Australia – an astounding place.
In the Beginning.
It came as something of a surprise to me the other day when I realised that my wife Lynne and I have lived in Australia for over fifty years — half a century! Most of that time in Western Australia.
As I write, it is Australia Day. For some there are parties and fireworks. For others there are protests, rallys and marches because they believe that today should be a day of shame, because it is the day that the British stole Australia from its indigenous people.
Jacinta Price puts Australia Day into context for me:
Australia Day is often heralded by ads about lamb and barbies being ‘Australian’. But what does it actually mean to be Australian? I am half Warlpiri and a mixture of Irish, Scottish and Welsh. My sons are of Warlpiri, Irish, Scottish, Welsh, Malay, Indian, French, African, Chinese, Scandinavian and German ancestry. My stepson is half Scottish and a quarter Mauritian. They are all 100% Australian. My husband and stepfather of my children is Scottish but calls himself a ‘Scaussie’. What we all have in common is a love for this multifaceted and beautiful nation.
My great grandfather’s grandfather was convicted of ‘robbing a soldier of his arms’, in 1832 in Kilkenny at the age of 21. He came as a convict in 1833. He was an Irish patriot fighting for his faith and people. In the current political climate I would not be expected to acknowledge and celebrate his life because I have a Warlpiri mother. Most of the self-identifying indigenous members of our community who claim to feel hurt by Australia Day being held on the January 26 would also have white ancestors in their family trees and may not even have been born if the First Fleet hadn’t come.
A Sense of Wonder.
I can still remember the ever increasing sense of wonder and admiration that I had as I got to know the small wheatbelt community of Coorow, who so warmly welcomed Lynne and I and one small child into Western Australia.
While still in England we had read the government propaganda pamphlets about Western Australia and we’d seen a couple of films, but in reality, making the decision to be a ten pound Pom was a gamble. We had our ‘eyes wide shut’, we were blinded by ambition and the sense of adventure and nothing, nothing could or did prepare us for what we would find or how we would feel when we realised that every place and every person we known since birth, we had left behind in Britain.
Our sponsors for migration were John and Allison Doley who owned a farm called Koobabbie in the Shire of Coorow, which is 290 km north of Perth in what is known as the Mid West. First settled in the 1860s and by 1966 the Shire of Coorow had a population of 808, and in 2016 that had grown to 1036, due to the opening up of the land west of Coorow and the development of the small coastal town of Leeman. John and Allison were incredibly kind to us, not just for sponsoring us, but for helping us settle into this foreign land.
We spent one day in Perth completing the migration formalities. The buildings on St Georges Terrace were testament to the pride of a people who in 150 years or so, had turned a settlement of tents and bark huts on the banks of the Swan River into a majestic city. I’m glad I saw that Perth before the vandals got to work ripping out its heart and its testament to the pioneers by knocking it down and rebuilding it into a city that I find somewhat soulless. I watched it happen and it was called progress, by some at least.
Settling in Coorow.
Coorow was first settled by the Long family just 31years after Swan River Colony was proclaimed by Capt James Stirling in 1829. What amazed me was the development that had been achieved in Coorow and every other town in the wheatbelt in just a hundred years between 1829 and 1929 and in the 138 years to 1967.
The early settlers had cleared farms from the natural big timber virgin bush, into a self-sufficient communities that wanted for little. Western Australia must have had some amazing people in the state government and private industry, which at the same time as the farmers cleared the land, they financed and built a comprehensive rail network that by 1929 was some 5000 miles or 8000km long this was equal to a mile of railway for every 80 persons in the State. A system which connected every community between Geraldton, Horseshoe and Meekatharra in the north, Kalgoorlie, Leonora and Laverton in the east and Esperance in the south to Perth and Fremantle. In 1917 the first train crossed the Nullabor connecting Western Australia to the rest of the Commonwealth.
John Forrest travelled from Perth to Adelaide in five months in 1870. In 1917 he travelled from Adelaide to Perth, by rail, in three days.
