Briefing Note – Global Food Forum

23 April 2013

The Australian – with support from Visy and The Wall Street Journal – presented a day long conference focused on food security in Melbourne on Thursday the 18th of April.

Key Points:

-          Australia is perfectly placed to benefit from rapid economic growth in Asia and the changing eating habits of their growing middle class

-          Northern Australia has the potential to play a pivotal role in increasing Australia’s agricultural export capacity

-          Creating an environment conducive to foreign investment is necessary if Australia is to take advantage of the $2 trillion export opportunity developing in the region

Summary:

The Global Food Forum brought together people from around Australia associated with the production, packing, distribution and sale of food stuffs domestically and internationally – a blog covering the day’s events can be found here. The essence of the day was how best Australia could take advantage of Asia’s rapid economic growth and the expansion of their middle class from 500 million to over 3 billion consumers by 2030. This rapid growth will precipitate a substantial increase in demand for high protein foods that Australia, with 20 times the arable land per head of population of China, Indonesia and India, is perfectly suited to meet and profit from. But with the world’s population growing to 9 billion by 2050 Australia’s moral obligation to do more was also discussed.

For much of the day a key element of the necessary discussion was regrettably ignored. That was until Queensland Cattle farmer Graeme Acton took the audience microphone, “someone said this morning we’re in the best position, that’s right – we are in the best position, but we’re also in the worst situation. Australian farmers are being strangled by green tape, red tape and bureaucracy.” Acton also decried the high wages that were making Australia increasingly uncompetitive compared to international producers.

The huge opportunities that exist for feeding Asia’s demand for agricultural produce out of our vast undeveloped North were also explored in detail. The audience was unreceptive to Wilderness Society national director Lyndon Schneiders’ suggestion that “Northern Australia is the wrong answer.” Senator Bill Heffernan confronted Schneiders about several clear inaccuracies in his remarks, especially relating to the amount of arable land in Northern Australia.  He also noted that if even 40 per cent of climate change science was correct, there would soon be no water allocations left in the Murray Darling basin, and that Australia had to consider options in the North.

Andrew Robb talked at length about the myriad opportunities that exist in Northern Australia. As well as traditional farming, Mr Robb also discussed increasing Australia’s expertise in tropical farming techniques which could then be successfully exported, as “over 40 per cent of the world’s population lives in tropical areas.”

Mr Robb argued that there would be no chance of Australia reaching its agricultural potential with out a relaxation of restrictions that are holding back agricultural areas, particularly in Northern Australia. A prime example, he argued, were the land use laws that constrained the use of millions of hectares of land in the North to the running of cloven hoof animals.

The use of dryland farming techniques in Northern Australia was also the source of some discussion. While opportunities for expanding aquaculture off the coast of Northern Australia were discussed in relation to meeting the protein demands of the emerging middle class in Asia.

Further media coverage:

News Ltd. CEO Kim Williams gave the opening address, found here, in which he focused on the necessity to reach a greater community understanding in order to meet the economic opportunities in food exports. He said there was a projected doubling of global food demand in the next 20 to 30 years.  “Even on an issue with great bipartisan potential like food security, governments of all hues need to take the people with them and create a public atmosphere conducive to understanding and from that reflecting a willingness to embrace change. The allocation of public monies to research and development, skill development, infrastructure development, and so forth, requires public understanding as to the future benefits those investments can liberate,” Williams said.

In the keynote address, reported in The Australian here and in The Financial Review here, Visy executive chairman Anthony Pratt suggested Asia’s demand for food should be an opportunity for “our next boom” saying Australia could become a “food superpower” and capitalise on a $2 trillion export opportunity in the region as the Asian middle class is forecast to grow by six times to over 3 billion people.

In his speech, Pratt highlighted not only the economic opportunity, but the humanitarian responsibility to feed the growing world population. “Australia will have almost 20 times more arable land per head of population than China, India and Indonesia, and 60 times that of Japan… So in the most fundamental way, and well into the future, Australia is uniquely placed to produce surpluses of valuable commodities”. Pratt also focused on opportunities beyond exports, saying Australia could “develop and provide the expertise and know-how to the Asian region in agricultural development, food manufacturing, and distribution that would enable one billion people to benefit”.

