Agmates

The Global Credit Crisis has dominated the news for the month, yet there has been virtually nothing written or said by Agriculture Industry leaders on the impacts on, or consequences for our rural industries.

Yesterday Federal Agriculture Minister Tony Burke [pictured] finally took a leadership role by summonsing representatives of Agricultural groups, accountants, the National Rural Advisory Council, ABARE and the big banks to Sydney for a crisis summit.

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“After the meeting, Mr Burke said bank representatives - including those from the big four banks - had given him and farmers assurances the financial meltdown would not swallow up this month’s interest rate cut, or block access to credit.

(I was) able to find out for the farmers … directly from the banks, that in the immediate term they are still open to business, that they are still providing credit to Australia’s farmers,” he said.”

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Farmers now want to know what the outlook is as commodity prices tumble and farm input costs soar. Minister Burke is gloomy in his outlook:

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“We still don’t know what the impact will be on global demand for Australian exports,” he said.

“Certainly it’s true that most farm inputs, such as fertiliser, such as chemical, such as fuel are imported, and so the lower dollar has an impact there.

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On top of these woes Australian farmers are waiting for the minister to spell out to the industry what the financial impacts will be of the proposed emissions trading scheme. Those impacts will be a double whammy as countries like the USA and the EU are expected to increase subsidies to their farmers and impose import tariffs on Australian Ag exports.

The Agmates community looks forward to Minister Burke now providing our Rural industries with strong and decisive leadership as we move forward in these unprecedented times of global economic turmoil.

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Have Your say! Has your bank passed on the interest rate cut yet?

Phillip Glyde, executive director of the Australian Bureau of Agricultural and Resource Economics (ABARE) being interviewed on ABC’s Lateline Business last night.

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PHILLIP LASKER: “So you’re not forecasting a steep fall in Australia’s export earnings?”

PHILLIP GLYDE: “We actually haven’t done the numbers as yet for December when our next forecasts come out.

But if you look to the extent the Australian dollar’s fallen that’s actually going to provide some support for our export earnings.

In essence, it’s good news, a lot of the commodity contracts are written in US dollars and particularly for agriculture, I think there is a little bit of room for optimism there.

Lower exchange rate also means higher input costs but on balance, it is relatively good news in the short term.

Given the turmoil we’ve got, and the big uncertainty, of course, is the extent to which the economic slowdown in the West transfers through to China and the other Asian economies.”

Go the Asian Tiger economies.

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Have Your say!

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Got a tip off, article or have you seen a video or item you’d like to be seen by the Agmates Community? If so please email it to us at news@agmates.com

Grain farmers in the Southern Half of NSW and the Northern part of Victoria are desperatley in need of rain if they are to save their winter crops.

“Werrimull Victoria - farmer Eric Yates yesterday said he expected this season’s harvest would again be well below average.

This season I’ll probably be looking at around two or three bags an acre where an average season would produce six or seven bags, but there’s no chance of that happening.”

Crops in Victoria’s northwest Mallee and northern areas of the western Wimmera district, have been stressed by hot and windy weather and unless they receive a good drink in the next two weeks they will fail completely.

In the Mallee, many crops that have enough bulk have already have been cut for hay. The Victorian Department of Primary Industries “The Break” monthly crop report, noted that most districts in Victoria received rainfall in September in the lowest 20% of historical averages.

The Australian Bureau of Agricultural and Resource Economics ABARE in September forecast Victorian wheat production would come in at 2.7 million metric tons up from last year’s state output of 1.9 million tons.

In that report ABARE predicted the Australian wheat crop would come in at 22.5 million tons, up from last years drought affected low of 13.0 million ton. On the back of mainly continuing dry conditions in South NSW & Northern Victoria some analysts are predicting that will be reduced to 20 million tons.

(thanks to Agmates Reader Rowell)

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Have Your Say!

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Beef consumption per head of population in Australia has not changed since 1960. Ross Garnaut and others fanciful suggestion that Australians should shift from eating beef and lamb to Kangaroo would entail a massive re - education program of consumers and or incredibly cheap retail prices.

The below graphs sourced from ABARE show that the retail price is an all important factor in what meat familes buy and consume.

You can see from the graph that retail beef prices in 2006 were just above those of 46 years previous. Poultry on the other hand was just 20% of its 1960 equivalent. Note the big beef price drop during the beef crash of the 1970’s.

Now for the Consumption per capita (person) for the same period.