But the big achievement detailed in: Maps of the Western Australian Government Railways (WAGR) system in the 1930s show that in the main wheatbelt region, any railway line was within 30 miles of the harvest location, facilitating ease of access to rail transport for every wheatbelt farm.
That meant that by the 1930s no grain grower had to transport grain, all in bags, more than 30miles (48km) to the rail siding. The wheat harvest in 1930 was 33,827,601 bushels or 920,629 tonnes. In 2018 the forecast for the 2017/18 crop is about 10 million tonnes. By the end of 1928 the WA government had spent £24 million on the rail system in the first 100 years. That is equivalent to £345 million today —what an achievement with a population that grew from just 1003 in 1829 to just 405,000 by 1929. The Australian pound had parity with the British pound until 1931 so £345 million today is the equivalent of about $612 million.
In 1967 a large part of the railway infrastructure was still operating. At Koobabbie we were about 40 minutes from Coorow with an 8 tonne truck loaded with wheat. Seems small bickies today but 10 to 12 trips a day was good going over gravel and bitumen. The 1968/9 the WA wheat harvest was 3.060 million tonnes, 69/70 was a drought year, it dropped to 1.815 million tonnes only to rise again the following year to 2.957 million tonnes and stay at around that figure for the next few years.
What is interesting is that WA Government Railways only transported 1.5 million tonnes from the ‘hinterland to the port’ in 1968/69 which was about half of the 3 million tonne harvest. Then the percentage changed with rail carrying the bulk of the WA wheat harvest to the port terminals. In 69/70 rail carried 2.3 million tonnes out of a harvest of 1.8mt, which means there was a carryover from the big harvest of the previous year. In 70/71 rail carried 2.5mt out of a harvest of 2.9mt. The following year the harvest was 2.1mt and the rail carried 2.6mt to port.
So, half a century ago rail was carrying a substantial proportion of the annual WA grain harvest to port and it was also carrying fertilizer and other vital inputs back to country rail sidings. Providing an order was placed early enough with a Perth supplier, most of Western Australia enjoyed a next day delivery a service as good or better than today. I have a feeling that there was legislation compelling livestock for Midland to also be carried by rail, if that isn’t the case I do well remember that we could load sheep and lambs in Geraldton and they would be sold in Midland the following day. No B doubles in those days clogging up the narrow main roads, just a slow quiet journey by rail.
To a newcomer Western Australia the rail system, albeit slow by some standards, provided an exceptional service to a rapidly growing agricultural sector.
Heading for a Train Wreck and the Comparative Advantage.
In 1967 and new to Australia, the comparative advantage West Australian wheat and sheep agriculture had over the rest of the world’s agriculture astounded me. My views were supported by the huge amount of foreign capital which was flooding into the country at that time to buy established farms and virgin land for clearing. The opportunity was evident to the world’s investors that Western Australia was the place to put their money into the agriculture of the future.
A million acres a year of virgin bush was being cleared by those investors, established Australian farmers and their families from all over the country, and anyone else who could show the selection panel that they had the knowledge and the money to do the job. The granting of land was conditional upon development taking place within a certain time.
Mistakes were made, there is no doubt that some land was released that should have remained bush, but hindsight, as I have said many times, is the only precise science. It would appear that funding for the research looking for the answers to the rapid encroachment of salinity stopped soon after the turn of this century. We’ll come back to salinity at another time.
In the 1960s what was also impressive to a newcomer was that much of the machinery used to clear the land was made in here in Australia. Western Australia made tractors, ploughs, rakes, scarifiers, seed drills. Harvesters came from South Australia and Victoria, by rail. Western Australia at that time was almost self sufficient in agricultural machinery, fertilizer, chemicals and virtually all the inputs required to drive agriculture forward. That was fifty years ago — today there is hardly an input into cereal farming that isn’t imported from overseas.
