Article – Archaic systems crippling export

by 12 December 2014

24 November 2014
Andrew Marshall
Stock and Land

CONSUMERS across Asia expect agriculturally-rich Australia will strive to double food export values to $75 billion by 2050, but the nation is so ill-prepared for the Asian Century the market opportunities are little more than fantasies for our farmers, says Don McGauchie.

The Nufarm and Australian Agricultural Company (AACo) chairman said Australia’s export architecture was so archaic it barely coped with moving existing production tonnages offshore within the year they were produced, let alone having capacity to handle double those volumes.

“Our road and rail infrastructure is little better than third world,” he told the inaugural Rabobank F20 (Food) Summit.

Mr McGauchie used the forum to also highlight rural research as totally unprepared for the task of ramping up farm sector productivity, particularly in non-commodity specific areas such as soil and water productivity.

He said northern Australia alone had 10 million hectares of high quality soils capable of producing cotton and grain crops to feed overseas buyers, but the land lay virtually dormant “crying out” for research information on how to make it more productive.

It also needed government-led infrastructure commitments to support farming initiatives that could service the food needs of “the world’s greatest leap forward in prosperity since the industrial revolution”.

Australia-wide our poor arterial road network, ageing railways and lack of integration between road, rail, port and airports made the agricultural export task cumbersome and expensive.

Coastal shipping between Australian ports was so inefficient and protected it was cheaper to import grain and fuel from the US or Singapore than ship freight between Perth and Melbourne or Brisbane.

Mr McGauchie said potentially efficient rail deliveries to grain ports were increasingly by-passed by less efficient road freight going direct to seaboard because semi-trailers were invariably faster, cheaper and more reliable (although still costly).

While 20 years ago the Victorian Port of Geelong relied on 2.5 million tonnes of rail-freighted grain receivals and 500,000t delivered by road, the figures were now reversed in a weird twist of transport efficiency logic.

He argued part of the solution was a much bigger focus on public-private investment partnerships and making our much-needed infrastructure projects attractive to a wealth of superannuation investment looking for low-risk, long-term returns.

Although 70 per cent of Australian agricultural exports already go to Asia, the booming Asian mega middle class, led by China (and soon to be overtaken by India), would create a six-fold increase in the region’s prosperous consumers by 2030.

Mr McGauchie believed Australian agriculture should aim to double its farm production output within 20 years – not 40 years – to meet that demand.

However, achieving that goal would require a massive 5pc lift in farmers’ annual productivity rates.

Productivity growth had actually slipped to about 1pc in the past decade, coinciding with a crash in publicly funded research spending from about $1b annually to less than $600m.

While private agribusiness investors were contributing more to the research and development effort, their spending strategies were restricted by immediate earning capacity.

Mr McGauchie said both research and development and infrastructure initiatives badly needed long-term, broad investment backing from governments.

“If we’re to play our part in providing high quality food to 100m people, we have to face reality and make those changes now.”

Courtesy of Stock and Land

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