NFF Annual Dinner Address

By David Crombie

President

National Farmers’ Federation

The Deck at Regatta Point (Canberra)

18June 2008

Introduction

Agriculture is an important part of our Australian National heritage:

  • Agriculture is also a major contributor to our economy - production value through chain is $103 billion, export performance $30 billion and our farmers deliver more than 93% food security.
  • A robust agricultural sector supports healthy regional communities, and
  • Our food producers occupy over 60% of the continent and their engagement is critical for environmental delivery.

So, what will Australian agriculture look like in 2020 and what will be the drivers that shape our future?

What we do know is that because of our engagement in export markets many of the issues facing Australian agriculture will be global issues.

World population is increasing at an estimated 100million each year and of this 97.5% is in developing countries. World food demand is growing and the nature of food demand is changing as a result of regional income growth.

Most of the world’s food is consumed where it is produced but traded food and stocks have a major bearing on food prices. Unfortunately traded food does not move freely.

World food trade has long been distorted by Government interventions – interventions that seek to protect farmers or consumers or paradoxically in some cases, both.

Today world food stocks are low and food prices are surging. Good policy settings are needed to send the right signals to encourage food production to meet expanding global demand.

World food demand and supply

In the past eighteen months the global price of staple foods has spiraled upwards – rice has tripled while maize and wheat have more than doubled. Prices are likely to continue to be volatile while stocks remain low.

There are a number of reasons for these price hikes:

  • There has been a sustained growth in food demand,
  • Supply has not kept pace with below average harvests and a weak 1.5% growth in world food productivity,
  • The biofuels sector is competing with the food sector for grain,
  • There has been a rundown in intervention stocks in the EU and US,
  • There has been a rapid increase in the cost of inputs (fuel, fertiliser and chemicals), and,
  • Governments have restricted trade through tariff barriers, subsidies and quotas. This has sent the wrong message to farmers who are producing less food at a time when the world needs more.

So, how do we fix it?

The best Policy response is to ‘get out of the way’ and let the market operate. But it is not that simple.

Typically Governments around the world have felt the need to respond to domestic pressures, often by addressing one market distortion with another.

Export bans designed to provide food security at home frequently reduce the prices received by farmers and thus reduce their incentive to produce more.

Farmers across the world in the Ukraine, Vietnam, Kazakhstan, Egypt and elsewhere have faced export taxes and export bans and within our region we have witnessed subsidized food imports, rationing and food queues in Indonesia and in the Philippines. None of these measures has increased food supply.

So where is the extra food going to come from?

European Union (EU) stockpiles are a thing of the past as a result of decoupling CAP payments plus programs to take farmland out of production. The United States (US) has similar production distortions from the mixed messages that it is sending to its farmers with their US$350billion five-year Farm Bill plus their biofuels (ethanol)program.

Both of these agricultural monoliths will be slow to crank up. EU law prohibits their US$75 billion farm aid being spent on research and at the ground level producers in both economies have become wedded to their supports and will be slow to respond even though there is productive capacity to do so.

African food production is principally in the smallholder, rain-fed sector. Targeted development assistance can help and is needed. The sector is slow to move and suffers from seasonal variability, high priced inputs, poorly developed infrastructure and political instability and intervention.

South America has significant opportunities for expanded food production from new areas and from better production and Brazil is the standout.

In Asia many of the productivity benefits of the ‘Green Revolution’ have already been taken up.

Asian agriculture now has a row of new hurdles with an increased dependence on high priced inputs and like Africa, population pressure on available farming land and water.

The United Nations (UN) has targeted an increased in global food production of 30% by 2030. This cannot be met by simply increasing the area farmed.

The food supply solution will be mainly from improved and sustainable productivity on existing farm lands.

This will come from better research leading to better farming systems. It will come from more efficient use of soils and water and it will also come from advanced technologies such as Genetically Modified (GM) crops on marginal lands and GM crops that thrive on lower inputs.

So what is the role for Australia?

We have both opportunities and responsibilities. By a stroke of good fortune we are located on the Pacific Rim. This is the epicenter of world growth with populations expected to increase by 500million by 2020 – over half of the world’s population in countries with economic growth projected at 7-10% per annum.

This growth ‘quinella’ has major food implications. On the demand side, there will be an increased need for staples plus demand for animal proteins to meet the shift in consumption that accompanies high personal disposable incomes.

On the supply side, Asian food production is stretched now and is unlikely to meet this projected demand.

Australia’s competitive advantage stems from our location plus our clean natural production capability. Our niche will be in the production of food and fibre to meet tight specifications with guarantees for consistency and product integrity. Our competitive advantage is not in raw base commodities against competitors who can supply at half our cost.

Australian agriculture will always operate in juxtaposition with environmental and other community expectations. The Australian response to the global food challenge will therefore be with improved efficiency and quality. This is our current focus, this is what Australian farmers have always done.

Australian agriculture has recorded productivity gains of 2.8% per annum over the past 15 years with 25% less farmers on a constant farming area.

We need to continue what we have done only faster and better. To take advantage of these opportunities we need to get the settings right and this is where good policy development is critical at the National level.

Policy Settings for the Future

There are a number of areas where we need to get policy right for the future. I will run through some of these:

TRADE

Trade reform is necessary to improve the flow of world food and to send the right signals to farmers around the world to produce food to meet market needs. In the past 12 months we have seen a retreat to trade regulation in an attempt to manage food security and to shield consumers and/or protect farmers. This is not the answer, particularly in times of volatile prices.

