CANBERRA OBSERVED by national correspondentNews Weekly
Our farmers under siege from government policies
, October 25, 2014
Agriculture Minister Barnaby Joyce has prepared for the federal Cabinet a white paper on the future of Australian agriculture.
Recently, he hosed down the idea that Australia was becoming the bread-bowl of Asia, saying that if we doubled food production we couldn’t feed Indonesia. Possibly, we could become a special gourmet supplier into certain Asian markets.
Minister for Agriculture
We constantly hear from political and farm leaders that Australian farmers have a bright future. How credible are their glowing predictions?
Consider these facts about the rural sector:
• Sheep numbers have plummeted from 170 million, in 1990, to 74.7 million today.
• Cattle numbers have not grown in 38 years. In fact, they dipped from 29.8 million head in 1976 to 28.5 million today.
• Dairy production has fallen following deregulation in 2000, from 11.3 billion litres in 2001-02 to 9.2 billion litres in 2012-13.
• Sugar cane production has dropped, following deregulation and the loss of its single selling-desk, from 38 million tonnes in 2005 to 31 million tonnes to 2013.
• Horticulture (worth $8.7 billion) used to be a net exporter; but imports of processed, frozen and other products mean that Australia now imports $863 million (2011-12) of horticulture more than it exports.
• Wheat: Since the loss of the single selling-desk for wheat, Australian wheat exports are generally classed as only feed-stock quality. This is because of a big increase in reliance on plastic tube farm storages that are subject to attacks by animals, reducing the quality of the grain at the port.
The Murray-Darling Basin produces 60 per cent of Australia’s food, most of which comes from irrigated farms.
Under the Murray-Darling Basin Plan, now set in law, around 40 per cent of irrigation water has been bought from farmers for environmental flows.
Many farmers sold their permanent water rights at a high price, thinking they would buy back temporary water each year for $15-$25 per megalitre. “Temporary water” is water purchased for one season.
The problem is there is now such a shortage of water available to irrigate farms that the cost of temporary water has soared to around $115 per megalitre in northern Victoria.
As a result, many farmers are not planting a crop because they cannot make a profit when the price of water is so high.
Other smart farmers are making a handsome profit by selling their water for this season to other farmers who are planting a crop. A farmer holding a 1,000 megalitres water right can make $115,000 without turning on his tractor, simply by selling his water.
Meanwhile, those buying the water will be lucky to make any profit.
The loss of water to the environment, along with open water-trading rules, has led to huge inflation in the price of irrigation water.
Finally, much has been promised from free trade agreements (FTAs), but the outcomes for farmers have been meagre.
Under the Australia-United States FTA, some industries were promised concessions way off in the future, while the U.S. refused to open its market for Australian sugar. This led Prime Minister John Howard to offer a $440 million package to the sugar industry. At the same time, the sugar industry was deregulated.
The Japan-Australia Economic Partnership Agreement, concluded in April this year, did not improve, or only marginally improved, market access for dairy, sugar, grains, pork and rice.
Now there are rumblings in Canberra that negotiations may have to give more ground to Beijing on agriculture than Australian farmers will accept in the planned Australia-China FTA.
So, just where is the bright future for agriculture? Nearly all major sectors are in decline or stagnant.
Policy-makers can no longer blame the woes of farmers on the long drought. That ended in 2010.
The problem lies with the false assumption made by government ministers and bureaucrats that Australian agriculture primarily sells to the export market, and that the domestic market buys only about one-third of farm production.
Based on this false assumption, federal governments have assumed that their primary role is to make farmers more competitive overseas through deregulation of agricultural industries, with the anticipation that farmers will be able make big profits from free trade agreements and after the World Trade Organisation achieves global free trade in agriculture.
First, the WTO cannot achieve free trade in agriculture, because the big economies all treat agriculture as a strategic industry.
Secondly, and more fundamentally, Australia’s agricultural policy platform has been based on a wrong assumption for over 30 years. Two major studies have shown that about 78 per cent of farm product is sold into the domestic market by value. The studies are by Dr Mark McGovern (1999) and Dr Guy West (2002) and were published in the Australasian Journal of Regional Studies.
They found that the primary market for farmers is the domestic market, not the export market. This is the exact opposite of what governments are claiming.
As a result, the rural sector is not suffering from poor world prices or the high Australian dollar, but from policies aimed at the export rather than the domestic market — measures such as deregulation under National Competition Policy; allowing into Australia unlimited imports from a global market characterised by corrupt pricing policies; and policies focused on FTAs that to date have delivered very poor outcomes — and all at the expense of Australia’s domestic food market.
It remains to be seen what Barnaby Joyce’s white paper on agriculture recommends.
Let’s hope that it starts with a review of the policies that have been slowly destroying our farmers’ livelihoods for over 30 years.
 Mark McGovern, “On the unimportance of exports to Australian agriculture”, Australasian Journal of Regional Studies (Brisbane), vol. 5, no. 2, 1999.
Guy West, “Decomposition of exports and GDP into direct and indirect industry contributions”, Australasian Journal of Regional Studies (Brisbane), vol. 8, no. 2, 2002, pp.143-164.