State of Queensland Agriculture
On 26 June 2014 the Honourable Dr John McVeigh MP, Minister for Agriculture, Fisheries and Forestry, launched the State of Queensland agriculture report at the Queensland Agriculture Conference in Brisbane. This report was prepared to set the baseline against which the Queensland Government’s ambitious strategy to double agricultural production by 2040 will be measured.
Download a copy of the State of Queensland agriculture report.
The report did not go so far as to specific solutions as to how this strategy will be achieved. Mind you, that was not the purpose of the report. The broad pathways remain as outlined in the Queensland Agricultural Strategy launched in June 2013 with a focus on resource availability, productivity, markets and production costs. What the report does do however is consider, through statistical analysis, the key challenges that need to be addressed in order for Queensland to take advantage of the Asian opportunity. This is fundamental to achieving the 2040 goal.
To summarise a selection of those challenges:
The report concludes that the increase in output is less likely to come from increasing the area of land under agricultural use. Approximately 85% of Queensland is used for grazing, 2% for cropping, and other agricultural uses (excluding forestry) account for less than 1%. Accordingly, unless there is an argument for a significant change in the mix of use, the growth engines must come from productivity and price. We will not be the only nation trying to take advantage of the emerging global demand opportunities, so relying on price increase would be risky, and this is consistent with many forecasts including those of ABARES. In fact, data in the report suggests a near term downward price adjustment, followed by mild growth through to 2022.
Therefore, productivity needs to be the key driver of growth. From 2007/08 to 2011/12, the gross value of production for farm gate and first round processing did increase from $12.5 million to almost $15 million, so growth has been achieved in the recent past. However, the forecast for 2012/13 and 2013/14 is for a small reduction from the 2011/12 peak. Reversing this recent trend will be a key concern for the industry, which is not assisted by a general downward trend in Research, Development and Extension funding over the past five years.
Aside from strong returns in the 2000’s attributable to capital appreciation, the rate of growth in cash returns for Queensland broadacre farms and beef producers over the last 20 – 25 years has been negligible, which is also reflected by the declining terms of trade.
The profitability of farms is important to draw the next generation and/or new entrants to the sector, attract capital investment, and to generate cash flow surpluses that allow investment back into farms and the broader industry. However, statistics in the report indicate 29% of broadacre farms had a negative farm cash income on average for the five years to 2011/12, a preliminary estimate of 33% for 2012/13 with a similar forecast for 2013/14. It is likely that there will be a relatively high proportion of smaller scale operations in this pool and recent dry weather conditions will not have helped, however in a sector looking to attract investment profitability issues need to be addressed.
Agforce estimates the labour shortfall in Queensland’s key livestock and grain industries is 5,000 skilled full-time employees, and 17,000 casual employees. Combine this with the fact that in 2013 only 2,100 people whose last job was in agriculture, forestry or fishing were identified as being unemployed, and industry reports of less than 1,000 agricultural graduates each year , and it is not difficult to draw the conclusion that labour conditions are tight and could remain so.
It may be that a slowing of the mining boom will draw workers back into other regional industries including agriculture. However this could be with high salary expectations in contrast with a desire to lower costs in agriculture. Highlighting the value of non-salary benefits from working in agriculture (such as improved family living arrangements, and often the inclusion of accommodation and motor vehicles) will be an important aspect of attracting and retaining the agricultural labour and expertise.
Rural debt, which increased significantly in concert with rapidly rising land prices during the 2000’s (which in hindsight was not supported by underlying earnings) has begun to reverse since 2010 as the industry has sought to pay down existing debt.
The report suggests only a small proportion of farmers have debt problems, which we certainly hope is the case; however suspect may understate the issue. A combination of stagnant or falling land prices, declining terms of trade, and recent poor seasonal conditions have impacted gearing ratios and the ability to service existing debt, even in a low (official) interest rate environment. It goes without saying that productivity and profitability improvements will go a long way towards addressing these concerns.
While it is easy to dwell on the challenges, we can’t lose sight of the opportunity that is there particularly with the recent FTA’s being signed and the well documented demand conditions, particularly from Asia. There is no easy answer to the questions of how are we going to improve the productivity and profitability of the sector, however it is clear that the industry has government support achieve the goal of doubling production by 2040. Getting to the ‘how’ needs to be the next step.
Tel +61 7 3308 7281
To read more articles on Agribusiness and get the latest industry news: