Crunching the wrong numbers

We have been officially overestimating our agricultural export surpluses for decades.

OVER the course of the past few weeks I have been forced to justify my criticism of the government as incompetent.

Indeed, some people have even suggested that my credentials as a fat, one-legged farmer from Boggabilla really didn’t qualify me to have any kind of credible opinion.

To the first issue, I say it is entirely fair and reasonable that I should be able to justify my opinion. To the second I can only say that I have been around enough cattle to know when I am standing downwind of a feedlot.

So on with a defence of my opinion.

A few short weeks ago I was having my leg cut off for the third time and our beloved Ag Minister was basking in the glory of the Ag White Paper. It was short lived when he got covered in coal dust. To be fair though, the White Paper was in fact prepared by the Prime Minister’s office and not by the Ag Minister, so they are both implicated by the document.

At the time I was a little preoccupied to really attack the fundamental and foundational error of the White Paper because the same government was busy carving up some of the most productive agricultural land in the country for coal mining.

The Prime Minister’s Office, the Bureau of Statistics, the Department of Agriculture Fisheries and Forestry and its Minister have no clear idea of what percentage of Australian agricultural produce is exported.

Don’t be ridiculous you say. It can’t be true you say. Sadly it is true and I will explain why it is true and why it is so important.

The figure bandied around so frequently by government is 60 per cent. In an attempt to be conciliatory in the past to try and avoid having a bureaucratic door slammed in my face I have said this number is arguable. Well, my patience has run out and I just can’t argue it any more.

The 60pc figure is calculated by using two numbers. The first number the government uses is the gross value of farm production. The second number is the value of agricultural exports. Simply, they divide the value of agricultural exports by the value of farm production.

Roughly, we produce $50 billion at the farm gate and we export $30 billion of agricultural products. So if you divide $30 billion by $50 billion and times it by 100 you get a figure of 60pc.

What is wrong with that you ask.

The gross value of farm production is calculated based on the value of our grain, wool, livestock, grapes, sugar cotton etcetera as it leaves our farm gate. It is the unimproved value of our produce.

On the other hand the value of agricultural exports includes all of the costs of transport, handling, storage and processing of our goods. In fact it includes the added value above those costs.

The truth is that farmers do not produce beef or sugar or wine. We produce cattle, sugar cane and grapes. However, Australia exports beef, sugar and wine. It is farcical to compare the value of the value added export product with the farm gate value of raw product we produce.

In 2000, a meeting was convened at the Customs House in Brisbane to resolve this misconception. The meeting was attended by Australian Bureau of Statistics staff, highly qualified economists and academics, influential members of the National Party and key producers.

Careful analysis at that time disproved the then quoted figure of 80pc exports. With sound economic analysis the meeting corrected the numbers to compare the farm gate value of production with the farm gate value of exported products to determine that Australia in fact only exported 22pc of its agricultural production in real terms.

The then Agriculture Minister, a rooster by the name of Truss, agreed that the ABARES figure of 80pc was incorrect and accepted that a mathematically robust analysis showed that Australia indeed only exported 22pc of its agricultural production in real terms at the time.

In 2002 the Bureau of Statistics warned "Analysis of data about the exports of agricultural commodities requires an understanding of the concepts, classifications and methodology." Of course our current Agriculture Minister and his department have no idea of this understanding. It seems to be inconvenient for the bureaucracy to be honest on this issue.

I will be bold and suggest that issues of food security for Australia are in fact very real. We have been officially overestimating our agricultural export surpluses for decades. Furthermore the strategies around providing support to agriculture in Australia are heavily influenced by perceptions of export surplus.

Obviously, there is considerable variation on percentage of agricultural production exported across different sectors of the industry. However, there is no doubt that in every sector the simplistic and flawed methodology used by the department over estimates the proportion of agricultural production that is exported.

Let us turn our attention now to a few key issues that should be heavily influenced by this “revelation”.

The first is the prioritisation of the protection of our agricultural land and water. Given our new knowledge it would seem that it is an even more heinous offence to sacrifice any more of our prime agricultural land to mining or to expose our precious water resources to further risk or harm by extractive industries.

The second is the real opportunity for agriculture to truly drive our economy and export earnings. If we can lift agricultural production in Australia by just 25pc instead of the impossible 60pc currently espoused through sound investment and incentive, we can double export earnings. Currently, bureaucracy disregards agriculture’s economic potential because it is perceived too difficult to significantly increase export earnings.

