I have the time and I have the intense interest in food trade and objective to see Australian agriculture, once again, world competitive.
We really are a small player in world agriculture. We grow just 5% of the world’s crop. We jump up the ladder as a trader where we come in at between 12 and 15 in world rankings. That’s why the big boys want to play here. If you live 200km from the port it’s costing you between $60 and $75 a tonne to get you grain to port.
I know we are a world leader in the export of beef but I’m looking for a volunteer to tell the full story. From what I am told we could do so much better both domestically and for export.
One of the reasons we don’t get a lot of international news is because we are obsessed it seems to me, with domestic politics and in agriculture with domestic agricultural politics. It is hard to imagine an industry with so many organisations, committees, Peak Bodies, and people who claim to speak for one particular group or another, gossipers and rumour mongers. Yet in spite of that, we are deeply dependent on the export markets for our commodity products, cereals, meat and wool and to a lesser extent on perishable goods, fresh fruit and vegetables. Quite fascinating that WA is exporting fruit and veg to Bali, maybe it reduces the Bali Belly?
So in my view, our future lies in providing what the rest of the world wants, when it wants it, in the form it wants it and at a price that is satisfactory to both producer and buyer. That means trade relationships which are somewhat different than what we have at present, which in many cases, like the auction, haven’t changed since the beginning. One of the biggest changes we must have is transparency between paddock and plate and that’s not just meat. Because anyone who thinks it is healthy for an industry like horticulture, as the processing disappears overseas, to become more and more dependent on the duopoly, must have rocks in their non-commercial head.
If our labour costs and factory running costs are more expensive than our competitors, then let us admit to it. I heard from a very reliable source it is 40% cheaper to run a food processing factory in New Zealand than Australia, and that is not including the cost of the goods inward.
We have the States, each with its own Minister for Agriculture, in WA ours has got Food tacked on the end, so he is the Minister for Agriculture and Food. I have always thought that to be something of an oxymoron. I will stand correction but as far as I am aware for at least the last forty years, each new Minister for Agriculture in Western Australia has conducted some kind of review or reorganization, or re-structuring of the department, it has also undergone a couple of name changes to suit the political philosophy of the incumbent.
It’s happening again now, all senior positions are being advertised. Having been a senior manager in a multinational company and run my own management consultancy for more than a decade, the Director General of Agriculture (silly name I know) now knows that his new Minister has little faith in his ability to select the best management team available. He is questioning the management ability of his own Director General.
Put whatever spin on it you like if as a CEO (Director General) the new Executive Chairman of the Board (the Minister for Agriculture and Food) suddenly announces he is going to advertise a number of senior management positions in the organisation that you manage and the incumbents should apply, the only conclusion one can draw is that he, the Minister, is not happy with the incumbent and by association with his Director General.
Most managers who institute corporate, company or departmental reorganizations, restructurings and all other euphemisms for change do not realise that the deleterious effect on the whole organisation is opposite to what was intended and is logarithmic. It is destructive of morale and usually has the opposite effect on productivity, at least for a time, than was the original intention of the change.
A far more worrying consideration when new managers, CEOs, Ministers, or whatever start causing change early in their term of office, and I have seen it so many times in my career, is that firstly they don’t take sufficient time to understand the operations and the operational culture, corporate culture of the business they have been appointed to manage, or sometimes even worse they have decided ‘before’ taking over, what changes they are going to make. The result is irreparable damage to staff morale and culture.
For instance in the past I believe we had a Minister who was ‘frightened’ of ‘white coats’. Didn’t understand pure research. So he did his best to do away with both. Same result with staff, they became confused and worried about their own future and career, and as any manager will tell you the quickest way to reduce productivity is to allow rumors about an uncertain future to gain hold because they behave like a leech.
The report, when it finally came out, months and months late recommended a reorganisation. I won’t bore you with the details for many will remember. Basically it meant moving from the ‘matrix’ system, which worked quite well and was productive to a ‘line management’ system. Again the result was the evisceration of the organisation. It was almost a choice between Business School Model #1 or #2. A few friends and myself reckon we could have knocked out the plan over a long weekend with the aid, before personal computers remember, of a couple of good typists.
More Sheep Forum.