The drive to clear more land and so increase the production of food was due in no small way by those who convinced the world they could predict the future. In the 60s and 70s Paul Erlich and his wife Anne and their book The Population Bomb were predicting mass world starvation within a decade or so and for a while they frightened the world. Their book began with this statement: The battle to feed all of humanity is over. In the 1970s hundreds of millions of people will starve to death in spite of any crash programmes embarked upon now. At this late date nothing can prevent a substantial increase in the world death rate.
Then along came Prof Norman Borlaug and his team of pioneers and the green revolution and made the Erlichs look like fools: The ability to grow more food on the same amount of land was also beneficial to the environment because it meant that less forest or natural land needed to be converted to farmland to produce more food. This is demonstrated by the fact that from 1961 to 2008, as the human population increased by 100% and the production of food rose by 150%, the amount of forests and natural land converted to farm only increased by 10%.
There was also something of an altruistic fervour about farming in those days we were playing our part in saving the world. Farmers organisations did and still do remind us of how many people Australia feeds apart from its own. There was an aggression too. Remember ‘You’re in cattle country now so eat beef you bastard.’ There was another admonishing people for arguing against farmers with their mouth full.
There was a palpable sense of optimism, progress and achievement permeating through the wheatbelt in those days. Grain yields were still increasing and new technology like direct drilling or minimum tillage, new clovers and better wheat varieties were decreasing costs together with new chemicals to control grasses like ryegrass with Trifluralin, they all added to what was a vibrant and progressive and optimistic agriculture.
There were no senseless illogical protests fifty years ago from those plastic patriots of today warn us of the dangers foreign ownership of land in Australia.
Opportunity was knocking.
“Failure is simply the opportunity to begin again, this time more intelligently.” Henry Ford
“In the middle of every difficulty lies opportunity.” Albert Einstein
In 1960s and 1970s there was an opportunity to build a prosperous, self-reliant West Australian agriculture with a future to match that which our forbears had developed following the settlement of WA in 1829 — but it was not to be — like the priest and the Levite on the road to Jericho, my generation ignored the man who had been set upon by thieves, we looked the other way. We were too busy to be a Good Samaritan to ourselves.
It didn’t need a degree in economics to calculate the strain that the wheat and sheep from an additional one million acres a year would put on the existing infrastructure of road and rail. Grain and livestock had to be moved one way or another from the farm to the markets and ports, and from the ports to markets overseas. The same applied to transporting inputs into the ‘new land’ areas. Developing, expanding and modernising the existing rail network to keep up with the expansion of WA agriculture needed sensible foresight and planning of the quality and excellence of our forefathers, something my generation and the generation before us just didn’t have. We looked the other way.
The politicians and governments of all persuasions promoted, encouraged and applauded and were proud of the expansion of the agricultural industry in Western Australian in the 60s and 70s. Then in the late seventies early eighties Western Australia started to change, agriculture was no longer Western Australia’s biggest industry. The change when it came was sudden and dramatic.
It was like the gold-rush of the 1890s all over again. Perth was a frontier town. Foreign investors with enough money to build railways and ports were everywhere but not this time for agriculture, but for minerals, iron ore, bauxite, mineral sands, you name it and for a while it seemed like it had been found in Western Australia and the world wanted what we had.
The big plus for the West Australian government was that they didn’t have to put their hands into their pockets for the new ports and railways others did that and willingly, all the government had to do was build a few ‘frontier towns’ and collect the royalties.
Thatcherism was taking over the world. The market economy was the mantra for many governments. Those Australian Socialists Hawke and Keating embraced Thatcherism and floated the Australian dollar and sold off the assets of the people like the Commonwealth Bank . A move which was a disaster for Australians and a bonanza for investors. Tony Blair, also a Socialist and the man who succeeded Thatcher in the UK, did not reverse her policies. The adoption of market economy philosophy started the demise of Australian manufacturing, especially in agriculture. Within a decade or so we were forced to pay world parity prices for our crop inputs and with yields per hectare of less than half of those of many of our competitors, we faced and still do face a huge challenge of low yields and international costs — we danced to the pipers tune and we have done ever since.