What is required is clear and open market signals and improved and appropriate technologies to allow farmers to respond with increased and better targeted production. Australian agriculture has long been a champion for more open trade, it is the right policy for a more secure world food supply and we need to continue this fight.

CLIMATE CHANGE

There is no real point in continuing the debate about whether climate change is happening or not. What we need to know is what it may mean and what we can do about it. There may be wetter areas of Australia and there may be areas that are dryer. There may be greater or lesser extreme events. Increased climate research is necessary and what is important is that agriculture does what it has always done, and that is to adapt to any changing circumstance with appropriate technologies and better holistic management.

EMISSIONS TRADING

Under the Climate Change banner agriculture needs to be engaged in the development of the rules in our emissions control and carbon policy. A kilogram of carbon is the same whether it comes from a Chinese power station, a forest fire in Kalamantan or from one of our farm tractors. So the first rule must be ‘all countries in’ with no exclusions. Also the rules must take account of the biological and whole of life movement of carbon and other emissions within agriculture. We need to develop the science to measure carbon debits and credits before we can tax or offset it. This is not being done anywhere yet.

Credits need to be created for the investment that Australian agriculture has already made with a 40% reduction in emissions over the last 15 years. This has allowed Australia to meet its Kyoto targets but it has been at a cost. This cost has been absorbed on behalf of the broader community by our farmers – it is the cost of retained vegetation plus tree planting and changed farming practices that capture carbon.

As Professor Garnaut has recognized, Australian agriculture is a low emitter by world standards. It would be a perverse global outcome indeed if we exported our food production capacity to countries with higher emissions and lower regulatory requirements. The development of a National Emissions Trading Scheme is arguably the most important of our policy decisions going forward. We cannot afford to be the only ones doing it and we cannot afford to get it wrong.

WATER

Water policy must address the needs of all water users and create certainty of entitlements for whatever water is available for towns, for farmers and for the environment. Water trading needs to be transparent, property rights must be respected and all purchases should be from willing sellers.

RESEARCH

Research is critical to a better understanding of our natural environment and in developing new technologies to adapt and improve our sustainable farm production capability. This is the key to increased food supply. Research policy needs to engage farmers in setting priorities and it needs the support of an Education system that can address the emerging needs for biological research.

TRANSPORT

If we are to efficiently meet the demand for domestic and world food we need good intermodal infrastructure with harmonization in regulations between roads, rail and ports and between jurisdictions.

BIOSECURITY

The risk of exotic diseases to our agriculture and our biodiversity is always present. If we are to maintain our clean natural production systems we need rigorous science-based import risk assessment pre border, comprehensive border surveillance and effective post border management and they need to be interconnected. The Equine Influenza event was a timely wake-up call for industry.

BIOFUELS

Biofuel development can contribute to fuel security and lower emissions, but we need to avoid the market distortions such as those flowing from aggressive policy intervention, such as that in the US. Biofuel development must be market driven and the research focus should include new technologies such as lignocelluloses plus other alternate energy sources. Fuel prices are getting to a level where some start-up support may be appropriate in particular circumstances.

BIOTECHNOLOGY & GMO’s

Biotechnology and Genetically Modified Organisms (GMO) will be a feature of world agriculture 2020. Within Australian agriculture we need to develop new technologies with regulatory safeguards and with the necessary industry codes of practice to allow both consumer and farmer choice. This could be one of the key strategies in expanding production with reduced inputs.

WORKPLACE FLEXIBILITY, VISAS & TRAINING

Given the seasonal and time critical nature of many of its operating procedures agriculture needs a flexible workplace and a combination of skills training plus working visas to meet the projected demand for skilled and unskilled labour. Visiting workers should be employed on the same conditions as locals and Pacific Island working visas could embrace on the job training and skills transfer to complement development assistance at home.

COMMUNICATIONS

Communication remains a priority in regional Australia. Efficient and market responsive supply chains rely on telephones and broadband that works and is available at metro competitive pricing.

In summary, these and more are the policy settings that we need in place if Australia is to play its part in addressing the global food challenge. Many are interdependent and all are important - we need to get them right.

So what will farming look like in 2020?

We will have a lot more holes in the ground - many of them in prime agricultural lands – and there will be increasing competition for scarce water from the mining sector and from urban sprawl.

  • There will be less farmers farming the same area and producing more.
  • There will be more corporate investment but the farming sector will continue to be predominated by farming families.
  • There will be a strong customer focus with shorter and more accountable, transparent and responsive supply chains.
  • Our farm sector will not only be producing food and fibre, they will be
  • Partnering research (as they do now with the Government)
  • Delivering community environmental outcomes through stewardship partnerships, and
  • They will be providing options as part of an emissions management solution.

The acid test in any new policy must be; does it contribute to improved production efficiency and will it avoid the unintended consequences of regulatory requirements that diminish our international competitiveness?

These are the challenges facing Government and farm policy organisations like the NFF going forward.

I am confident that despite these ‘unusual times’ Australian agriculture will continue to be an important part of the Australian economy. It will continue to be the lifeblood of regional communities and a strong agricultural sector is our best bet in the delivery of environmental outcomes.

Superimpose on this the opportunities of expanding global food and fibre demand – and with good supportive policies and dare I say it some rain – the future of Australian agriculture is positive indeed.

Thank you.

[ENDS]

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