Agriculture in Australia is suffering from reductions in research and just as importantly extension expenditure both at State and Federal levels. We are starting to fall behind the rest of the world. There was talk again yesterday, October 10, there will be further cuts in the DAFWA budget. Yet the day was the ‘More Sheep Forum’, so we have to do more with less. But to offset those cuts Minister Baston announced a one off boost of $10 million over 4 years into the Sheep Industry Sheep Innovation Project. That’s 2.5 million a year. Nationals Member for the Agricultural Region Paul Brown said the $10 million will also go into wool industry innovation.The money is from Royalties for Regions.
I have a barometer I use these days on Government expenditure especially on agriculture, our second biggest industry. It goes like this, a kilometre of Freeway cost~$55m www.ptua.org.au/myths/capcost/. The Melbourne City Link cost $100m per kilometre www.smh.com.au › BusinessDay According to Leighton Holdings the 2.7 km upgrade on the Great Eastern Highway completed Feb/March this year cost $229 million. So more than it costs to build a new road.
The export value of the sheep industry, even with a flock down to some ~15million was: frozen and chilled meat ~$324m FOB and live sheep exports of ~$200m. That is $524million in sheep meat. Then there was a wool clip of ~80m kg, for which I don’t have a value.
It may be cynical, but the Minister Baston said yesterday he wants the flock to get back to well over 20m and maybe closer to the 30 million. That would more than double our sales of sheep and sheep meat. The overall DAFWA budget is being reduced, and another $10 million over four years will buy us the equivalent of one fifth of a kilometre of Freeway.
I know there is the rest of the DAFWA budget allocation and I think that is about $20m and there is the promise of money from Royalties for Regions in ‘Seizing the Opportunity’. I just wonder if we have all this thought out and budgeted or if its aspirational and dare I say it political.
Multi Peril Crop Insurance – The American experience.
As an industry we are deeply in debt (+$60 billion) and our opposition, that is agriculture in other countries and communities like the EU is pushing on as strong and as resolute as ever. Yet they too, especially in the EU as we shall see later, are falling behind in productivity in spite of subsidies.
Multi Peril Crop Insurance has been on the ‘wish list’ for Australian farmers for almost as long as I can remember, and the debate reached fever pitch during the drought years over east (from Western Australia. WA) and in WA during droughts and devastating frosts in Western Australia. The sums were simple farmers laying out over a million dollars on a crop planting and then relying on the weather alone for them to see any return on their capital. In simple terms they gambled millions of dollars.
Too often the weather intervened and the millions were lost. Farmers went bankrupt. Farm equity dropped. Rural debt in Australia rapidly went over the 60 billion mark. Something had to be done and there was intense discussions with governments and insurers in an effort to develop a multi peril crop insurance scheme for Australia. I always claimed I could not find an agricultural multi peril crop insurance scheme anywhere in the world where the government was not involved.
Is a link to an article in ‘Choices Magazine’ on the cost of multi peril crop insurance in the U.S. For those who hanker after a multi peril crop insurance for Australia, we have to decide how a country like America can ‘afford’ to protect its farmers, when it seems that we in Australia cannot. In 2007 in the U.S. 408 million acres was used for crop production and they have a population of 316 million people.
The population of Australia is 23 million and a couple of years ago our cropped area was 66 million acres.
So in the USA for every person there was 1.29 acres of crop planted. In Australia it was 2.44 acres.
The opening paragraph in the ‘Choice Magazine tells it all:
Consider a deal where for about 200,000 farmers every dollar they pay to the government in crop insurance premiums will give them an expected return of $1.90 as J W Glauber reported was the case for 1990 to 2011. Imagine that it costs the taxpayers at least $1.10 to get farmers paid that 90 cent profit (Glauber 2013) imagine this deal has just been sweetened further with a new set of giveaways in the legislation that is widely called the 2014 Farm Bill, at eh end of the half-decade called the “great recession” when farm families wealth has soared to over eight times that of the average American familiy (Bricker et al., 2012 and U>S> Department of Agriculture (USDA) 2014) In an ingenious and successful political marketing campaign, farmers continue to promote public support for this deal as “insurance.”
I should tell you now read on as the detail in the ‘Choice Magazine’ will astound you. So too will the power of the rural lobby on the ‘Hill’.
