Key trends that could transform agriculture

Ingredients to a $100 billion industry


Opinion
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Plenty of positives exist in agriculture that help create a buoyant, despite the past year being dominated by drought.

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As National AgDay’s celebrations draw to a close, and we reflect on what’s been a challenging 12 months, it’s important to also examine the overall outlook - one that should create buoyancy among farmers.

ANZ’s head of agribusiness, Mark Bennett, says there a a lot of positives to look forward to in agriculture's near future.

ANZ’s head of agribusiness, Mark Bennett, says there a a lot of positives to look forward to in agriculture's near future.

The National Farmers’ Federation’s recently launched ‘2030 Roadmap’ highlights the pillars critical to industry growth. In talking with our customers, we’ve identified several developments and considerations under each of the report’s themes that could transform and strengthen the industry.  

Customers and value chain

The use of blockchain technology will change the way agricultural goods are certified, processed and delivered. It will also bring a new level of traceability to the supply chain. This should lead to better informed consumers and reduce the instances of counterfeiting.

Blockchain will also speed up agricultural trade, particularly in cross-border transactions. For example, rather than being delayed in lengthy quarantine procedures at port, a blockchain certification could see barley or lamb arrive in China and move directly into the supply chain without delay.

It also provides the opportunity for instant payment and changes of ownership. Rather than every step being subject to manual checking, contract paperwork and human involvement, the technology could mean the seller is paid instantly at every point.

Rising trade in our region will also create opportunity. Intra-Asian food beverage and agriculture (FBA) export flows are increasing and six of the world's top 20 FBA corridors in 2030 are predicted to be in Asia, compared with just two today.

While Australia’s proximity to Asia continues to be an advantage, opening access to new markets for each commodity, combined with improved and cost-effective freight, will remain paramount.

This is especially true in countries like China where the growth in consumption of horticultural products such as blueberries and avocados continues to grow strongly, though none of these goods originate in Australia. This gives our international competitors a head start in establishing their brands and making them consumers’ origin of choice.

Growing sustainability

About 70 per cent of the world’s extracted water is used for agriculture and this is estimated to reach 89 per cent by 2050. Low rainfall and high variability is affecting many Australian regions and creating more volatility. This can also create pressure on farmers to meet short term financial needs, while maintaining productive soils for the future.

The availability, security and ongoing supply of water is top of mind for many farmers, especially as new plantings continue in regions like the Sunraysia without any additional water supply. There must be greater collaboration between farmers, industry and government to review the ongoing concerns and challenges of those working on the land to ensure effective and fair policy.  

ANZ has also developed methods to improve stress-testing of our business lending portfolio for climate-related risk.

Unlocking innovation

Technology and data have the power to influence farm production and profitability.

ANZ’s research paper AgTech – Advance Australia Agriculture, showed that if Australian agriculture achieved a 1.5 per cent annual growth in capital investment and 3pc annual increase in productivity, largely driven by scale-generated technology, this could help the sector grow to $A98 billion in production by 2030.

In contrast, continuing on the current trends of a 0.5pc a year increase in capital and a 1pc increase in productivity would see the industry grow to $A74 billion, meeting just 1.5pc of global food demand.

Encouragingly, the Australian agtech sector is seeing terrific momentum in the development of new technologies and data analysis to improve connectivity, and willingness across stakeholders to share opportunities and resources and create positive outcomes across industry.

People and communities

In terms of education, it has been encouraging to see student intakes in agricultural courses almost doubling from the 2012 low of just over 900, recovering to more than 1500 enrolments in 2016. Concerning, however, is that courses in agriculture and environmental studies still have the fewest Commonwealth-supported student places across Australian universities.

Providing more opportunities for the industry’s youth is critical in the face of an ageing workforce – the average age of a farmer is 56, which is 17 years older than the average Australian worker.

This makes programs such as Nuffield’s Australia Farming Scholars all the more relevant. ANZ also runs its own agriculture graduate program which sees graduates spend 18 months rotating across a range of business functions and regions, including weekly interactions with farmers. This is aimed at improving their understanding of the industry – both its economic and social opportunities and challenges – as well the availability of financial solutions which align with a business’s goals.

Finally, ways to improve workplace health and safety must be a continued focus for industry. It’s been pleasing to see farming families and agribusinesses such as Safe Ag Systems, doing things differently in this regard; using software that enables farming enterprises to manage their legislative obligations and incorporate workplace health and safety requirements into their operations.

Capital and risk management

The challenge remains to fund Australia’s agricultural productivity needs. In 2016, ANZ modelling showed that if Australia was to simply maintain its current share of agricultural exports, by 2025, the country would need an additional $109.2 billion of capital investment. Even moderate growth in Australia’s share of agricultural trade could cause this figure to increase to $133.6 billion.

While numerous funding models and structures exist, the reality is that very few of them are adopted. In part, this is due to conventions, conservatism and cost of change.

However, it is arguably also due to a general lack of promoting the successes in Australian agriculture. There are many examples where innovative structures have attracted new capital to the industry resulting in productivity gains through technology and infrastructure investment.

It’s important for all farming businesses to understand the various structures available from debt funding, agricultural fund managers, sale and lease-back, joint ventures and equity partnerships.

There are pros and cons to all, but it’s important to note there are many alternatives that allow businesses to expand their operations and production, and execute a well-considered business strategy. They can also help to establish size and scale which is very often a pathway to profit.

The story Key trends that could transform agriculture first appeared on The Land.

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