Cattle Prices

There has been much discussion in recent months about the improvement in cattle prices for Australian producers.  The price improvement in late 2015 has certainly been most welcome and reverses the trend of a number of years of very poor returns for cattle producers. 

It is interesting to consider how good the price rises have been.  The chart below shows cattle prices in nominal terms and also real or inflation adjusted terms.  The data shows a slight improvement in prices over time in nominal terms.  However, price rises have not kept up with the inflation rate, demonstrated by the steady decline in saleyard prices in real terms. 

Despite the recent price rises, cattle prices are still approximately 25% lower in real terms than those prevailing in 1980. 

Figure 1:  Average Australian Saleyard Price for Yearling, c/kg.  

Source:  ABARES, Commodity Statistical Bulletin 2015. 

Since 1994, average weekly earnings in Australia have risen by approximately 130% in nominal terms.  Cattle prices referred to in the chart above rose by only 30% in the twenty years between 1994 and 2014 in nominal terms.  The price rises in 2015 have meant that prices have risen by about 80% since 1994, still considerably less than wage rises. 

FURTHER READING

Australian Bureau of Statistics (2015)  6302.0 Average Weekly Earnings, Australia.

Red Tape

“Reducing red-tape” is a favourite election time commitment.  Usually soon after an election, reducing re tape becomes all too hard and the normal course of events is resumed.  That certainly seems to be the case with the State Government in Western Australia following the last election with promises to reduce red tape quickly forgotten.  At least the Federal Government has attempted to address the issue in some form with an annual day for repealing unnecessary regulation. 

An important question to address is why we end up with all this inappropriate regulation in the first place.  Bureaucrats have a tendency to regulate first and ask questions later – their first response is to regulate before considering what alternatives there might be.  The default position is regulation. 

A fundamental tenet of human behaviour is that rewarding good behaviour is a much more effective way of achieving a desired outcome than punishing bad behaviour.  In other words, the carrot is much more effective than the stick – a fact that appears lost on the bureaucracy. 

Now my own industry in Western Australia, cattle grazing in the rangelands, faces a significant increase in the regulatory burden imposed on pastoral businesses.  The Department of Lands in Western Australia has put forward its plans for legislative reforms in the rangelands.  The “reforms” proposed include: 

• ·         Requirement to Comply with Land Management Laws.
• ·         Rangelands Condition Management and Monitoring. 
• ·         Lease Management Plan. 

On the face of it, these changes may seem reasonable but a closer consideration would suggest otherwise.  Pastoralists already have to comply with a myriad of Land Management Laws.  Introducing an entire suite of additional laws is unnecessary and will result in additional compliance costs.  Many pastoralists already monitor their piece of the rangelands, again meaning significant additional compliance costs. 

The Lease Management Plan component of the “reform” process appears to be the most onerous with reference being made to “….a number of regulatory mechanisms..”.  The “regulatory mechanisms” will be additional to those already in place.  The requirement for pastoralists to go beyond what is required in other sectors is unfair and will be inimical to the development of industry in the Rangelands. 

Businesses in Western Australia already face an intolerable regulatory burden.  Ultimately it is up to our elected representatives, our politicians, to stop these sorts of insidious regulations being put in place.  Once installed it is extremely difficult to repeal. 

FURTHER READING

Department of Lands (2015).  Legislative Reform in the Rangelands.  Fact Sheet – November 2015.  http://www.lands.wa.gov.au/Publications/Documents/Rangelands_Reform_fact_sheet.pdf

Support for Agriculture

The Organization for Economic Development (OECD) has been monitoring agricultural policies in its member countries for many years.  The key results of their analysis are no surprise to famers in Australia.  Direct support to Australian farmers is low to the point of being non-existent, in sharp contrast to other countries where support can amount to in excess of 50 per cent of farmer’s income (Figure 1). 

Figure 1 – Producer Support Estimates by country, 2013 (Per cent of gross farm receipts)

Source:  OECD.  European Union is the 27 member states.  



In addition to the very low level of assistance, the majority of what is classified as “support” by the OECD is not what most Australian farmers would mean by support.  

While direct support from Government to Australian farmers is undoubtedly low as shown by the OECD and other reports, the negative effect of Government policy means that support is effectively negative.  In 2011, the Federal Government stopped the live export of cattle to Indonesia – a decision which has cost the industry hundreds of millions of dollars and still has negative consequences today.  To compensate for this decision, the Federal Government offered affected producers compensation of $25,000. 

