Monthly Archives: May 2014

Bush Matters Op-Ed – “Parting is such sweet sorrow”

30 May 2014

It is astounding the pace at which the Australian sugar milling industry was able to swiftly become mostly foreign owned.

From a starting point of less than 20 per cent in 2010, the level of foreign investment has soared to more than 75 per cent by the end of 2013, particularly following the sale of one of our largest milling companies, Sucrogen, to the Singapore-owned sugar giant, Wilmar.

It is clear how and why this industry transformation occurred.

Globally depressed sugar prices and poor climatic conditions through the early 2000s led to long term underinvestment in our milling sector.

Most of the nation’s mills were at least a century old, cooperatively owned and struggling with ongoing underinvestment.

Significant annual capital investment was required to maintain production efficiency across our 24 sugar milling facilities.

But, at the same time, there was strong growth in sugar consumption across Asia, which was experiencing eight per cent annual consumption growth – more than four times the global average. 1

Australia was regarded as supplying a consistent, high quality product. We were also the world’s third largest exporter.

There was huge opportunity and potential.

It is little wonder overseas companies viewed our sugar industry with hungry eyes.

Initially, foreign investment enabled much needed capital to enter the industry and, it could be said, has allowed our sugar sector to regain its global footing following several tough years.

But at what point does foreign investment become foreign intervention?

Wilmar caused uproar within the Australian sugar industry in recent weeks after it announced intentions to exit the current QSL export marketing arrangements and set up its own commercial model, tied to its global trading operation.

While Singapore-owned Wilmar claims its business decision will only impact a handful of growers that use eight of its mills across the Burdekin and Herbert region in North Queensland, there is little doubt within industry that this proposed business model will shake the entire Australian sugar supply chain to its very core.

Wilmar’s proposal has the potential to remove two million tonnes – or more than two-thirds of all exported Australian sugar – from industry’s collective annual export pool.

It will weaken QSL’s dominant marketing position in the global sugar export business, leaving the bulk of Australia’s millers and growers worse off. Some question whether QSL could survive this scenario.

We have already seen the looming threat to the rest of the Australian sugar industry’s sales base and structure, with credit ratings agency Standard & Poor’s this week downgrading QSL from A/A-1 to BBB-, following the Wilmar announcement.

More than 1200 of the nation’s 4000 canegrowers have written letters of objection to Wilmar and Canegrowers have called on the Australian

Competition and Consumer Commission to investigate, labelling the move ‘anti-competitive’ and ‘predatory.’

Even cane growers in the Wilmar controlled areas will have little option but to sell their sugar to the Singaporean agribusiness giant.

The average distance cane is transported from farm to mill is only 30km, anything further than 100km increases costs dramatically.

Even more concerning is Wilmar’s gradual purchasing of almost 6600 hectares of farmland within the Herbert, Burdekin, Proserpine and Plane Creek milling regions.

An average cane farm is about 70 hectares.

At a total of only about four million tonnes of sugar produced annually, we are a relatively small industry compared to the rest of the world.

To give some perspective, our two major export rivals are Brazil, which produces about 39 million tonnes annually (which half is used for ethanol production) and Thailand, which produces about 11 million tonnes.

However, Australia well and truly punches above its weight in providing sugar to the world, with more than 80 per cent of all our sugar produced destined for export.

The recent submission by Canegrowers for the Federal Government’s White Paper on the development of Northern Australia displays the overwhelming opportunity in coming decades, with proposals for more than one million hectares of sugarcane to be developed in West Cape York.

If this opportunity could be capitalised on, it would provide much needed national revenue at a time when global consumption of sugar is expected to almost double to 257 million tonnes by 2030.

I am of the opinion that any encouragement from Australia towards foreign investment must commit to working with trade partners and overseas businesses to achieve – as its collective objective – fair and equitable partnerships that bring mutual prosperity.

