Peter Reith's Solution for Australian Agriculture

Attention has been focused on the plight of Australia’s dairy farmers in the wake of the decision by Coles and Woolworths to cut the price of their home brand milk to $1/litre.  In addition to the poor returns for their output, dairy farmers like all primary producers in Australia have suffered from higher input costs including fuel, electricity, labour and fertiliser. 

Peter Reith recently weighed into the debate about the viability of the dairy industry and proposed a six point plan to reduce costs.  Given much of Australian agriculture is facing similar problems to dairy farmers, it may be appropriate to use Mr Reith’s blueprint for other sectors.  Below, I consider if the Reith plan could be extended to other farm sectors. 

 

1.        Cut municipal rates; councils have been increasing expenditure above inflation.  This needs to stop. 

This is certainly applicable to most farmers.  In our case, shire rates increased by 9% last year following similar increases in previous years.  This was an outrageous increase given the Shire provides no services to us. 

2.       Abolish payroll tax on all dairy processing plants. 

Abolishing payroll tax on manufacturing plants including meat and dairy processing would indirectly benefit the farm sector.  Taxing employment has always seemed like one of the most insidious forms of taxation. 

3.       Reduce energy prices by abolishing the carbon tax and remove impediments to other initiatives like gas, including coal seam methane. 

I will sidestep the issue of coal seam gas, but certainly agriculture is an energy intensive business and will therefore benefit from lower prices.  The carbon tax has certainly negatively impacted on the meat and dairy processors and thus affected farmers in these sectors. 

4.       Reform labour market policies introduced by Labor for the benefit of unions. 

In our case we have problems getting labour so reforming labour market policies have not affected us too much. 

5.       Slash government waste, cut wasteful expenditure, and stop the boats to cut costs. 

No-one could argue with this point.  In addition to reducing wasteful expenditure, Governments should also reduce the regulatory burden they place on business. 

6.       Slash the petrol tax to lower business costs.  Improvements to transport should be a much higher priority ……

Again lowering taxes will obviously assist business in a period when input costs for farm businesses have increased significantly.  Investment in transport infrastructure and other infrastructure such as ports and rail will also assist export focused sectors such as agriculture. 

 The response to Peter Reith’s plan has not exactly been ebullient.  On www.milkmaidmarian.com dairy farmer Marian Macdonald thought the plan, at first, was a spoof.  It is notable that Mr Reith does not mention the elephant in the room – the supermarket duopoly. 

What affect would the Reith plan have overall on the agricultural industry?  The results would be minimal in the short term – the problems of the dairy industry and my own industry, the northern cattle industry, have specific problems not addressed by Mr Reith. 

Should the Reith plan be implemented?  Absolutely – the medium and long term benefits from his ideas would be substantial across all agricultural industries. 

Will the Reith plan be implemented?  Probably not – Governments of both political persuasions have shown little appetite for meaningful reform in areas such as Government spending. 

FURTHER READING

Reith, P (2013).  Stop milking our dairy farmers.  http://www.abc.net.au/unleashed/4464198.html

 

Wildlife and Cattle Production

It is often assumed and sometimes promulgated by anti-farming groups that all agricultural production comes at an environmental cost.  In our case, we have a great example of conservation and food production in a nice balance with mutual advantages. 

Our station is adjacent to Eighty Mile Beach – a vast coastline which is home to a number of migratory wader birds.   Despite its name the Eighty mile beach is approximately 230 kilometres long.  Many of these species migrate to the northern hemisphere to breed, often flying thousands of kilometres in a single journey all without complaining about the airline food.  The farthest journey from the Kimberley is to Siberia which is sometimes completed in a single journey. 

A few of these species feed on the grass plains of the station while seeking refuge on the beach during the hot part of the day.  The birds benefit from the presence of cattle as they keep grass shorter reducing potential hiding places for predators including birds of prey and feral cats.   Water points provided for cattle, can also serve as thermal refuges for the birds at hot times during the day. 

Three key bird species that forage on the grasslands but roost on Eighty-mile beach during the hottest period of the day are the Oriental Plover, Charadrius veredus, Little Curlew, Numenius minuta and Oriental Pratincole, Glareola maldivorum. 

The birds do a great job of reducing the burden of grasshoppers and thus benefiting pasture production.  In addition to being able to fly across the world, the birds appear to know where rain has fallen in Australia and thus the best places to feed. 

Being an extensive grazing property in the rangelands, inputs are minimal – no fertilisers or herbicides are used in cattle production.  Raising cattle in the rangelands of Australia is one of the most environmentally benign forms of food production in the world.  In addition to a light environmental footprint, pastoralists also perform a number of other important environmental services including the control of weeds and feral animals such as cats, wild dogs and camels.  The control of wildfires either by controlled burns or by extinguishing fires when they start is also an important environmental service. 