The $25,000 compensation offered as compensation needs to be viewed in the context of most producers incurring losses in the millions of dollars.  Nevertheless the OECD counted the $25,000 as support to agriculture in Australia and ignored the negative consequences. 

There are a whole myriad of policies which are negatively impact on the competitiveness of Australian farmers including: 

• ·         Increasing charges at State and Local Government services with often few services provided for the fees collected. 
• ·         Poor provision of internet services often at high cost. 
• ·         Underinvestment in key infrastructure assets by all levels of Government over a number of years. 
• ·         A forest of red-tape which affects every aspect of farm businesses. 

It is much more difficult to measure the negative affect of Government policies on a sector so don’t expect any different methodology from the OECC or anyone else in the near future.  In the meantime, farmers in Australia just have to suck it up and get on with it. 

FURTHER READING

OECD (2014), Agricultural Policy Monitoring and Evaluation 2014: OECD Countries, OECD Publishing, Paris.
DOI: http://dx.doi.org/10.1787/agr_pol-2014-en

The Future of Food Production

A recent article in The Economist pointed out that the world needs to produce more food in the next 40 years than they did in the previous 10,000 years put together.  Such soaring rhetoric suggests this will be a difficult task given the other constraints that exist in modern agriculture.  These often cited obstacles include a reduction in available arable land, increasing demand for biofuels, aging farmers in developed countries, a rapidly changing climate – the list is seemingly endless. 

Concerns about the world not being able to feed itself have been around since English economist Thomas Malthus postulated in 1798 that the world faced a famine due to expanding population.  At the time of writing his theory, world population was less than one billion.  With world population now exceeding seven billion and food production continuing to increase, a global famine is still nowhere in sight.  Indeed in real (inflation adjusted) terms, food prices continue to decline. 

There is no doubt that hunger exists in the world but it is rarely due to a lack of food production.  The presence of people going without in affluent countries is testament to that. 

Despite the discrediting of Malthus theory many times over, it still generates plenty of support.  The reality is that the world’s farmers will have little problem feeding the world’s expanding population provided Governments have appropriate policy settings.  The sort of policy settings that will facilitate adequate food production include: 

• ·         Eliminating wasteful subsidies which encourages inefficient production.
• ·         Building infrastructure to facilitate distribution of production. 
• ·         Reducing barriers to trade around the world. 
• ·         Targeting aid to boost local production capabilities rather than dumping surplus production from developed countries. 
• ·         Investing in research and development especially where there is a “public good” element to the research such as biological controls of pests and diseases. 
• ·         Encourage investment in the sector across national boundaries. 

The Economist article mentions that technology adoption can significantly increase yields on farms citing examples of “big data” in cropping operations and robotics on dairy farms.  Technologies such as these in addition to a whole host of other productivity improvements should ensure the world continues to avoid a Malthusian catastrophe. 

FURTHER READING

Investing in Agriculture.  Barbarians at the farm gate.  The Economist, January 3^rd 2015.

CATTLE AND METHANE GAS

The production of methane gas by ruminant animals is often given as a reason by some people as a reason for avoiding meat to mitigate the potential effects of methane on global warming.  The notion exists that methane is a more potent greenhouse gas than carbon dioxide.  Like so many issues surrounding agriculture, a little knowledge is dangerous and leads many people to the wrong conclusions.  It even led to the New Zealand Government at one point considering a financial penalty for the farming of ruminant animals. 

There is a popular belief that methane is something like 20 to 25 times more potent than carbon dioxide – an example of how if you repeat a lie enough times people start believing it.  Here are a few facts:

• ·         Carbon dioxide is nearly three times heavier than methane so if equal volumes of the gases are compared rather than weights it is evident that the warming ability of methane is grossly overstated. 
• ·         Carbon dioxide remains in the atmosphere for hundreds of years whereas methane has a half-life of around eight years converting into carbon dioxide and water. 
• ·         There appears to be little correlation between methane levels and the number of ruminants on the planet.  Increases in the number of ruminant animals has resulted in no corresponding increase in methane levels in the atmosphere. 
• 
  

·         Livestock agriculture contributes between 15% and 28% of global methane emissions from human activity.  The balance comes from activities such as rice growing, landfills and pipeline leaks. 

