Home truths delivered about northern beef industry have wider implications for farmers

It is rare for leaders of agricultural organisations to present unreserved opinions about the direction their industry is taking. One leader to do so is Ralph Shannon chair North Australian Beef Research Council. His recent address to the Queensland Leucaena Conference in Rockhampton while directed at northern beef cattle producers contains messages that all broadacre farmers should consider about how they run their businesses. This is an edited version of his address.

A few weeks ago, I was fortunate to spend a few wonderful days in Hobart with my 15y/o daughter. Samantha and I share a love of Salamanca, and of its cafes and in particular its Hobart book shop which sells an eclectic range of books.

I`d been thinking about Donald Horne’s  book “A Lucky Country” and bought a copy to see for myself his classic comment “Australia is a lucky country, run mainly by second rate people who share its luck.” Horne, who was a renowned journalist and academic, and one time Chair of the Australia Council, wrote that in 1964. I wonder what he would say now if he were still alive. He died sadly in 2005.

Whilst browsing the books, my eye fell to another interesting title by an American, PJ ORourke, entitled: “Don`t Vote, It only encourages the bastards”. I had, of course, to buy it as well, and also the Australian Publication, ‘the Quarterly Essay’, featuring an Article by Financial Review Journalist Laura Tingle. The title for that essay was “Great Expectations – Government, Entitlement and an Angry Nation”. Having now read those three in the few intervening weeks, it will be no surprise to you the flavour of what I will say tonight!!!

Unfortunately, in those two weeks I have also received and read the just released 150 page ABARES Assessment of Risks and Opportunities of the Northern Australian beef industry and the QRAA Rural Debt survey forQueenslandagriculture. You just have to put it down to bad luck that I`m to address you after all that reading!!!

From my point of view, tonight presents me with an opportunity for ‘coming out’ as it were, not in what appeared to be the context for a significant number of Tasmania’s own, but in the context of what I hope will be a coming out of intelligent discourse of the state of the Northern beef industry, in the light of an assessment of some of the national forces which mitigate against it. In so doing I will draw from the various writers mentioned above and a few not yet mentioned.

YOU MUST BE CRAZY:

Let me therefore begin at the beginning – we all must be crazy! Horne sums it up by saying that’ the North is relatively underdeveloped due to fundamental economic forces – it is simply not worth developing!’ He does go on to say however, that if ever there was an industry for this wasteland known as Northern Australia, the cattle industry is it, and the advent of road trains will ensure its viability.

Having recently sat beside Ross Fraser of Frasers Livestock Transport at a Northern development forum, to use his words, we may not have them for long unless something changes for the better. We in Central Queensland have seen the Brigalow scheme transform our part of northern Australia, but despite the transformation since 1964, as indicated by the QRAA debt survey and the Mc Cosker report of 2010, there`s no money in it for the majority of producers, certainly not a sufficient return on the significant investment required.

The average beef operation in Queensland has a debt of $1.4m to the major financial institutions who are part of the QRAA debt survey, meaning close on $100,000 per year paid in interest. Most alarming is the trend of debt and value of production in gross terms. In the past 3 years, beef industry debt has climbed 17.2% and value of production has dropped nearly 5%.

Until 2005, agriculture debt was less thanGVP, now it is 50% greater. And we have the carbon tax to come. I`ll let Greg Sheridan, columnist for the Australian, speak for me on that: “The Australian Carbon tax is a species orphan, the Collins Class submarine of global environmental policy. It is environmentally inconsequential, economically costly, administratively nightmarish, and unlike anything else in the world. Policy folly, it is, the Gillard government would still have a better chance of selling it if it occasionally told the truth.”

Therein lies the rub. We must confront the truth no matter how unpalatable. One of the truths is that the carbon tax is partly to blame for a dramatic increase in electricity prices. Using a base of 2002 as 100, by the end of this year Australians will pay 180, starting from the same base,Canadais still at 100, Japan below 100, EU at 105, and US at 110. All under rules set by our Aust Energy Market Commission, and endorsed in 2008 by energy ministers led by Martin Ferguson. Not much good if you want to use electricity to pump water to irrigate crops like leucaena.

BUT NOT ALL OF US:

But this is only my version of the truth. I am hopefully expecting that a number of you will say that I`m wrong, some of my mates say they make good money from beef production. I suspect they are debt free and they are good operators, as, I`m sure, are many of you, but I want to focus on the trend …… it`s getting harder not easier.

