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Barnaby demonstrates his ignorance — It’s a worry for Australian agriculture.

In the light of what our Federal Minister for Agriculture has written in the first three paragraphs of his letter, I have come to the conclusion that he  doesn’t understand what is going on and what has been going on for more than a decade in Australian agriculture.

I have no reason to doubt that he is passionate about Australian agriculture and wants to do everything he can to improve ‘the lot’ of producers and rural communities. He writes that he is planning for future growth. That is an admirable objective because the graphs below show that since about 2000, exports have been declining and food imports have been increasing. Contrary to what Mr Joyce espouses and the media publicises there is no evidence that Australian agriculture has the capacity, people or capital to become internationally competitive, except with those products which are ‘minimally transformed’ (see Fig 4). Even then there is ample evidence that yields in those areas are declining. What is more of a worry is that whether the Minister wrote his own letter or someone wrote it for him, the figures I am quoting are from his own department, DAFF.

Why can’t we be internationally competitive?

In a previous article ‘This Little Piggy #2’, I wrote this: I understand that it is in the view of the Australian government, as demonstrated by their actions, that it’s easier or they are more content, paying interest on the money the country has borrowed and continues to borrow, in part to pay for the shortfall in our balance of payments, that is we import more than we export, than pay that money to Australian farmers so that this country can be where it should be, self sufficient in food.

In other words what I am asking is why don’t we subsidise our producers to be competitive, to produce all we need at home and to export, and earn foreign currency rather than what we are doing now and allowing food imports into the country unfettered by tariffs or quotas, like America, the EU, May and so wreck our balance of payments and make or much vaunted ‘deficit’ so difficult to manage? How can we compete with the rest of the world? First of all we have to ask the question whether we want to. If the answer is yes then we have to play by the same rules as the rest of the world. If we don’t, we become unsustainable, see Fig 20.

To support that argument I present Figure 1, which is self explanatory, and then a series of graphs that further explain that our our agricultural industry is to say the least struggling. I wonder what it is that Minister Joyce doesn’t understand about his portfolio — about agriculture? I make no apologies for publishing these figures again, if only to show that the minister is wrong.

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Fig 1. Compiled from: ABARES Agricultural commodity statistics 2014 Table 7 by Ben Rees. The difference between the Trade balance and B.O.P is net income flow. Net Income flow comprises net flows of interest on debt , dividends and transfer payments.

I wonder if the Minister has seen this one (Fig 2)  which shows where we are really going? Imports are going up, exports are declining. Take one from the other and this is what we get those lines getting inexorably closer. I’m no economist but I suspect this graph would be different if the true value of our exports were calculated farm gate price instead of FOB which is used at present.

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Fig 2. The trend is obvious. For all the effort that agriculture is putting into remaining viable and a a food producer of importance, it all seems to be going wrong. Source DAAF. Australian Food Statistics.

 

Barnaby trade #1

Fig 3. Exports, imports and net trade, substantially and elaborately transformed food. 70% of Australia’s exports in this category are from, sugar, wine, dairy and beef. Source: Australian Bureau of Statistics (2014a)

 Look at the trend line on Fig 3. That is our food processing industry going down the tube. Sugar, wine, dairy and beef keep the flag flying.

second Barnaby trade

Fig 4. Exports, imports and net trade, minimally transformed food. Grains, oilseeds, fish, shell fish, vegetables, fruit and nuts, cotton (?) Source: Australian Bureau of Statistics (2014a)

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Fig 20. Have Australian farmers been subsidising themselves? Source: Ben Rees – ABARE.

Just to put agricultural subsidies into perspective, this is what the highly respected ‘Worldwatch Institute’ reported on the latest statistics available on agricultural subsidies:

Washington, D.C.—In 2012, the most recent year with data, agricultural subsidies totaled an estimated $486 billion in the top 21 food-producing countries in the world. These countries—the members of the Organisation for Economic Co-operation and Development (OECD) and seven other countries (Brazil, China, Indonesia, Kazakhstan, Russia, South Africa, and Ukraine)—are responsible for almost 80 percent of global agricultural value added in the world, writes Grant Potter in the Worldwatch Institute’s latest Vital Signs Online trend.

‘Worldwatch’  give an opinion on the effect of subsidies on world wide agricultural trade:

Price supports can cause overproduction and oversupply because they encourage greater production of a specific commodity and less domestic consumption (since consumers tend to buy less as prices rise). Rather than let the oversupply go to waste, it is traded on the international market at artificially low prices. Since subsidized farmers are insulated from the true cost of farming, they can afford to sell at a lower price than their less-subsidized foreign counterparts. Many developing countries have argued that this undermines their own agricultural sectors as they cannot afford to spend billions in subsidies to overcome this handicap. Full report here.

