Sunday, 21 September 2014 Sydney
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Agriculture Australia::

Agricultural productivity has exhibited strong growth over the last three decades — more than twice the rate achieved in Australia’s market sector as a whole. Between 1975 and 2004 Australian farms consistently achieved average multifactor productivity growth of 2.8%-a-year - no other industry, with the sole exception of telecommunications and information technology, comes close to this achievement.

 

OVERVIEW

 

Australia is a major agricultural producer and exporter. Australian farms and their closely related sectors generate $137 billion-a-year in production, or 12% of GDP. Australian agriculture represents 1.6 million jobs and 20% of national exports.

 

Major agricultural exports include wheat, barley, sugarcane, fruit, cattle, sheep and poultry as well as an increasing amount of processed or prepared food products, such as fish products, cheese and wine.

 

There are 140,704 farms in Australia - including those for whom farming is not their primary business. However, there are 125,594 farms solely dedicated to agricultural production, as the table below reflects:

 

State
No. of farms% of total
NSW 
39,23631.2
Victoria30,93124.6
Queensland26,15920.8
South Australia13,47510.7
Western Australia11,6279.3
Tasmania3,5832.9
Northern Territory5220.4
ACT620.02

 

The major issues facing agriculture in Australia are drought, water security, global warming caused by climate change, biosecurity (biological threats from imported foods and livestock), and tariffs on Australian exports in the importing country (particularly in Europe and Japan), subsidies to farmers in other countries, currency fluctuations and price volatility. The wheat industry has also faced the end of the "single desk" marketing system after the Australian Wheat Board was found during the Cole Inquiry to have illegally paid bribes to officials in Iraq.

 

TRENDS

 

Agricultural productivity has exhibited strong growth over the last three decades — more than twice the rate achieved in Australia’s market sector as a whole. Between 1975 and 2004 Australian farms consistently achieved average multifactor productivity growth of 2.8%-a-year - no other industry, with the sole exception of telecommunications and information technology, comes close to this achievement.

 

Performance within the sector has been mixed — over the last three decades the cropping industry recorded the highest productivity gains, and the sheep and sheep–beef industries the lowest.

 

Australia will see growth across all agricultural sectors following the global economic recovery, with demand primarily led by Asian emerging markets. As a developed state, Australia will not expect to see large consumption increases. Despite this, Australian exports should see increased export opportunities through free trade agreements, particularly with its regional peers and Middle Eastern markets.

Another important trend which has the potential to impact on agricultural sector profitability and adaptive capacity going forward, is the recent acceleration in farm sector debt and reduced debt servicing capacity,

 

KEY FORECASTS

 

  • Wheat production growth to 2013/14: 25%.

 

  • Wheat consumption growth to 2014: 13%.

 

  • Wheat will show strong production increases owing to increased deregulation in the sector and enhanced export opportunities, particularly to the Middle East.

 

  • Given the recent spike in wheat prices, Australia wheat exports stand to gain, especially on the back of an estimated year-on-year (y-o-y) increase in production by 4.2% for 2010.

 

  • A surge in rice-consuming Asian immigrants combined with increased interest in foreign foods should see rice gain in popularity. Assuming the rate of growth of immigrants, rice consumption growth to 2013/14: 21%.

 

  • Milk production growth to 2014: 12% and consumption growth to 2014: 6%. Consumption growth will be driven mainly by population growth, since at close to 110kg per year, Australia already has one of the highest global per capita milk consumption rates. - 2010 Real GDP Growth: 2.3% (up from 1.4% in 2009; predicted to average 2.3% from 2009 to 2014).

 

 

INDUSTRY DEVELOPMENTS


Experiments are underway to produce rice in areas outside of the Riverina - the main rice-growing region where irrigation is not necessary. Another potential avenue for the expansion of rice production is the Ord River Irrigation Area in the remote Kimberley region of Western Australia. The US$390mn project will bring around another 12,000 hectares of land under cultivation, with the first parcels being sold off in 2011.

