Ag could miss export boat

18 Apr, 2014 02:00 AM
Comments
1
 
Australia risks missing the boat without a more co-ordinated effort from industry and government

AUSTRALIA needs to co-ordinate far better use of its abundant natural gas reserves and revitalise rail and port infrastructure or else agriculture will literally miss the boat to booming export markets overseas.

Gas and transport infrastructure are just two examples of why Australia's farm sector competitiveness is at risk of being undermined at home despite huge opportunities for our products opening up around the globe.

A report by farm industry banking and research specialist Rabobank has highlighted a succession of mounting competitive threats across the supply chain, which it said required resolute and aligned action from industry and government.

Critical areas to be tackled included fast-rising production costs for farmers and farm produce processors, and the need for more strategic relationship building and investment by local agribusinesses in our key markets, notably nearby Indonesia.

Also needed was better access to equity capital to invest in revitalising and rationalising farm industry supply chains and greater innovation and branding to add value to the products we grow and process.

"Many of Australia's competitors in agricultural markets around the world are investing heavily and becoming much more productive, and this is very much raising the bar for our agricultural industries," said Rabobank's food and agribusiness research general manager Luke Chandler.

Mr Chandler co-ordinated the Agriculture In Focus 2014: Competitive Challenges report.

"While the rising demand growth for food from our Asian neighbours remains a golden opportunity, Australia risks missing the boat without a more co-ordinated effort from industry and government," he said.

"The combativeness of Australia's food and agricultural sectors has generally compared favourably in a global context in the past - underpinning our prominent role in global agribusiness market - but this situation is far from static."

He noted highly-resourceful developing countries in South America, Eastern Europe and Asia were threatening traditional export marketers by assuming a greater role as low-cost food and agricultural trade competitors.

In fact, some of those same trade competitors weren't just undermining Australia's food export competitiveness, they threatened to make one of our own most plentiful input resources - gas - much more expensive to local users because of its value as an export product.

"Ultimately the challenge for Australia is to formulate an energy policy that maximises the economic benefit of this country's gas reserves," the Rabo report noted.

Given our energy policy frameworks were still in their early stages of being developed, setting key ground rules now would give Australia the chance to ensure local downstream processing sectors had access to affordable energy.

Mr Chandler noted how the strategic importance of natural gas to overall manufacturing had convinced other developed economies with local gas reserves to support high-end manufacturing - industries ranging from food to fertiliser processing - by providing access to affordable gas.

"Many offshore buyers have limited domestic gas production and the price they pay for imports (of liquefied natural gas) can be as much as five times higher than Australian wholesale prices," he said.

"Over time Australian east coast prices are expected to be more connected to these export markets."

The Rabo report noted one of Incitec Pivot's Queensland fertiliser plants stung with rising gas prices last year would pay $50 million more for annual production costs because of the new contract price.

At the same time the company opted to build another $850m fertiliser plant in the US, rather than Newcastle, because of access to cheaper US gas.

Addressing the inefficiencies in Australia's logistics infrastructure was another priority in lifting our competitiveness.

The report noted that transporting grain by road was 30 per cent more expensive than using rail infrastructure.

Future infrastructure spending should be directed to parts of the supply chain which delivered the greatest overall efficiency.

"Strong infrastructure and quality improvements by our global competitors is exposing a relative lack of investment in Australian grain logistics and the inefficiency of Australian grain movements to export markets," Mr Chandler said.

In Canada the efficiency of that country's rail network required just six 112-wagon grain trains to fill a 60,000 tonne Panamax cargo ship, but in Australia the job needed 16 50-wagon trains.

A unified industry-wide, long-term strategy to invest in infrastructure in Australia would require co-ordinated and "unilateral input from government, supply chain operators and industry participants".

More to trade success than FTAs

LAST week's Australia-Japan free trade agreement (FTA) may have delivered some successes for agriculture, but the Rabobank competitive challenges report has highlighted the frustrating progress taken to crack an FTA and the urgent need to improve Australia's access to international markets.

The process of "de-constructing trade barriers in foreign markets is proving incredibly complicated and drawn out", the report noted.

At the same time greater lobbying by our competitors risked leaving Australia behind in the race to tie down global meat market access and trade relationships.

Apart from government negotiators extracting "most favoured nation" status for our food and agriculture suppliers in key markets and prioritising the six free trade agreements (FTAs) Australia currently had in progress, local agribusinesses should also do more on a personal level.

"The beef industry must set itself apart by investing in strengthening relationships and knowledge exchange frameworks with foreign counterparts," Mr Chandler said.

"Clearly there is a fundamental need for industry to build even closer working relationships in foreign markets, and sometimes invest downstream in the supply chain.

"This would provide greater reassurance around long-term supplies.

Page:
1
FarmOnline
Andrew Marshall

Andrew Marshall

is the national agribusiness writer for Fairfax Agricultural Media
Date: Newest first | Oldest first

READER COMMENTS

Jock Munro
18/04/2014 6:07:05 PM

There will have to be a complete disaster before our urban elite decision makers will consider any legislative framework for our export industries. We had it 'nailed' in grains but we have been progressively deregulated for over twenty years. The 'Kiwis' are causing us acute embarrassment as they 'blow us' away in Dairy with their co op Fonterra and supporting legislation.

POST A COMMENT


Screen name *
Email address *
Remember me?
Comment *
 

COMMENTS

light grey arrow
I'm one of the people who want marijuana to be legalized, some city have been approved it but
light grey arrow
#blueysmegacarshowandcruise2019 10 years on Daniels Ute will be apart of another massive cause.
light grey arrow
Australia's live animal trade is nothing but a blood stained industry that suits those who