Laura Tingle in her essay Great Expectations, says that much of our dissatisfaction with governments and politicians stems from our having too high an expectation of them, she may well be right, but sooner rather than later, things need to improve, or to borrow from Ross Fraser, there won`t be anyone wanting to do it. That’s not rocket science, but it still seems to be lost on some.

INDUSTRY OUTLOOK

Even as lately as Beef 2012, there was optimistic comment for the future of the industry, coming, as I understand it from an American speaker. (I could say ‘ when will we learn?, but I won`t). The decline in the US herd, the growth in (beef) demand in Asia etc were underpinning a positive outlook, and I must say, they may well be right.  However it is interesting to note here  that the growing middle income Chinese are eating more meat per person per year, but the extra is as pork and chicken and that is expected to continue, beef consumption per head is not expected to change significantly and even if the total volume consumed increases, its will be in lower value cuts. They are not the cuts that put profit back into northern beef businesses.

Let`s consider Brazil  for a moment, it has over 200 million beef cattle, its government is sending 100,000 PhD graduates each year to study overseas, funded by the government. It is developing its beef industry on the back of strong domestic demand, but also on export development.

As we explore our lazy assumption about Asian middle class demand being our saviour, do we consider why Asians will buy beef over pork or chicken? Do we consider the effect of exchange rate which is currently stealing what could be profit to the Australian producer? Do we, for a moment wonder why we will be the primary beneficiaries – is it just because we are here?/ Is it because we have NLIS trace back?/ is it because we think we are better than everyone else, especially those Asians and South Americans?

Let us remember our appalling treatment of the Indonesian peoples during the live export fiasco and hang our heads in shame. According to Hugh White, the well regarded strategist, it is time for us to fundamentally change our thinking and our approach to our Asian neighbours. We are not as good as we think we are, and just about everyone knows it but us. That doesn`t stop our prime Minister lecturing the G20 nations on economic management. What appalling second rate leadership indeed.

Notwithstanding the increased likelihood of birdflu as a result of increased poultry consumption inAsia, (as I heard espoused by a viriologist recently) I certainly wouldn`t bank on it driving beef consumption, and I correspondingly wouldn`t bank on our Governments aspiration for a doubling of beef production over the next 20 or so years. Why would we when the price signals are just not there?

TheANZbank’s annual Commodity Informer review graphs for primary products real and nominal prices – show agricultural products real prices have mostly flat lined; compare that to minerals especially in the last 10 years. The message from the graphs is that middle incomes people (and politicians)  around the world don’t value what keeps them alive food, but values what adds to their lifestyles.

Another important point here is that according to Professor Lindsay Falvey, 90% of the world’s food is grown and eaten in the country of origin. So the food future debate is not about how much more food major exporters likeAustraliacan produce but about how much more food the major population growth countries can grow.

Falvey concludes in his  book  “Small Farmers Secure Food”:

* Securing the most basic of foods for survival is the first element of national security and an essential foundation of governance.

* Families, tribe, nations feed themselves first so national food security policy for food-scarce nations is imperative yet those forced to borrow for development are enticed into free trade that compromises essential food security

* Food policies in food-scarce countries assume international food trade because of international agency bias, yet 90% of world food does not cross a border.

* Two billion small farmers feed themselves and can produce higher yields than industrial agriculture on marginal soils, and if forced to migrate to cities they swell the urban poor who need 30% more food produced plus other welfare inputs.

* More than half the world lives in cities where the urban poor go hungry if food prices rise – and angry urban groups riot, disrupt governance and emigrate.

* Western agricultural development is a less relevant development path for food insecure countries than that of populace successful food exporters particularly China.

URBANISATION AND SOCIETY

Which leads me to urbanisation. Donald Horne wrote about it even in 1964. He writes: ”It is a fact, highly inconvenient to national mythmaking, that we are probably the most urbanised nation in the world.” Despite frequent suggestion of schemes to populate our inland, in my lifetime, we have become more urbanised, not less. The fly in fly out mentality of labour for mines further validates that Australians want to live in cities and towns near the coast, not in agriculture serving rural and regional centres. I think we have to accept this and move on.

What has really made a difference for us, however, is the concept of one vote, one value. We rural Australians no longer have political influence through the ballot box. Our only hope is to keep our city cousins thinking well of us. In decades past they often were our city cousins and they came to visit on holidays and understood what we did on the farm, even the yukky bits which we did to sheep and cattle to keep our production systems as the best in the world. The trouble now is that they are no longer our cousins, they are Australians.

The demographer Bernard Salt in a recent article in the Weekend Australian promoted the notion of the tribes in Australia and the balance of power amongst them. It`s no surprise that our tribe, the rural and regional tribe, no longer has much influence, it`s all held by the city dwellers, even the inner city dwellers who are a tribe all of their own.