Enabling a foreign owned business to completely restructure an industry’s landscape at the expense of the remaining, largely Australian owned businesses, is not in the national interest.

By removing itself from QSL, Wilmar will instantly undermine a century of gains and prosperity for thousands of family-owned sugarcane farms.

As such, I do not believe the Wilmar proposal meets the national interest test.

And I believe there are many, many people out there who would agree.

Bush Matters Op-Ed – “Farm debt limiting our future”

16 May 2014

The view from my kitchen window is of the Toowoomba range. On any given morning, I can make myself a cup of coffee and look out my window to see the endless procession of trucks carting Queensland produce down the mountain towards the global marketplace.

As I sip a mouthful of my brew and prepare for the day’s work, the iconic highway that neighbours my home carts almost 60 per cent of all the goods that will eventually depart from the Port of Brisbane.

From the cotton that will clothe the Chinese to the beef that will feed the Japanese, the Toowoomba range is a microcosm of our agriculture sector’s international momentum.

We are increasingly being told that a vibrant, innovative and competitive agricultural sector will be one of the pillars essential to underpinning a diverse, world class Australian economy.

But if we are to truly capitalise on the increasing food and fibre demands in this ‘Asian century’ then our government must work with private enterprise to address the structural concerns underpinning sector confidence.

I stood on the Federal Senate chamber floor recently and spoke out against the inaction of the banking sector in providing relevant and accurate data detailing the true extent of farm debt across Australia, particularly our northern regions.

I believe this information shortfall hampers the ability of governments to formulate relevant public policy for the rural sector.

It also limits the ability of not for profit organisations, such as social and financial counsellors, to accurately allocate resources across rural regions.

I would argue that making farm debt more flexible and manageable and increasing farm gate profitability are among the biggest structural challenges confronting the rural sector as its prominence increases on the national agenda.

The federal government is working towards improving farm gate profitability through the development of the white papers for agricultural competitiveness and northern development. The Queensland government has committed to doubling agriculture output by 2040.

But the nation’s overlying debt challenges remain the elephant in the room. Just as individual farms must reduce over-reliance on credit, so too must the nation.

Households all across the Australia are waking up with the stark reality that all the benefits to our standard of living from more than two decades of unprecedented economic growth are at risk if we do not take action to address our nation’s bottom line.

Australia exports more than half its agricultural output and cannot afford to lose its momentum nor competitive edge due to national complacency on debt.

We must make the necessary savings so we can dedicate more funding towards nation building infrastructure.

In my home state, freight volumes are expected to increase from 871 million tonnes in 2010-11 to a projected 1741 million tonnes by 2026.

To give some perspective, that will be the annual equivalent of 21.7 million more truck trips on our roads or 174,000 more freight train trips on our state network.

The world wants our product.

We have got to start building the infrastructure that is going to lift productivity across an economy that has been finding it tough over the last few years.

Whilst no one doubts there is a plenitude of burgeoning opportunities, we first must confront the government’s tough fiscal situation so that we can restore stability and increase business’ ability to plan.

Whether it is moving a mountain or eating an elephant, difficult obstacles have to be tackled one step at a time.

Federal funding for the second Toowoomba range crossing was among the major project announcements from Joe Hockey on Tuesday night.

Once completed, trucks will likely travel this alternative route as they continue their path from the farms of Western Queensland to the Port of Brisbane and beyond.

It will significantly change the morning view from my kitchen window – and will prove a clear vision for agriculture’s future is in the frame.

 

The Squaretable Initiative

14 May 2014

Senator O’SULLIVAN (Queensland) (19:25): I have been a senator for less than 100 days, yet, as I travel across Queensland and the wider nation, I truly feel a sense of renewed vigour in rural and regional communities because government has committed itself to supporting the challenges and opportunities that lie ahead for those in areas outside the major metropolitan and high-population centres. This government recognises the need to support and enhance the viability and capacity of our communities in rural and regional Australia.