To achieve this, Pratt called on governments to put the national interest above political, sectional and regional interests to address the decline the food processing and manufacturing sector has faced over the last two decades. Pratt lamented that the sector, which supports 317,000 direct jobs and a flow through of about 1.6 million jobs, did not receive the support it deserves, particularly given its competitive advantage and the urgency needed to capitalise on the Asian century. “Our governments have to reach out more to the food business sector—from farmhouse gate to the table –  and involve them in the hard international talk right from the outset,” Pratt said, including the establishment of free trade agreements with Asian partners for food exporters.

Pratt gave six proposals to facilitate development in Australia’s food industry:

  • “We need accelerated depreciation for new manufacturing investments in food.”
  • “We need a massive boost in food and beverage sector innovation. Governments can’t create innovation. But they can help drive it by providing financial incentives, partnerships, and much greater R and D support.”
  • “Australia needs to follow the American example in anti-dumping practice by putting the burden of proof on the offending party to prove that they are not doing it.”
  • “Let’s find a way to suspend – not abolish – payroll tax for food manufacturers.”
  • “Competition policy should be more relaxed to allow food companies to consolidate under certain conditions, thus enabling greater profitability and so encouraging companies to stay here.”
  • “As a matter of urgency, we need to get more young people into agricultural science. We’re only producing 750 graduates a year, and there are over 4,000 vacancies in the food industry.”

You can find his full speech here.

This article in BRW focuses on Pratt’s comments on Australian car manufacturers, in which he said the car manufacturing industry lacks a competitive advantage yet receives an imbalance of political attention and funding.

Murray Goulburn chief executive Gary Helou also called on governments to improve relationships within the food manufacturing sector to provide support to farmers to help them capture a bigger share of the profits generated in the industry. The industry needed ”good policy that promotes investment and bilateral trade agreements in interesting markets such as China,” Helou said. ”There has been less than adequate engagement between government and business to forge a way in food manufacturing areas where Australia can win… The New Zealand example is a classic example of a government picking a winning industry, backing it and making it world class. We haven’t had that in Australia”.

The Australian reports here on the necessity for Australia to support innovation in food processing as highlighted in a speech given by Kraft Foods Australia and New Zealand president Rebecca Dee-Bradbury: “I’ve often said that we have a window of opportunity to seize right now, and if we don’t act with urgency, we will miss that opportunity,” she said.

Nick Cater writes in this opinion piece that the green movement poses a huge threat to the development of a food bowl in northern Australia and echoes Pratt’s sentiments that the contribution of farming and agriculture to the export economy is under appreciated. Rowan Callick is excited about the increased focus on food exports and raises important questions about the types of policy needed to support growth in the sector, particularly in terms of attracting capital and skilled workers.

This piece focuses on the move from ‘mining boom’ to ‘dining boom’ through the implementation of good policy, such as: the development of Australia’s fertile north; sensible land clearing and management; better transport; new dams; promotion of irrigation methods; the reversal of soil degradation; welcoming foreign investment; payroll tax incentives; and incentives for research and development, all of which should be used to create optimum conditions for Australian companies to take advantage of export opportunities.

Rural director Peter Margin said that industry specialisation will be needed in order to maximise Australia’s global competitiveness. “We have to make choices and concentrate on sectors where we have clear natural advantages like grains, animal protein and dairy protein,” Margin said.

AACo chief executive David Farley has criticised Australia’s major parties for failing to provide the vision and leadership needed to take advantage of Australia’s $2 trillion opportunity of exporting foods to Asia. Farley said land rights and native title legislation should be redrafted to make Australia more attractive to foreign capital. Governments should consider investing “hundreds of billions” in infrastructure in northern Australia and focus agricultural research and development on north of the Tropic of Capricorn, he said.

This article says new business structures in the agricultural sector could attract the necessary capital needed as the sector faces a $500 billion equity shortfall, including through sovereign wealth funds, high net worth individuals and the country’s $1.4 trillion superannuation savings pool. Visy director Ross Fitzgerald said the food industry was the “greatest business opportunity for Australia in the next 40 years”.