Then the world slowly changed.
Gradually over the next decade or so West Australian agriculture realised that successive governments were intent on letting what was was once one of the finest railway networks in the world, decay. A rail network that covered an area the size of Britain was deliberately being allowed to rot. As the output from agriculture increased the infrastructure to support it was withdrawn by the governments of the day, if there was a squeak from agriculture it was just that, a ‘squeak’. Government ineptitude, output up, infrastructure down.
As the harvest size increased year on year and the sheep population reached over 30 million, more and more strain was put on the roads as trucks got bigger and carried heavier loads, loads for which the roads were not designed. To make matters worse no new roads were built, no new highways to take rural produce to market.
The Brand Highway opened in the seventies and for those of us living in the Northern Wheatbelt it was a godsend, but it was only a two lane highway and at the same time as it opened, the Government relaxed the requirement for freight to first go to Geraldton by rail on its journey to the Pilbarra and the Kimberley. So immediately what started as a highway for small vehicles became a highway for big trucks. Then the truck industry seduced the governments of the day with the promise of freight rates lower than a now ailing rail network and a struggling, run-down State Shipping Service could offer.
What great system piggybacking heavy freight on rail to Geraldton, Albany and Esperance would be now with our roads clogged with trucks. Being a State as big as Western Australia and with a coastline covering virtually all the larger towns, the creation of what became the State Shipping Service was a ‘no brainer’ when it was formed in 1912. What a godsend an efficient shipping service would now be servicing the mining and oil and gas industries in the north.
I’ll bet when the bureaucrats did their sums and advised their Minister to let the railways rot because they were not paying their way, and the State would be better off taking vehicle registration fees they didn’t know that research would eventually show that a B Double wears the road ot 20,000 times quicker that a family car, and to add insult to injury, they pay far less for their diesel than the average motorist.
Is it any wonder that our main highways in Western Australia are constantly being repaired, repair upon repair? The State now spends its money madly building new ‘passing lanes’ in an attempt to calm angry motorists behind convoys of trucks. Passing lanes which become race tracks as streams of cars break the speed limit in an attempt to get past the trucks before the road closes again to two lanes and frustration.
In 1979 Premier Charlie Court closed the rail line between Perth and Fremantle his contention was we didn’t need it. Just look at it now.
It is not unreasonable to claim that in the period from 1829 to 1989 wheat and sheep farming provided sufficient funds for agriculture in Western Australia to grow and in many ways prosper. But then in the late seventies and eighties as the real price of wheat around the world started to decline, yields in Australia stopped increasing about 1990. The rural population declined due to the acceleration of farm aggregation as many smaller farmers sold their sheep after the 1990 wool price fiasco. Farmers with more land invested in bigger and bigger machinery, started pulling out fences and moving towards crop only rotations. The impact of these changes on rural communities was inevitable, slow, and in many way pervasive. Pupil numbers started to decline schools closed and businesses in small rural towns like Coorow started to feel the pinch.
So where did it all go wrong?
There is an interesting article from where I got this graph which shows that in 1973/4, wheat at today’s value or the real price was over $500 a tonne, it then jumped to about $800 in 75/6, and then fell back to $500. The constant decline in price, where the value of a tonne of wheat fell below $500 tonne to never recover was in 89/90, coincidentally at the height of the wool boom.
Ross Kingwell, a well known West Australian economist from the Australian Export Grains Innovation Centre seems to be arguing that innovation has and can handle a decline in real prices over time of a bit over 2%, and if they can’t why haven’t lots of farmers gone bankrupt? he asks. Well of course the answer is that those who couldn’t make a profit or thought they didn’t have enough land to make a profit, sold up, they got out of farming. There are now 60% fewer farmers in WA than there were in the sixties. Maybe those who are left believed that the bigger the area of crop the bigger the profit? Maybe the farm profit increased but what about the profit per tonne or per hectare?