It should be noted that the Prime Minister has repeatedly told the world that Australia is open for business. Some people have mistaken that declaration by the Prime Minister to mean that Australia is up for sale. I believe that that was not the intended message. Whilst all in government have an open mind with respect to foreign ownership, particularly the nuances associated with ownership in the agricultural and processing sector, I am of the opinion that the statement related to a commitment on the part of government to work with trade partners in a modern, globalised economy that has, as its collective objective, fair and equitable trading arrangements that bring mutual prosperity to the participating nations. However, this goal cannot be achieved unless the government demonstrates a commitment to working in partnership with the private sector in these communities to pursue and realise these significant economic development opportunities.

Our nation is confronting a critical juncture as we see mining revenues, which we have so heavily depended on in the early years of this century, commence to decline. This was inevitable. As this mining boom comes to an end, we are again experiencing a shift in focus to the so-called soft commodities in agriculture. More and more, we are hearing economists say that a vibrant, innovative and competitive agricultural sector will be one of the pillars essential to underpinning a diverse, world-class Australian economy into this 21st century.

Rural and regional Australia is poised to reap the benefits of this transition. The rise of agriculture as a major focus of the Australian economy is not a new concept. This is not a new economy. It is an old and indeed important economy that is returning to prominence. Whilst this nation has been trading and exporting commodities since British occupation, the terms and conditions that will frame this future trade opportunity will look very little like anything we have experienced previously.

Modern export markets demand the very best product and produce that we can deliver, where, to the extent possible, goods are free of traces of hormones, pesticides and herbicides and—for some—genetic adjustment. These goods need to be fresh and they need to be delivered in pristine condition. They need to meet the customers’ standards, they need to be priced competitively, and they need to be better than those of our trading competitors. In export parlance, ‘Quality is the new black.’ Where our export trade involves livestock, there have been demands of social licence made on our exporters that have continued to affect the trading commodity all the way through the downstream supply chain until the animals are humanely processed. Long gone are the days when we can do what we like with our exports because we have them and our customers do not. However, I remain troubled by the increasing intervention of environmental groups in this process. In recent years, a number of certification and labelling programmes have been imposed on business in the effort towards perceived sustainability certification systems as defined by multinational corporations. These programs have been promoted by corporately sponsored activist groups as reflective of the community’s environmental and social concerns. These programs have, more often than not, included auditing by third party organisations, where the costs of the process are met by the producer-grower community.

Whether it is forestry, seafood or palm oil, the formula employed by the green movement on industry is the same. Activist groups such as the WWF apply public pressure on both industry and business. These activist groups continue to lead, and sometimes use commercial intimidation, until private enterprise agrees to join the activists’ program. The end result is a scheme that simply adds a further level of regulation and cost to these businesses. Furthermore, and as previously stated, there is evidence that some of these groups are funded, in part, by end users in the food supply chain—who are more motivated by adding a marketing edge to their sales campaign than either environmental protection or the economic viability of the relevant industries.

It must be noted that less than two decades ago retailers knew little about sustainability and certainly not certification programs that audited these efforts. Therefore, the question arises as to what lay behind the rise of these efforts and how business can best address these valid consumer concerns. My answer is simple: the solution must be directed by industry. It must be driven by the improved promotion of industry’s existing efforts in this space. No one wants a sustainable product—environmental as well as economic—more than I do. However, it is my personal view as a businessman that the most important decisions need to be made by those who have their hands in their own pockets, because ultimately they will be the beneficiaries or the victims of the risk and reward strategies that are put in place.

In recent weeks, my colleague Senator Boswell and I have announced the formation of a ‘squaretable’ of farming representative groups in response to vocal constituent opposition to Australia’s participation in the Global Roundtable for Sustainable Beef. The squaretable, which will meet for the first time next week, is a steering committee consisting of beef sector organisations that represent grassroots industry stakeholders. Its underlying ambition is to improve communication between these representative bodies to facilitate a unified stance and action plan to deal with significant challenges confronting the beef sector.

