Convincing evidence – Short of a miracle, the Australian wheat industry is terminal.

In this issue I republish the simple truth from a leader in Australian grain marketing, Mr Palmquist from GrainCorp. He confronts us with the unpleasant reality that an antiquated infrastructure is being paid for by grain growers and I suppose by definition he is saying the only ones paying, are the growers. An expensive infrastructure, together with the poorest world wheat prices for more than a decade are wrecking the budgets of Australian wheat producers. This grain trader says he has no option but to pass the costs on to the grower — he would say that wouldn’t he? He only has to answer to shareholders — growers only have to answer to the bank. As an example he claims it’s cheaper to move grain from Ukraine to Indonesia than it is to move it 350 kilometers from Swan Hill to Geelong.

Continue reading “Convincing evidence – Short of a miracle, the Australian wheat industry is terminal.”

Australian Wheat is too Expensive – Interflour.

The World Wheat Market – Where is it going and where are we going with it?

Interflour has added to its Vietnam flour mill portfolio, with the purchase of an existing mill at Da Nang on the central coast adding to its site at Cai Mep (pictured). Photo Fairfax
Interflour has added to its Vietnam flour mill portfolio, with the purchase of an existing mill at Da Nang on the central coast adding to its site at Cai Mep (pictured). Photo Fairfax with thanks.

The recent comments reported to be made by Greg Harvey, Interflour’s Australian born Chief Executive, that Australian wheat is too expensive for the markets in Indonesia and Singapore defies belief. If we cannot be competitive in the big and expanding markets on our doorstep, with wheat at the price it is at present, where will that leave Australian grain merchants selling into markets around the world? What price for growers at the next harvest?

The move into Interflour was strategic for Cooperative Bulk handling making vertical integration a reality for Australian wheat growers. Recent announcements have reported Interflour expanding into Vietnam. Cooperative Bulk Handling the West Australian grain handling and marketing cooperative owns 50% of Interflour. Interflour, which now owns nine flour mills across Vietnam, Indonesia, Malaysia and Turkey is, one would think, integral to the prosperity of WA wheat production, if it is to meet the challenges of market expansion in the region in which Interflour operate.

This story fits in quite nicely with another story. A few years ago I was talking to a lady whose family had decided to build a new biscuit factory in Indonesia rather than Perth and then export their biscuits into Australia and around the world. I found their biscuits and good they were too, on the shelves of Woolworths. Out of curiosity and because of what was on their label I phoned their Perth office.  The lady was quite open in claiming that it was cheaper ‘for them’ to build a new factory and manufacture in Indonesia than in Perth. She claimed their factory was as clean as any Australian hospital and having a base in Indonesia it opened up the world wide Halal biscuit market to them.

I said I hoped they always used Australian wheat. Her answer was something like ,’We do when we can, at the moment we are using British wheat. Sometimes we can’t get Australian wheat.’ I never thought to ask if that was because of price — It never entered my head. If Australian wheat remains too expensive — just look at the markets below.

Continue reading “Australian Wheat is too Expensive – Interflour.”

National Bank Bastardry – Part III – Greed.

Money and Greed Conquer All — Including the Law?

So who in this land of the free protects the weak and poor, like the Cronin family, from the financially strong like Ferrier Hodgson and the National Australia Bank? The answer is nobody, at least nobody that we have been able to find—we are still looking.

Man walks up to jewellers shop window, chucks a brick through it, grabs a couple of trays of diamond rings and then an hour or two later finds himself wearing steel bracelets and in the back of a Paddy Wagon.

His mate, who the robber had taken into his confidence, had hidden around the corner, took a video of the robbery, sold it to the police and collected the reward.

No excuses for the NRL player recently videoed behaving very badly, but the cockroach, the traitor who took and sold the pictures got something like $40k from the media scum is different. That cockroach deserves a punishment far worse than that metered out to the player.

The other one dobbed in his mate and if he has any vestige of a conscience will have to live with his treachery all of his life.

What motivated the two video enthusiasts? Greed. Greed caused the Global Financial Crisis and few if any ‘on Wall Street’ who caused that crisis were punished, they took their government funded retirement packages and disappeared as wealthy men.

