Mailler’s excellent article ‘Why is Agriculture Different’, begs the big question of the extent to which the agricultural industry’s relationship with government policy has resulted in a viable, sustainable and world competitive Australian agriculture? And if not, is the government failing to defend the people?

Empirical data – as Mailler brings to the fore – tends to show that the relationship of agriculture with government policy (in the context of global competition and the myriad of factors that express themselves through industry performance data and trends), has resulted in the industry exhibiting signs of systemic failure. The ‘vital signs’ of this industry are not good.

If one sets aside short term factors of drought, flood, fluctuations of commodity prices and looks at the long term trends, it is inescapable that revenue has been ‘chased’ by costs and in some cases overtaken by costs. The trends are seemingly inexorable.

While in any industry there will be leaders and laggards and those who fall off the bottom, the situation for agriculture as Mailler points out is not just the ‘tail’ that’s failing – it’s many of the core businesses that make up the industry.

Whether one agrees or disagrees with past and current agricultural policy, one must surely accept the notion that the outcomes are not good?

So what of policy for agriculture?

Governments have a primary duty to ‘defend the people’ and see to their wellbeing.

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Photo: Courtesy Veeoz

For a couple of hundred years, most ‘western’ governments have taken this duty to extend from:

  •  basic ‘human rights’ of health and education systems (safe drinking water, sanitation systems, hospitals, primary, secondary and tertiary education), through …
  • reform and development of democracy (wide range of concepts of what is democratic!)
  • military defence of their territory and its people from aggressors and on to…
  • making their industries competitive in the markets where their goods and services are sold.

Governments develop and implement POLICIES to cover all these aspects and more of our national life in pursuit of their big job to ‘defend the people’.

Importantly, governments generally see it as prudent to make the nation’s export industries profitable and sustainable in the longer term because their profits contribute so much of the resources to fund the implementation of all other policies!

One of my observations in Australia over the last 40 years or so is that agriculture has been progressively de-capitalised and made less resilient as a result of government policy. Local control of the industry is being lost as new capital, new vision and new policy comes in from overseas.

We can see this de-capitalisation and loss control of agriculture in many of the resources used by agriculture.

Mailler identifies strategic, long term issues or challenges facing agriculture in Australia — an industry which has been and retains the potential to be a contributor to national prosperity and one that provides profits back to the government of the day for use in the defence and wellbeing of the people.

And discussion of these issues simply begs the bigger questions about agricultural policies that limit the government’s ability to manage resources and effectively ‘defend the people.’

Could it be that the development and implementation of government policy – formulated on the twin bases of popular economic theory (or dogma?) and electoral popularity – are at the bottom of the current situation and prospects for Australian agriculture?

Could it be that poor policy formulation for agriculture’s long term international competitiveness (and resultant prosperity and contribution to the community) has government’s job to ‘defend the people’ sit behind many of these observations about agriculture in Australia and trends:

  • cash and savings – not enough in the inevitable ‘good years’ to take businesses through the ‘lean’ or disaster years
  • soils and soil fertility – widespread understanding of the fragility of soil resources and significant long term issues with acidity, loss of topsoil etc
  • loss of rotations and concentration on short term profits for survival – the eons have shown many peoples around the world forsaking rotations of crops and pastures at their peril; but what’s a man to do when pressed?
  • farm infrastructure including fences and water supplies for livestock and pasture seed reserves in the soil – all lost in the shift to cropping (as one would expect) and since their replacement lies at the outer reaches of feasibility, farm business flexibility has been lessened
  • loss of control of even short lengths of the value chain in handling, processing and marketing
  • loss of intellectual resources – agriculture is no longer the attractive ‘new frontier’ nor the place to build a good career – the gloss and glitter is in other industries – so generally fails to attract young people.

Foreign ownership of Australian farms or other production facilities is not new. But today and yesterday have much in common.

Foreign farm owners may not seek to compete with Australian farmers at the wharf of loading. Nor perhaps at the point of unloading.

What they are doing today, as in the past, is to capture as much of the value chain from paddock to plate. This involves retaining ownership at the farm gate, loading wharf, unloading wharf, through processing and each step of value adding, often through to the point of retail sale. If this is the case, should we wonder why they choose to invest in farms and farming enterprises that make poor returns when selling predominantly undifferentiated food ingredient products near the farm gate?

The production and sale of food ingredients – such as grains, frozen cuts of meat – or unprocessed fibre – such as wool, cotton or timber – at the farm gate or wharf of loading is saddling Australian agriculture with one of the shortest parts of the value chain from paddock to plate. Perhaps this could change?

If government is to properly ‘defend the people’ and ‘defend agriculture’ then policies must surely be developed and implemented to make one of the nation’s major industries profitable so that if nothing else, it is viable, sustainable and an active contributor to the community’s and the national wellbeing?

Supportive policies are needed. Always. A policy that strips an industry supplying goods or services in the global market of all its supports is not ‘defending the people’.

Mailler points out that other governments have policies that support their vital industries. The USA and France for instance, make no secret of their support for their aerospace industries. Even their weapons industries!

Others make no secret of their support for industries that sell goods and services. How did India become a colossus in IT services? Through supportive policies?

How did China become a colossus in consumer goods? Through supportive policies?

If Australia wants a viable, sustainable and profitable agricultural industry that contributes to the wellbeing of the people through helping to pay for health, education, military and commercial defence; the starting point is policy.

And agricultural industry leaders must, surely, take up the points that Mailler raises and bring about a change in the relationship of our agricultural industry with government?

It is not only imperative that we have a change in agricultural policy. It is crucial that policy reflects an industry structure built on a strategy that will reverse the laissez-faire policies of the last forty years or more.

John Kenneth Galbraith, (1908 – 2006). Nobel laureate and advisor to Presidents from Kennedy to Regan and beyond, understood the need to ‘defend the people’, especially the farmers, from the free market economy.

What Galbraith came to understand was that farming was fundamentally different from other forms of economic activity. Even if you accepted prevailing economic orthodoxy of the way markets operated – and Galbraith always maintained the view that markets for farm products do not operate according to orthodox theory.

Farmers, large numbers of them producing undifferentiated products, would always be facing organised buyers capable of manipulating prices down to ruinously low levels. It was necessary, he convinced Presidents and some say reinforced to Thatcher, for the farm sector to be shielded from this inevitability by government action of one sort or another.

The curious thing is that orthodox economic opinion once again denies Galbraith’s fundamental proposition; yet those in political power in the US – who in all other respects oppose what Galbraith stands for – continue to provide support for farmers in ways which accord with Galbraith’s ideas. Their counterparts in Europe do the same for European farmers – also in the face of concerted opposition from most of the economics profession

As Mailler’s paper showed, Australia is almost totally alone in the world in holding the (misguided?) view that its farmers should be required to face subsidised international competition in global and indeed many domestic food markets without support.

In the absence of sensible supportive policies from government, our export-oriented agricultural industry is failing important tests of profitability and sustainability.

As a result, its ability to contribute to government revenues is also failing. With other industries failing, should government agricultural policies now be reviewed? If they were changed to deliver a profitable and sustainable agriculture, this would surely assist the government to ‘defend the people’?

Ian Crook

About 

Ian C Crook is former farm and agribusiness management consultant, now working part time in corporate governance. Ian is a graduate of Aberdeen University, the North of Scotland College of Agriculture and the Australian Institute of Company Directors. He lives in Ballarat, Victoria.