It is self evident that neither Minister Joyce, if he wrote the letter, or as is more likely, one of his advisers (even though it is written in the first person) wrote it, neither of them could not be bothered to take five or ten minutes out of their ‘busy’ day to do the most obvious before writing such a condescending reply and that is read the original article. Had they read ‘This Little Piggy Went to Market’, Barnaby would have avoided making a fool of himself or the adviser making a fool of his or her Minister.

As it is, what I got from Barnaby is a re-affirmation of an outdated and what I consider to be a flawed twentieth century agricultural policy for Australia. No that isn’t a misprint or a mistake on my part — twentieth century. I don’t know if the Liberals rely on the Nationals for all things agrarian— but isn’t it time we had an agricultural policy that accepts the way the world is, not how we would like it to be? We have moved on

Even more importantly Barnaby could have, might have, should have avoided what politicians of all persuasions do all the time. He could have answered the questions implicit in the original article. I am tired of hearing the rhetoric of the so-called agricultural policy of this government, which constantly demonstrates to us its ignorance about what is going on in the real world of international agriculture. What is more disturbing, laughable if it wasn’t so serious, is that I honestly believe that they think we believe them.

I will now show how just plain wrong Barnaby Joyce, our Federal Minister is, when he trots out the same old head in the bucket of sand rubbish as he does in the second and third paragraphs of his letter about keeping our doors open to other countries (because we are an exporter) who can in effect, produce food cheaper than we can. Why do we have to be subjected to such hogwash? (sorry)

Just to refresh your memory, this is what appeared in the original ‘This Little Piggy Went to Market’ regarding the importation of pig meat into Australia. I only do this so you can see how silly the Minister’s rhetoric really is:

Ten years ago we were importing about 75,000 tonnes a year. With a few stumbles along the way that figure has now doubled to 149,000 tonnes or nearly 2,900 tonnes a week—that’s a lot of pig.

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Fig 5. Australian Pig Meat Imports

Of more interest is that in 2002-3 imported pig meat accounted for 23 per cent of domestic consumption and by 2012-13 it accounted for 49 per cent, nearly half of all the pig meat we consumed.

We do export pork and those exports declined between 2005 and 2012. In 2005 we exported about 43,000 tonnes and in 2015-16 the forecasts are that we will export 28,000 tonnes, so exports are increasing, but not as quickly as imports.  Australian pork is famous for being disease free. We live close to some of the biggest pig meat markets in the world, something must be wrong that we cannot penetrate these markets quicker than we are.

Australian Pig Meat Exports

Fig 6. Australian Pig Meat Exports

Why is this so?

Why is it when Australia grows everything that is needed for a good pig ration we are now reliant on other countries for about 80 per cent of our bacon and ham? One answer may be in two words ‘agricultural subsidies’. A glance at the graph below is better than a thousand words.

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Figure 7. Graph: OECD

As you can see (Figure 1) the overwhelming majority of the pig meat we import doesn’t come from the Developing World where we might expect costs to be less than ours, on the contrary it comes from the United States, Denmark, Netherlands and Canada, Developed countries, who all have generous agricultural subsidies for the growing of grain and the production of pigs. All the pig meat imported into this country is frozen, we turn it into disease free bacon and ham by processing it. None is sold as pork.

So if you buy pork it will be a 100 per cent Australian product.

It was estimated a few years ago that worldwide, agricultural subsidies amounted to US$1 billion a day and that was before the recent increases announced by China and Indonesia, subsidies now total ~ US$1.3 billion a day. To all intents and purposes there are no subsidies paid to Australian farmers and they are paid to all of our competitors; see Figure 3.

So when you hear Australian farmers complaining that world trade isn’t a level playing field — that is part of what they are talking about. If we export food of any kind we have to compete with subsidised products from other countries.

Pig meat is a perfect example of how subsidies can distort international trade. Our pig meat imports show quite clearly that producers on the other side of the world can produce pigs, slaughter them and transport them at least 14,000 km and present them ready to be turned into bacon and ham for less than we can produce them at home. Subsidies I suspect, are not the only reason we rely on imported pig meat.

In Minister Joyce’s the first two paragraphs of Mr Joyce’s letter he seems to be saying competition is good for us and that as we rely on exporting food we should provide an open door to food imports. Mr Andrew Spencer form Pork Australia has a different view as expressed on the ABC.

