RURAL AFFAIRS by Patrick J. ByrneNews Weekly
Rabobank report highlights need for new rural policies
, August 2, 2014
Australia won’t become a food bowl to the world or Asia, but it can become the delicatessen to Asia if key issues facing farmers are addressed.
Rabobank argued this case in its submission to Barnaby Joyce’s inquiry into agricultural competitiveness.
Rabobank is a Dutch-based, cooperative bank that operates in 42 countries, with 92 branches in Australia and New Zealand. It runs client councils to canvas issues facing the farm sector.
Much emphasis has been placed on Australia becoming a food bowl to Asia and to the world. Indeed, global food production is expected to increase 70 per cent by 2050 to satisfy predicted demand.
However, general manager of Rabobank’s food and agribusiness research and advisory division Luke Chandler says: “The reality is Australia is not in a position to supply and compete in the high-volume markets.
“Rather, our focus needs to be on developing into high-value markets where we can compete on quality and other sought-after attributes where consumers have the capacity to pay.
“Australia will not be the food bowl of Asia, but we can be the delicatessen.”
According to Chandler, a food and agriculture sector that has better access to global markets, ready access to capital, more efficient logistics infrastructure, higher-value product and processes, a highly sustainable environmental impact, and more affordable production inputs will be better placed to capture the “Asian dining boom”.
He warned, however, that Australia is not the only agricultural exporter looking to capture this increasing demand. He explained: “Over the past decade, highly-resourceful developing countries have begun to assume a greater role in the global export trade of food and agriculture products.
“The potential of countries in South America and Eastern Europe is obvious, but even some major food-importing countries and regions, such as China and the ASEAN-5 nations, are playing a greater role in shaping the export landscape.”
Rabobank’s submission shows that, since 2000, Australia’s share of the global food and agriculture market has slipped almost 1 per cent, while a much larger slice of global markets has gone to the ASEAN-5 nations, Brazil, Ukraine, India, China, Argentina, Russia and New Zealand. Australia supplies only 6 per cent of agricultural produce (by value) consumed in the Asian region.
The Rabobank report did not focus on major domestic issues, such as the dominant market power of our two supermarket chains; the dismantling of numerous farmer-marketing agencies under National Competition Policy; major changes in water policies; or the debate over whether most of Australian agriculture is sold into the domestic or export markets.
However, it proposed other policy options. It said that the Australian farming sector, despite its high-cost structures, is well regarded for the quality of its products in global food and agriculture markets.
It therefore recommended “a continued focus on developing high-value products/produce for export into targeted global markets. Policy and regulatory settings should centre around a shift away from competing in highly commoditised global markets and towards supplying high-value targeted markets.”
The report warned that Australia was facing higher costs from lack of infrastructure investment, in the face of strong infrastructure and cost improvements by global competitors.
Rabobank recommended “the development of a long-term strategy for infrastructure investment … [in] rural storage, handling and transport infrastructure, as well as reducing costs for the processing of Australia’s food and agricultural products”.
In a case study on the grains industry, the report calculated that Australian grain exports into major Asian markets have enjoyed a cost advantage over most major competitors of roughly US$10 to US$20 per tonne. Significant though this may be, it could easily be undermined by efficiency losses caused by poorly maintained infrastructure or by the future efficiency gains of global competitors.
Currently in Australia, transporting grain utilising road freight is approximately 30 per cent more expensive than using rail infrastructure.
The report recommends: “Policy and regulatory settings should focus on investment in domestic logistics, in particular rural rail infrastructure.”
Acknowledging that market distortions were caused by failed schemes such as managed investments, Rabobank’s client consultations called for further investigation into encouraging superannuation funds to invest in agriculture.
The report also expressed concern at the disappearing connection with rural heritage in urban areas, which leaves the farm sector exposed to negative opinions that may further affect the resilience of some farmers.
It argued that farmers need to be proactive in their messaging and activities in order to connect with urban audiences, or else they will risk missing the opportunity to engage.
Governments have an opportunity to stimulate this dialogue in partnership with the stakeholders from the food and fibre supply chain.
A successful example of such a partnership is the Center for Food Integrity in the United States (www.foodintegrity.org) and the associated channel (www.bestfoodfacts.org).
These initiatives have successfully connected consumers, experts, government and industry stakeholders in order to increase transparency in the food system and build consumer confidence.
Patrick J. Byrne is national vice-president of the National Civic Council.