Is Agriculture Different? Part One

Is agriculture different from any other industry?  Is the production of food a more noble endeavour than any other human endeavour?

Many would answer yes to these questions – especially farmers like me – and would use these arguments to justify special assistance from Government.   It is an argument that has worked extremely well in most developed countries other than Australia and New Zealand.  The fact that agriculture is also subject to the vagaries of the weather also is used to justify special assistance. 

The chart below compares the level of support for farmers in different countries as compiled by the Organisation for Economic Cooperation and Development. 

Source:  Australian Farm Institute. 

The data will come as no shock to Australian farmers – that they receive the least support from their Government.  In other countries, they believe that farming is much more than just another business – it is a social imperative that must be supported by Government. 

Successive Australian Governments at State and Federal levels have pursued economic deregulation across entire sectors of the economy including the farm sector.  There are a number of sectors of the economy that have escaped the deregulatory push, but that is another story.

Support to Australian producers is limited to the odd drought payment and some support for research and development.  Other countries are content to go on subsidising their farm sectors through a variety of means.

Indeed it now seems that not only will Australian primary producers not receive any additional support, but they will contribute a disproportionately higher burden of taxation revenue than other sectors of the economy (in reality “negatively subsidised”).  The recent Commission of Audit for the Federal Government recommended a number of cuts to rural programs including abolishing the Rural Financial Counselling Services, halving funding to the National Landcare Program, abolishing the Farm Finance concessional loans scheme and reducing support for Research and Development Corporations. 

In addition to these measures, there has been talk of reducing the diesel fuel rebate scheme which rebates the diesel fuel excise to groups such as miners and farmers when they use diesel off-road.  This reflects the fact that producers using diesel off-road should not have to pay the excise to fund road building.  Any change to this scheme will be the “thin edge of the wedge” as any introduction to reduce the rebate will be ramped up by subsequent Governments. 

My own view is that Agriculture in Australia should not receive any special help but instead be given a “fair go” by all levels of Government, something which has not happened in recent years. The reality now for my business in Western Australia is that we pay very high shire rates for the services provided to us (virtually none) and we pay pastoral lease rents at a rate tent times that prevailing in the Northern Territory. It is possible to put in place strategies to mitigate the effects of the drought but impossible to manage unfair Government policies.

The Case for Livestock Farming Part 1

There are many arguments put forward against livestock farming, none of which have any substance.  One of the arguments against livestock farming is the environmental one.  It always disappoints me to hear people say that to reduce their carbon footprint they should reduce their meat consumption.  Such glib statements while not only being profoundly ignorant do nothing to further the cause of the environmental movement. 

We produce meat in the rangelands of Australia – it is one of the most environmentally benign forms of food production.  There are minimal inputs such as fertiliser or herbicides and the land supports a variety of plants in contrast to the monoculture of modern cropping operations. 

The grass produced on the station will either be fermented on the ground or in the fermentation vats that are the digestive system of a cow.  By having a cow utilise the grass then we can utilise the output of this fermentation.  And by appropriate management of the livestock on the property we can maximise the carbon that is sequestered by the vegetation. 

The use of livestock can also reduce the fuel load through the grazing of herbaceous plant material thus reducing the probability and negative consequences of wild fire.  Thus if we eliminated beef production in our neck of the woods it is likely that carbon output would increase and nothing would be produced.  

The potential benefits of livestock farming in the rangelands have been recently highlighted by Allan Savory with his talk on TED receiving more than one million viewers.  Mr Savory illustrates the potential to produce food on land while improving its condition by mimicking nature.  

Sentimentality in Farming

A recent blog by Sam Trethewey on sentimentality in farming certainly got the agricultural twitterverse into a frenzy.  Sam’s basic point was that sentimentality amongst farmers clouds their business decision making and makes them slow to adjust to modern commercial farming realities.  Many farmers hold on to land bequeathed to them over generations for too long, Sam contends, and some of them even hold their hand out to the Government to keep them afloat. 

