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Wheat and Merino sheep are the parents of Australian agriculture.

It’s time to talk seriously about re-structuring the wheat industry in Western Australia and probably Australia. It’s time that wheat growers demanded recognition for the contribution they make to the national economy. When was the last time you heard the Prime Minister or the immediate past minister (Barnaby) or the current Federal Minister for Agriculture, or even the current crop of state ministers talk about the financial health of the producers of Australia’s biggest cash crop?

It’s time that the wheat industry faced reality, the bureaucracies they fund have failed them.  Have a look at what Negative Profit means, it’s a euphemism for loss; then read on and tell me what you think, tell me if I am wrong in calling for change.

 

To make a national average wheat yield of 1.8 tonnes per hectare there are a heck of a lot of growers producing less than that, but they are hard to find.  They don’t, apparently, employ consultants and their so-called Peak Groups, the agricultural bureaucracies, NFF, WAFF and others, and for that matter the wealthy GRDC,  don’t claim them as their own. We learn of their valiant fight when the ‘For Sale’ signs go up.

If you want more numbers, click on the link to ABARES under Negative Profit or go my last article on the future of the wheat industry and if they’re not enough, go back twelve months or so and there is another Global Farmer article on the almost the same subject.

Negative Profit.

Negative farm business profit means a farm has not covered the costs of unpaid family labour or set aside funds to replace depreciating farm assets. Many farms occasionally record negative farm business profits as their incomes fluctuate. However, ongoing low or negative profits affect long-term viability because farms have reduced capacity to invest in newer and more efficient technologies. Over the 10 years to 2015–16, the proportion of grain farms recording negative farm business profits averaged 56 per cent a year.

There is no need to discuss farm budgets and margins or even negative farm business profits, the evidence is there for all to see. A drive through the towns in wheat belt in Western Australia will be enough to convince you that all is not well in the region, the region which provides the bulk of Australia’s second biggest agricultural export industry. What were thriving towns back in the seventies and eighties are looking tired, worn, un-cared for and in many instances partially uninhabited. Too many shops are empty and boarded up. Many motels are worn out and forlorn through lack of patronage.

Royalties for Regions (RfR) may have been a good idea in Western Australia (WA)  for the wheat belt towns but now the real cost of spending $6.7 billion on community projects is emerging. According to John Langoulant a special investigator employed by the current WA government only 9 out of 50 projects presented a business plan.  It is painfully obvious that the politicians who handed out the money were incompetent. “To spend a billion dollars a year on recurrent expenditure without a plan [from day one] … is impossible,” Mr Langoulant said.That says it all. Why do we elect nincompoops?

That $6.7 billion, spent on the regions where the population is declining, would have been better spent on improving the infrastructure and reducing the costs of those who generate the wealth, the farmers. The roads are a disgrace, the rail is not fit for purpose. It is time to demand of the current Labor government in WA, that they stop fiddling while the fires of wheat growing insolvency, burn.

Change or perish.

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Destined for the pot and the BBQ, the best merino genetics in the world.

I wrote some months ago that In 1970 there were about 14000 farms in the wheat belt of Western Australia, today there are less than 5000, a decrease of over 60%. At the same time as farms have got bigger the service industries in those same towns, have died. Even more alarming, there is evidence that as farm numbers have declined so has their productivity.

Merino ewe and lamb

Courtesy WA Agric.

We and others around the world have eaten 120 years of breeding the best merino genetics in the world. The awful irony now is that as the world has become wealthier, especially in China, wool, particularly merino wool, is affordable, even ‘high fashion’ has ‘discovered’ it. What Australian wool growers have been paying for, for for many decades, is suddenly resonating with the market, and, to add insult to injury the world is short of animal protein so it wants more sheep meat.

Getting back into sheep is proving to be expensive with merino ewes selling for well over $150.00 a head, then there are repairs to yards and sheds that haven’t been used for years and for many replacing fences that were pulled out to accommodate a world without sheep. Unfortunately the cost is too high for those most in need of change.