I wrote last week of the weakness of the rural lobby in Australia and how little agriculture is respected both in Canberra and by the general public. Substantially that is because of poor communication between those on the land and those in power and those whose only worry is that the shelves in the supermarket are full.
It is obvious that the farmers in the United States have little to worry about with regard to prices received. In short they are wealthy. Whenever I write about the United States and agricultural subsidies I have the words of Bill Clinton ringing in my ears, I think it was in an address to Congress, he said “We will not let the heart of America die.” He increased farm subsidies in retaliation for what he saw were increases in the EU.
This web site is called the ‘Global Farmer’. This is just one glimpse of what we are up against in this ‘global’ world. We buy our machinery from a country where the farmers are wealthy and so the bearable price of a tractor or seeder in higher than it is here. The same goes for all our inputs, they are all imported from countries where agriculture is on a different footing to us. I will stand correction but I think the CAP payment for every arable hectare in the EU the year are something like this: One Euro equals 1.44 Australian dollars. The Annual CAP per hectare paid to some of the leading EU farming countries is:UK €229. France €296.Germany €319. Netherlands €457.
I wonder how many people in Canberra and withing our agripolitics really understand the wealth with which we have to compete to gain an export market? I wonder how many also understand the extent to which the EU will go to secure food exports to other countries. No wonder we got bread from Ireland. Incidentally I have a condition that demands a certain type of bread, sour dough, it was available fresh baked every morning in Woolworths. Last week it disappeared. I wonder?
This is an extract from: https://www.tcd.ie/iiis/policycoherence/eu-agricultural-policy/protection-measures.php
Exploring links between EU agricultural policy and world poverty and provided by Trinity College Dublin.
EU Agricultural Protection Measures
The EU is often accused of following very protectionist trade policies in agriculture, where developing countries have most of their comparative advantage. Trade barriers are indeed extensive, although they are tempered by a variety of preference schemes which give more favourable access terms to developing countries. This page outlines the most important trade barriers.
In broad terms, there are three types of agricultural protection
- Market access restrictions involves measures that protect domestic agriculture by restricting foreign imports. This usually involves high import tariffs or quotas, which restrict the quantity of imports for a particular product from a given country and allow domestic producers with high production costs to compete.
- Export subsidies are financial benefits conferred on exporting firms by the government in order to encourage exports as opposed to domestic consumption. As a consequence, global prices are suppressed and domestic consumers may pay a higher price than foreign consumers for the same product.
- Domestic support includes price supports and direct subsidies paid by the government to farmers. The most trade-distorting payments are those tied to levels of production (called coupled direct payments), thereby encouraging overproduction and driving down world prices.
The EU makes use of all three types of instruments.
So there you have it. Crop farmer’s wealth in America is eight times that of the average family in the U.S. Wonder what it is compared to the Australian Farmer? And in the EU before they do anything a UK farmer gets A$330 per hectare of EU money.
Further reading: http://capreform.eu/the-end-of-export-subsidies/ Sounds good, read the detail.
Meanwhile a big fuss today on the country hour that a few dairy farmers have broken the mold and are selling their own brand of milk to the duopoly, that has to be good news. A couple of years ago the UK government subsidised, paid farmers to change over an produce what was seen as a demand for ‘organic’ milk. Eventually price ruled or nobody tasted any difference, whatever the reason the public went back to the $1 litre milk and the scheme failed. Let’s hope this scheme sets the benchmark for others and starts a movement to push the big processors around a bit.
Also to the Coles PR machine went into overdrive this week with pork, claiming it will only stock Australian pork in the future. They failed to mention that Australia imports very little pork at present, but it does import over 80% of all processed pig meat, bacon, ham and so on. Why can’t we supply all our pig meat supplies? Subsidies paid in America, Canada and the EU on pig production are huge and are probably the answer.
Being the answer doesn’t help. International trade is vital. Figures published on this web site have shown countries in the EU who are no longer self sufficient, yet here in this country it seems it is cheaper for our infamous food duopoly to import pig meat, than it is to produce our own. The difference in pre-packed bacon and loose bacon is quite extraordinary, and my guess is that much of the loose, carcase bacon, is in fact ‘hog’ meat out of Canada and the U.S. The thickness of the back fat would embarrass any decent bacon producer.
More another time on what we get foisted off on us as bacon.