1 August 2014
Australia’s agricultural soul is stirring in a way it has not done since the end of the great wool years, and the drive is coming from business. Big business.
As billionaire miner Andrew Forrest put it to me, “The premier of China bumped past me the other day and said, ‘Oh what are you coming to see me about today Andrew?’ And I said, ‘actually I’m coming to speak to you about food and agriculture.’
“He turned back through his minders and almost tapped me on the chest and said, ‘That’s China’s number one issue.'”
That was the trigger for a meeting on Thursday, set up by Forrest and the Business Council of Australia, which brought together an A-list of food power: Federal Agriculture Minister Barnaby Joyce; state agriculture ministers; top bureaucrats; peak body leaders; and industry chiefs including Wesfarmers’ Ian McLeod, Anthony Pratt from JBS, AA Co’s Jason Strong and, yes, Harold Mitchell.
Australian-Chinese agricultural partnership
They launched the ASA 100 – the Australian Sino 100-year Agricultural and Food Partnership.
What emerged was an agreement that Australian governments and producers will form a single brand to broaden the nation’s competitive markets in China.
“That brand is going to be synonymous all over Asia and particularly in China with quality, food safety, reliability, friendliness, adequate quantity, with everything you need if you’re sitting looking after a billion-plus people and wondering how to feed them and Australia can give you an answer,” said Andrew Forrest.
The next ASA 100 will be with the Chinese side just before the November’s G20 in Brisbane.
The inaugural event follows this week’s launch of a new BCA blueprint, underpinned by a weighty McKinsey report which places agriculture as the standout in global competitiveness for Australia.
In the last ten days The Business has done interviews with Barnaby Joyce, who is busy working on a soon to be released Green Paper on agriculture, the new BCA chairman Catherine Livingstone in her first big media outing and Andrew Forrest.
They are all calling for purposeful policy to push agricultural growth, both primary and value added.
As journalists, we wait wearily for the food bowl story to materialise.
So why are these latest developments a big deal? Because of the timing.
Fifteen years ago, if you drove up the New England Highway, Australia’s fund managers were busy bailing out of their huge land holdings, pressured by the need for quarterly returns, and not being able to see beyond the extended drought.
In the last few months, private Australian money is returning to the sector, most notably Forrest’s acquisition of Patrick’s Meats and Chris Corrigan’s Kaplan taking stakes in Ruralco and AA Co.
Forrest sees more coming. ANZ, Bendigo & Adelaide, JP Morgan and Macquarie Bank were all in attendance at ASA 100 meeting.
Resistance to agricultural ‘champions’
That is not to say there is no resistance to this unusual new agforce of BCA/Forrest/National Party.
The backlash is over picking winners, sectoral winners, and it comes from both Australia’s competition regulator the ACCC and, more broadly, the free marketeers.
The McKinsey report drew much from dairy giant Fonterra’s success, which has underpinned New Zealand’s soft commodity boom.
While it is true that New Zealand’s dairy competitiveness is world class, Australia is not far behind. Yet our industry growth has flat-lined as the Kiwis stocks have soared.
Purposeful policy, a free trade agreement with China and then prime minister Helen Clark’s rolling of the NZ competition regulator – the Commerce Commission – allowed Fonterra to dominate.
It is unsurprising that Andrew Forrest wants the ACCC to pull its head in and allow agricultural companies to become bigger to compete globally.
The surprise is the BCA. I asked President Catherine Livingstone, in the context of Fonterra, whether we need to relook at what the ACCC allows through.
“We’ve been pretty clear at the BCA, we think a more global perspective, looking at a global marketplace as the defining marketplace not necessarily small domestic markets, is the appropriate approach for many industries,” she answered.
No, this is not picking individual corporate winners, let alone subsidising says Livingstone.
“So I would say they invested in a comparative advantage to create a global competitive sector,” she added.
It is a fine line, given that the Age of Entitlement is over – moving the goalposts to favour the champions of the sector.
The ACCC’s chairman Rod Sims came back this week like he meant it.
“It’s very hard for governments to pick winners and usually they get it wrong,” he responded.
We shall soon see where the Government’s green paper, prepared by Barnaby Joyce, sits on the matter.
Most critical will be the response of the purse holders, Matthias Cormann and Joe Hockey, to this push for most favoured status.
Notable for its absence in the McKinsey report and the BCA Blueprint was any enthusiasm for a $20 billion punt on medical research.
A China free trade agreement (exactly like the one the New Zealanders have on tariffs please Andrew Robb, says our dairy industry) could be a game changer.
Yet Andrew Forrest, surely a key player in that negotiation says there is concern about the Government’s self-imposed deadline yearend deadline.
“One of the serious messages that came out of the ASA 100 is that Andrew Robb’s position and the Government’s position now must be driven by quality and not just timing,” he said.
Getting the FTA right is pretty subjective. Take the hot political potato of Chinese direct foreign investment in agriculture.
Andrew Robb’s open for business attitude puts fear into agrarian socialists who worry at what might be bartered away.
Andrew Forrest believes that the Chinese are more interested in the value add part of the supply chain, rather than the land and yet he agrees that it is who controls the supply chain that will drive the rewards Australia can reap from the sector.
As one highly respected top-50 CEO said to me recently, if anyone is going to succeed with the food bowl challenge, it will be Twiggy.
Andrew Forrest has been building relations in China for years through his mining interests and they now reach the very top.
Less than 1 per cent of his wealth is in agriculture and I asked him why this mattered.
His answer was part philanthropic: before going public, Forrest’s Minderoo Foundation had been a long time anonymous lender to individual farmers almost at the brink.
It was the mismatch of farming potential and China’s growing need for safe food that struck him.
Former BCA president Tony Shepherd recently bemoaned the lack of entrepreneurial spirit in Australia. Perhaps Forrest will fire it all up again.
Courtesy ABC News