Things we can learn from the two graphs.

1. Note the only time that beef consumption has risen during the 46 year period was during the 1970’s cattle crash. Except for this period beef consumption been flat lining for the last four and a half decades. This is despite Meat and Livestock Australia spending millions of dollars of producers levy money on domestic promotion over the last decade.

2. Sky rocketing consumption of Poultry (900% increase) is in direct relation to the plummeting retail price.

From the two graphs it would appear that if Roo meat was to retail at about the same price as Poutry, Australian consumption would automatically dramatically increase.

There is the conundrum. If Roo meat has to be sold at those sort of prices, how do producers make any money from the enterprise? Currently beef producers receive about $2.50 - $3.50 a kilo carcass price for beef. Roo carcass price is approximately 0.70 cents - 0.90 cents a kilo carcass weight.

There are about 3 million Roo’s killed each year for consumption. Of the 3 million 30% go to pet food and 70% to human consumption. Of that 70% - 30% is sold domestically and 70% is exported, with the largest market Russia. The Russians cheifly use it as a beef substitute filler in cheaper sausage meats.

Senator Ron Boswell touches on why producing cheap Roo meat is an impractical dream.

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Have Your say!

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Agmates has been writing for months about the disastrous impact on Australian farmers of the proposed Emissions Trading Scheme in its current form.

We have been critical of Australia’s peak farming lobby group the National Farmers Federation (NFF) almost total public silence on the issue.

Finally flushed out by the concerns of the Agmates community coupled with the rising chorus of dissent from Agricultural economists the NFF has broken its silence on the issue.

As reported In todays Age Newspaper the NFF is calling on the Rudd government to issue the farming community with free permits. “Make ETS Permit Free for Farmers, says NFF”

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The National Farmers’ Federation said free permits for agriculture would be justified as action by farmers had cut greenhouse emissions from agriculture, forestry and fishing by 41.7% between 1990 and 2005.

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The NFF call comes from it’s submission released 12 days ago [10th of September] in response to the Governments publication of its Green Paper in July of this year.

The NFF says that free permits would cushion the impact of increased farm input costs that farmers and rural economist have warmed will force 1,000’s of farmers off the land.

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“This process [free permits for Agriculture] has been adopted in Europe and New Zealand,” the NFF said.”Agriculture’s capacity to pass on costs is notoriously poor, meaning that many farmers will be forced to absorb the vast majority of the cost of these permits,” the NFF said.

“It would be perverse if agriculture was more adversely treated in the Australian CPRS than in any other ETS in the world,” the federation said.

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The issues we have raised in articles like “ABARE Chiefs warn Ag Doomed under ETS” [18th Sept] are also starting to receive national press coverage. Our most prestigious National Newspaper The Australian today has run this article “Emission Scheme “will mug farmers“.

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Brian Fisher [pictured] , executive director of Concept Economics and former head of the Australian Bureau of Agriculture and Resource Economics ….

Although farming is exempted from the ETS until at least 2015, Dr Fisher says that many small farmers will be mugged in the meantime by increases in the costs of inputs such as electricity and fertiliser.

His warning reinforces recent modelling by the Business Council of Australia and the Australian Farm Institute that predicts many businesses will be made unprofitable by the scheme.”

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We have to ask why has the NFF needed to wait for the likes of Agmates,[5/7/08] ABARE, Concept Economics, [18/9/08], Business Council of Australia, Australian Farm Institute,[15/9/08] Queensland Farmers Federation,[15/9/08] to come out publically and state what should have been obvious to Australia’s peak farming body…….

Indeed after the release of The Green Paper on the 8th of July we called for the NFF to ’step up to the plate’ on behalf of Australian farmers.

“National Farmers Federation Must Save Australian Agriculture”.

Finally 10 weeks later the NFF is rather timidly poking their head out of its shell, to add its voice to the protests on behalf of Australian Farmers. Hardly a driving force.

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Have Your Say!

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Got a tip off, article or have you seen a video or item you’d like to be seen by the Agmates Community? If so please email it to us at news@agmates.com

The current and former heads of ABARE have joined the growing chorus of Agricultural Economist who are warning that the Emissions Trading Scheme will have dire consequences for Australia’s trade exposed Agricultural industry.

Dr Brian Fisher, former head of ABARE for 18 years has expressed grave fears for the future of Australian Agriculture under the proposed Emissions Trading Scheme.