I have repeatedly said, and continue to maintain, that the agriculture sector has a bright future as the Asian middle classes look to our nation for a quality and reliable food supply. Our agricultural output remains the envy of the globe and its demand is ever increasing. Australian farmers meet, and in most instances exceed, any accepted key performance indicators or world’s best practices and so we are well placed to serve these volume market demands as the Asian middle classes expand. Therefore, it is clear that any effort to collate and communicate the industry’s sustainability credentials must lay with the private sector—especially those organisations whose future viability is dependent on this process. If we are to truly capitalise on the increasing food and fibre demands in this ‘Asian century’, then our government must work with private enterprise to reduce the regulatory burdens that jeopardise productivity and viability.

Whilst there is no doubt there is a plenitude of burgeoning opportunities, we must first confront the government’s tough fiscal situation so that we can restore stability and increase the ability of businesses to plan. Last night, the government proved its willingness to make the difficult but necessary decisions so that we can ensure prosperity for all in the future.

This first Abbott government budget calls on everyone and every business to contribute. We are strengthening the workforce, boosting productivity and building a stronger economy with more investment. But there is still much work to be done. To fully realise the significant opportunities that lie ahead of our nation, the coming years will require an almost obsessive focus from all tiers of government on delivering reforms that enable Australia to remain one step ahead of our international competitors.

We must refocus our economy in part on agricultural and primary production and those sectors and communities that support these important deliverers of wealth. We must be prepared to be innovative. We must continually question our methods in the search for the cutting edge. We must strive never to be complacent but to always remain committed to being quality trendsetters, not followers.

The fundamental goal is to improve returns to the farm gate. This will mean greater resilience and long-term profitability for farmers, more jobs, more investment and stronger regional communities. We now have a strong foundation to begin this next stage of economic development. This government is focussed on laying the foundations so that future generations might benefit. In a resource-hungry world, our rural and regional areas hold the keys to Australia’s prosperity. And every one of us should, and indeed must, contribute to the implementation and strengthening of this vision.

Senate adjourned at 19:35

Beef Central Op-Ed – “The Square-table”

7 May 2014

The Australian beef industry sits at a critical juncture.

We are experiencing the decline of the so-called mining boom, and, at the same time, an ever-increasing focus on the so-called Asian ‘dining boom.’

More and more we are hearing economists say that a vibrant, innovative and competitive agricultural sector will be one of the pillars essential to underpinning a diverse, world class Australian economy.

There is no doubt there are major opportunities ahead for our beef sector.

To fully realise these opportunities will require more investment, better infrastructure, some labour market reform and increased emphasis on research and development.

But, perhaps most importantly, it will require a significant reduction in the red and green tape that impedes the growth of the agriculture and primary production sector.

Just as the Federal Government is attempting to reduce its dependence on unsustainable borrowings, so too must every beef property across this nation.

As a consequence, we should be wary of those who seek to tie this industry up in more red and green tape.

Adding another, superfluous level of regulation to our already strongly-regulated beef sector can only further challenge farm gate profitability.

I stood on the Federal Senate chamber floor recently and spoke out against the inaction of the banking sector in providing relevant and accurate data detailing the true extent of farm debt across Australia, particularly our northern regions.

I believe this information shortfall hampers the ability of governments to formulate relevant public policy for the rural sector.

It also limits the ability of not for profit organisations, such as social and financial counsellors, to accurately allocate resources across rural regions.

I would argue that making farm debt more manageable and increasing farm gate profitability are among the biggest structural challenges confronting the rural sector as its prominence increases on the national agenda.

In order to maintain Australia’s proud tradition of the family farm, it is imperative that these debt and profit issues be addressed. And quickly.

However, it must equally be an imperative that government continually works towards reducing the burden of cost imposts on rural industry.

The greatest gift the public sector can give to the private sector is to get itself completely out of your way.