Money Never Sleeps – Neither do the Greedy.
Gordon_Gekko
Gordon Gekko

Perversely the 2010 film ‘Wall Street-Money Never Sleeps’ the sequel to the famous 1987 film ‘Wall Street’ starring Michael Douglas became almost cult films. Both stories concentrated on greed and both, apparently, caused a rush of graduate applicants both in America and the UK wanting to work in the banking industry.

One of the few advantages of being over a three quarters of a century young is (thankfully) I can still look back with a deal of clarity and compare yesteryear with today. Don’t jump to conclusions—this is not about the good old days. I have only reached this age because there are cures for what killed many of my ancestors. ‘Jack the Magic Dancer’ is not the man he was and I continue, helped by some very clever people, to beat him. I cannot help but compare our wonderful health system with our antiquated legal system. It is as if we are frightened to change, little realising that an antiquated legal system increases the cost of the health service. Think about it.

My age and my experience were on my mind a lot while was writing the last two episodes of the Global Farmer. I have contemplated if the world has changed or whether I have? Whenever I have started to write this series, the word GREED has materialised on the screen—so I thought this month I should pay it some attention.

I should also declare I have only been to one mortgagee’s sale in my life. I only went to fly the flag. I was a farm manager so the chequebook wasn’t all mine but there was nothing to stop me, for a mate, pushing the bidding if needed.

I saw the mortgagor’s wife in tears while she was serving tea and sandwiches with the other ladies from the CWA. I didn’t stay for the sale. The mortgagor had borrowed to pay a family member out who was a ‘sleeper’ in the family farm. Then we had two dry years and he had a fire over half the farm. I learned later they had a good sale, the neighbours rallied round so he didn’t need me after all. Someone bought his farm ute and gave it back to him.

Then I heard that a neighbour had bought the farm from the receivers and leased it back to the original owner. That was back in the 70s. Maybe many of us were still pulling chains and rakes around clearing land, just like those before us had done going back generations? Maybe there were too many ‘battlers’ there to kick a ‘mate’ when he was down? There were the exceptions of course, there were the ‘greedy’ ones hunting a bargain, but the neighbours outbid them.

Continue reading “National Bank Bastardry – Part III – Greed.”

A Lidl of what you fancy does you good.

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Photo: Oxygen IE

European Bank Subsidised Lidl Expansion with A$1200 million.

This article owes its origins to an intriguing report originally published by GRAIN. You will see why I found it intriguing when you get to it. I have spent some time on the Global Farmer discussing agricultural subsidies, little did I know and I’m sure you didn’t, that the Guardian Newspaper recently revealed German discount supermarket giant Lidl and its sister chain Kaufland have benefited from almost US$900 million (A$1200 million) in public development money over the last ten years. Is this just another form of subsidy to encourage the global expansion of European supermarkets and European food?

The companies, owned by the large retail company Schwarz Group and controlled by one of Germany’s wealthiest families, received loan funding from a little-known wing of the World Bank and from the European Bank for Reconstruction and Development (EBRD). There is no suggestion there was anything ‘wrong’ with the funding, as you will see it is part of the specific mandate of these organisations funded by taxpayers and owned by governments to encourage local development, in this case in Europe.

The German Federal government, on their website has been heavily promoting both Lidl and Aldi in America to help it to become established in that country and, no doubt, sell food that has been made or produced in Germany. Lidl like Aldi, also sell a range of German made hardware, electrical goods and many other things.

Aldi already have stores in Australia and it is understood they plan many more. Lidl are also planning a chain of stores throughout Australia. In what seem like a few years in the UK they have secured over 10% market share and are causing both Tesco and Waitrose, the two biggest food retailers in the UK, to review their business plans.

They have made no secret about being ‘aggressive’ with their entry into America. Maybe interesting times for the Australian consumer, but what about the producers and what few processors are left, what of the future for them?

Continue reading “A Lidl of what you fancy does you good.”

Not the last word – MCPI #3

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Below is an email I received on June 3 from Jay Horton from Strategis Partners, the company that is promoting Multi Peril Crop Insurance. I have attached a copy of the spreadsheet to the email I sent to you informing you of this article. I hope it works, if not then write me in the comments section at the end of this piece and I will forward it to you.