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“Introducing a scheme ahead of other nations was not prosecuting Australia’s national interest, it was prosecuting somebody else’s and we are going to be damned if we do.

There is absolutely nothing to be gained by going first here. We are a very, very small country. We constitute about 1.3 odd per cent of emissions on the planet.

The government should focus its domestic climate change policy on adaptation because it will be “years” before there is an international agreement on emissions trading between the 190 countries involved in the ongoing negotiations.”

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Dr Fishers views reinforce what Agmates said in the article: “ETS in Aust & NZ will Zero impact on global emissions”

In fact if you are one of the 1,000’s of informed Agmates readers you will have know for at least 2 months that the ETS in its existing form is disastrous for Australian farmers. Rural Press finally 10 weeks later have picked up on that fact. On the 5th of July we wrote:.

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“What the main stream media have missed in the flood of coverage is the potential devastation to rural Australia the emission trading scheme will be.”

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Dr Fishers successor at ABARE Phillip Glyde [pictured below], supports his views. He points out that regardless of whether or not agriculture was included in the ETS from 2010, the impacts on farming through the use of emission intensive inputs would be significant.

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“In the cropping sector, 39 per cent of the input costs to cropping came from emission-intensive inputs, while in livestock those costs were about 17 per cent.

There’s only one solution to all of this, particularly while the rest of the world doesn’t introduce an ETS or have emissions trading schemes excluding agriculture - it is to continue down the path of productivity improvements.

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The Australian Bureau of Agricultural and Resource Economics (ABARE), located in Canberra, is the Australian government’s own economic research agency and is respected for its professional independent research and analysis.

It is incredulous that the chief architects of the Emissions Trading Scheme Prime Minister Kevin Rudd, Agriculture Minister Tony Burke and Climate Change Minister Penny Wong are ignoring their own Economic experts advise.

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Have your say!

Q. Why do you think that the architects of the ETS are going to knowingly cripple our Agricultural industry with an ETS that will have zero impact on global emissions?

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Got a tip off, article or have you seen a video or item you’d like to be seen by the Agmates Community? If so please email it to us at news@agmates.com

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CEO of the QLD Farmers Federation John Cherry [pictured] writes:

The Australian Farm Institute has done farmers a huge favour pointing out the massive cost that an Emissions Trading Scheme could impose on farming.

While that cost will be biggest for livestock producers if methane is included from 2015, all farmers will cop it on the inputs like fertiliser, diesel and freight from 2010 (although a rebate on on-farm fuel use will be offered for the first three years).

Queensland Farmers Federation has been arguing that the Government needs to look at more cost effective alternatives, such as uptake of better farm practices on soil, water, feedstock, nutrients and vegetation. A lot of this is not counted under the Kyoto protocol’s accounting rules, making emissions trading even more troublesome for farmers.

While the Government has acknowledged that farming faces particular challenges and will not be included fully in the ETS in 2010, it has not offered full compensation for the cost impost then (even though the ETS will make us less competitive in export markets).

Nor, has it been prepared to seriously consider alternative approaches for the future.

Incidentally, your article was heavily critical of the National Farmers’ Federation’s stance on the ETS. I think this is a bit unfair.

QFF is not a member of the NFF, but we are very supportive of the huge amount of work NFF has put into its
comprehensive 47-page submission on the Government’s emissions trading green paper delivered last week.

That submission covers all the big issues in an informed technical way building up a compelling case for a better approach.

Clearly though, farmers have a long way to go to persuade Canberra that emissions trading might not be the best thing since sliced bread for our sector.

As the Farm Institute’s research and similar work done in New Zealand shows, failure to get this policy right could be devastating for the profitability of our sector.

And that would be on top of what ABARE tells us will be the very substantial cost of adapting to climate change and increased climate variability for our sector.

John Cherry

CEO Queensland Farmers Federation.

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Have Your say!

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Australian Bureau of Statistic (ABS) figures for 2007-08 just release show that domestic beef prices are helping hold down the CPI and thus inflation.

Australia’s Inflation rate came in at 4.5%. Food prices across the board increased less that the overall inflation rate at 3.9%.

ABS found that beef prices increased by just 1.7%

Over the same period Milk prices rose 12%, Poultry 11%, Pork 7% and bread 7%.

Interestingly Bill Bray, president of the Cattle Council of Australia, expressed disappointment that beef did not keep pace with other foods.

Meat & Livestock Australia (MLA) spent $18,300,000 on domestic beef marketing in 2007 - 08. The best figures we can find are that Domestic consumption of beef was static for the period. MLA head of marketing David Thomason (pictured) was in a meeting and unable to call us before publishing this article.

ABARE (Australian Bureau of Agriculture & Resource Economics) statistics are telling. The figures for Australian Farm Costs and Returns show a grim picture for Australian farmers:

Real Net Farm Cash Income:

2003-2004 - $14.600 Billion

2004-2005 - $13.805 Billion

2005-2006 - $11.870 Billion

2006-2007 - $ 8.479 Billion

2007 -2008 -$ 8.478 Billion (Estimate)

The actual 2007-2008 are not available yet but I would imagine will the huge rises seen in the 4 major farm inputs - fuel, chemical, fertilizer & interest rates that it will not be a pretty picture.

What the figures do tell us is that in the 3 years from 2003 -2004 to 2006-2007 Australian farming’s real net farm cash income after expenses fell by a whooping 42%. That was the period according to the previous coalition government when Australian’s had never been better off.

Is it any wonder the rural sector was growing weary of the previous government.

Not that things have improved one bit for farmers under the Rudd Labor government.

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Have Your say!

From Whence it Came.

May I begin this presentation with a little explanation as to what this committee was instructed to do. The committee was borne at Conference last year as a result of resolution 90, which stated;

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“That this Conference of the National Party of Australia-Queensland, calls for the establishment of a sub-committee of the Primary Industry, Trade and Treasury policy Committees to investigate discrepancies in figures between the Australian Bureau of Agricultural Resource Economics (ABARE) and the Queensland University of Technology (QUT) research which identifies major statistical differences in Agricultural produce exported and that consumed domestically”.

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After being unanimously carried by Conference at Rockhampton, our previous State President generously proposed myself to chair the duly constituted NPA-Q Agricultural Production Destination Committee. Thus began the process.

Special thanks must go to Dr Mark McGovern who refused to be intimidated by powerful agencies and departments. Consecutive ministers who chose to challenge his credibility rather than question their bureaucrats, consistently ignored his research.

Along with Dr McGovern, other members from academia who so willingly and freely gave of their time are world renowned economists Emeritus Professor Rod Jensen, Emeritus Professor Ted Kolsen and Associate Professor Guy West, who like the Australian Bureau of Statistics were surprised to say the least, at the repeated claim that 80% of our agricultural production is exported.

It is most important to mention that not one of these esteemed gentlemen participated for any personal gain and that they are internationally regarded in this particular field of economics.

My committee also should be thanked. In particular the chairman of the Economics committee Rolf Mitsdorffer, a person whose integrity and objectivity is an example for us all.

Mark Mazzanti and Dick Jeremy for their valuable contribution, their persistence and their no ‘nonsense’ approach. I have come to admire these men for their intelligence and strength and they are not bad blokes as well.

During the year our State President repeatedly offered encouragement to me, though his personal contribution was limited by his relentless effort to be every where in our great State.

I must extend our gratitude to one Bob Katter MP. Bob was responsible for gaining departmental approval for the ABS to travel to Brisbane and meet with our committee at Customs House on that historic day in May. We might even call the resultant agreement the Bob Katter Customs House Agreement.

Finally I would like to point out that each and every delegate to these Queensland National Party Conferences, can feel justifiably proud for having encouraged democracy to function as it ought.

Without the power brought to bear at a forum such as this through an organisation like ours, this critical issue may never have been resolved. We are part of a truly wonderful structure in this great Queensland National Party.

Findings.

Who said What

When the committee began its work we discovered that numerous organisations claimed various levels of agricultural exports;

• The Parliamentary library came up with figures of up to 200%,
• The Department of Foreign Affairs and Trade after some time finally settled on a draft paper suggesting about 66%,
• The Australian Bureau of Agriculture and Resource Economics when pushed concurred with about 66%. However, in their Farm Stats 2000 publication and earlier, they have claimed 80%,
• The National Farmers Federation claimed 80%,
• The Queensland Farmers Federation repeatedly claimed publicly 75% or 80%,
• Most of our politicians from all parties publicly supported 80% and subsequently accepted 66% when DFAT finally came good with a set of draft numbers. (Politicians depend on advice from their minders and departmental bureaucrats, therefore the actual percentage value of exports becomes a critical issue for policy development),
• The Queensland University of Technology’s research project by Dr McGovern indicated 22 % direct exports.

Our committee felt that to confirm or refute McGovern’s findings some further knowledge and authority should be engaged. Specialist economists, after initial investigations, were very much in agreement with the lower figures as concluded by Dr. McGovern.

Our committee then sought to discover the source of the various ‘stated beliefs’ and these all led to The Australian Bureau of Statistics. (ABS)

ABARE’s response to our early approach for clarification prompted a statement to the effect that we do not have the specialist (input-output) skill to undertake such work. We source this kind of information from ABS.

DFAT, as well confirmed ABS as their source.

All paths led to ABS.

Now What.

Phone discussions with ABS showed that two departments existed inside ABS that deal with this information. The Agricultural Statistics section were themselves perplexed. In fact, one of the gentlemen from Ag stats rang me to say he had heard on radio somebody claim 90% exported. He could not believe his ears.

The second ABS department involved is National Accounts. This was to be an interesting chapter of our investigation.

National Accounts, we discovered, had been somehow involved in the draft DFAT position paper suggesting 66%. This was in direct conflict with the previous head of National Accounts who confirmed Dr McGoverns research.

When I spoke to her prior to last conference, she was ecstatic that at last something meaningful may be done about this 80% myth which has permeated the minds of politicians, bureaucrats and the Australian public.

As no one was prepared to move from their stated position, it was clear that a meeting was needed to reconcile the wide differences that had now emerged. When approached, ABS agreed to a face to face meeting, but in Canberra.

All who are sitting here today know of the costs involved with travel and accommodation associated with committees. However with Bob Katter’s considerable efforts ABS staff gained approval to meet with us in Brisbane. I should also thank minister Hockey’s office for their co-operation in allowing this meeting to take place.

At the end of the Customs House Meeting, the committee had established the facts, and the subsequent agreement of proceedings became known as the Customs House Agreement.

The Customs House Agreement

• It is unequivocally agreed that for the year 93/94 that only 22% of farm gate value is directly exported from Australia.
• It is agreed that direct exports, together with the first round total of indirect exports, roughly account for 25% or an additional three percentage points,
• All agreed that those who propose the higher figures like 80% are simply wrong,
• ABS agreed that 66% was questionable and problematic ,and
• ABS would not arrive at 66% figures using accepted methods,
• Only 7 of 53 sectors exported more than 50% of output,
• All agreed the real proportion of exports as shown by Dr McGovern was well known for some time,
• Figures such as 80% use FOB values to compare with farm gate values,
• Some calculations have led to double counting or have included inappropriate components which have distorted outcomes,
• Errors occur when comparing value added items like biscuits in a container on board ship with wheat at farm gate or perhaps a bottle of wine on board ship with the value of grapes at farm gate,
• In some cases inappropriate basis are used eg. the value of spraying or shearing being added to exports of wool, grain or cotton,
• Other examples of double counting occur when such things as sausages consumed by coal and steel miners in their respective industries are classified as exported agricultural production.

All these definitional and methodological anomalies distort real farm gate values. Some extreme methods of calculation have arrived at up to 200% of farm gate value exported.

Ramifications / Considerations.

Several important ramifications flow from the confirmation that we export significantly less than 80%.

There certainly is a need to circumvent misinformation.

We need to question how and why the 80% myth gained so much creditability, through consecutive governments, despite repeatedly being told of the error.

Does a sufficient level of skill exist within the bureauracy to provide governments with the information that they require?.

Is the public service truly independent?.

Does it offer government advice on policy framework reflecting fact, not actively building numbers to support particular partisan positions which leads to inappropriate policy development?.

Is there a need for an independent Department/Office capable of informing government of the needs of rural and regional Australia which can specify policy development that recognises the true role of agriculture in the Australian economy?.

The false logic in our current industry policies can be found in a quote by the National Farmers Federation in the February 2000 edition of the ‘Farm Journal’

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“With nearly 80% of gross value of production sold on export markets, Australian agriculture is trade dependent. No other single issue could potentially lift the profitability and investment in rural Australia than reform of world farm trade”

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Or from some of our politicians who claim “Australia doesn’t need four out of five of its farmers”,

Such comments are simply incorrect. Three out of four farmers produce for the domestic market.

Ladies and gentlemen, now that the facts have been established, and they are without doubt, that Australian agriculture sells its production mainly to Australians, the most important question is quite simple.

What are we going to do about it?.

Thank you.

Chairman: Rowell Walton

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