Opinion

Ag white paper: good in parts but focused on symptoms

Mick Keogh, Australian Farm Institute, July 7, 2015

After an extended gestation, the Australian Government released its Agricultural Competitiveness White Paper yesterday, giving effect to the Government’s stated vision of building a more profitable, more resilient and more sustainable agriculture sector to help drive a stronger Australian economy. Many of the initiatives outlined appear beneficial, although some appear to address symptoms rather than solve long-term problems, and have missed strategic opportunities.

The “Fairer go for farm businesses” component of the package has some very useful measures that will free-up and expand the use of Farm Management Deposits, and the proposal to reform agricultural chemical registration processes should result in better and cheaper access to these products. However, the proposal to increase funding for the ACCC to improve its understanding of agriculture will be of little benefit unless the root cause of many of these issues – the lack of market transparency in concentrated markets – is addressed. As the milk wars and the Coles supermarket case have demonstrated, without market transparency, it is very difficult for a regulator to get to the bottom of illegal activity by dominant players.

The infrastructure measures included in the package appear to be sensible and likely to deliver long-term benefits, although they rely on state and territory governments to also come to the party in terms of funding and planning approval, and it will be interesting to see what is actually delivered in terms of new water infrastructure out of this measure in a few years time. The two biggest infrastructure-related challenges for many farmers – better mobile phone and internet access, and more reliable and cheaper rail transport for grain – both receive mentions, but it is questionable whether the measures proposed will be sufficient to really fix these long-term challenges.

The drought and risk management package proposes a continuation of the current low-interest loans as the cornerstone measure, coupled with some funding for those seeking advice on insurance products. The low-interest loans are undoubtedly preferred by Treasury because they do not need to appear in the budget as government expenditure (and they actually end up being revenue-positive for the government) but some real questions remain about the effectiveness of these measures over the longer term. They provide some farmers with reduced interest costs for a limited period, but ultimately these farm businesses will need to go back to normal bank finance if they can, or if they remain unviable at the end of their concessional loan period, the government will face the prospect of having to sell up the farm. Meanwhile, there is a considerable administrative cost associated with this measure. The Farm Household Allowance measure seems a much more rational approach to in-drought support, and it would seem better to strengthen this measure rather than have the Australian Government acting as a lender of last resort to farm businesses.

The measure that provides farmers with a cash grant to access advice about multi-peril insurance is another measure that is addressing symptoms, rather than causes. Farmers have been slow to take up this insurance because it remains relatively expensive in Australia – a problem that is partly associated with the lack of local weather data in many locations, but also with the lack of uptake. Proposals to reduce the cost of premiums – such as by offering 150% tax deductability – would have assisted to expand the market for such insurance, something that will ultimately drive down the cost. Offering cash grants for training or advice about these measures will do little to address the main problem, and uptake is likely to remain low, despite the attractiveness of this type of insurance as a risk management option for some farm businesses. It has also been noted that whilever governments continue to provide ad hoc drought support measures, the incentives for a fully commercial farm risk-management system to develop remain muted.

The “Farming Smarter” package, which includes an extension of the additional $25 million in annual  funding for rural R&D for a further four years is a welcome measure, but it does not really tackle the fundamental problems that are at the heart of rural R&D in Australia. Australian Universities – especially those in the Group of Eight, have become education businesses that rely on overseas student revenue, (almost $12 billion in 2013-14) and the consequence of this model is that Australia has the lowest level of collaboration between industry and researchers of any nation in the OECD. This has arisen because the major universities are largely focused on research that generates international publications, which in turn attracts more Australian Research Council funding, lifts the universities up the international ranking tables, and attracts more international, high fee-paying students. For the universities, this is a virtuous cycle, but it comes with a cost. There is no room or incentive for industry collaboration in this model unless it generates international publications, which is often not the case in agriculture. Additionally, agriculture attracts few international undergraduate students. As a consequence, universities and their researchers are becoming less and less connected to industry – and especially agriculture – in Australia. Unless this issue is addressed, it is hard to see the extra $25 million in annual R&D funding (welcome as it is) having any real impact on farm productivity and hence profitability.

The “Accessing Premium Markets” package contains what appears to be some potentially quite useful measures that will be of benefit to the sector. Increased funding for biosecurity and the appointment of additional agricultural counsellors in key international markets should assist in overcoming the increasing thicket of technical trade barriers that Australian exporters need to slash their way through, although the package does not appear to allocate resources to the development and strengthening of the “Australia” brand, which could be an equally important element in accessing premium markets.

In summary, there is plenty to like about the package of measures, but also plenty that could have done with a lot more strategic thinking – which is surprising given the amount of time the White Paper took to develop!

Mick Keogh is the executive director of the Australian Farm Institute. This article was first published on the Australian Farm Institute website. To view original article click here

 

Scientific reaction:

The Australian Science Media Centre (AusSMC) has released the following statement on the Agriculture Competitiveness White Paper from Professor Snow Barlow, a Professor of Horticulture and Viticulture at the University of Melbourne:

“After an 18 month incubation the White Paper on Agricultural Competitiveness represents a missed opportunity for this government to set a strategic agenda for the agrifood industries in the next decade.

There is a critical opportunity for Australian agriculture in the slipstream of trade agreements with our major trading partners and a remarkable confluence of demand drivers such as population growth, the emergence of the Asian middle classes and climate change pushing up food prices. The white paper does not map out a strategic pathway for Australia’s agrifood industries to capitalize on these historic opportunities supported by innovative policy initiatives and investment.

Rather it proposes a number of bandaid solutions for drought and the power of the supermarkets without addressing the underlying issues of climate change adaptation and leveraging the quality and safety of Australian food to achieve greater value. While there are some promising components of this white paper, such as the doubling in size of farm management deposits and the re-introduction of income averaging to promote greater farmer resilience in the face of climate change and increased variability, they have not been placed within a strategic framework. Similarly the further RDE commitment is pushed well into the next electoral cycles without a strategic direction.

“Unfortunately this white paper does not provide the clear direction required if Australia’s agrifood industries are to fill some of the export gaps left by the car manufacturing and mining industries.”

 

 

 

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Comments

  1. charles nason, July 7, 2015

    For once I agree largely with Mick
    This disappointing white paper is even more so when you see that Ian Chubb’s 10 research priorities puts food and soil and water as the top two priorities . If they address the top 2 so poorly , the rest will be woeful
    What it does illustrate so well is how out of touch Canberra is with regional Australia and how poorly they understand the productive and economic fundamentals of agriculture and the enormous multiplier effect of agriculture
    The laissez faire philosophy will continue to sell off our strategic agricultural assets to the highest bidder

  2. David Crombie, July 7, 2015

    The White Paper is a good start. The important issues facing farmers are a combination of –
    – Market access within fractured markets where there is a premium for differentiated products,
    – Infrastructure including road and rail with transport hubs and port connections, reliable fast telecommunications and access to community services
    – Access to risk management tools particularly affordable crop insurance,
    – Sensible harmonised policies at National, State and Local levels that remove impediments and encourage initiative, and
    – increased R&D to provide data for better policy development and the right tools to enable productivity improvement.
    These and other issues affecting farm operations are all addressed or touched on in the White Paper and the challenge will be to deliver tangible outcomes that empower farmers to get on with the job and improve their long term business outcomes.

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