Monthly Archives: August 2014

Thoughts on Western Queensland Trip

26 August 2014

Senator O’SULLIVAN (Queensland—Nationals Whip in the Senate) (21:24): I intend to continue a theme that has been present in many of my speeches since I came to this place in February—that is, matters that are of significant importance to people in agriculture and primary production, particularly beef producers in my state of Queensland and, most particularly, beef producers in the western and northern aspects of the state, who are engaged in grass-fed beef production. I recently undertook a tour of western Queensland in the company of Senator Brett Mason, the Parliamentary Secretary to the Minister for Foreign Affairs, and over time we had a series of about 25 meetings, which allowed us to engage one-on-one, firsthand with over 300 people who are involved in the pastime of predominantly pastoral pursuits west of the township of Roma and all the way through the Mount Isa.

Whilst I have acknowledged before, and I will continue to acknowledge it again, that there are some aspects of agriculture and some agricultural enterprises that are doing well, I would have to declare that the majority of producers in the area through which we travelled are having a very, very significant struggle. I have put this matter on the record previously and I will continue to do so until we are able to start, as a government and as a parliament, to be able to respond with some meaningful changes to support this vital sector of our country to get back on their feet, to grow their businesses and to return to contributing to the wealth of this nation.

There is a belief amongst many that the problems in the bush are confined simply to debt and drought and that somehow by mitigating the debt circumstances, transferring the type of debt and the application of debt and having rain will restore their fortunes and that everything will be all right. I can report to you that that is not the case. Drought and debt circumstances for many have compounded their circumstances, but the problems that are facing these producers have been coming for 20 years. It is about a lack of profitability in their enterprises.

These enterprises are reporting, in many cases, zero return on investment and those that are operating effectively are operating on about three or four per cent return on investment. These are not anecdotal figures; these are figures that have been borne out by many peer-reviewed empirical studies into this issue over the last decade. We have producers who are reporting the same level of income per kilogram for their commodity —for their beef or for their livestock—as they were receiving 20 years ago. In fact, for those who have looked at the index in the last 24 months, there have been occasions where producers who have sold their entire livestock for up to one quarter of the prices per kilogram that they would have received 20 years ago.

Many of the property owners I spoke to have completely sold all of their breeding stock, and they are in no financial position, even with the return of fortune with the weather and even with restructuring their debt with government support in some instances, to restock their properties. In the language of producers, many sold breeding livestock, including replacement heifers, for as low as 30c or 35c a kilogram, yielding prices that for many barely covered their freight and that certainly showed no return on their investment in that livestock. We all know that when there is a break in the seasons and surface waters are replenished and the need for investment in fodder and support feed is mitigated, thousands upon thousands of producers will return to the market and will be competing for replacement stock and so, if they are in a position to purchase that stock, they will be buying them at a price 600 or 700 per cent more expensive than they originally sold their breeding stock for.

The issues I found in the bush involved drought, debt, profitability and, in many cases, the impact of a high dollar. There are consequences from the reduction in breeder numbers—they have their land but they have an incapacity to produce the commodity that typically provides their income. I am talking about millions of hectares of country in the west where they have limited or no surface water, even if they did have pasture feed. They have endured diminished extension services funded by state and federal governments, so in many cases they are being denied the sort of support they received for many decades which enabled them to cope better with the circumstances they faced.

People on the land are reporting large increases in the number of dingoes and predatory dogs. I am inclined to think that the dingo is now in the minority. Dogs such as pig dogs have bred with dingoes, and those crossbred dogs now make up the majority of the dog population in the west. These dogs are much more aggressive and there are many reports of these dogs pulling down cattle of a size that a dingo would be incapable of hunting to ground. Unlike dingoes, these dogs might pull down 20 or 30 calves or weaners in the course of a day and consume none. It is a blood sport for them. There is evidence that these dogs are now travelling up to 120 kilometres in a day, so the traditional means of tracking a pattern of dog activity on your property and responding are gone. By the time you have discovered the work of these dogs, they might be 50 or 60 kilometres away.

Weed infestations are getting out of control. West of Charleville, between Charleville and up around the back way to Stonehenge and Jundah, about 50 per cent of properties in the mulga are no longer occupied. During the course of our visit a producer who went there in 1988 told us that in one district alone where there used to be nine families on a mail route there are now none and on the north-south mail route that intersects with the route I just spoke of there is one family left out of eight. Survey work on a property north of Aramac showed there were 26,000 kangaroos on a property of 110,000 acres. It is professionally estimated that they are eating up to 50 per cent of the pasture. The cattle are competing with this and they are competing with the dogs, and, Mr Acting Deputy President Back, you would know better than anyone in this place that fertility rates are down around 40 per cent.