As someone has once said, the trouble with being a part of the rat race is that at the end of the race, you are still a rat.

Let`s not pretend that these city folk are getting it easy either, second rate leadership is non-discriminatory in effect. City people generally work longer hours and have less holidays than people in other developed nations, they compensate by living beyond their means and therefore have rising debt, fuelled in part by the same thing which has fuelled rural debt – increasing asset values, except that now they aren`t any more.

Clive Hamilton and Richard Denniss of the Australia Institute have written a book entitled ‘Affluenza’ about Australian society, and in the back of it they publish a Political Manifesto for Wellbeing, which aims to promote what they call a flourishing society, one where Australians are more fulfilled. It seems to me a worthy aim, but these are its key themes:

1. Measure what matters – not GDP but wellbeing
2. Provide fulfilling work
3. Reclaim our time – shorter working hours
4. Rethink education
5. Invest in early childhood
6. Discourage materialism and promote responsible advertising
7. Protect the environment
8. Build communities and relationships

ZIP about food or agriculture!!!

They argue “Australians are anxious about declining moral standards. We worry that we have become too selfish, materialistic and superficial and long for a society based on mutual respect, self restraint and generosity of spirit.” I have one comment –‘let`s get back to the farm and the values of rural Australians’, but of course, I shout in vain.

I share this stuff with you to bring home that we cannot operate in isolation from the society to which we belong. Like it or not, we will be driven by their influence upon second rate leadership and some of that will impact us directly, some indirectly. But impact us it will. We in the northern beef industry need to work out how to respond in this society, how, for example, do we contend with the challenge of mining and coal seam gas to our land and enterprise, not to mention our community.

ACTIVISM

I remember when I was very young, my father leaving home for a few weeks if not a month, to go to a place called Quera, a meatworks near Cairns. The meat workers had gone on strike and the producers went there to run it. I remember as will many of you, the formation of the Cattlemens Union, and the impact on the political landscape of a heightened level of activism by producers. Years of grind since then, the erosion of profits and labour on solid family farms have depleted our strength, such that we now confront afresh what our industry bodies should look like and do, but with less energy. I urge you to be a part of this deliberation, however you can – we need a vital Cattle Council and Ag Force to continue to represent our needs and views.

But it is important to recognise the alternatives to the traditional representative organisations – I suspect there is an increasing number of cattle producers (and other farmers) who don’t want to associate with traditional organisations with a lowest common denominator focus. Groups like holistic management, organic, landcare, QA brands.  So if you are supplier of the organic certified OBE Beef your efforts are focused in that direction, you are very unlikely to be so interested in beef producer groups who have no interest in what you are doing and may even criticise your approach. This is happening on an increasing basis across agriculture for example  in cereal growing, producers are setting up their own companies to meet their personal and regional interests eg Free Eyre, Kangaroo Island Premium Grain, Southern Agventure etc.

EDUCATION:

What about education, I hear you say! What we do in promoting leadership in the beef industry is to drag one of our best off a horse and elevate him or her to a position of national policy development and advocacy for the industry, without so much as a one day orientation course, and we wonder why we are falling behind those who are not for us. For some, it`s too much, others don`t do much of a job, and still others relish the elevation and become arrogant and forget who they are meant to represent – they become politicians, industry politicians, but politicians nonetheless.

Professor Jim Pratley from Charles Sturt University, published a paper recently for the Australian Farm Institute in which he highlights the decline in agriculture graduates from Australian universities. Our Universities produce less than 20% of the number of graduates needed to satisfy demand in that arena.

He goes on to say “On any analysis, the educational standards of the industry of agriculture do not stand up to scrutiny. Over the past quarter of a century, the proportion of the broader community with tertiary qualifications has risen from 10% to over 25%. In contrast, in agriculture in 1984 only 4% were degree holders, and in 2009 that had only risen to 7%. The gap is widening, yet food production would seem to be an essential service industry where standards should be unquestionably high.”

There can be no argument with the need for better education options for farmers to equip them for the difficult environment they are facing. With the spread and isolation of beef production in Nth Australia, the problems magnify, but we need more targeted short courses perhaps available through distance ed. UQ has recently closed its distance ed centre at Gatton, and have reduced their support of Rangelands Australia courses, so we need to support any effort by regional Universities like CQU to meet some of this need. Even as participants in beef R and D, the universities lack core commitment to the industry, due to a focus on revenue and status, and the fact that they are better elsewhere.