Small government that allows the private sector to find its own balancing point is most definitely an ideal held by the Federal Government.

In line with this ideal, there are thousands of pieces of legislation and other regulations that are in the process of being repealed with large volumes more under active consideration.

Accordingly, before any further interaction with this Global Roundtable for Sustainable Beef is undertaken, the Australian beef sector should consider how this roundtable process jeopardises the long term ability of industry to decide its own fate when working towards environmental and sustainable outcomes, as well as its interaction with its customers.

The concerns over the roundtable are focused on the future ability of businesses to make independent decisions and formulate their own, grassroots, industry-driven solutions to tackle a perception that the beef sector has not fully made its case regarding environmentally sustainable production practices.

At best, there may be an argument that industry needs to better share its efforts towards sustainability.

The National Party has recently become involved in this debate because of our collective concern that there could be more work undertaken to ensure the relevant beef sector representative groups seek a collective industry stance.

However, the beef sector should, and must, be the drivers of this process.

There is no doubt that consumer purchasing decisions have increasingly focused on animal welfare and environmental concerns in recent years.

This is in no small measure due to the sensationalist claims of animal rights extremists and sympathetic sections of the media.

However, the beef sector must never forget the environmental movement is not driven by concern over profitability of family farms or the long term viability of the industry.

The argument by those advocating for, and organising, the national ‘Squaretable’ alternative is that there is already a strong case to be made for the Australian beef sector’s ongoing drive for sustainability.

The Australian beef industry spends hundreds of millions of dollars every year in the effort to provide a world class product.

Australian producers meet – and in many cases exceed – any measure of global best management practices. No one doubts this.

If McDonalds – or any of our other major beef customers – want evidence of industry’s drive for world class practice, then let our industry provide the evidence.

If a national, industry-driven alternative can be found to the global roundtable, why not investigate it?

If we can avoid creating additional costs burdens on our producers, why not explore these options?

The drive for branding a product does not require the intervention of third party groups when a sophisticated industry already exists, which is more than ably represented by a prolific number of peak industry bodies and government agencies, all of whom are trying to maintain world’s best practice so the sector remains competitive on the global and domestic marketplace.

Any debate over sustainability should equally consider profitability as well as important environmental issues.

Bluntly put – agenda-driven, third party groups seeking to add further regulation need not apply to this space.

Many with a seat at the global roundtable are also not there as a result of grassroot elections.

The WWF is not there because it has been democratically elected to the roundtable. The WWF is not representative of any particular demographic in society.

It is an activist group that uses its well-known panda logo as a bargaining tool when pushing its policy agenda on multi-national corporations.

Yet, sitting with organisations such as the WWF at the global roundtable, firstly gives a legitimacy to this group’s opinions on the rural sector and secondly, provides the WWF with, at the very least, an equal voice and an equal opportunity to impinge its policies on the future direction of the Australian beef sector.

I have recently met with representatives from the WWF at my Toowoomba office and their responses to my simple questions did not leave me with any confidence in this group’s long term intentions.

The WWF could not answer how an international definition of sustainability could avoid becoming a certification scheme.

The WWF could not answer how any measures could be undertaken to ensure the full cost of a certification scheme would not be passed down the supply chain to producers.

My research into previous WWF-inspired global roundtables, such as the Sustainable Roundtable for Palm Oil, only further supports the belief that the roundtable process will end up being an annual certification scheme that forces individual producers to employ third party groups to carry out regular inspections.

However, there are already alternative options to the global roundtable that should be considered by the Australian beef industry.

When the Australian dairy industry was confronted with one of its major customers, the multi-national corporation Unilever, partnering with the WWF for sustainability, it was able to develop an industry-driven solution that both reassured its supply chain customers that our milk producers were ‘sustainable’ whilst still managing to keep the WWF away from the policy formulating table.

