Farming's epic battle

Farmers could be forgiven for thinking their blood, sweat and toil have been all but futile ...

LIKE the myth of Sisyphus – the man cursed to spend eternity pushing a boulder to the top of a rocky hill in hell, only to have it immediately roll back to the bottom – Australian farmers could be forgiven for thinking their blood, sweat and toil over the past few decades have been futile.

The facts speak for themselves.

In 1980, output per dollar of debt in Australian agriculture peaked at $3.12. By 2010, output per dollar of debt had fallen to 64 cents.

At the same time, farm debt in Australia has increased by almost 75 per cent in a decade, from A$40.3 billion in 2004 to an estimated A$70 billion in 2014.

Until recently, the Australian dollar has been troublesome, reaching an all-time high of US$1.10 in May 2011.

The ongoing cost-price squeeze has held back profitability for more than two decades, and now many primary-producers are not able to cover the rising costs.

All these factors are without considering the climactic conditions and atrocious public policy decisions, such as the live export suspension, which have contributed to driving a stronger wedge between farmers and profitability.

During the mining boom years, the struggles and difficulties for our agriculture sector were never a major concern for successive governments.

Governments did not necessarily rely on profits from rural industry for their budgets because the tax earnings from the mining companies were so great.

But in the past 18 months, the Golden Goose has begun laying scrambled eggs, which has left the Australian economy truly cracked.

The tune is now changing as Australia increasingly transitions from a mining boom to a dining boom.

The fall in prices for iron ore and coal resources from their peak in 2011 is bringing down state and federal government revenues and so Australia is once again looking to sectors such as agriculture to generate more wealth for the nation.

There is probably no greater example of this transition than the investment decisions of the mining magnates themselves.

These mining magnates – who know a thing or two about which direction the Asian economy is headed – have been big investors in agriculture in recent years.

For example, Australia’s wealthiest woman, Gina Rinehart, and is said to have invested in cattle stations in the Kimberley, an abattoir south of Perth and has plans to establish a significant dairy operation in Queensland.

Agricultural assets now represent her most significant investments outside iron ore.

Twiggy Forrest has also been dedicating more effort to his family’s traditional beef production businesses, announcing several grand visions to further develop northern Australia.

Speaking at the recent ABARES conference in Canberra, Twiggy recognised agriculture’s growing potential: “I truly believe the agricultural sector of our nation will experience great strength in the future and scaffold our domestic economy in its next leg of growth, this will strongly assist our neighbour nations as they transition to rely on high quality food that Australia can supply.”

“There are so many parallels in Australia's agricultural industry to the mining world, less than two decades ago that I cannot begin to list them. Suffice to say today's agriculture sector reminds me of the self-evident opportunity I saw when I started Fortescue in the early 2000s.”

While much of the foundational work is still being laid, it gives reason to believe we are entering a golden era for Australian rural industry.

This means we should expect better research, more investment and a firmer focus on removing the barriers for businesses to start-up, expand and innovate across our agriculture sector if we are going to improve our international competitiveness.

It also means we need stronger leadership at all levels of rural industry to ensure we move forward with purpose and vision.

At a macro-political level, Barnaby Joyce’s Agricultural White Paper is being finalised. It will provide a road map for the future progress of our sector.

The Senate Inquiries into the grass-fed beef levies and red meat processing industry will shine a spotlight on our research and development groups and the broader supply chain so we can better understand how money is apportioned and outcomes are determined, and whether they are fair and reasonable.

The ‘Square-table’ initiative last year has enabled the red meat sector to develop a strategy to collate and promote its sustainability credentials that will provide a competitive point of difference to the WWF’s Global Roundtable.

We are also developing stronger consideration of the impact and influence of foreign ownership of agricultural assets through senate inquiries and a federal taskforce into sugar marketing and a reduction in the Foreign Investment Review Board (FIRB) review threshold from $252 to $15 million for agricultural land purchases.

Last week we saw Malcolm Turnbull – a politician more associated with King’s Crosses than Hereford-Crosses – spend last week touring through remote Queensland, speaking with locals about the struggles they confront due to poor telecommunications.

Minister Turnbull has spoken of delivering Long Term Satellite Services next year, which he claims will be a “game changer” in Australia, offering downlink speeds of 25 Mbps as part of entry level plans, compared to 4 or 6 Mbps that Australians in regional or remote parts of the country experience now.

With the drought still lingering across too much of Queensland, myself and a handful of other rural MPs have rolled their swags at the front door of the Prime Minister’s office and have refused to budge as we continue to push for an economic stimulus package for the worst drought affected regions of Queensland and NSW.

An outcome is expected in a matter of weeks.

I share the same worldview as my colleague Barnaby Joyce that achieving a better return at the farm gate must be the bedrock of all agricultural public policy.

The family farm is the best business model for our rural communities and we must do our utmost to defend it.

There is an argument that producers have few productivity gains left to make on farm and so there is a need to look at how risk and reward is distributed across the chain.

When producer margins are increasingly under threat it is important significant attention is given to the industry structures underpinning the sector to determine where there is room for improvement.

Like eating an elephant, we can only chip away at our vision one teaspoon at a time.

It won’t be fast enough for some, but measured and considered action will deliver stable results.

It is the only way we can really get the ball rolling for our rural economies in this Asian Century.

FarmOnline
Barry O'Sullivan

Barry O'Sullivan

is a Queensland-based Senator for the Liberal National Party
Date: Newest first | Oldest first

READER COMMENTS

John Elgin
1/05/2015 1:02:05 PM

Farmers make their decisions and live with the consequences of their choices, like us all. You Senator, have the capacity to adjust the ground rules that allow them scope to flourish or stagnate. The White Paper is a 'vision splendid' and I look forward to how you manage the expectations you have raised from that process. Looking forward to seeing some walk in the talk/fine words above
angry australian
1/05/2015 11:53:06 AM

Barry, you just have no idea. The coalition is just as bereft of ideas as the opposition. blame everything except the incompetence of the bureaucracy and the ignorance of you politicians for the destruction of our primary industries. Where are our once proud fisheries and forestry industries? Gone, micro managed to death by politicians pandering to green lobbyists and inner city professionals' wives. And what hasn't been destroyed by them as done over by bureaucrats, government and industry, creating rules justifying their existence. farming will be next. Barry, less talk, more action.
Keith
1/05/2015 11:33:40 AM

Barry, what business/industry does not feel a cost-price squeeze? Every business is under pressure for lower prices against rising costs. There is competition for product in every industry. Businesses consolidate within any given industry every single day. Agriculture has been doing exactly that for last 4 to 5 decades here in Oz. As the asset pool consolidates with fewer owners, of course debt will increase among those who remain!! Just a question of the price the new owners paid for those assets and the funding mix they used. If they've chosen to fully debt fund, who's fault is that?
Jacky
1/05/2015 9:37:14 AM

"At the same time, farm debt in Australia has increased by almost 75 per cent in a decade, from A$40.3 billion in 2004 to an estimated A$70 billion in 2014." In what industry doesnt debt significantly increase in 10 yeras???
Bush mattersBush matters - LNP Senator Barry O'Sullivan tackles the issues facing Aussie primary producers and people across rural and regional Australia.

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