In his address to the Rural Press Club of Queensland on November 27th, 2013, Mick Keogh, Australian Farm Institute Executive Director quickly points out the difference between public (and political) opinion and the truth behind the recent trend of portraying Australian agriculture as being “on the cusp of a boom that will rival the pound-a-pound wool boom of the 1950s.”
This bold claim is in relation to the rapidly growing Asian consumer demand for food, coupled with Australia’s close proximity to Asia. But, as Mr Keogh explains, over the last five years, “Australian agriculture has lost market share in all the big five Asian markets – Japan, Korea, China, Indonesia and India.”
He shares a recent trade statistic which “really puts Australia’s agricultural export performance in its true context is the fact that Australia’s fruit exports to Asia were worth around $500 million in 2012-13, while Chile’s – a developing nation located on the far side of the Pacific Ocean – were worth $4.3 billion.”
Below are a few of the factors he raised to highlight what he believes is behind the “insipid export and domestic performance of Australian agriculture”:
- The Australian dollar exchange rate has been above $US 90 cents for most of the time since 2007, which makes Australian produce relatively expensive in Asian and Australian markets and reduces prices received by Australian farmers,
- Australia is now one of the highest cost nations on earth, with labour costs in particular very high, making many businesses that rely heavily on labour – such as horticulture – internationally uncompetitive.
- The sheer scale of Asian markets means Australia will never be able to supply a large share of the extra demand. To give this some perspective, in the next twelve months China will import almost $US150 billion worth of agricultural products, while the total value of Australian agricultural production in 2012-13 was estimated to be around $US 45 billion.
- Australia has had a singular lack of success in negotiating trade agreements with Asian trading partners, while competitors have concluded such agreements long ago and are enjoying significant tariff and trade access advantages relative to Australian exporters.
- The Australian retail food market is dominated by two major supermarkets, which have squeezed most of the profitability out of the food processing sector which would normally be expected to compete strongly in domestic markets and provide a platform for export growth. The result has been a lack of offshore investment or expansion by Australian food companies (in fact the reverse has been occurring). In addition, Australia’s food processors have lost market share in Australia and processed food exports have experienced virtually no growth over the past few years.
Keogh concedes that some of the factors he has discussed cannot be easily addressed, or can only be addressed by individual businesses, or in the case of trade agreements the Australian government. But insists there are some collective actions that can be taken that would deliver benefits to all involved in the sector, and among these is the development of a ‘brand image’ for Australia agriculture, similar to what has already been developed by New Zealand, Canada and the USA.
He shared how critically important it is that as much as possible of Australia’s agricultural produce needs to be positioned at the premium end of Asian and Australian food markets, which are markets in which a product’s quality and freshness are valued, and credence characteristics also become more important.
Adding that, Australian agriculture does have some characteristics that mesh well with what are understood to be the desires and values of fussy, middle and upper-class Asian and Australian consumers.
Some of these characteristics included:
- Australian farmers are able to produce very high and consistent quality products,
- Australia has extremely high food safety and biosecurity standards,
- Australia has very efficient logistics and transport systems that enable products to be delivered that are very fresh and retain their nutritional qualities.
- Australian agriculture has very strong sustainability credentials, including some of the most water-efficient crop production systems in the world.
- Australia has very high standards of farm worker welfare and safety compared to virtually any other agriculture sector worldwide.
- The Australian agricultural sector receives the lowest level of taxpayer support of any national agricultural sector worldwide, and therefore represents extremely good value for Australian taxpayers and consumers.
Keogh can see how these could form the basis of a strong national brand image that encompasses all these characteristics and wraps them up in a set of values that would be attractive to consumers in Asia and in Australia.
He understands that developing a brand that encompasses the characteristics of Australian agriculture and meets the wants and desires of consumers in Australia and internationally will not be a simple task. It will require resources and commitment, and it should surprise no-one that both are hard to come by. That does not mean the task is impossible, though.
He goes on to look at the political hurdles of this approach and the idea of this brand requiring a champion to drive the message home both here in Australia and out into the world.
Read Mr Keogh’s full address here
