To grow agriculture in Australia, farmers need to think like miners

By Michael D’Occhio, University of Sydney; Beverley Henry, University of Sydney; Chris Taylor; Luciano Gonzalez, University of Sydney, and Robyn Alders, University of Sydney, 06/08/2014

It’s perhaps fitting that mining magnate Andrew Forrest is in the vanguard of a move to position Australia as a major food supplier to China. Fitting, because if the plan is to work, Australian agriculture needs to take some tips from another successful exporter to Asia: the mining industry.

A substantial increase in food production will require major improvements in the efficiency of existing systems, plus the expansion of farming into new areas. That will mean spending an estimated A$600 billion to upgrade and add to the ageing network that currently supports Australian farming, in much the same way that the resources industry paves the way for its activities by building roads, rail, ports and even entire towns and cities.

Industry and federal and state governments want to increase Australia’s food production in order to contribute to the unprecedented global demand for food, particularly in China.

The renewed interest in agriculture is also partly due to the new free trade agreements with major importers of our food, including China, India, Japan, South Korea and the United States.

Many people, including the federal government, see northern Australia as having significant potential for food production. In a Green Paper released earlier this year – and which is open for public comment until Friday 8 August – the government pledged that:

No longer will northern Australia be seen as the last frontier: it is, in fact, the next frontier.

A dose of realism

Yet this enthusiasm needs to be balanced with careful consideration of the scale of investment in infrastructure needed for agriculture. Indeed, recent agricultural assessments in northern Australia have highlighted the lack of transport and other infrastructure in areas that are being considered for food production, such as the Flinders and Gilbert catchments.

It could be argued that the lack of supporting infrastructure is probably one of the main reasons why Western Australia’s Ord River Scheme has not been as successful as predicted, and past mistakes should be avoided.

The expansion of agriculture across northern Australia will be influenced by the availability of natural resources (soil, water) and capacity (people, communities). But any significant expansion will also depend on the infrastructure that is necessary for food production, transport, processing and marketing.

The movement of food in Australia relies heavily on road and rail networks, which are mainly concentrated in eastern, southeast, southern and southwest Australia. Transport networks largely radiate from capital cities, because urban areas are a major destination for food and also contain export facilities such as ports and airports. From cities, the transport networks penetrate into regional population centres and areas that have historically been major agricultural regions.

Major road and rail networks in Australia (Supplied)

Much of northern Australia lacks decent road and rail networks. Expanding agriculture will therefore require a large-scale investment in this infrastructure. And, crucially, this infrastructure needs to be in place before significant food production begins.

This is where agriculture could learn from the resources sector. Mining firms typically invest billions of dollars in infrastructure before digging anything out of the ground. The large up-front investment is justified by the relatively quick and substantial flow of money once the operation finally begins. Of course, it helps that large mining companies have ready access to money and credit.

Putting the cart before the horse

In contrast, it is not uncommon for agricultural production to start before infrastructure is in place, and for that infrastructure to be progressively added as production expands. But this model will not work for the magnitude, and predicted time-frame, of the increased food production envisaged across northern Australia. The government has a very important role in contributing to infrastructure development across northern Australia as part of nation building.

The agricultural industry must itself look at non-traditional sources of capital for infrastructure. Resource companies’ recent major investment in the northern beef industry is an interesting development, which illustrates the capital reserves of resource companies, their large investment potential, and their capacity to drive major transformations in how industries operate.

It’s the kind of thinking that northern Australia needs.

The road to the north

At the moment, northern Australia is not ready for large-scale agricultural expansion. Infrastructure is still concentrated around traditional areas of food production in other parts of the country.

Take beef, for example, where facilities for processing and marketing are mainly found in eastern, southeast, southern and southwest Australia. If beef production is to increase substantially in northern Australia, infrastructure will need to be a priority consideration. The new beef abattoir near Darwin is a rare example of new infrastructure driving production, rather than the reverse.

Beef industry infrastructure, including feedlots (red), abattoirs (black) and meat processing facilities (blue). (Supplied)

Similarly, grain infrastructure (silos, export facilities) is found mainly near existing rail links. Expanding grain production into northwest Australia, partly in response to climate variability and change, would require major investment in storage and transport infrastructure.

Wheat infrastructure, including grain silos (red) and export facilities (green). (Supplied)

Dairy is a slightly different question, as the future could see the current pasture-based system give way to intensive, larger-scale production – a move that would need lots of new transport and processing infrastructure – or a broad retention of the existing system.

Major dairy procesing facilities (Supplied)

Can Australia capitalise?

If Australia is going to benefit from booming global food demand, perhaps we need to focus more on investment, rather than other issues such as free trade agreements and land sovereignty. Trade deals are important, but we need to make sure we can actually deliver the goods.

According to an analysis by ANZ, Australia needs to plough A$600 billion into agriculture by 2050 if it is to realise the opportunity from the global increase in demand for food. Much of that investment will need to be in infrastructure, rather than production.

Without this funding, Australia’s ageing road, rail and ports will come under increased pressure, while whole new systems will need to be constructed if the north is to join other parts of the country as a major farming area.

That’s why farming should take its cue from the mining industry, where billions of dollars are routinely invested up-front for projects that typically last for 15-20 years. If managed correctly, agriculture lasts much longer than that, potentially creating opportunities for rural and regional communities that will last for generations.

The Conversation

Michael D’Occhio receives funding from Meat and Livestock Australia and has confidential funding agreements with three veterinary pharmaceutical companies.

Beverley Henry, Chris Taylor, Luciano Gonzalez, and Robyn Alders do not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article. They also have no relevant affiliations.

This article was originally published on The Conversation. Read the original article.


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