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.
In the last issue of the Global Farmer I discussed the need for change based on a strategic plan for the behemoth called Australian agriculture. It is not possible to look at the whole until the parts have been examined.
To start with the wheat industry is logical and relevant considering this is the time of year to review last year and make plans for and give a commitment to the next season and beyond.
The headline says it all, based on current trends, the wheat industry in Australia will be gone in twenty three years. If you are having difficulty in trying to remember what was going on in Australian agriculture twenty three years ago, it was five years after the wool price crash and we were all being told to get rid of our world beating merino sheep. That is how close we are to the demise of the Australian wheat industry. It won’t happen like the wool crash, for those who refuse to recognise the signs it will be a slow, painful and imposed exit.
Why do we put up with governments who do nothing for our national security?
It is Friday March 3 2017 at 08.00 hrs. On ABC AM this morning at about 10minutes 29 seconds into the programme, Andrew Davies from the Australian Strategic Policy Institute, announced we only have about three weeks supply of petrol in store in Australia — three weeks!! (search in the archive for the AM programme of March 3, otherwise you will get today’s programme) He raises the possibility of any tension between America and China could close off the sea route through the South China Sea and so cut of our supply of fuel from Singapore, on whom we are almost totally reliant. The story gets worse because it is not a new problem, there is a story in The Conversation from 2013 which forecast an impending fuel supply crisis unless the government of the day took strong action. It didn’t happen. The point needs to be made made it wouldn’t need a full blown war to disrupt fuel supplies, just a disagreement between the world super powers and the shipping routes that service Australia could close and we would run out of not only fuel but everything we import by sea.
There is a paradox, an absurdity of enormous proportions happening in agriculture in much of the Developed world. In spite of the US$486 billion a year being paid to farmers in the 21 top food producing countries in the world – heavily subsidised farmers in the European Union (EU) have embarked upon a civil disobedience campaign, some of it has been violent and massively disruptive to the rest of society. Their problem is that in spite of being paid over US$100 billion a year in subsidies, they are going broke. Their costs are greater than their returns. Across Britain, France, Germany, the low countries – everywhere in Europe, mainly family farmers are saying ‘enough is enough.’ They are taking to the streets and the supermarkets to show those who buy and consume the food what the difference is between what it costs to produce food, what the producers are being paid for it and what the consumers are paying for it at the supermarket. There is a sober lesson here for Australian agriculture as the value of the food we import goes up every year it is mostly from countries who subsidise their agriculture. According to the Worldwatch Institute, ‘Agricultural subsidies are not equally distributed around the globe. In fact, Asia spends more than the rest of the world combined. China pays farmers an unparalleled US$165 billion. Significant subsidies are also provided by Japan (US$65 billion), Indonesia ($US28 billion), and South Korea ($US20 billion).’
The value to Australian agriculture from Free Trade Agreements (FTAs) can be put into perspective when we contemplate having to compete against the home grown subsidised produce of much of Asia. If their ‘home grown’ produce, for instance beef, is subsidised, then to compete we have to be price competitive with a subsidised product – can we compete with subsidised agriculture? Only if we can sell at a price that is competitive, which may mean lower, than the subsidised product. For decades, since the seventies, Australian farmers have been duped by politicians of all colours and from agriculture, that ‘market forces’ and a ‘free market economy’ will eventually prevail. Fig 1 and Fig 2 (later) puts a lie to that propaganda and shows what it has cost. To compete we can see that Australian farmers ‘chased’ the ‘get big or get out’ mantra of the 70s with debt. More of that later.
As a child growing up in post-war Britain anything from Australian from wool to meat, to apples both fresh and dried, dried fruit and the delicious Sunday treat of Australian canned peaches, was a sign of absolute quality. The only exception to that rule was the processed cheese we were served in the army in the nineteen fifties. I am sure it had been imported during the war. Second World War, I think – maybe?
How times have changed. Britain is part of the EU, the European Union. This is what the EU say about themselves:
The EU is an attractive market to do business with:
We have 500 million consumers looking for quality good
We are the world’s largest single market with transparent rules and regulations
We have a secure legal investment framework that is amongst the most open in the world
We are the most open market to developing countries in the world
That is a proud boast and if you look at the link you will see the truth of it. They are indeed a powerful union – even a nation. To protect their agriculture the EU pays their farmers subsidies amounting to about US$100 billion a year.
In ‘Farming on Line’ a UK farming journal came this alarming news on Wednesday 29 July 2015. Copa and Cogeca warned at the EU Milk Market Observatory meeting today that the EU dairy market situation has deteriorated rapidly in the past 4 weeks, and without EU action, many producers will be forced out of business by Winter. Speaking at the meeting, Chairman of Copa-Cogeca Milk Working Party Mansel Raymond said “The market is in a much more perilous state than it was 4 weeks ago, with producer prices far below production costs. It’s a critical situation for many dairy farmers across Europe”.
Who or what are ‘Copa’ and ‘Cogeca’? ‘Copa’ was formed in 1959 to represent farmers within what we now know as the EU, it had 13 affiliates at that time. It now speaks in Brussels for sixty farmer organisation’s within the EU and another thirty six affiliates like Norway and Turkey, outside of the EU, but in Europe.