Darin Qualman, a Canadian, has traced the the real value of a bushel of wheat in Canada for the last 150 years and he puts it into perspective by asking the question, ‘ How many bushels of wheat would be needed to buy?’ and so on. This is the graph and it has been adjusted for inflation, Darin makes some interesting observations on how many bushels of wheat are needed to buy something now and then. What do you think?:
My father bought a new, top-of-the-line pickup truck in 1976 for $6,000, equivalent to about 1,200 bushels of wheat at the time. Today, a comparable pickup (base model) might cost the equivalent of about 4,000 bushels of wheat. As a second example, a house in 1980 might have cost the equivalent of 20,000 bushels of wheat; today, that very same house would cost the equivalent of 60,000 bushels.
Darin claims that prices in 1985 as the beginning of the rapid decline in wheat prices, it was about that time that prices in Australia fell below $500/tonne.
Darin contends that declining grain prices have had the following effects on Canadian agriculture:
– The expulsion of one-third of Canadian farm families in just one generation;
– The expulsion of two-thirds of young farmers (under 35 years of age) over the same period;
– A tripling of farm debt, to a record $102 billion;
– A chronic need to transfer taxpayer dollars to farmers through farm-support programs (with transfers totaling $110 billion since 1985); and
– A push toward farm giantism, with the majority of land in western Canada now operated by farms larger than 3,000 acres, and with many farms covering tens-of-thousands of acres.
As per-bushel and per-acre margins fall, the solution, some say, is to plant more hectares. The inescapable result is fewer farms and farmers.
According to the Reserve Bank of Australia the total Rural Debt in Australia in 2018 was $76.4 billion. In 2014 it was $66.3 billion. In 1969 the rural debt was $1953 million. In 1980 it was $3769 million. The number of farm businesses is declining and the debt is increasing.
No one can survive without food. How is it then, that no matter where I look around the globe, those who grow food for a living, both in in countries where agriculture is subsidised and where it isn’t, are having trouble making a profit year on year? Sure, there are good years and they are what everyone likes to remember but there are also bad years which everyone tries to forget. Mix the two together and the average yield of wheat per hectare in Australia is about 1.8 tonnes. That is the reality.
Figure 10 shows the increase in rural debt per farm in Australia. I’ve expressed my concern about these figures more than once. It shows an average farm debt of around $850,000 to $900,000 over the last five or six years and the trend line is on the up. I suspect, although I don’t know if this figure includes debts to merchants and suppliers and cash advances made by traders like Cooperative Bulk Handling (CBH) in WA.
I learned recently that more and more land is being leased and the difficulty some tenants have in raising working capital to crop on land in which they have no security. I gather, and I haven’t gone into it in any detail, that suppliers and grain merchants have been stepping into the breach and taking a lien on a crop of sufficient size to cover their exposure, so there may be more debt than appears in the statistics.
Paul Keating used to put up the argument about the national debt that it isn’t the size of the debt, he used to call it the national Bank Card, but rather the ability to repay as and when the debt falls due. It’s a sound argument except when this happens, see Fig 2:
ABARES explains negative farm business profit in this way:
At the national level, strong financial performance in 2016–17 resulted in a fall to around 32 per cent in the proportion of farms recording negative farm business profit, the lowest since 1989–90 (Figure 2). In the 10 years to 2016–17 the proportion of grain farms recording negative farm business profit averaged 51 per cent a year. In 2017–18 a projected 37 per cent of grain farms will record negative farm business 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 profit when their income fluctuates. However, ongoing low or negative profit affects long-term viability because farms have reduced capacity to invest in newer and more efficient technologies.
It was the last sentence that caught my eye and reminded me of an article I had read by an American rural economist Steven C. Blank: The Profit Problem of American Agriculture: What we have learned with the perspective of time.