 

MARKET SIZE

 

The gross value of Australian farm production (at farm-gate) totals $43.6 billion-a-year. The top three agricultural commodities produced nationally (ranked by gross $ value) are:

Cattle and calves       $7.4 billion

Wheat                         $5.2 billion

Milk                            $4.6 billion

 

KEY PLAYERS

 

Grain Corp Limited Tel: 02-9325-9100 ASX: GNC

201 Sussex Street, Sydney, NSW 2000

 

Handler & supplier of agriproducts & bulk products in Australasia; operates 250+ grain accumulation sites in Queensland, NSW, & Victoria; offers supply chain solutions, research, storage, marketing, & export & import services at 9 port terminals.

 

AACo

 

AACo is the oldest continuously operating company in Australia. Currently operates 19 cattle stations, 2 feedlots and 3 farms. Is the custodian of over 7.2 million hectares (about 1.1% of Australia’s land mass). Is the largest beef cattle Company in Australia with over 500 staff. Run 485,000 beef cattle. Beef customers include both domestic and export consumers.

 

ABB Grain Ltd Tel: 08-8211-7199 ASX: ABB

124 South Terrace, Adelaide, South Australia 5000

 

Australian agribusiness with a multi-faceted operation & international focus; based in Adelaide; accumulates grain from all grain-growing regions across Australia, & trades in all grain commodities; also involved in storage, handling, logistics etc.

 

Batlow Fruit Co-operative Ltd Tel: 02-6941-4200

74 Forest Road, Batlow, NSW 2730

 

One of the largest fruit storage & packing operations in Australia, owned by growers who produce, market, & pack 1 million cartons of apples a year; also sells apple juice; located in Batlow, near the Snowy Mountains, 450 km south-west of Sydney.

 

Consolidated Pastoral Company (CPC) is one of Australia’s largest privately owned cattle companies operating 16 cattle stations throughout NT, WA and Queensland.

 

Inghams Enterprises Pty Ltd Tel: 02-9602-8744

203-209 Northumberland Street, Liverpool, NSW 2170

 

One of the largest producer of meat chickens and turkeys in Australia, operating in all states of Australia & in New Zealand; involved in poultry breeding, pet food ingredients, stockfeed, & Mitavite horse feed production, and a piggery operation.

 

Tassal Tel: 1300-660-491 ASX: TGR

2 Salamanca Square, Hobart, Tasmania 7001

 

Vertically integrated salmon farming company whose activities range from financial involvement in hatchery operations, through to farming, processing, value-adding, distribution, sales & marketing; largest aquaculture company in Australia.

 

GROWTH FIGURES AND FDI FIGURES

 

During 2009, Australia’s major sources of FDI capital were the European Union (40.9 % of total), Japan (26.6% of total), China (13.6% of total), Singapore (13.2% of total), and Canada (8.7% of total). 

 

Stock of Foreign Direct Investment in Australia by Industry

 

Industry

$ million

% share of total

 

Agriculture, forestry and fishing

 

700

 

0.2

 

Mining

 

99,659

 

25.4

 

Manufacturing

 

73,848

 

18.8

 

Electricity, gas and water

 

16,105

 

4.1

 

Construction

 

13,037

 

3.3

 

Wholesale and retail trade

 

57,093

 

14.5

 

Accommodation, cafes and restaurants  

 

914

 

0.2

 

Transport and communication

 

25,929

 

6.6

 

Finance and insurance

 

53,143

 

13.5

 

Property and business services

 

33,830

 

8.6

 

Other services

 

6,105

 

1.6

 

Unallocated

 

12,500

 

3.2

 

Total

 

392,862

 

100


 

 

RECENT DEALS

 

Canadian fertilizer giant Agrium offered to buy the Australian Wheat Board (AWB) straight up for US$1.1bn in an all cash deal on August 18. For the recently privatized AWB, the move would help fulfill a goal of joining forces with a global player after its monopoly over Australian wheat exports was recently revoked in 2008. And on July 6, Indonesian Wilmar International, the world's largest palm oil producer, agreed to buy Sucrogen, a major Australian sugar producer for US$1.75bn, in a bid to pursue growth strategies in Asian markets which synergise its operations.

 

INVESTMENT OPPORTUNITIES

 

Rice, dairy, seafood farming and processing etc.