While I agree that sentimentality, can cloud business decisions, I would not necessarily agree with all that Sam Trethewey said.  The fall in commercial farm numbers suggests that many farmers do overcome this sentimentality and do manage to sell their properties and move on to other lives. 

Many businesses have made plenty of money when sentiment is pushed aside.  There is no better example than that of Wesfarmers.  The former farmer’s cooperative showed no sentiment in divesting rural businesses and certainly has shown no sentiment towards farmers as suppliers to their supermarket businesses. 

The right amount of sentimentality can be a good thing for farmers.  It drives them to maintain their properties and leave them in better shape than they found them.  It motivates them to expand their business so that they have something to pass on to future generations rather than just a mountain of debt and an unproductive property.  Some sentimentality can give a longer term focus and the implementation of environmental projects which take a long time to produce an economic benefit. 

A key point in Sam’s blog is that a lack of business acumen among farmers clouds business decision making.  All of us should improve our business skills and be clear about why we are doing what we are doing.  It is obvious that many primary producers accept a very low return on the assets they have employed and a very low return on their own labour.  It is up to each individual farm business to determine how they can improve returns on their capital and labour. 

While some primary producers see the Government handouts to other industries and want to claim some of the action for themselves, most producers just want a fair go from Governments rather than a handout.  Sentimentality can be an Achilles heel for many producers but it can also give compassion and a sense of responsibility.  Like everything it is a matter of getting the balance right.  

Barnaby's Blueprint

Barnaby Joyce is keen to leave his mark on Australian agriculture and so has initiated his review of competitiveness of the sector.  While there can be doubts as to the wisdom of another review, there is no doubting that Mr Joyce has a passion for Australian agriculture and a strong vision for what the sector can become. 

The scope of the white paper and the background information does give an insight into the thinking of the Minister and the Government more widely.  This is a clear focus on improving returns at the farm gate and achieving fair returns through the value chain.  The fact that improving returns to farmers is a key objective of the process is encouraging. 

The other terms of reference are also important.  The need to improve skills and training is explicitly acknowledged.  The need to improve the regulatory environment for primary producers is also considered.  Market access, the capital requirements of the sector and the contribution of agriculture to regional economies are also important topics which will be considered.  The involvement of the Prime Minister is also encouraging and shows the industry is being taken seriously at the highest level. 

The process announced by the Minister has been criticised by many as being just another review.  The previous Government developed their own “Food Plan” last year.  Let’s face it no-one was ever going to take seriously a plan for agriculture from the previous Government who were content to shut down the northern cattle industry to satisfy a noisy minority. 

A key element of the vision from Barnaby Joyce is development of agriculture in northern Australia.  The north of Australia does indeed have great potential to expand and contribute significantly to the goal of doubling agricultural output.  Generally the rhetoric from politicians is never matched by actions when it comes to developing the north.  It remains to be seen whether this flurry of activity will be any different. 

The Government does not need to wait for the results of the review to take action.  There are a number of key areas where action can be undertaken immediately such as continuing to secure free trade agreements, investing in infrastructure and reducing red tape. 

There is little doubt that Australian agriculture can expand significantly and can meet the objective of doubling production by 2050.  The role of all three levels of Government is to create an environment which encourages this growth.  This means there is plenty of fodder for future blog posts.  

What #hadagutful means to me

Watching my industry colleagues rally in Fremantle gives me a sense of pride that so many support our industry while at the same time gives me a feeling of guilt that I am not there in support.  Being more than 2000 kilometres away and with 20,000 cattle to look after, it made it a bit difficult to get there. 

While the rally was going on and I was firing off tweets, it gave me time to reflect on the issues at stake and exactly what #hadagutful means.  The expression #hadagutful captures the feelings of most producers extremely well and its frustrations in these areas:

·         That an industry can be shut down overnight. 