I circulated the email among consultant friends and I have to say that none have been enthusiastic. One said he could see ways of taking advantage of the proposition. Some of the comments I cannot repeat. Let’s say they were from non-believers. But here is a sample of the comments and questions about the commercial proposal to provide MPCI:

  • Fire and hail is only 1% or $5/ha compared to $$21/ha. Do not tell me that isn’t an extra cost.
  • It will happen(government assistance) and I wish I could have that sure bet on it.
  • Benefits are imaginative. In risky areas where the cover would be most useful the premium will reflect the risk.
  • I fail to see why interest is saved. We normally pay insurance (F + H) after harvest. I am sure they will require payment before.
  • What about the interest on extra inputs?
  • Real cost $32,000 net of saved insurance. You could get the yield by extra inputs anyway, nothing to do with insurance.
  • For every winner with forward pricing there is a loser. Is the farmer better at this than the speculator? In the end forward pricing is a COST. Frankly it has to be to pay for the broker of the deals. Otherwise everyone would be in on the act. It is only sensible when prices are towards to top decile as currently with wool. How much can you cover forward anyway, safely? (Remember this was written early June, just this morning wool has continued to go down and wheat up. It needs an expert to comment but I have noticed the Shanghai Stock exchange has taken a hit over recent times. Once again China controls the market this time in wool. Ed)
  • Only a % of the output is covered. 70% as I read it. To me that business will have a serious loss if only 70% of the proposed output is achieved.
  • Jay relies on security of income to make business decisions that could or might pay off. Returns from extra inputs. Forward pricing. True should they work but they are not assured. Observe Canola prices this year. Early pricing, which looked pretty safe has been eclipsed. Do you hedge currency as well?-you should at extra cost.

End of comments. I welcome comments from farmers and anyone else in agribusiness. If in this article I have missed something, then tell me. Same goes if you think I am wrong.

Continue reading “Not the last word – MCPI #3”

Live cattle exports – Is there a future?

With yet another report of Australian cattle being mistreated in a foreign slaughterhouse, this time in Israel, the question must be asked whether the export of live animals from Australia is sustainable? Not only is it sustainable as far as numbers are concerned, particularly following the dreadful drought in Queensland and New South Wales, which has decimated numbers . We need to consider that between February 2012 and June 2015 there have been sixty ESCAS Regulatory Compliance Investigations. All have been or are being investigated.   The Federal Dept of Agriculture, Food and Fisheries (DAFF) who pick up the bill at present, have served notice on the exporters that they are going for cost recovery. In other words the exporters are going to pay. This is government policy throughout Australia—the user pays. No other country involved in the export of live animals has an Exporter Supply Chain Assurance scheme (ESCAS) type scheme.
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A common sight in Vietnam. How do we stop generations of habit? Only the mode of transport has changed. The animal is alive and destined for some village somewhere far away from ESCAS.

The Australian Livestock Exporters Council (ALEC) CEO Allison Prescott has been telling the international press that a significant investment is being made in building and upgrading slaughtering facilities and feedlots in Vietnam and exporters from Australia were expecting the trade between the two countries to continue to grow into a long-term and sustainable market. The question must be asked, who pays for the upgrades? And where are the cattle going to come from?

Continue reading “Live cattle exports – Is there a future?”

This little Piggy – #2

It’s all a load of pigs.

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I thought the Federal Minister for Agriculture, Barnaby Joyce, might have a view, which he could share with us regarding the alarming statistic that 80% of all processed pig meat consumed in this country is imported. I was wrong.

I thought he might, together with his state counterparts, also have a view on the plague of  wild pigs, some twenty million many say, that roam this land and by their very existence threaten our major livestock industries. I was wrong.

I accept that in spite of what I have written those who administer agriculture in this country don’t know or don’t care or both, about the domestic pig industry and threat feral pigs present to our livestock industries.

Preamble.

It would be easy, when reading what follows, to conclude that as the author, I am suffering from an acute case of self-righteous indignation because nobody in government, anywhere in Australia, has responded in a positive way to my original article and personal letters. So before anyone has such scurrilous thoughts, I should explain myself.

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.

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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 also understand that this is a free country and that Coles and Woolworths who between them control 80% of the food retailing business are free to roam the world seeking the cheapest food they can get their hands on so they can continue their price war with the objective of increasing their respective market share, so they are part of our balance of payments problem. It is quite evident they would rather do that than support the Australian pig industry, so that it can employ and deploy, by the size it could be, the latest in technology and science in the world of pig meat production, from genetics to processing. The rise in food imports and the decline in food processing in this country I have written about before —but here it is again in case you have forgotten. Trends in Australian food trade.

