FARMERS will fail to cash in on growing Asian demand for food unless productivity rises and there is a major shift in how Australian produce is marketed overseas, the government's agricultural forecaster warns.
The Australian Bureau of Agricultural and Resource Economics and Sciences executive director Paul Morris will also tell a Canberra conference on March 5 that the high dollar and tough global economy mean the next five years will be challenging.
And the longer-term outlook is uncertain, as farmers cannot compete on price with low-cost producers in countries such as Brazil and India, which are now the world's leading exporters of beef.
"Australia is now effectively a high-cost supplier of products," Mr Morris told The Australian Financial Review, ahead of the ABARES annual outlook conference.
"If agriculture continues to do what it does now, we're probably not going to be able to take advantage of the opportunities for the future. We need to go through some transformational changes."
In the medium-term, through to 2017-18, he said farmers, who export about 60 per cent of what they produce and are very dependent on global economic conditions, faced a "subdued outlook".
To take advantage of much vaunted longer-term opportunities in the Asian Century, he said farmers must focus on reversing the decline in productivity that had occurred in the past 15 years, on promoting the quality of their produce and on tailoring it to the demands of emerging markets.
"We need to move away from a commodity-based export scenario to one more based on targeting the specific quality needs of consumers, particularly middle-income and high-income consumers in Asian markets," he said.
"It's probably not going to be on price that we're able to compete, but on quality – whether that is food safety, how our meat is presented to the market or our clean, green environmental attributes."
The ABARES conference theme, "future food, future farming", follows two relatively good years for agriculture, when farm exports reached a high of $35.9 billion in 2011-12, well above the drought-affected average of $28.4 billion in the five years ending 2010-11.
But Mr Morris said there was no room for complacency, as some of Australia's key commodities would face stiff competition. Grain production was rising in the Black Sea region, of Russia, the Ukraine and Kazakhstan and there was strong growth in the soy bean crop in Brazil.
Australia's horticultural producers were already facing tough competition domestically, he said, as the high dollar made imports attractive.
The opportunity presented by the growing Chinese middle class was the focus of much attention at last year's ABARES conference, but Mr Morris warned against over-reliance on China.
"It [over-reliance] leaves us vulnerable to changes in China. We need a diverse market. We need to continue the emphasis on free trade, opening up markets, trying to remove technical barriers, like quarantine barriers, in the Asian region," he said.
He will also discuss the role of industry and government in responding to consumer demands, including animal welfare campaigns, and argue that if industry can address such concerns, there is less pressure on the government to impose costly regulation.
And if the government felt forced to act, then it should be clear about the economic costs of extra red tape.
"The reality is that locking away more forests into national parks, putting fisheries in marine parks, putting more regulations and legislation on chemical use in agriculture – there's good reason for doing some of those things in terms of what the community wants but we shouldn't assume we can do those things and not have impact on economic growth," Mr Morris said.