Take control of the wheat industry.

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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™

Pig_EOG

 

 

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.’

6 thoughts on “Take control of the wheat industry.”

  1. Gday Roger-
    The wheat industry seems to be in lock step with every other Primary Industry in Australia. We all have “Levy funded” propaganda units that boost the daylights out of their trough dwelling favourites. Like you say – very glossy & the implied message is that – if the peaches & cream is not flowing to ones fridge and bank account…………………
    well you better read how the clever, smart 10% operate!!!!!!!!!!!
    Very devisive crap -especially when the average age of primary producers is so high.This is a slur on each persons lifetime of experience. I’m sure that “innovation” in farming has come from the “elite” farmers over the years working with Agricultural Engineers to make more precise equiptment(eg minimal till etc)
    No one can predict the seasons yet ( with bankable accuracy)- so the lucky dip makes some “smart” and some “losers”. I have spent a lifetime in wool/beef/lamb(43 yrs) & the NUMBER#1 problem is pathetic -Farmgate returns. If this were rectified to a true/fair /competitive level- the elements/failures would be taken by all in their stride. They all (primary Ind ) have their moment in the sun for about 12 months-every decade-but it is a staircase to the bottom and the cellar /dungeon for Australia is looking closer by the day,
    Roger- the reason that people appear numb to any information- is that the continual chaos and scandalous/traitorous behaviour from right at the top-(PM/cabinet/ 2 party straight jacket etc)-is so toxic that no one even bothers with the nitty gritty of sorting out our baseload money earners for our country.
    Couple this with a lazy left wing media in all the mainstream that would rather burn Israel Folau @ the stake- than research a story -such as you have done very well here Roger. This Grain levy toad plus the Meat & Livestock Australia are by far the biggest bloated of the dozen or so levied Industries.
    They seem untouchable by ANY politicians. I have “whistleblower” material with several senators re Processors controlling Cattle producers MLA govenence -via their Grainfed levy from there own feedyards to their own Works. I maintain that this isn’t a transaction & they AREN”T paying(there are 528000 Grain fed -NON levies) -in a file that I obtained from the Levies Collection Unit (by mistake??) How did these get in that column-and from where did they come from -Mr Littleproud???????
    I have requested that senators Sterle,O’Sullivan,Williams- who I gave this evidence -into Hansard by the senate Inquiry hearing I appeared at- FOLLOW this up with The Aust National Audit Office ANAO………………..the useless bastards haven’t even had the decency to reply to me????
    These same gutless wonders re the meat mafia- love a” soft target” and in their wisdom – have conducted a full performance review of AWI- the wool body???? Wool is finally at record levels because supply is so short & it is the only Levy mandated set up where we can set the rate of levy every 3 yrs by poll(0 means wind up)= every $ put in gives a pro rata vote entitlement.So wool is the ONLY equable/non compulsory unionised Primary Industry.
    Just because Wal Merriman told a snotty nosed ABC journalist to f..k off- all of the “parasite” class line up to gang bang him out of his Chair role. He would have forgotten more about the Industry than these vermin ever knew. It was a ABC hit job that destroyed the Wheat -single desk and later the 4 Corners setup that destroyed the cattle industry as well.
    I am certain that we are way past the point of “no return” and intend to wind back to subsistence level – no more churning over $6-700000 pa to pocket less than being on the dole!
    I’ll sit back with a carton of Rum & Cola a week and watch all these clever ABC arseholes go broke when Canberra runs out of cash for their bloated pay packets.

    1. Thanks Rob, still calling a spade a spade I see. I have had a couple of emails along the same lines as your, just as angry, perhaps this will encourage them to print? The signs are not good, I am reluctant to use the ‘bad’ word. What is disturbing is that so many farmers and others in the industry who are younger than us and I am older than you, seem to have accepted the inefficiencies of the organisations they fund through levies. The other thing which is quite appalling Rob, is as you correctly say, the lack of intestinal fortitude among the elected, the politicians of all parties to ask the questions that need to be asked and to demand answers from the levy takers. As for Wal, well goodness, when has telling someone to remove themselves in that manner, and with those words become a hanging crime in Australia not just rural Australia? You are right the people who are offended are probably the same who defrauded the people of Victoria of about $1.4 million, said ooops whens they were caught, paid back $400,000 and then forgot about the million in legal fees their Attorney General spent defending their original fraud. The same people who now want a non-gender specific birth certificate in your state.
      I will not give up and I encourage you to do thee same, we won’t get action by saying and doing nothing.

  2. If the “rule of law” ONLY works for those that can shovel the $’s in with a front end loader- anarchy awaits this sleepy corrupt country.I have learnt a thing or two in the last decade while putting it to the most senior players in this country. Individually they are a pretty bland ordinary lot BUT when they enter the hallowed luxurious two ringed circus with it’s two party duopoly firmly safeguarded by years of stacking the judiciary & top public service jobs……………..well …there is no tomorrow……a $B a day more debt to buy the apathetic compulsory votes to keep it all afloat a bit longer= no sweat!.
    imo -The only way to make any of them” blink” -is to grab them by the balls and start squeezing…………..Al Capone went to jail for Tax Evasion – not murder. To achieve this -one must put a “ticking bomb ” on their desk (so to speak)- with a clear paper trail that cannot be wormed out of…………………..This I have done with Senators Sterle & O’Sullivan & Williams. David Littleproud (my local member ) is also bearing witness to my WHISTLEBLOWER request to the ANAO. Any MP or Senator can instigate an inquiry(not the public)…………..so why would it be that these same ppl are in such denial that they can’t even reply back. I have asked for an email SAYING that they won’t proceed!
    It is quite unacceptable for the 2 Qld Senators to totally Ignore me!
    My evidence cast doubt over the funding /Control & Governence of the MLA- for the last 20yrs.This is an annual “slush fund ” of $160 M of which I am forced to put in abt $5000pa. The head honcho is on a salary of $520000pa.
    I have help on this mission & will not give up or be denied- these horrid people will be bought to account! Just look at this Banking fiasco unfold! Turnbull & his ilk fought tooth and nail to keep the lid on this!

  3. Hi Roger/Rob,
    Some background notes that I shared with Rob and he suggested that I drop them in here for you also.

    Gillard & Co legislated for a transparent wheat pricing site similar to your PPP re beef whereby grain handling companies had to list the volume and type of wheat stocks held at any one time so that growers could determine the best breed to grow for the next season based on the stocks held etc.

    The grain companies came back and claimed that it was all “too hard” and at that time the govt. had changed hands and Barnaby let them off the hook. It was legislated, it was compulsory and not voluntary but he let them off. Peter Mailler estimated a negative impact to the industry and the communities (via the 7 x factor) that amounted to some $81 million in the first year of default.

    Rod Culleton’s frontal attack on banks has now been vindicated and no doubt he would have had wheat in his sights also if they had not colluded to throw him out of the senate illegally. Shades of Pauline all over again there, and even she folded when they attacked him. Gun shy from her own experience with them?

    No reply/email acknowledgement from Helen Walker (Fairfax Media) so another dud in the packet? – no response from that Page Research Group (Nationals media hipsters) so ignoring people seems to be the modus operandi across the board?

    The internet certainly has some +’s and also some -‘s in it. It is a perfect tool for them to glean the mood of people without having to engage with them. Maybe the days before when they had to front “town hall meetings” face to face to sell their policies and themselves and answer eye to eye was a better way?

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