Cogeca? Straight off their website : On 24 September 1959, the national agricultural cooperative organisations created their European umbrella organisation – COGECA (General Committee for Agricultural Cooperation in the European Union) – which also includes fisheries cooperatives.
COGECA’ s Secretariat merged with that of COPA on 1 December 1962.
When COGECA was created it was made up of 6 members. Since then, it has been enlarged by almost six and now has 35 full members and 4 affiliated members from the EU. COGECA also has 36 partner members.
So ‘Copa & Cogeca’ to our antipodean ears may sound like a dance from South America, is in fact a very powerful agricultural lobby in Brussels and the Parliament of Europe. Stuck down here at the other end of the world we tend to forget that Europe is now a bigger trading bloc than America and China.
Vive la France !
French farmers are a passionate lot and in support of Copa & Cogeca, last month on warm summer days in the middle of the tourist season they dumped loads of animal manure in the middle of Paris and other cities. For those who don’t know what the machine below is, it’s a ‘muck spreader’. Normally filled with animal manure and coupled to the power take off on the tractor it ‘spreads’ the manure on the fields or paddocks. In this case it looks like it is being used to ‘clean’ windows – on a bank perhaps?
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?
It has been difficult for me to be true to the name I gave this web site ‘Global Farmer’ In Australia. I chose the name because, 1. I had used it before and, 2. Because there is so much going on in the world of agriculture and agricultural trade that we never get to hear about. We are traders, or at least we have many traders living in our midst. We now know why they are keen to be here because there is more money in trading in grain than there is in growing it, and according to Rabbo Bank boss this is the most expensive country in the world to grow wheat. So we have a few challenges in front of us.
I have the time and I have the intense interest in food trade and objective to see Australian agriculture, once again, world competitive.
We really are a small player in world agriculture. We grow just 5% of the world’s crop. We jump up the ladder as a trader where we come in at between 12 and 15 in world rankings. That’s why the big boys want to play here. If you live 200km from the port it’s costing you between $60 and $75 a tonne to get you grain to port.
I know we are a world leader in the export of beef but I’m looking for a volunteer to tell the full story. From what I am told we could do so much better both domestically and for export.
One of the reasons we don’t get a lot of international news is because we are obsessed it seems to me, with domestic politics and in agriculture with domestic agricultural politics. It is hard to imagine an industry with so many organisations, committees, Peak Bodies, and people who claim to speak for one particular group or another, gossipers and rumour mongers. Yet in spite of that, we are deeply dependent on the export markets for our commodity products, cereals, meat and wool and to a lesser extent on perishable goods, fresh fruit and vegetables. Quite fascinating that WA is exporting fruit and veg to Bali, maybe it reduces the Bali Belly? Continue reading “Q. How unlevel is the ‘playing’ field? A. It’s a hill.”
Mailler’s excellent article ‘Why is Agriculture Different’, begs the big question of the extent to which the agricultural industry’s relationship with government policy has resulted in a viable, sustainable and world competitive Australian agriculture? And if not, is the government failing to defend the people?
Empirical data – as Mailler brings to the fore – tends to show that the relationship of agriculture with government policy (in the context of global competition and the myriad of factors that express themselves through industry performance data and trends), has resulted in the industry exhibiting signs of systemic failure. The ‘vital signs’ of this industry are not good.
If one sets aside short term factors of drought, flood, fluctuations of commodity prices and looks at the long term trends, it is inescapable that revenue has been ‘chased’ by costs and in some cases overtaken by costs. The trends are seemingly inexorable.
While in any industry there will be leaders and laggards and those who fall off the bottom, the situation for agriculture as Mailler points out is not just the ‘tail’ that’s failing – it’s many of the core businesses that make up the industry.
Whether one agrees or disagrees with past and current agricultural policy, one must surely accept the notion that the outcomes are not good?
So what of policy for agriculture?
Governments have a primary duty to ‘defend the people’ and see to their wellbeing.
Photo: Courtesy Veeoz
For a couple of hundred years, most ‘western’ governments have taken this duty to extend from:
basic ‘human rights’ of health and education systems (safe drinking water, sanitation systems, hospitals, primary, secondary and tertiary education), through …
reform and development of democracy (wide range of concepts of what is democratic!)
military defence of their territory and its people from aggressors and on to…
making their industries competitive in the markets where their goods and services are sold.
Governments develop and implement POLICIES to cover all these aspects and more of our national life in pursuit of their big job to ‘defend the people’.
Importantly, governments generally see it as prudent to make the nation’s export industries profitable and sustainable in the longer term because their profits contribute so much of the resources to fund the implementation of all other policies!
“The farmer is the only man in our economy who buys everything at retail, sells everything at wholesale, and pays the freight both ways”
– John Fitzgerald Kennedy
Recently the dire situation faced by many farmers and graziers induced by yet another “drought” has reignited the debate around justification for Government financial support to farmers.
On one hand there is the visible and emotive scenario of dying stock and desperate farmers that demand immediate aid. This call for financial support externalises the disruption of drought and market interruption and deems them beyond reasonable management.
On the other hand there is the cold and objective rationalist position that argues, ‘agriculture is a business like any other and hard times are a fact of life, and so if you can’t handle the pressure – get out’.