Farm smarter or fall behind

21 Jul, 2015 02:00 AM
Comments
9
 
Continuing with the research status quo has not really been enough to drive our productive growth

RISING farm production costs are eroding Australia's competitive position in global agricultural markets and highlighting the danger of another troubling farm economy black spot - our slowing rural productivity growth.

The rising competitiveness of low-cost food and farm export competitors from regions such as South America and the Black Sea should be sounding a stark warning to the Australian industry, particularly government authorities responsible for research and telecommunications connectivity, according to agribusiness bank Rabobank.

In 15 years Australia's annual farm productivity growth has halved from around 3 per cent to 1.4pc.

That's noticeably below the average for other high income members of the Organisation of Economic Co-operation and Development (OECD) at 1.7pc, and well below developing nation Brazil's average of 3.4pc in the decade to 2011.

Even New Zealand, which is also under pressure to broaden its productivity gains and control farm costs, has solidly outstripped Australia's growth, while The Netherlands, despite extreme land use constraints, has used big technology gains to achieve 3pc growth in the past decade.

Rabobank's research report on the Australian and NZ food and agribusiness sector noted how it was crucial to get productivity growth re-ignited to drive farmer profitability and ensure the industry remained globally competitive in coming decades.

Global demand for sustainable food production was also climbing fast as population growth zoomed towards nine million within 30 years.

"It's a beast of an issue," said research analyst and co-author Georgia Twomey.

She said individual farmers were constantly worried about their ability to maximise enterprise productivity and profitability so they could have long-term sustainability on their farms and in other businesses in the food and agriculture supply chain.

Recent productivity gains had largely been achieved by farmers scrimping on labour costs and using bigger machinery and consolidating farm holdings, but more sophisticated and innovative solutions were now required.

Helpful signs

Ms Twomey noted there were some helpful signs the wider community acknowledged agriculture's economic potential and the value of productivity growth.

The federal government's recent and much-anticipated Agricultural White Paper had identified the need to prioritise access to premium-paying export markets, as well as initiatives to "farm smarter" through better research and farm efficiency and better business models for producers.

Continued investment in research and development (R&D) corporations was also highlighted in the white paper as important.

"However, continuing with the research status quo has not really been enough to drive our productive growth in the past decade," she said.

"And there's no indication governments are changing their attitudes on the need for public investment in research and development.

"State government spending in agricultural research and extension is declining and federal budget limitations have created challenging times for national organisations at a time when government funded research into innovation and technology is critical to our food sector's improved performance."

While the private sector may be able to play a bigger research role and should be encouraged to do so, Ms Twomey noted the priorities of many agribusinesses were not necessarily relevant to important aspects of Australian agriculture.

"Yes, big global players like Monsanto, Bayer or DuPont spend a lot of time and money on research, but it's directed at projects that work to their best advantage, often in other parts of the world - GM corn for the northern hemisphere, or Africa or Asia, for example," she said.

"In many respects Australia's not a big market and we really need research focused to our best advantage, including money for R and D in livestock industries, or pastures and other systems unique to our environment and productivity priorities."

Connectivity challenges

Ms Twomey said Canberra's recent investment in identifying and fixing mobile phone network black spots was welcomed by farmers and farm support services desperate to get better real-time information connectivity in the field.

Everything in the bush, from weather data to technical feedback, from farm advisors and marketers or "cloud"-based accounting activities, required metropolitan standard internet and telephone capabilities to enable farms to perform effectively.

"Digital agriculture in the form of precision farming, big data, sensor technology and drones presents uncharted potential for productivity gains and improved management practices," she said.

Better connectivity also helped living standards and education options for farm families and other rural businesses, creating conditions which encouraged qualified people to stay in country areas and build vibrant communities.

Rabobank's report said reversing farming's productivity slowdown required Australia to make the most of any under-utilised land and water resources, and drive productivity gains across the entire supply chain, including value-adding for export.

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FarmOnline
Andrew Marshall

Andrew Marshall

is the national agribusiness writer for Fairfax Agricultural Media
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READER COMMENTS

Jock Munro
21/07/2015 5:03:28 AM

That would be right! Strip farmers of their equity in the market place eg wheat single 0desk, flood the domestic market with cheap products, pass on the costs of labour, social security and so on and then tell them (the farmers) to get smarter about what they do.
mug
21/07/2015 8:37:14 AM

Jock Munro hits the nail square on the head.
Qlander
21/07/2015 3:43:48 PM

We're getting smarter by reducing production. There's nothing smart about increasing production in an over supplied market.
Invey
22/07/2015 5:17:04 AM

Instead of telling us to get smarter to compete with third world countries with our first world costs, why not just cut wages and remove excess costs to business and every business in this country could compete. It costs too much to increase production so why would you when it normally results in lower profit. Profit and production are not constantly aligned. I think we need smarter politicians not farmers! There are only a handful that are actually qualified for their positions.
John NIven
22/07/2015 10:12:39 AM

Borrowing money to increase production to reduce profit is about as dumb as it comes.
newbroom
22/07/2015 11:33:18 AM

the cost price squeeze has been challenged by the prominent agri analyst Phil Holmes. It has been written up in the Northern Beef Report and covered at the 2015 Rangelands conference. I am no expert but Holmes challenges the orthodoxy. I do not see any real insights in the comments on this story. Just negativism writ large.
Zero till
22/07/2015 7:41:17 PM

If only we had the desk back. I could buy another Chamberlain, maybe another one way plough and a shiny new ACCO or one of those new fang dangle wideline harrows.If only !
Jock Munro
24/07/2015 5:03:47 PM

Why would the desk make any difference for the purchase of those items Zero Till? They were obsolete thirty years before the single desk was abolished by Rudd Labor and Nelson's Liberals.
John Hine
25/07/2015 3:13:18 PM

Perhaps we are relying too much on R&D Corporations and not on farmers, or groups of farmers, or cooperatives etc, doing their own proprietary research on local issues and on addressing crops etc for target markets. I suspect we need more groups like the Birchip Cropping Group, owned by farmers in NW Victoria, which now employs some 20 researchers and extension officers working with farmers on issues they choose, not issues a committee has chosen for them.

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