If you are struggling to make sense of all that I have said, then I am with you! These are not issues which are easily solved, but we do need to confront them.

CONCLUSION:

I am going to conclude by trying to make some futuristic punts on what might or could happen:

1. The leopard doesn`t change its spots, so mining will win over agriculture in politics every time, so you producers will need to do the best deal you can with the miners and if need be go to work for them to help pay the bills.
2. The real export price for beef may not grow significantly in my life time, history does not support a rapid change in price received by producers, so the game will remain tough, especially for those with debt. Profit through the supply chain needs to improve and bigger producers will survive by owning the whole chain and capturing profit where they can.
3. Don`t expect any increase in Government investment in R, D and E in Northern beef, no matter who`s in power, in fact, expect to pay for services which you have traditionally had for free, which will increasingly come from the private sector as government investment declines. In that, you may not be much worse off, except that the likes of Max Shelton will be less likely to come from a University, because there is more money and prestige for the University in other fields not related to agriculture.
4.  The notion of public good commitment to agricultural R, D and E is under severe threat at the hands of our leaders. If you need help, get a good consultant!
5. Government investment in your properties is more likely to be about destocking it for carbon sequestration, carbon dioxide equivalent abatement (less methane) and for species conservation eg Carbon Farming Initiative, National Reserve System and the proposed National Wildlife Corridors network. It is not surprisingAustralia’s agricultural area dropped below 400 million hectares for the first time in 2010. It was 462m hectares in 2001 (ABSdata). Most of this area was excised from the pastoral zone in northernAustralia. The point being most politicians have so little knowledge of agriculture that they accept the conservationists mantra that to protect native species and ecosystems agriculture needs to be excluded. At the moment there is little interest in the delivery of ecosystem services on agricultural land – theCFImethodologies to exclude grazing in revegetation/reafforestation for 100 years is a prime example. (The much acclaimed soil carbon methodology is unlikely to eventuate for a myriad of biological, administrative (verification) and practical reasons. Soil carbon is a critical component of farming and in areas where it has been depleted involves a systems approach over decades to change to a tradeable extent.

6.  What is known as the social licence to operate will get more difficult to keep in the face of the growing city country divide, and due to the lack of political interest in agriculture. I suspect that live export will ultimately become unacceptable. Social media will serve city dwellers better than farmers, because they will be more familiar with it.  The so called social license to operate a farming business will require the owner/manager and workers to have a greater knowledge of the biological systems under their stewardship. Understanding and monitoring systems like the soil food web, carbon flows, water flows, livestock behaviour, wild life booms and busts, should be just as much part of northern beef businesses, as understanding and monitoring cattle branding rates,  livestock weight gain, nutrients supplements, and returns on investment.

7. The Bible says “He who is not for us is against us” and farmers need to learn that. Our admirable trait of benign goodwill, needs to be tempered with a steely resolve against those who are not for us, politicians especially. Use your own influence in your own electorate, to do what Don Chipp said theDLPwould do in the 70s, keep the bastards honest!

8. The producers who flourish will need to be innovative and flexible, producing different products for different markets as signals change. Most northern Australian beef producers are not capable of this yet, I suspect that elucaena growers are. R and D systems need to support this flexibility.

9 .The industrys interests are best served by producers making more money from the same number of cattle inNorthern Australia, not from running more cattle, due to the environmental and labour considerations. The ‘more cattle’ agenda is run by the processors who need greater throughput for meatworks efficiencies and by technology purveyors who want to sell more products

10. Donald Horne and PJ O Rourke were right, so don`t expect politics to improve!

11. It will not be enough just to be a good cattleman or woman in the future, so advanced education will be critical, and leaders will need to be equipped for their roles.

12 Finally I want to say that your presence at this conference indicates that you are focussing on the right issues, the delivery of a higher quality product from an environmentally enhanced grazing ecosystem to consumers. Australian society is changing and good food is being valued, so agriculture will be viewed favourably because of that.Tasmania, due to the fact of not really having a metropolis, seems to support that notion with local brands that support high product and environmental standards, but unfortunately Northern beef producers will always be dependent on the export market for the majority of their product. The good news is that we are a resilient people and the beef industry will survive even this period of second rate leadership.

Our country owes much to the beef cattle industry, and will continue to do so in the future provided beef businesses embrace, understand and communicate new knowledge with  consumers. Never before in the modern farming era has it been so important for like minded cattle producers to set the agenda for their business and environmental success.

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Ralph Shannon contends mining will remain politically more influential than agriculture so northern beef producers should learn to live and work in harmony with it.