Blank contends that poor profit in American agriculture is nothing new, in fact it has been around for eighty years or so. Most disturbingly he forecasts: Farm income for 2018 is forecast to fall to its lowest real-dollar level in nearly two decades (USDA, 20018c). He further makes the point: Profits to U.S. agricultural producers are being squeezed because for an increasing number of commodities, price is global, production cost is local. That means the markets and prices of commodities have become global in scope, while production costs remain local. Thus, profits vary by location. With a single competitive ‘world price’ ceiling affecting producers of a global commodity, it means that local costs determine the profit per unit for producers dispersed across the globe and, therefore, costs determine which producers will survive in the long term.
Canada has realised that it must do something about the cost of getting grain to the ports and they are investing heavily in modern rail infrastructure. Bigger wagons and bigger trains. They need to, see Table 13.
Competition for ‘our’ markets.
WA generates about 50% of Australia’s total wheat production with more than 95% exported predominantly to Asia and the Middle East. WA produces white grained wheat varieties that generate high flour milling yield and a bright white flour that is suitable for a range of products.
Historically Indonesia has purchased from Australia over 4 million tonnes of wheat a year worth $1.2 billion. Virtually all of that wheat is supplied by Western Australia. The population of Indonesia is predicted to grow by 30 million to 295 million by 2030.
You don’t need to be a Rhodes Scholar to understand Graph 1. Ukraine, Russia and the Baltic States have the land and the capacity to increase grain yields.
In August last year Mr Gorbachov, President of the Ukrainian Grain Association claimed that his country can increase it’s average wheat yield from 4 tonnes per hectare to 8 tonnes per hectare by deploying the same technology as the rest of Europe.
Table 13 tells the full story for Australia and how it compares with the rest of the world and more importantly with countries like Ukraine, Russia and other Baltic States, who are rapidly ramping up their infrastructure and production, unlike Australia they have the very real potential to substantially improve yields.
So what can we do? More importanty for us in Western Australia who rely on the export market, what can we do? To start with it would be helpful if there was an indication from the West Australian Government and in particular the Minister for Agriculture, Alannah MacTiernan, that she and her government recognised that we, Australia, are rapidly becoming uncompetitive in the world wheat markets. Never mind about the high profile cottage industries, which have urban and ‘green’ appeal like the truffle market which might be worth in total $10 million, in 2015/16 Western Australia exported wheat worth $2.8 billion and barley worth $820 million, so let’s get real. The sales from the 2018/19 harvest will far exceed that figure.
The first thing that must be done is to impress upon those in government that unless West Australian wheat growers have an infrastructure, now and in the future, which is competitive with our competitors we will be pushed out of what is becoming a world market in which we will be unable to compete. Without wheat in Western Australia what will we have? Probably just untidiness as those to whom money is owed scramble to recover what is theirs.
Stop Press.
The WA State Government has just announced that two reports are complimentary to the establishment of a sea freight service to the Pilbarra, back to the future!
‘Bangalore’ Fatwa in the Outback.
Forgot to mention that ‘Bangalore’ is doing reasonably well in the short time it has been out. You can read about it in the book section on this site.
It’s a Print on Demand system, POD, working well so far. You can order on line, Amazon, of course, seems to be the cheapest, but it looks like no matter where you are in the world, for goodness sake! There is a bookshop advertising ‘Bangalore’ even in India. Years ago, when I was in the army, late 50s, I was taken to Foyles Bookshop, in Charing Cross Road in London. I spent hours browsing and spending too much of my measly pay in there, I bought the first James Bond ‘From Russia with Love’. Now they are advertising my book!
The system is the same whether you order on line or through a bookshop, you pays your money and the book should be with you within 7 to 10 days. I have made two orders so far for promo and they, whoever they are, have been bang on.
I’m getting good feedback from people who are reading it, so if they write to me as I have asked, I will publish their views.