The beef ‘Squaretable’ aims to provide a forum for the representative bodies that govern our national beef sector to collectively collate and promote the outstanding work the industry is already undertaking in the drive to meet consumer and supply chain expectations.

We already have numerous pieces of legislation – across the states as well as federally – and a large body of ever-expanding programs, reports and collected data.

This ‘Squaretable’ process will save time and money whilst providing definitive evidence to Australia’s beef purchasers that there are strong efforts already in place that balance environmental outcomes with the drive to improve farm gate profitability.

The Australian beef industry has much to be proud about.

It is simply a matter of providing a more definitive summation and explanation of these endeavours to our major customers.

Bush Matters Op-Ed – “Beware the ‘panda people'”

2 May 2014

There is a Looney Tunes cartoon that features Bugs Bunny and a witch. As Bugs lay fast asleep, the witch pores over her cauldron, concocting her brew, stirring in the ‘eye of newt’ and the other ingredients.

Bugs is awoken by the witch’s stirrings. He sees the cauldron, which he mistakes for a bubble bath. The witch encourages this belief and even offers to scrub Bugs’ back with a stick of celery.

It is only once Bugs has hopped into the cauldron and adjusted to the temperature of the witch’s brew that the bunny realises he is the one on the menu.

This image of Bugs Bunny awakening from his snooze and excitedly climbing into his “bath” reminds me of the risk being taken by the Australian beef industry if it continues to participate in the Global Roundtable for Sustainable Beef.

The argument adopted by some is that if our beef producers are not at the table, they will be on the menu. The trouble is, Australian producers are not at the table. They are the ones climbing into the cauldron.

Our beef industry is already on the menu.

Graziers should be wary of the power of the panda because the policies that govern the World Wildlife Fund (WWF) are not as black and white as its iconic logo.

Despite the WWF’s protestations that the global roundtable process might not necessarily become a certification scheme, recent history suggests otherwise.

The WWF-initiated ‘Roundtable for Sustainable Palm Oil’ (RSPO) took just six years to become a full scale certification system.

Companies that were unwilling to join the roundtable faced having their offices picketed by protesters in orang-utan costumes, with television cameras recording the occasion for a global audience.

The final offering from the roundtable was a certification scheme where more than 1000 members from 50 countries are now forced to employ an “approved independent certification body.”

Under the scheme, growers are assessed for certification once every five years, and if successful, they are assessed annually for continued compliance.

Every five years the main assessment is repeated.

At all stages of this process, these growers are expected to foot the bill in order to get the panda people’s tick of approval.

I have been encouraged by the support I have received from my announcement this week that the Queensland Nationals team will convene a ‘square-table’ of grass roots beef industry representatives in the coming weeks.

The planned series of conferences will gather our beef industry representative bodies to work towards collating the already-existing programs and reports that establish the Australian beef sector’s ongoing commitment to sustainability.

This will enable a final statement to be provided to reassure our major business customers.

Much of this work is already well underway.

The ‘square-table’ aims to save time and money.

There is no need for the Australian beef industry to sit alongside the WWF and the chorus line of foreign-owned multinational corporations at the global roundtable.

We already have some of the best biosecurity and food health standards in the world.

Australian producers already meet, and in most instances exceed, any accepted key performance indicators or world’s best practices.

We are well placed to serve these volume market demands as the Asian middle classes expand.

We are already proving our sustainable credentials. It is simply a matter of collating, describing and then communicating these combined efforts.

The onus should be on the WWF to explain what possible benefit it can offer our world class beef sector.

Whether it is drought, flood, debt or the live export ban, Australian graziers have confronted a lifetime’s brew of unsustainable struggles in recent years.

Producers cannot afford another unnecessary layer of regulation that will serve only to reduce farm-gate profitability.

The WWF is trying to get its hands into the pockets of Australian producers at a time when no one can afford it.

Singing from the same song sheet as the WWF is the biggest mistake our beef industry could make.

That would be a real looney tune.