·         That two years later the industry is still suffering from the fall-out of that decision. 

·         That all the efforts to improve animal welfare are ignored. 

·         That alternatives to live export which are glibly expressed by industry opponents are accepted by many in the media and by politicians.

·         That all the care of animals before and during live export is ignored. 

·         That cattle production in the rangelands of Australia is one of the most environmentally benign forms of food production. 

Judging by the support from other farmers not directly reliant on live export and from a number of people who are not farmers themselves, the response indicates a wider resonance with rural Australia.  Farmers are generally sick of being treated like second class citizens.  They are sick of being at the mercy of supermarkets and their discounting wars. 

The old saying "the darkest hour is the hour before dawn" may be appropriate.  The big turn out at the rally and the even bigger turn-out on social media shows that farmers are no longer content to be the political pawns of various politicians. 

I certainly don’t feel like I am owed a living or want a hand-out from the Government like some large companies in Australia.  All I want is to receive a fair go, something we have not received from any level of Government.  Primary producers in Australia can do their bit to feed the world if only we are allowed to.  

Community Perceptions of Agriculture

Community perceptions of agriculture have never been more important as consumers try and understand more about where their food comes from.  Consumers want to buy products that say something about them.  They want to know that products have not damaged the environment, that animal welfare is paramount. 

The contrast of community perceptions of Australian agricultural sector with other sectors of the economy is certainly intriguing.  Research conducted by Readers Digest suggests that farmers are highly regarded in terms of trustworthiness. 

Indeed consumers can have complete contempt for an organisation but still utilise its services.  A relevant example to the agricultural sector is the perception of the supermarket industry.  In Australia and around the world, the major supermarket chains are held in contempt by consumers (give references) but still widely used by the same consumers.  I personally have not been in a supermarket that has no people in it despite all the negative perceptions. 

A consideration of the professions at the bottom of the most trusted list shows that they do not seem to be adversely affected by negative perceptions.  Very few people choose to sell their house without the services of a real estate agent.  People still consume plenty of stories from media outlets despite negative perceptions of journalists. 

The Four Corners episode on the Indonesian cattle industry resulted in substantial publicity subsequent to the program and a Walkley award for the journalist, Sarah Ferguson.  An episode on the manufacture of clothing and mistreatment of workers in Bangladesh generated much less publicity and will no doubt not result in another Walkley award for the journalist involved. 

The conclusion that you can draw from all this discussion is that community perceptions of agriculture are important but perceptions of other sectors are much less important.  What the sector should do about community perceptions is probably worthy of another blog post.  

Spy Scandal in Indonesia

Just when the Northern Cattle Industry thought that we may have turned the corner, along comes a scandal which threatens the recovery of the industry.  The scandal this time is in the form of espionage where Australia is accused of intercepting the mobile phones of senior officials in the Indonesian Government. 

What has all that got to do with cattle producers in the north of Western Australia?  Very little is the answer, but it still seems the northern cattle industry could be the collateral damage if the relationship between Australia and Indonesia continues to sour and retaliation takes the form of lower beef and cattle imports. 

The cattle industry in the north of Australia continues to rely heavily on live exports and will continue to do so for the foreseeable future.  There is a processing facility under construction in the Kimberley region of Western Australia.  Initially at least this facility will source cattle that are not suitable for the live export trade. 

The live export trade plays to the relative strengths of both Australia and Indonesia.  In the north of Australia, we have the comparative advantage of in breeding cattle.  With access to a variety of by-products, Indonesia has advantages in feeding cattle.  Low labour costs in Indonesia means that they can process cattle very cheaply compared to Australia. 

The contrast with breakdowns in diplomatic relations with other countries could not be more stark.  The spat with China over comments made by the Foreign Minister does not result in any threats of trade retaliation. 

While the Australian cattle industry should continue efforts to diversify markets, the Indonesia will remain very important for the foreseeable future.