Farmers hold the winning hand for our future growth
IF the best forecasters are saying China’s demand for Australia’s minerals will wane, they are also saying demand for Australia’s agricultural products will boom. Farming, agribusiness, the food and beverage sector — whatever you call it — it is the industry with the greatest potential to take mining’s place in paying Australia’s way in the world in the coming decades.
Even since the eager take-up of HV McKay’s Sunshine Harvesters in the early 20th century, Australian farmers have been quick to adopt the latest machinery and techniques. Today, as the Business Council of Australia pointed out this month, the industry remains among the nation’s most competitive.
Free-trade deals with Japan, Korea and soon China are chipping away at the longstanding artificial barriers that have denied Australia’s highly efficient food and drink producers lucrative overseas markets — 98 per cent of trade with Korea will be tariff-free by the time this latest deal becomes fully effective.
“China alone by 2030 could consume 59 per cent of Australia’s output compared to around 12 per cent in 2007,” John Barilaro, NSW government parliamentary secretary for small business, told the The Australian’s mid-market panel on the food and beverage industry.
The Australian Food and Grocery Council chief executive Gary Dawson pointed to a “tremendous upside”, singling out rising Asian demand, but also highlighted the challenges posed by a permanently higher Australian dollar that make imports cheaper and “very high cost structures” in local manufacturing.
“It’s been the mid-tier players who have been quicker to adjust and spot the opportunities to develop a niche and stronger brand around their particular project,” he said, noting about 85 per cent of food and drink consumed in Australia is manufactured here. The mid-market sector alone contains about 1200 businesses turning over about $56 billion a year.
The power of the Australian brand will make the vicissitudes of the Australian dollar less important, helping underpin the industry’s long-term future. While demand for resources will inevitably wane in Asia once the massive process of urbanisation slows, the demand for food, richer and higher quality food, will increase.
“Price is important but it doesn’t mean everyone races to the cheapest product; we’ve got a good proposition around clean and green high food standards, pristine produce, provenance etc — a good story to tell,” he added.
Ben McKee, chief executive of Capilano Honey, said: “A lot of people like products that we produce because they’re actually produced here as well — not only the primary production but all the manufacturing and quality standards have become more important in the past few years than ever before.”
But McKee is right to point out that so-called “free trade’’ deals are not a panacea for all industries, noting honey wasn’t even included in Australia’s latest trade deal with Korea, and still faces tariffs in the hundreds of per cent.
And while capital investment is growing about 10 per cent a year in the sector, Australians fear of greater foreign ownership in the sector will undermine Australia’s export earnings in the longer run.
The government’s rejection of Archer Daniels Midland offer for GrainCorp last year denied the grain export sector billions of fresh investment dollars.
Source: The Australian - 31st July 2014
