Cattle in Indonesia or people in Bangladesh?

What is more important - cattle in Indonesia or people in Bangladesh?

My industry - the cattle sector in the north of Australia - has been rocked by animal welfare abuses in export markets, notably Indonesia and Egypt.  These incidents were truly shocking to all those involved in the sector.  The response of the industry to these incidents was swift and involved investing more into animal welfare in these markets.  

To participants in the industry like me the response of the Australian Government to the problems seemed to be completely disproportionate to the magnitude of the issue.  To completely close the trade overnight crippled a successful industry in addition to offending an important trading partner and close neighbour.  

The contrast between the response to animal welfare problems in Asia and human rights abuses could not be more stark.  Recently a factory in Bangladesh collapsed killing more than 1000 people making it the worst industrial accident since the Bhopal disaster in India nearly 30 years ago. The factory collapse was the result of shoddy building standards and overcrowding in the building. 

The factory in Bangladesh produced cheap clothing enjoyed by consumers in affluent countries including Australia.  Judging by the reaction to animal welfare abuses, you would have expected a bigger reaction to this disaster and demands to rectify the situation.  After all human lives were involved and not just the lives of  farm animals.  The expected reaction would have involved a boycott of similar products made in Bangladesh or at the very least, the boycott of the companies involved, some of which were well known international brands.  And it is not as if the factory collapse was an isolated incident.  It was merely the latest in one of a string of incidents.  

To say the reaction in Australia and around the world to these incidents is muted would be the understatement of the decade. They barely create a ripple in the Australian media and no calls for blacklists from Green Party politicians.  

Of course any such boycott would not have been welcome in a desperately poor country such as Bangladesh.  The workers in such factories are no doubt grateful for whatever meagre wages they are paid.  Instead the industries involved should do a similar thing to the Australian livestock industry - work with the local companies to improve their standards. Isolating countries such as Bangladesh or even industries within the country is likely to be counter productive.  

Positive Media for Livestock

It is easy to get downcast in the livestock industry.  Not only do you have to cope with low prices, high costs and increasing Government regulation, but there are also ridiculous claims from environmentalists that livestock production is bad for the environment. 

It is always good to see positive media about the sector when it comes along.  Once piece of media that has gained a lot of traction recently is the video by Allan Savory on the potential to reverse desertification in the world’s grasslands through the use of livestock.  Not only can there be food production from now degraded areas, economic and political stability can be improved in areas prone to violence. 

Allan Savory also mentions the role of regenerating grasslands and its positive effects on reversing the global warming.  The video challenges much of what is regarded as conventional thinking – that livestock production adversely affects the environment and that less is better.  To those of that produce livestock in the rangelands it confirms what we already know.  That is running livestock in the rangelands is one of the most environmentally benign forms of food production.  The rangelands are teeming with life and capable of producing large amounts of food. 

Further Reading

Allan Savory: Grassland ecosystem pioneer.  http://www.ted.com/speakers/allan_savory.html

The Farming Gene

I think we all have the farming gene in us somewhere.  For many people the gene is latent and remains that way for their whole life.  In others who live in towns and cities it may manifest itself through people growing fruit and vegetables in their backyard along with a few chooks.  Some people exercise their farming gene by visiting friends and relatives who live on rural properties. 

For farmers the “gene” is fully expressed through daily activities as they go about producing food and fibre.  Often the farming gene can reveal itself when someone marries a farmer.  Traditionally this happened when a woman from the city married a farmer and moved to the bush.  Now there are many men who follow their wives back to farms that may have been in the family for generations. 

On our property in Northern Australia, we often see expression of the farming gene when a backpacker comes to the station with no experience in handling livestock and takes to it like a duck to water.  Of course we encourage expression of the farming gene as much as we can by on the job training and encouragement. 

The farming gene also becomes evident in jobs around the homestead such as feeding the poddy calves or tending the chooks.  Again people with little or no experience in dealing with animals soon have a real connection with the animals in their care. 

Despite most people becoming further and further removed from their food production, the farming gene means that everyone could get back to some form of food production without too much trouble.  

Improving Productivity

At a recent ABARES conference in Canberra it was noted that the rate of productivity growth in Australian agriculture had been declining.  This would affect the ability of Australian farmers to be competitive in export markets particularly with the strong Australian dollar. 

Productivity improvements are essential for Australian agriculture as input costs always rise faster than the prices farmers receive for their output.  The response of one city based Fairfax columnist to this decline in productivity was that the blow torch should be applied to the sector by both Federal and State Governments.  Rationalisation in the sector should be accelerated in the author’s opinion so that productivity can be enhanced by those producers that remain capturing economies of scale.  Drought relief would be done away with so that only the most efficient producers survive any dry period. 

What the author seems to forget is that the industry has had a blow torch of extreme ferocity applied to it over the past five or so years.  All farmers have suffered as a result of the stronger Australian dollar with most individual sectors having their own unique problems. 

Dairy farmers have had to battle milk discounting, horticulturalists with cheap imports, farmers in the Murray Darling Basin have the prospect of major water reform hanging over them.  In my own sector, the Federal Government has brought the industry to its knees through its ban on exports to Indonesia. 

The reality is that rationalisation has been occurring in the sector for about 100 years.  We do not need the Government making it any harder for primary producers than they are already doing.  Rationalisation will continue to occur at a steady pace.  This allows those exiting the industry to do so with dignity and allows service industries around the sector to adjust also. 

