Aus agri sector already a winner but big questions remain

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The problem is restating the “great opportunity” is just stating the obvious.  Unless the sector can crack the combination of market access, capital flow, supply chain competitiveness, skills injection and generational change, the opportunity will slide by.

"Recent debates have been focussed on yesterday’s issues."
Grant Mitchell, Director Port Jackson Partners

But then the first businesses to succeed will steal an enormous march on their competitors.

Yet recent debates have been focussed on yesterday’s issues.  Agriculture doesn’t need to be “picked as a winner” – the potential of the sector is already clear.

Greener Pastures, a Port Jackson Partners report commissioned by the ANZ, described the implications of Asian economic development for our agriculture sector.  We described success stories in New Zealand, Brazil, Malaysia, Indonesia and, yes, Australia, that demonstrated what happens when a sector gets things right.

We were also very honest about the sector’s shortcomings.  There has been a loss of focus on driving competitiveness and long term growth.  There are growing labour and skills shortages in the sector – not least aging farmer populations. And there is an enormous challenge to mobilise the capital needed both to introduce new farmers to the sector and then fund the production growth the sector can deliver. 

There are clear, sector-wide paths to address these challenges and in “Greener Pastures” we laid this out.

We recognised, for example, the sector’s capital needs can only be met by introducing innovative capital structures, with equal emphasis on equity not just debt.  But these structures remain underdeveloped in the sector.

Solving the sector’s capital needs also means dealing with two other important issues:

• Agriculture related infrastructure. How can the public and private sector work together to mobilise capital and the improved logistics efficiency gains the sector needs?
• Foreign capital. How can Australia foster an environment that safeguards national interests while allowing the formation of profitable investment relationships?  As the sector works to form new and long lasting trade relationships, it will be naïve to think investment relationships will not also become a priority.

Smart agribusinesses and policymakers are building on this agenda.  Victoria, for example, has launched its “Food to Asia” action plan.  All states have the potential to think more deeply about the real potential of their sectors - and what it will really take to get there.

In the private sector, investment and corporate activity targeting Asian opportunities is picking up. Agribusinesses are exploring innovative ways to develop new types of supply arrangements, at times tied to capital investment.

Dialogue in the sector not sharply focussed on these paramount issues  – in other words, on the actions needed to create a globally competitive cluster of Australian agribusinesses – is behind the times. 

Although learning lessons is wise, directly transplanting overseas models intact isn’t the answer, certainly not for the whole soft commodity sector.  And recent calls for a wholesale reshaping of competition regulation is likely not the answer, either. Even in recent dairy M&A activity, the debate was focussed on how to appropriately apply the arrangements we have, not on cutting a special deal.

Broad-based, whole of economy reforms are helpful but it’s the pursuit of specific strategies that will put agriculture on the best possible track.  What really counts is dealing with the glaring issues specific to agriculture - this should be the sector’s priority.