Having discussed the relative potency of methane and carbon dioxide, perhaps the most important point is that in many ways it is irrelevant.  I raise livestock in the rangelands of Australia where there are few alternative land uses and cattle are raised in close as possible to a natural environment.  It is one of the most benign forms of food production.  The vegetation that grows here would be eaten or broken down by something.  In our case it is cattle converting the grass to meat – if the cattle were not there the grass would be eaten by termites or broken down by microorganisms releasing methane into the atmosphere. 

The digestion performed by ruminant animals is truly a miracle of nature which brings into agricultural production land that would otherwise be unsuitable for production.  It is a form of food production which should be promoted rather than the opposite. 

FURTHER READING

Brill, Barry (2011)  Methane:  myths and misrepresentations.  http://quadrant.org.au/opinion/doomed-planet/2011/05/barry-rill-methane/

Schwartz, Judith D (2013) Cows save the planet and other improbable ways of restoring soil to heal the earth.  Chelsea Green Publishing. 

The Case for Livestock Farming Part 2

We often hear of the disconnect between urban dwellers and the farming community here in Australia and in other parts of the world.  Most people don’t grow food and many don’t know anyone who does grow food and have little understanding of how their food is produced. 

It seems to me that the disconnect goes further than that – the urban existence means that many people no longer have an appreciation for the circle of life.  Temple Grandin puts it this way – “Unfortunately most people never observe the natural cycle of birth and death.  They do not realise that for one thing living to survive, another living thing must die”. 

Life feeds on life – every living thing whether it is a fish, bird, bacteria, plant or fungi feeds on other living things.  Humans are part of this despite the fact that most of our food is sourced from a supermarket. 

Grazing animals of which domesticated livestock are an important component of this cycle of life.  Ruminant animals have the ability to digest cellulose in grass in their rumen – the first component of their complex digestive system.  Of course it is not the animal that is digesting the cellulose but the bacteria, fungi and protozoa in the rumen. 

Livestock are able to digest the plant material and return nutrients to the soil through urine and faeces.  Without the grazing the plant material will continue to build up and prevent new plant material from growing.  The grasses need the livestock as much as the livestock needs the grass. 

In addition to gaining the benefit of recycled nutrients, people are able to benefit from livestock through the supply of products such as meat, milk and fibre.  In Australia most of the land mass is made up of open rangelands.  Cattle are able to utilise the vegetation on marginal, uncultivated land and convert this into food. 

 

Further Reading

Thinking in Pictures.  And Other Reports from My Life with Autism.  Temple Grandin.  Vintage Books. 

 

GRASSLANDS

Grasslands are areas with few natural trees or shrubs and are dominated be grasses as the name suggests.  These are some of the world’s most iconic landscapes – think of the plains of the Serengeti in Africa, the savannas of North America and the steppes of Europe and Asia. 

Here on the Plains grasslands are a vital part of our livestock business supporting significant cattle production.  An important part of our business management is matching the needs of our livestock with pasture availability.  This ensures that the land is not overgrazed and the welfare of the livestock is maintained. 

A particular issue we have with the grasslands on Anna Plains is the encroachment of Mealeuca (paperbark) species on the grasslands of Anna Plains.  Photo monitoring from station management together with aerial photos and satellite images shows the encroachment of paperbark. 

These trees obviously reduce pasture availability to livestock and they reduce the abundance of foraging ground for migratory shorebirds.  In addition they also provide refuge for predators such as birds of prey and feral cats. 

The encroachment of trees onto grasslands is not a situation unique to this part of the world.  Reports of trees encroaching onto grasslands have been made in Africa and North America. 

The reasons for the tree encroachment are on grasslands are not fully understood.  One reason could be increasing levels of carbon dioxide in the atmosphere which favour the growth of trees as opposed to grasses.

 

Most of the grasses in this part of the world use the C3 pathway for photosynthesis as opposed to the C4 pathway which many trees have evolved to use.  C4 plants are more efficient than C3 plants and are well adapted to high temperatures and moist environments, both features of our grasslands here on the Plains, particularly in the wet season.

The concentration of carbon dioxide in the atmosphere will continue to increase.  If the higher levels of carbon dioxide are a factor in the spread of trees on the grassland then we will have to learn to deal with it.  Potential management solutions include the use of fire to control tree growth and the use of grazing animals to knock back the trees.  The use of herbicides could also be considered in some areas although the scale of the rangelands means this solution would be impractical. 

FURTHER READING

Grasslands in a changing world.  Drovers Cattle Network.  http://www.cattlenetwork.com/expert-columns/?author=Joseph+Craine&aid=213203031