 

 

RESOURCES: INDUSTRY GROUPS AND ORGANIZATIONS

 

Australian Department of Agriculture, Fisheries and Forestry is the national agriculture agency. http://www.daff.gov.au/

 

Animal Health Australia (AHA) is a not-for-profit public company established by the Australian Government, State and Territory governments and major national livestock industry organizations. The company manages national animal health programs on behalf of its Members. http://www.animalhealthaustralia.com.au/

 

The Australian Egg Corporation (AECL) is a producer owned company, which integrates marketing, research and development and policy services for the benefit of all stakeholders. AECL is mainly funded through statutory levies collected under the Egg Industry Service Provision Act 2002 and Australian government funds for the purposes of research & development. http://www.aecl.org/

 

Australian Pork Limited (APL) is a producer-owned company combining policy, research and development, marketing and export under one body in order to create a profitable and secure future for the Australian pork industry. http://www.australianpork.com.au/

 

The Australian Wine and Brandy Corporation (AWBC) is responsible for national matters such as export and labeling regulations, the determination of geographical indications, the collection, development, assembly and dissemination of information relevant to the Australian wine industry and under its committee, the Australian Wine Export Council, the generic promotion of Australian wine. http://www.wineaustralia.com/

 

Australian Wool Innovation Limited (AWI) is a fully independent public company limited by shares and owned by Australian woolgrowers. AWI initiates, commissions and delivers research and development (R&D) to Australian woolgrowers and provides trade development and market intelligence services. Their role is to provide government with economic and social data to support Australian representations to other nations.

http://www.woolinnovation.com.au/

 

Cotton Research and Development Corporation (CRDC)

The Cotton Research and Development Corporation is a partnership between the Australian Government and the Australian cotton industry, and invests in and manages a comprehensive research and development program designed to deliver ecological, environmental and economic benefits. http://www.crdc.com.au/

 

Dairy Australia

Dairy Australia delivers the services needed by the Australian dairy industry for its ongoing and future development as a competitive, innovative and sustainable dairy industry that contributes to the overall prosperity of Australian and regional economies.

http://www.dairyaustralia.com.au/

 

The Fisheries Research and Development Corporation is a rural research and development corporation within the Australian Government portfolio of Agriculture, Fisheries and Forestry. The FRDC is the leading Australian agency concerned with planning, funding and managing fisheries research and development.

http://www.frdc.com.au/

 

Forest & Wood Products Australia (FWPA) is an industry services body investing in research and development and wood promotion advancing an internationally competitive, sustainable and environmentally responsible forest and wood products industry in Australia. http://www.fwprdc.org.au/

 

The Grains Research & Development Corporation (GRDC) is one of the world's leading grains research organisations, responsible for planning, investing and overseeing research and development, delivering improvements in production, sustainability and profitability across the Australian grains industry. http://www.grdc.com.au/

 

The Grape and Wine Research and Development Corporation (GWRDC) is responsible for investing in grape and wine research and development on behalf of the Australian wine industry and the Australian community. http://www.gwrdc.com.au/

 

Horticulture Australia (HAL) is a national research, development and marketing organisation. It works in partnership with the horticulture sector to invest in programs that provide benefit to the Australian horticultural industry. http://www.horticulture.com.au/

 

Meat and Livestock Australia (MLA) provides services to its owners - Australia's livestock producers - and offers support to the cattle, sheep and goat industries in strategic planning. http://www.mla.com.au/

 

Plant Health Australia is a peak national coordinating body for plant health in Australia. It commissions projects and works with members to coordinate the development of national policy and capability to enhance the ability of Australian agriculture to respond effectively to plant pests, weeds and diseases. http://www.planthealthaustralia.com.au/

 

Sugar Research and Development Corporation (SRDC) is an Australian statutory authority with a mission to foster an internationally competitive and sustainable Australian sugar industry. http://www.srdc.gov.au/

 

Wheat Exports Australia (WEA) was established on 1 July 2008. It superseded the Export Wheat Commission. WEA's operations are funded from Australian wheat exports, accreditation application fees and Australian Government grants. http://www.wea.gov.au/