Australia’s agribusiness industry faces a number of significant challenges it needs to overcome if it is to remain globally competitive in the long-term, with processors especially at risk.
A report by KPMG Expanding Horizons: Agribusiness in Australia 2011/12 outlines that the key challenges facing the industry include food security, the need for innovation, global competitiveness, water usage and facilitating food production.
The Australian agribusiness industry is a very diverse and notoriously-fragmented industry, which has hampered federal policy development. Importantly, Australia is only just starting to consider a national position of what food production should look like by 2050 when most other OECD peers have well-established plans.
“Agribusiness is under-represented and needs to unite with one voice on these issues to effectively engage with government and on the international playing field to make an impact,” said Phillip Napier, National Leader of Agribusiness at KPMG.
“Right now, the industry is shooting itself in the foot by not coming together on the big issues.”
KPMG’s research also found that differentiation and innovation will be the key to the future of Australian agribusiness in both domestic and international markets, especially as Australia exports 60% of the food it produces.
“With the growing globalisation of ‘agri-trade’ and an increase in the ease of food substitution between countries, Australia cannot compete globally on price,” said Mr Napier. “We know that other countries such as Mexico and South Africa can produce food cheaper than we can. The only reason Australia is currently able to compete on an international stage is because of productivity gains largely as a result of previous investment in R&D.”
Investment in agriculture R&D has declined since the mid-1970’s. There is a delayed effect in the benefits of R&D investment, which means there was a decline in agribusiness productivity in the mid-1990’s – from 2.2 percent between 1953-94 to 0.4 percent between 1994-2007.
Among OECD countries, Australia has the lowest effective rate of government assistance to agribusiness – other than New Zealand. This relatively low-level of government investment in agriculture means that foreign direct investment is essential to improving R&D, innovation and infrastructure.
“Industry and government need to collaborate financially and operationally on the R&D front to enable the productivity gains essential to meet long-term global demand. This includes marketing, product development, packaging and supply chain innovations,” Mr Napier adds.
The need for R&D is becoming critical, especially given changes to global food consumption patterns. A notable example is the surge in China’s middle class, which is creating increased demand for protein and other agri products including sugar and exotic fresh fruit.
Examples of successful innovation include Australia’s beef industry lifting its profile by engaging in strong marketing campaigns to promote Angus beef as a premium product, and investment in water technology to enable water savings of up 50% in the supply of water and its use on farm.
Innovation has also been used successfully across the dairy industry, with Dairy Innovation Australia Limited (DIAL) acting as an innovation hub for dairy manufacturing R&D and technology. This has allowed many dairy farmers to produce a large-scale premium offering both domestically and internationally.
“Agribusiness has such a bright future in Australia, if it can unite and rise to the challenge,” concluded Mr Napier.