I didn’t publicise my last article on Global Farmer, concerning the forecast demise of the bulk of the Australian wheat industry in twenty years or so, mainly because it was a subject I have written about before. So I published the article and put it up on Facebook. I know how many read the article, (because Facebook knows everything!) so I waited to see if there was any reaction and, not surprisingly, there wasn’t. Plenty of readers and just one comment and nothing from the media. I concluded that maybe nobody believed me or that nobody wanted to believe me or they agreed and had nothing to say.

A friend informed me the other day, that at a meeting of grain growers, which he addressed recently, there was deep concern expressed about low wheat yields getting lower. So why don’t they at least voice their concerns? Do something? Bail up the WA minister and tell her there are more important things than making vodka out of spuds. What was interesting was the reaction from overseas, from India and from a miller in that country who buys Australian wheat. They want to buy direct from the Australian grower, any takers?

I wrote in my last article that unless there is a dramatic increase in wheat yields, to lift the national average above around 1.8 tonnes per hectare, then the forecasts by some of Australia’s best scientists are that the average wheat yield will fall to around 1.5 tonnes per hectare in about 20 years is inevitable, and that drop in yield will be achieved in spite of growers improving their management and achieving 80% water use efficiency, an improvement from an average of about 45% at present and I have seen no evidence that the average grower can reach 80%.

If they haven’t done it so far what is going to motivate them to change? The equation is simple, given the costs to grow at present and the inevitability of increases in those costs and the decline over the last forty years on the real price of wheat, then costs will equal returns. The progression towards that inevitable day will take about twenty years with many growers suffering the equivalent of financial ‘water-boarding’ between now and then. Many are doing it now with ‘negative profit’ occurring too often.

It’s not a complicated argument, I laid out every factor that I could think of and came to the dismal conclusion, the same as I did 12 months or so ago, and that is that the Australian wheat industry is in trouble now and according to the experts, it’s only going to get worse. The trouble with the Australian wheat industry is yield, or more precisely, the lack of it. The rest of the world, by and large has left us in their wake as their wheat yields have increased over the last 20 years or so where ours, whether we like it or not, have been static at best and if we are truthful, declining.

Groundcover™

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I am recovering from an operation on my spine, yes, I do have one. The other night in the ‘wee small hours’, unable to sleep, I read the March-April edition of the Grains Research and Development Corporation (GRDC) publication Groundcover™, the Western Region edition. The first thing that I noticed about Groundcover is the quality of the paper on which it is printed. I’ve had a bit to do with publishing magazines and the like, and I cannot recall ever having been involved with any mass publication printed on such fine and expensive ‘stock’ or paper. I cannot believe that the message can be more powerful because of the high quality of the paper. The GRDC must have a lot of money to spend on magazines.

That said, Groundcover is a high quality production, good photographs, good stories and a lot of ‘spin’ about the efforts of GRDC on behalf of grain growers. There is a good mixture of stories on growers and what they are up to and researchers sponsored or funded by GRDC and what they are up to. What I found intriguing is the lack of talk about money. If you study their literature and many of the projects they are involved there is a lot of stuff that is just plain motherhood! Go to these pages and have a look where hundreds of millions of growers money is being spent and tell what use it is going to be to the fundamentals of growing a profitable crop. Then tell me how you will learn of the results when they happen.

The GRDC is funded by grain growers and the federal government. The bulk of grower funds are derived from growers in WA who provide the bulk of the wheat that this country exports. Are they getting value for dollar? Not with a static wheat yield they aren’t.

Biometrics at $1000.00 a day will save the bacon.

Groundcover, quite rightly, keeps grain growers up to date on how the GRDC is managing and spending grower’s and the Federal Government’s money. One article that caught my eye was about the GRDC investing $18 million over over five years on Statistics for the Australian Grains Industry (SAGI)-3. The money will be spent with the aim  will be ‘to improve national and regional grains research outcomes and ultimately, the profitability of Australian grain-growing businesses’. Eighteen million dollars over five years is $3.6 million a year, which is about $1000 a day, that is a lot of research money.

Dr Steve Jefferies, managing director of GRDC says, ‘This investment will increase the national grain industry’s capacity in biometrics — the application of statistics to biological data which is important for ensuring grains research is statistically sound and credible.’ The article is worth a read, I am the first to put my hand up and admit I don’t understand the science behind this project but I do understand the claims being made to justify the expenditure on what is described as the ‘unsung hero’ of grain’s industry improvements and I note it is already an ‘investment’. Really? I wonder what the Return on Investment is?

One of those claims about improvements, again from Dr Jefferies, is, ‘Through the GRDC investments over the past 15 years, statistical science has played a critical roll in breeding better grain varieties and delivering more efficient RD&E targeting grower priorities’. That is an interesting claim. If you have a look at my last article, ‘There will be no Australian wheat industry in 23 years time’, I lay out chapter and verse the undeniable facts that Australia, over the last twenty years, has been unable, for whatever reasons, to match the wheat yield increases, which have been achieved by other countries, some of whom, like Ukraine, are now our major competitors in the global wheat trade. If anything wheat yields are declining and are forecast to continue to decline. It’s about time Australian wheat farmers asked, ‘Why is this so?’ I am sure we will all watch with interest to see the practical results from this eighteen million dollar investment of growers and government funds.

Benchmarking.

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Graph 1. Nothing has changed in the last 7 years. The debt is now over $70 billion and the gross value flat lines. Courtesy Ben Rees. My comment not Ben’s

There is also an article in Groundcover by Ashley Herbert, ‘Australian Wheat International Benchmarking’. It is an interesting article in so much that Ashley comments that Australia is no longer a low cost producer of wheat. I wonder when we lost that advantage? It was almost certainly started when we adopted the fiscal philosophy and practice of Thatcher’s, Reagan’s and then Keating’s and Hawke’s ‘market economy’.  That was when we gave up our comparative advantage over the rest of the world and decided we would try and get a kick of the footy with the big boys, on their oval and in their game with them setting the rules. Certainly for agriculture we didn’t realise, or at least our governments didn’t realise or didn’t want to accept, that the big boys made the rules, that the playing field wasn’t level and they would cheat without provocation, they kicked the ball to each other, the biggest cheat was and still is, subsidies.

Thirty years on we are reaping a bitter harvest from decades of poor agricultural policy. The Australian wheat industry cannot be a low cost producer, when the rest of the world has ensured that the Australian wheat industry is dependent on importing virtually every input needed to grow a crop of wheat, and many of those inputs, like machinery, are from countries with higher yields than those being achieved in Australia. As the price of wheat is international, it stands to reason that a grower producing 7 tonnes of wheat per hectare can more easily afford a tractor or a header than a grower producing 1.8 tonnes per hectare. It’s not rocket science is it?

When the decision was made that Australia would join the ‘market economy’, gradually at first and then with increasing and inexorably pace, and almost with noticing, we stopped manufacturing the inputs, particularly machinery, vital for our low cost wheat growing regime — we were seduced by the promise of better times. Growers in turn were willingly seduced by the bright colours and promises of greater efficiency and greater profits to be had from using the red, green and yellow machines of North America and Europe. Tractors, seeders, harvesters, were imposed on us at costs, which were incompatible with our low yield and at the time low cost regime — but there was nothing we could do about it and maybe we didn’t care?; It was either buy them or perish. We had high cost inputs imposed on our low yield wheat growing economy. Now we are reaping a bitter harvest.

Take control.

Can we turn it around? Of course we can if we have men and women of substance, character and courage to take control of the wheat industry and put a stop to the self indulgent spending of growers money by agricultural bureaucracies. The time has come to say, ‘Enough is enough. You have had your chance now get out of the way.’

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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