Farmers should retain data: forum

29 Jul, 2017 04:00 AM
 The University of Western Australia Institute of Agriculture industry forum speakers and panel discussion participants, Australian Competition and Consumer Commission agriculture commissioner Mick Keogh (left), Planfarm managing director Greg Kirk, CSIRO director agriculture and food Dr John Manners, InterGrain chief executive officer Tress Walmsley, Rabobank head of Raboresearch food and agribus
The University of Western Australia Institute of Agriculture industry forum speakers and panel discussion participants, Australian Competition and Consumer Commission agriculture commissioner Mick Keogh (left), Planfarm managing director Greg Kirk, CSIRO director agriculture and food Dr John Manners, InterGrain chief executive officer Tress Walmsley, Rabobank head of Raboresearch food and agribus

A “DIGITAL revolution” occurring now could have as much impact on competition in agriculture as industry consolidation has over the past two decades.

And like consolidation, the digital revolution risk will be from reduced competition, with open access to on-farm data the key to combatting attempts at market control by monopolies.

Those are the opinions that Australian Competition and Consumer Commission (ACCC) agriculture commissioner, Mick Keogh presented last week to The University of Western Australia (UWA) Institute of Agriculture annual industry forum.

The forum topic this year was Consolidation in agriculture: impacts to the farm, research and agribusiness.

Mr Keogh said the Productivity Commission had recently considered the issue of rights to digital information and potential impacts on competition.

It had concluded, he said, the issue required urgent attention of government to maximise potential productivity gains from emerging digital technologies and to reduce risk of harm to competition and the economy.

The Productivity Commission had recommended a range of measures including comprehensive data rights for consumers and small businesses - including farms.

If implemented, Mr Keogh said, the recommendations would give farmers and others a right to check or retrieve any data held about them and to have some control over how that data was used.

“In many ways I personally think the debate about data rights and use is more important at present than debates about market consolidation,” Mr Keogh said.

“I say this not to downplay the effect that market consolidation can have on competition and ultimately on national economic growth.

“It is in recognition of the fact that data is rapidly becoming the critical element that can either be used to accelerate industry consolidation and the harmful effects that can have on competition, or to limit the potential anti-competitive effects of market consolidation.

“Even a company with near monopoly market power is much less likely to engage in anti-competitive behaviour if industry participants have open access to transparent market data.”

The digital revolution was rapidly emerging as the next major challenge for competition policymakers and regulators, and the agriculture sector was at the forefront, he said.

To put the digital revolution into context, Mr Keogh and other presenters pointed out the 2017 second quarter Financial Times list of largest global corporations by value was topped by four “data-dependant technology companies” - Apple, Google owner Alphabet, Microsoft and Amazon.

Two others, Facebook and Asia’s largest internet company Tencent, were in the top 10.

“Digitally enabled technology is emerging in every facet of our lives and business and rights over access to the resulting data and the purposes it can be used for is becoming a major battleground for businesses and governments,” Mr Keogh said.

“The concerns for policymakers and regulators are whether control over access to data will become the new way to reduce competition, or prevent new competition emerging.

“It is not hard to envisage a situation where a dominant market participant could become almost unassailable as a consequence of the market data that can be collected from customers.”

This was particularly relevant in agriculture, Mr Keogh said, because of adoption of proprietary digital technologies by machinery manufacturers to not only enable machines to operate more efficiently, but to record farm layout, paddock terrain, crop inputs, seeding and harvesting data.

“(Farm machinery) has extensive data collection capabilities, their performance can be monitored in real time via the internet and everything from routine scheduling of maintenance to complete immobilisation can be initiated remotely.

“In effect, many farm machines have become farm data harvesters,” he said.

The problem for farmers and policymakers, was the proprietary nature of technology used by different manufacturers and the value to farmers of on-farm data potentially at risk if they were to switch machinery brands.

“This can have the effect of locking farm business into one machinery brand, essentially creating a monopoly farm by farm,” Mr Keogh said.

“If a company knows that once it gets a set of wheels on the land they have locked the farmer in, then there is less incentive to be competitive in pricing associated equipment.

“Loss-leading with one key piece of machinery could be very lucrative in the long term if a customer can be locked in to a specific machinery brand for generations.”

Mr Keogh said similar concerns had already emerged in the automotive sector with third-party repairer concerns about access to factory diagnostic systems and data.

The Productivity Commission recommendations would give farmers who decided to change machinery brand the right to retrieve all of their own data and, if needed, “have a third party convert it into a compatible format suitable for use” in a new machine of a different brand, he said.

“This could significantly reduce the risk to competition posed by digital technologies, while still allowing all market participants to generate value from data.”

Earlier, Mr Keogh said implementing the “Hillmer reforms” as national competition policy from 1994 to 2004 had “fundamentally changed Australian agriculture” and promoted significant consolidation of not only farm businesses, but also up-stream input and services suppliers and downstream processors, marketers and food retailers.

Prior to the reforms, there were national statutory marketing arrangements for wheat, wool, dairy, sugar, tobacco and dried vine fruits and more than 50 State level single-desk and statutory marketing bodies for a range of commodities.

It was “generally accepted”, Mr Keogh said, that those arrangements, which involved mandated prices, floor prices, or pooling of commodities with farmers receiving an average price, reduced competition and incentive to increase productivity through innovation.

In 2005 the Productivity Commission found benefits to agriculture from the reforms were increased innovation and farm productivity, exports growth and lower consumer prices, he said.

Negative impacts were accelerated reduction in the number of farms, reduced rural employment and related rural population reductions in some areas.

Mr Keogh pointed out other industries also went through similar reform at the same time and deregulation of government-run agriculture had exposed it to normal competition and consumer laws which applied to other industries.

The value of gross farm output and the value of farm exports set Australian records in 2016, he said.

Farm input costs for transport, telecommunications, fuel, fertiliser and chemicals were now cheaper in real terms than they were a decade ago, because of increased competition via the reforms.

The Australian Bureau of Agriculture and Resource Economics’ farmers’ terms of trade index, an aggregated ratio of farm returns against farm costs, had been flat or “positive” for farmers since 2004.

This was “in marked contrast”, Mr Keogh said, to the trend for the period 1970-2000 when the index movement was “very strongly negative for farmers”.

Other speakers at the forum included Greg Kirk, Planfarm managing director, Dr John Manners, CSIRO director of agriculture and food and Tim Hunt, Rabobank’s head of Raboresearch food and agriculture.

Dr Manners said consolidation had impacted on research and development (R&D) which was critical “in the race against climate change to increase yield”.

He showed graphics indicating in 2014 Australia was ranked eighth in the world for R&D, 10th for dollar inputs, 21st for dollar output benefits, 81st for innovation efficiency and last among Organisation of Economic Co-operation and Development countries for company research collaboration.

Dr Manners also pointed out current merger proposals would reduce the seven top global seeds and pesticide developers, rated on revenue and power, to four.

An upside was the world’s fourth largest company, Amazon, had agriculture business interests, he said.

Mr Hunt said that while consolidation had reduced the overall number of companies involved in some way with agriculture, it had also created niche markets and openings for smaller, more agile operators.

“There’s a saying, ‘the bigger the bird, the larger the crumbs’ and that applies to the consolidation of agriculture.

“Big corporations tend to concentrate on big markets and that creates opportunities for start-ups,” Mr Hunt said.

Regional Development and Agriculture and Food Minister Alannah MacTiernan opened the forum.

She congratulated UWA, her alma mater, on being ranked as Australia’s top university and 14 in the world for involvement with agriculture.

Mal Gill

Mal Gill

is wool and dairy writer for Farm Weekly


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