 

FURTHER READING

Hollands, D and C Minton  2012  Waders.  The Shorebirds of Australia.  Bloomings Books Pty Ltd. 

Rogers DI, CJ Hassell, A Boyle, K Gosbell, C Minton, KG Rogers and Clarke, RH  2011  Shorebirds of the Kimberley Coast – Populations, key sites, trends and threats.  Journal of the Royal Society of Western Australia, 94: 377-391. 

Social Licence

We have heard a lot about the term social licence in the last few years.  In particular it has been applied to my industry – the northern cattle industry – with claims the industry had lost its social licence over the cruelty claims of treatment of Australian cattle in Indonesian abattoirs. 
The cost of the loss of this social licence to the northern cattle industry was first the closure of the industry followed by the imposition of additional regulation.  This was in the form of an auditable supply chain tracing mechanism.  An Australian animal exported to Indonesia can now be traced from its place of birth in Australia to its point of processing.  Fallout has also been ongoing with Indonesia reducing imports from Australia and a massive loss of confidence in the industry. 

At the time when the issue of a social licence was raised, many of us in the northern cattle industry were annoyed – why should it apply to us and not every other industry?  That question has never really been resolved but most in the cattle industry have come to accept that things are not always fair. 

What about applying the concept to other industries?  The mining industry always cops its fair share of flack and is always under pressure to maintain its social licence.  The mining industry argues that it contributes substantially to Government revenues through royalties and taxation as well as contributing in other ways such as funding local community projects. 

The supermarket industry in Australia is an industry where the concept could be applied.  The supermarkets announced a policy where homebrand milk be retailed for $1 per litre.  In a previously regulated industry, milk price was last at a $1/litre sometime in the mid-1980’s.  While the low price is good for consumers, the biggest losers are the nation’s dairy farmers with the low retail price reflected in the farmgate milk price.  Dairy companies also lost a substantial amount of equity in their brands which will ultimately affect their profitability and ability to invest in the supply chain. 

There is meant to be protection from this kind of activity through Trade Practices Legislation administered by the Australian Competition and Consumer Commission.  The ACCC is either unwilling or unable to intervene in this instance.

Where does the issue of a social licence come into this discussion?  Shouldn’t supermarkets provide goods at the lowest possible costs to their customers?  I believe that supermarkets have a broader responsibility than just screwing down their suppliers to the lowest possible price.  The end result will be a reduction in milk production as dairy farmers leave the industry.  Coles and Woolworths are only interested in a percentage point of market share from each other. 

What would the loss of social licence mean for supermarkets?  Loss of social licence could mean additional legislation or regulation to prevent this form of predatory pricing.  Additional regulation could also force supermarkets to be more transparent in their pricing policies.  It could also mean additional regulation to prevent supermarkets from entering new markets such as retailing or pharmaceuticals.  Limits could also be placed on the market share that the two major supermarkets have of the total grocery market. 

Sovereign Risk

I am often amused by the claims of the increase in sovereign risk that the mining industry faces.  While I have no doubt that the concerns the mining industry face are genuine, they and everyone else should have a look at the sovereign risk my business faces. 

I am a pastoralist in the Kimberley region of Western Australia turning off high quality cattle for live export markets in Asia and the Middle East with a small number of cattle going to the domestic market.  The business is a family business which plays its part in feeding a growing world population in Asia and around the world. 

In the past few years we have copped it from all three levels of Government – Local, State and Federal.  Our local shire formally withdrew the last remaining service it provided to us and we are now in the situation of paying about $30,000 per in local Government rates and receiving absolutely no services in return. 

No to be outdone, the State Government increased our pastoral lease rents by 400 per cent with very little justification.  This increase came at a time of falling cattle prices and sharply higher input costs. 

The suspension in the live cattle trade to Indonesia and the subsequent ramifications which are still being felt by the industry has been well documented by the mainstream media.  This decision meant that all three levels of Government are now moving against us almost simultaneously. 

Both sides of politics have been involved in the moves against us – the Labor party at the Federal level and a National party minister at the State level.  These incidents are far from being one-off events.  The Federal Government can shut the industry down with the stroke of a pen. 

State Government charges are reviewed every five years so there is every chance the increase will be as big or bigger next time.  Who knows what will happen to our local government charges – the only certainty is they will continue to go up and no services will be provided. 

The result of all this is that our business now faces a level of Sovereign risk that makes the mining tax look like the imposition of a parking ticket.  While all layers of Government mouth the rhetoric that they are committed to Australia’s agricultural industries their actions are entirely different.