Many issues raised at Blueprint forum

29 Mar, 2012 01:00 AM

Return on investment

FORMER WAFarmers president Mike Norton said the agricultural industry had faced some enormous changes since 1960, the year he started farming.

But none more so than the dynamic shift surrounding a farmer's average return on investment.

"Profitability and the return on investment is the WA agricultural industy's number one problem," he said.

"Finance is so important to agriculture and as the industry progresses into the future, its financing at a reasonable rate is going to be pivotal."

Mr Norton said before the Global Financial Crisis (GFC) the industry had access to a wide range of rational bankers as money lenders and the lack of them now proved to be at the very centre of the industy's current problem.

"There's between 30 and 40 per cent too much debt within our industry and somehow we've quietly got to try and rationalise that," Mr Norton said.

"But we're a bit up against it in terms of Woolworths, Coles and some of the independents."

Mr Norton said in terms of profitable returns, the production sector had been marginalised and industry needed to change its own outlook.

"We need to come up with some good ideas as to how we're going to do that," he said.

But as in all aspects of farm life, no two issues could be talked about separately from one another.

"The industry needs to financially incentivise farming.

"(Lack of) profitability is a big reason for many of the younger generation not going back to the family farm," Mr Norton said.

Bridgetown producer Michael Campbell also touched on the connection between profitability and a wide number of other issues including the lack of "young interest" in the agricultural sector.

"Lack of profitability is the number one reason why young people won't come back to the land," Mr Campbell said.

"I farm in an area of high rainfall yet, like hundreds of us throughout Australia, questions still surround how we're expected to pass our farms on to our kids knowing the current amount of money or debt that's wrapped up in the business."

2011 Rural Industries Research and Development Corporation (RIRDC) Rural Woman of the Year Caroline Robinson also cited profitability as her main concern in the agricultural sector.

She said together with her husband and extended family at Mount Walker, she had watched her family try to squeeze everything out of their assets including the land, the water and the rest of their inputs.

"We're farming with less resources and less money for very little return at the moment," Ms Robinson said.

"And it seriously starts to impact on our resilience as farmers."

Food security

WITH food security a hot topic on the global agenda, the tide is out for many within the Australian agricultural industry as to whether or not agriculture will benefit from the issue.

Donnybrook apple grower Steve Dilley is one person who believed that food security was an issue that farmers all play a part in, but said perhaps it's not as large as it's made out to be.

"We talk about food security but the harsh reality for Australia's population as it currently stands, we probably only need about ten per cent of our farmers," Mr Dilley said.

"I suggest to you that grain growers in WA, could probably supply the whole of Australia's population now and for the next 20 to 30 years, NSW grain farmers could probably feed the whole of Australia on their own and apple growers in WA could probably supply the whole market as well.

"We are next exporters, that's the reality of where we are.

"The food security issue is a card we like to play but I wonder how real it is.

"It's very real in China and throughout Europe because of the massive population, as they don't have enough land to feed them-selves, that's why they are coming over here and buying land.

"We need to be more realistic about that, our cost of production is what's killing most of us."

Mr Dilley believed that with Labor costs as high as they are compared to other parts of the world, Labor intensive industries are struggling to remain competitive against countries that can produce the same products for much cheaper.

Agricultural consultant and accountant David Falconer, agreed and said the agricultural industry had always heard talk of how the industry would be saved by the food security issue, but said it was old news.

"We have been hearing about food security for 50 years," Mr Falconer said.

"What has happened is, we seem to have lost the farmers' share of the profit in all the products we produce.

"I don't think Australians value food, they have never starved, whereas the rest of the world has."

Mr Falconer believed the industry had forgotten what the economic model for business is.

"You only need to have a look at other business to see the difference," Mr Falconer said.

"Most businesses are sold on a 30 pc return on investment, in agriculture we accept 4pc.

"The current model is production by price, less costs over capital value, and that is where the problem lies."

Mr Falconer believed that unless the agricultural industry as a whole was able to change some of these parameters, the industry will continue to have the same problems of people not wanting to enter into agriculture, and the problems surrounding obtaining funding for infrastructure."

Foreign investment

WESTPAC Agribusiness head of grains Chris Moore believed the main issue surrounding food security wasn't around food security itself, but more with the level of foreign investment in agriculture.

"The issue around food security isn't what we produce today, it is that this could be snatched off us and we won't have those resources in 10 years' time," he said.

Mr Moore pointed to the Queensland sugar industry and said two years ago it was 100pc Australian owned, whereas today it was 87pc foreign owned.

"These could be real issues for the Australian people," he said.

"What we see from Westpac's point of view and more broadly, is that we need to get this onto the consumer's agenda now, because it will be an issue for them and one for us."

Mr Moore said while at the moment we could feed Australia 10 times over with current levels of food production, the threat is that in 190 years' time it may not be our food to use.

Young people in agriculture

WITH a decline in the number of young people entering agriculture, many within the industry feel not enough is being done to arrest the problem.

Muresk Old Collegians Association president Floyd Sullivan is one of these people.

Voicing his concern at the Blueprint for Australian Agriculture forum, Mr Sullivan said he had serious concerns surrounding the resource of young people entering into agriculture.

"From my involvement in agribusiness and involvement with Muresk old collegians I travel all over the state," he said.

"The big danger point I see is that there is no one coming in to agriculture, especially the likes of farmer's sons and that really concerns me," Mr Sullivan said.


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