The author also fails note the huge assistance paid to farmers in other countries who compete with Australian agricultural exports in international markets.  In addition to this, large subsidies are paid to other sectors of the economy such as the automotive industry.  Other sectors are the beneficiary of Government regulations such as the financial services sector which benefits from the mandated contribution to superannuation for all Australians. 

So what can be done to reverse the productivity decline?  Some are noted in the Fairfax article including encouraging foreign investment and recommitting to public investment in agricultural research.  Some other key areas are missed including easing the regulatory burden place on farm businesses and reducing the level of sovereign risk faced by the sector.  

The Amazing Dung Beetle

One of the great advantages of living in the middle of nowhere is that you can marvel at the wonders of nature.  There is nothing like seeing a big red kangaroo skip away against the backdrop of a Kimberley thunderstorm. 

It is not just majestic creatures like kangaroos that capture my attention, the humble dung beetle is also an incredible animal in its own way.  Consider how the dung beetle goes to work on the pile of dung shown in the photo below, in this case from a horse. 

In only a few short hours it is converted into basically a powder as shown in the photo below.  This makes life a lot more pleasant for everyone and every animal in their surroundings, importantly reducing the breeding ground for flies in addition to the aesthetic benefits. 

It seems there is a lot more to the dung beetle than meets the eye.  Dung beetles are one of the few animals that use the stars to navigate.  Included in this exclusive club with dung beetles are some birds, seals and humans.  As reported in a recent edition of The Economist, it seems that dung beetles navigate by being able to identify the cluster of stars that forms the Milk Way. 

Further Reading

Stars in their eyes.  How dung beetles navigate.  The Economist, January 26^th – February 1^st 2013, p67. 

  

Hilmer Report 20 Years On

It seems that 20 year anniversaries are often widely celebrated.  One 20 year anniversary this year which will probably not receive much attention this year is the Hilmer report into competition policy in Australia. 

The Hilmer report had the agricultural sector firmly in its sights and in particular statutory marketing authorities.  Since the release of the Hilmer report, most of the marketing arrangements viewed as anti-competitive have been removed.  The only on remaining to my knowledge is the regulation of potato marketing in Western Australia. 

While the reduction of regulation in industries such as dairy and eggs had commenced before the release of the Hilmer report, competition policy increased the momentum for change.  For a number of producers in these industries, the move to deregulation was extremely difficult with large numbers exiting these industries in the years that followed it. 

Reduction in regulation in other agricultural industries has also occurred for other reasons.  An example is the removal of the single desk marketing arrangements for wheat marketing which occurred after the Iraq wheat scandal. 

In other sectors of the economy, competition policy has produced mixed results.  There have been a number of success stories, an example being the telecommunications sector where increased competition has benefited consumers. 

A number of other industries have emerged virtually unchanged despite the blow torch being applied in the Hilmer report and in subsequent inquiries.  It remains a mystery why Governments around Australia can find the political courage to deregulate agricultural industries but refuse to take action on industries such as taxis and pharmacies. 

In some industries competition has lessened with the obvious being supermarkets where the two players dominate.  A key component of the Hilmer reforms were changes to the Trade Practices Act and the creation of the Australian Competition and Consumer Commission in part to address anti-competitive practices.  Despite these changes we have a situation where Woolworths and Coles continue to increase their market share.  While it could be argued that consumers have benefited from lower prices, the longer term benefits are less certain.  The increase in home brands by the major supermarket brands will ultimately lessen competition. 

The provision of cheap milk may benefit consumers in the short term, but the longer term effects are less certain.  It could result in less fresh milk being available to consumers as farmers exit the industry and greater reliance on UHT milk. 

The changes introduced from the Hilmer report are essentially irreversible.  It would be very difficult if not impossible to reintroduce statutory marketing authorities that previously existed.  What should happen now is that competition should be extended to other areas of the economy.  

Opportunities in Asia

The recent Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES) conference in Canberra highlighted some of the difficulties that Australian producers will have in capturing opportunities in Asia.  The forum noted that Australian farmers face a range of challenges in the next few years including a high Australian dollar and increased competition from countries in South America and Eastern Europe. 

The analysis was in sharp contrast to the much of the commentary over the past few years with focus being on an impending food crisis and what a struggle it will be to feed a world population of nine billion people by 2050.  There have been various predictions of huge increases in food prices as demand soars in Asia with limited additional land available to meet the demand for more food. 

Instead of forecasting soaring food prices, ABARES are predicting a much more modest increase in prices out to 2050.  In fact, the medium term price outlook is subdued despite the increased demand from Asia. 

The ABARES analysis confirms what most producers, who are generally sceptical by nature, have believed for a long time.  That is that there will be no “free kicks” from increased demand in the Asian region.  Any opportunities that arise from growing populations and incomes in Asia will require hard work on the part of Australian producers and marketers.

Productivity improvements will underpin the ability of Australian producers to capture opportunities that arise in coming years.  Improvements in productivity are the way that farmers have coped in the past with falls in output prices and rising input costs and will no doubt continue to be in the future. 

The Government must play its role in encouraging productivity improvements.  A key area is in fostering investment in the sector by creating a healthy investment environment which addresses sovereign risk issues. 

The Government must also play its role by ending subsidies to unproductive industries, improving trade relationships with our Asian neighbours and improving infrastructure.  Other important areas for Government are ongoing investment in research and development and reducing the regulatory burden placed on business. 

Australian farmers have proved themselves to be innovative in the past and can meet the challenges that the Asian century will bring.  The Government changes required to meet these challenges are not onerous and will likely benefit the wider economy in addition to the agricultural sector.