According to Mr Spencer, it’s a cost issue, and countries like Denmark, the US and Canada can provide pork at at a much lower cost than Australia can.

“Agriculture in countries like the US and Europe is subsidised and the other thing is to do with demand. In Europe there’s very high demand for legs but not very much for the middle of the pig, while in the US there’s very high demand for the middles, where the grilling cuts come from, and not much demand for the legs.”

What Mr Spencer didn’t say is that according to DAFF Australian Food Statistics 2012/13, the latest available figures, and unless the pig industry has done something remarkable in the last couple of years, the pig industry in this country is not going anywhere except down slowly.

Pig meat -07/08 -08/09 -09/10 -10/11 -11/12 -12/13
Slaughtering ‘000 5 171 4 476 4 561 4 643 4 733 4 745
Production b kt 374 321 331 342 351 356
Imports bd kt 207 257 288 265 283 303
Exports bd kt 59 49 47 50 50 46
Consumption bc kt 533 525 na na na na

We can see from those numbers that the Australian pig industry, at the time these figures were compiled, was in decline. The pig industry really doesn’t stand a chance against other countries who subsidise their pig producers. This is how Pork Australia express their frustration the rest is here:

Competitors and Subsidies

The Australian pork industry firmly supports the principles of free trade, as Australian pig producers operate without the benefit of subsidies or tariff barriers.

Our competitors employ a range of discretionary subsidy spending to support domestic agriculture, which when applied to pork production equates to:

  • Brazil: US$11.77 billion p/a, or US$3.56 per kg;
  • USA: US$23 billion p/a, or US$2.42 per kg/pork;
  • Canada: US$2.2 bn p/a, or US$1.11 per kg;
  • Denmark: US$1.35 bn p/a, or US$0.67 per kg. 
In an Australian context, the rolling annual average wholesale pork price (to March 2014) was A$5 per kg/pork or approximately US$4.53 (as at 21 March 2014). Using the above figures, our competitors receive subsidies of 79 per cent, 53 per cent, 25 per cent and 15 per cent respectively.

It’s not as if Pork Australia don’t know what is holding this country back from being a major pig supplier to the region of the world where the most pig meat is eaten. Pork Australia also knows it can be competitive if, to use that hackneyed phrase, the international pork industry was a level playing field. It’s all in the link above.

The much heralded and celebrated (among some) Free Trade Agreements will not change anything, because even if all the barriers come down, if Australian pig meat is more expensive than that from America, we won’t get the business. Probably means we will get more imports.

Wild Pigs.

There is nothing to say really. On the disease front Barnaby is badly advised. Whoever advised him doesn’t read the literature.

When wild pigs are breaking into sheep paddocks in the south west of Western Australia, I will maintain my views on the biosecurity threat presented by wild pigs. When Senator Ludwig closed down the live cattle trade to Indonesia and Senator Chris Back advised that Indonesia could import F & M from India and other places as a consequence and so pose a threat to Australia, I will maintain my cynicism and incredulity at Minister Joyce’s reply.

We need new industry in ‘the bush’. Governments are supposed to help and facilitate new industry rather than poor cold water on it. I have just read an article from 2013 reporting that a planned helicopter shoot in Queensland had killed 30,000 pigs. The article highlighted, as we did the damage wild pigs are doing to native fauna, some say they could cause the extinction of some species, especially turtles.

I wonder if WWF and the ACF are as concerned about this problem as they seen to be about climate change? Maybe I will write to them?

All in all, the literature shows that over the decades ‘control’ programmes are determined by budgets and the wild pig population in Australia fluctuates between 15 and 20 million, pick a number and Barnaby doesn’t care, he believes that if he closes his eyes and covers his ears it will go away. Perhaps if he read here about African Swine Fever sweeping through Europe he would think again.

 

 

 

 

 

 

Roger Crook

About 

Over the last fifty years or so Roger has worked in agriculture, since 1967 in Australia. From farm labourer, to station and farm manager, then progressively to a senior management position in agribusiness as the marketing and sales manager of what was at the time the biggest agricultural chemical company in Australia, ICI (Australia- Rural Division), Roger has both a practical farming and comprehensive agribusiness background.
After a brief spell as the marketing director of a big public relations company in Perth, Roger formed his own consultancy specialising in agribusiness communications and the marketing of Australian agricultural intellectual property overseas.
Roger says he will only ever be 'semi retired'. He believes Australian agriculture is at the crossroads so he has set up the 'Global Farmer' as a forum to both pose, debate and hopefully answer some of the challenges being faced by the Australian family farm and so by Australian agriculture.

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