AUSTRALIA must become far more skilled at processing farm products before they leave our shores because factories in Asia won’t keep doing the “dirty work” for much longer, warns prominent meat and grain exporter, Roger Fletcher.
Mr Fletcher said our long tradition of sending mostly unprocessed raw commodities overseas, particularly to Asia, must change because customer expectations and processing priorities were evolving fast.
“They don’t want to take our rubbish any more,” Mr Fletcher said.
“I’ve spent a lot of time in Asia.
“They’re building new, super factories to support a better style of production.
“We can’t expect to just keep sending raw materials to places like China for them to deal with.
“We can’t afford to go to sleep at the wheel over the next five years because things are changing – we need to be thinking about this now.”
Mr Fletcher said taxation and business policy needed to shift to promote the import, or local development, of machinery and technology to encourage agribusinesses to do more product value-adding at home.
“The government wants to talk a lot about cutting company taxes, yet we can’t get tax incentives on new equipment to help improve the quality and efficiency of what we produce here,” he said.
The one-time drover turned sheep processor, grain trader, rail freight operator and 20 per cent shareholder in cotton farming giant Cubbie Station, said the Australian ag export culture had been revolutionised by container shipping (and former Prime Minister John Howard “fixing up the wharves”), but big challenges to the industry’s export expectations were looming.
The Fletcher International Exports boss highlighted how China’s rapidly urbanised and better educated population was deeply concerned about pollution and better quality of life.
He said raw wool scouring and early stage sheepskin and cattle hide processing were becoming less popular manufacturing options.
Mr Fletcher said China’s workforce was more skilled and health conscious, but also ageing, so far less motivated to work in dirty processing roles.
China was also focused on improving its global reputation as a manufacturer and wanted to be seen making quality products.
“They’re closing their little factories and building new woollen and cotton mills and other plants where computers and technology do the work,” Mr Fletcher said.
“Hardly any employees are on the factory floor any more, and those that are there are highly skilled.”
Without making specific reference to the future of the live export trade, Mr Fletcher also noted how air-freighted sheep carcase exports to the Middle East climbed from 250,000 in 2004 to 2.7 million last year.
At the same time live sheep sales had dropped from 4.5m to 2.7m.
Mr Fletcher said Asian markets were also increasingly fussy about the quality of coal and iron ore imports bought from Australia, and now China was refusing to take our plastic waste for recycling – indicators of heightening concerns about the public backlash to pollution across Asia.
“They want to improve their (manufacturing) status in the world,” he said.
“We’ve been told this for a while now, but I don’t think anybody in this country is listening.
“They’re going to beat us if we don’t have a plan.”
Mr Fletcher conceded he, too, had relied on offshore buyers to take on processing roles his company had once been involved in, or trialled.
In late 2010 the big sheepmeat processor closed Australia’s last wool combing plant, built about a decade earlier alongside his giant abattoir at Dubbo in Central West New South Wales.
It was also one of Australia’s last wool scouring operations.
At the time Mr Fletcher said he could not compete with topmaking operations in low cost countries such as China or India, where daily wages were less than a tenth or what it cost to employ a worker at the Dubbo plant.
The Fletcher business had also tried its hand at processing sheep skins into leather products such as chamois and producing sausage casings.
“We were probably 15 or 20 years too early with our ideas, but I think we should be carefully looking at it again – Australia has to be ready to do these things now,” Mr Fletcher said.
“The world in Asia is growing fast and we have this opportunity to provide a lot of new exports if we carefully pick the right subjects to develop.
“One day these countries are going to say they don’t want our basic, rubbishy stuff any more.”
Mr Fletcher warned, however, lifting Australian agricultural processing and handling industries to a new level required modern, efficient equipment and infrastructure, much of which invariably had to be imported, because local industry simply didn’t have the capabiilities.
“But we can’t get tax deductions on the new gear we need to improve our competitiveness,” he said.
“It takes 25 years to get railway rolling stock built here, so I import it, but then we get hit with a lot of tax costs.
“We pay a lot of tax every day just because we’re trying to be competitive and look after our customers around the world.”