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Stats ABS. We are always ready to believe our own propaganda. Food exports, whether we like it or not have been falling, imports have been rising. Food processing in this country has been falling.

I will also show in a later article that not only China, but many countries within our region, like us, import thousands of tonnes of pig meat from the EU, America and Canada, when we in Australia, as it were, are on their doorstep and desperate to grow our export trade.

Am I being dramatic?

It would be easy to construe that I am being a bit dramatic when I write about the threat wild pigs present to the livestock industries in Australia. I deal with this matter specifically later in this article — there is just one thing I would like to add, well two really. I have twice seen, first hand, the devastation that Foot and Mouth disease can cause – both times in the UK. The first time when I was about 13, the family put a barrier across the narrow lanes leading to the farm. There was disinfected straw everywhere even the crows were viewed with suspicion. The closest outbreak was five miles away. The fear in my family was palpable. Their dairy herd was their pride and joy and the sheep that grazed the mountains provided stability to the tenuous hold they had on their post-war hill farm.

The second time was maybe twenty years ago, when I was working over there for a few weeks. An outbreak was traced back to northern England and within days they were searching for sheep and cattle all over Europe. Meat exports stopped and markets closed. The losses ran into billions of pounds. Both events, disasters, caused the massive loss of some of the best animal genetics in the world. When it was all over there was a debate on whether if it happened again, the UK would start vaccinating. I think it was decided it would be impractical considering the movement of livestock around the EU.

Some countries in South America do vaccinate and they have developed internationally recognised foot and mouth free zones and this has enabled them to continue to sell boxed beef into Europe. They continue to export live cattle to those countries, mainly in South America, which have F & M.

Writing letters.

I wrote to the Federal Minister for Agriculture. I didn’t get a reply or even an acknowledgement of receipt of my letter.

There are obviously more important matters of State and photo opportunities regarding national biosecurity than 20 million wild pigs – like Johnny Depp’s dogs. They are not coming back evidently, not the dogs, but Mr and Mrs Depp.

This was the letter I wrote to Minister Joyce: Continue reading “This little Piggy – #2”

Multi Peril Crop Insurance. Part 2.

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I received the following paper from Ben Rees, who is an economist and farmer, or farmer and economist, not sure which comes first these days. A man with many decades of experience in the economics of agriculture, Ben is deeply involved in the debate on the future direction of Australian agriculture.

The last paragraph in Ben’s paper, which questions the legality of MPCI, should cause the promoters of MPCI to at least ponder and then ponder again. Particularly Mr Tehan.

There is interest and support in high places of government for MPCI. Has MPCI been politicised to gain support among the electorate without the proponents explaining the cost? Certainly this graph is a few years old but the trend line is obvious, maybe if it has changed direction you will let me know? By that I mean whether there is sufficient above the line to afford MPCI.

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You can read how deeply concerned Ben is about agriculture and particularly the drought situation in Queensland and NSW by going to:

Opinion: Why drought aid is a travesty of policy

Roger Crook

Roger,

The Senate Economics Legislative asked me a question on notice at the Inquiry on March 18th. The question was to compile a short note on multi peril crop insurance. It appears that the House Economics Committee led by Dan Tehan from Victorian Western Districts is pushing it. Also the policy panacea White paper will recommend it.

This attached note was subsequently submitted and accepted by the Senate Economics legislative Committee. It should have been incorporated in Hansard. I do not know if you can publish; but, at least you know it is being pushed at high levels.

cheers

Ben

I have checked and it is legal to publish, as it has been published by the Parliament of Australia.(Editor)

Continue reading “Multi Peril Crop Insurance. Part 2.”

Multi Peril Crop Insurance

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Bob Hall is a well-known agricultural consultant based in Darkan, Western Australia.
Back in the sixties Bob challenged us all about the way we managed our merino sheep.
There was nothing theoretical about Bob’s challenges. They were based on sound, practical and proven experience gained through working with his clients.
Bob offered solutions stretching from sheep yard and shearing shed design, to management practices designed to improve the efficiency and profitability of growing merino wool, which are still, maybe even more, relevant today.
Bob now manages a broad portfolio of consultancy covering all aspects of farm management in the wheat sheep belt of Western Australia. Here he presents his views on a hot topic of the day, Multi Peril Crop Insurance.

Continue reading “Multi Peril Crop Insurance”