Now that we know we only export about 25pc of our production in dollar terms it completely changes the economic justification for supporting agriculture and retaining the social capital in the industry to be able to drive the necessary productivity growth. It completely changes the socio economic assessments of things like drought support, the Murray Darling Basin Plan, agricultural development restrictions and State banking for the sector.

The third consideration is the urgent need to address the issue of foreign sovereign ownership of Australian agricultural assets. This is not xenophobic scaremongering. Australian farmers carrying a mortgage risk cannot compete with patient foreign investment funds to hold key land assets. As a nation we need to consider carefully what agricultural assets are of strategic national importance.

The purpose of this paper was to defend my criticism of the machine of government and my assertion that it is incompetent and out of touch. The truth is that neither Labor nor the LNP are any better than each other in this space and we deserve so much better. The margins are now too tight to be able to ignore the waste and incompetence any more.

FarmOnline
Pete Mailler

Pete Mailler

is a farmer on the Qld/NSW border and a co-founder of the Country Party of Australia
Date: Newest first | Oldest first

READER COMMENTS

Rob Moore
21/08/2015 6:59:59 AM

What is all this "assistance" we keep hearing abt?There is NONE other than a new loan that will pee off the big 4 forevermore! Simon-The middlemen/processors/forwarders etc -value add but in Redmeat the majority are multinational that transfer price -profits across the seas. In doing so they keep a deadweight anchor on competitive tension for the whole sector -domestically.This lets Supermarts get a free ride @ expense of retail butchers that are nearly extinct . This is now terminal and the raw material is drying up= MORE disaster for ALL=pathetic foresight from the puppet masters!!!???????
Hilda's Heteford
19/08/2015 8:49:41 AM

Dugong continues to make assumptions, Young people crack him up. I'm glad I'm young at 65!
Geronimo
19/08/2015 8:18:56 AM

Agreed Hilda. So why do we keep providing assistance to people who are trying to farm in arid and semi arid environments i.e. keep them out there with a business model that doesn't work?
Dugong Scrapers Walsh Shed
18/08/2015 4:30:18 PM

Stockman & Hilda Hereford...... I remeber the days of salt being thrown out to break down foliage so a crop could be planted, never mind survive. You young people crack me up.
Cocky
18/08/2015 2:12:12 PM

You say increases the value of farm production Simon, I say extorts the value. It's all in the view of the onlooker isn't it? Your missing the point that the farmer does 90% of the work and gets 10% of the profit.
Dugong Scrapers Walsh Shed
18/08/2015 1:50:26 PM

Stockman, So what your saying you stomp around in it.
Hilda Hereford
18/08/2015 11:15:03 AM

Geronimo, where did I suggest assistance should be provided to convert desert to farmland? I was making the point that the high cost environment in Australia plus the lack of water and nutrients will mean less and less land will be suitable for farming unless the profitability of farming increases to compensate, this is unlikely if we have to continue to sell produce on a level playing field, that isn't level at all.
Simon
18/08/2015 10:45:24 AM

No-one here has got the point of the article. Everyone thinks it's about farming...especially the agrarian fundamentalists. The point is that the economic sector that deals with farm produce beyond the farm gate increases the value of that produce that is exported from 20% of the value of farm production to 60% of the value of farm production. These industries are just as forgotten by politicians and lobby organisations as farmers are and the statistics conspire to hide them.
Geronimo
18/08/2015 7:30:03 AM

Hilda, are you confirming that farming in many parts of Australia is financially not viable and therefore people should be provided assistance to continue to stay out there?
Hilda Hereford
18/08/2015 6:38:33 AM

Dugong is a dreamer, this continent is one of the driest in the world and it's soils are the oldest and the most depleted of nutrients like P. It costs substantial money to make prime farmland from desert without natural nutrients. It's far cheaper to go OS to find good soils with water that don't need all the expensive inputs required here in Australia! If we must operate on a level playing field,that field needs to consider the cost imposts here in Australia for agriculture to grow and prosper!
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Burrs under my saddlePete Mailler is a farmer on the Queensland/NSW border. His perspective and opinions are borne from seeing more than one side of many problems in his various farm leadership roles and in wanting to ensure a future for his children in agriculture.

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