It is now absolutely impossible for these enterprises to service any debt—and, mind you, they have got debt. They have their old traditional debt that in many cases was properly invested in developing and increasing the productivity of their properties but, more recently, they are borrowing money against the remaining equity in their properties to survive. In effect, these producers are now subsidising the production of beef in our country—not all of them, but in the areas I pass through, which make up about 60 per cent of the land mass of Queensland, they are subsidising the production of beef and there are others who are enjoying the benefit of that subsidisation. In any other business one might consider that that was not a very sensible state of affairs. Indeed, for many of these producers it probably is no longer a sensible thing to do but there comes a point for these people on the land where everything they have—everything their forebears had—is invested in their rural properties and the road gets so narrow that it is impossible for them to turn around. In many cases they are on a collision course with bankruptcy.

I listened very carefully to Senator Madigan and Senator Xenophon, who spoke about mental health. As we travelled through western Queensland, these people did not talk in statistical terms—they named their neighbours who had committed suicide. They did not say that a half of one per cent of the population have been subject to mental health issues and have taken their life. They named their neighbours and the people in their community, and they named their wives and their children. I am not laying that at our feet; I am not going to lay that at the feet of this government or anyone in it. If we allow these circumstances to continue or deteriorate, then we have to take some ownership of what is happening in rural Australia and particularly in our state of Queensland.

In Queensland we are suffering drought conditions that have not been seen since 1902. Properties are receiving less income per kilogram of beef production than they did 20 years ago. The volume of beef that they are producing on their properties is up, because they have invested in pastures—as you would know, Mr Acting Deputy President Back—and they have invested in genetics. They have been able to produce more kilograms of beef per hectare than they did 10 or 20 years ago. They are not currently confronted with some of the big infrastructure and capital costs faced by programs years ago, such as the reticulation of water, the building of dams and turkey’s nests, the fencing of the properties—all things which increased the productivity of these enterprises. But it has taken them nowhere, because, as I said, they are being paid the same per kilogram for their commodity as they were two decades ago. They were rewarded for their hard diligence—I must say, significantly—by the decision to suspend the live cattle trade in 2011 by their Commonwealth government. Again, I lay that at no-one’s feet; that was a decision of this place. In retrospect it was a very ill-conceived decision and its impact is still playing through the balance sheets of these properties and those of their neighbours all the way down as far as Central Queensland.

We have a subprime crisis in Northern Queensland and Northern Australia. We have had reports, with supporting evidence, of declines of up to 28 per cent in the value of properties. When you have a collection of securities where your loan-value ratio is 70 per cent, which is not unusual if you have some more farm securities involved, and when you have a 28 per cent collapse in value of the main asset in the body of securities, you are nudging subprime. I say there are hundreds of properties—possibly more than a thousand—across Northern Australia that are marking time with their banks, with their lenders, waiting for a break in the seasons, waiting for improvements in commodity prices and waiting for increases in live cattle exports that will impact positively back on the domestic markets. I think the banks will then exercise their rights to sell these properties. Over the next five years or more, we are going to see the complexion of primary production in my state change significantly and not necessarily for the better.

Whilst I am not against aggregations of holdings by corporations, Australian or otherwise, their behaviour is completely different to that beehive of family-held enterprises, partnerships and corporations that underpins the viability of hundreds of our small communities right across my state—I am sure the same applies to New South Wales, Victoria, and indeed to Western Australia.

I made myself a promise during this trip, and I have tied my right wrist to my left ankle on this promise: it is time for us to draw a line in the sand. I am no longer going to devote my speeches, my time and my energy to establishing what the problems are. These people are tired of hearing from their members of parliament about what their problems are. They are tired of us indicating to them what the circumstances were that brought them into these unfortunate circumstances of their own. It is time for all of us across this place to dig deep, without regard to partisanship, to start to produce some solutions to support our primary producers. Each of us has to personally put a value on primary production for our nation. We each of us have to answer the question of whether we intend to continue to support these small communities and the social infrastructure that goes with them. We need to decide whether agriculture is important to us. We need to accept, I say, the proposition that agriculture and primary production will be the next economy. Long after the mining resources of gas, coal, iron ore and the like have made their contribution, we will go back to the age of producing soft commodities, predominantly for export into the Asian market.

I say to colleagues in this place that we need to spend some of our time—not all of our time; everyone here has a very important mission and they have their own missions—thinking about our fellow Australians who have invested their lives, in many cases for many generations, in agricultural pursuits across Western Queensland, New South Wales, Victoria and all the way across the nation until we get to the beautiful west coast of Western Australia. We need to put a value on that. We need to ask ourselves where they fit. We need to ask ourselves whether we want to join in partnership with them as they transition to this new economy and whether we are going to support them to take and exploit these markets in the Asian area. Decisions have to be made with them in mind.

Bush Matters Op-Ed – “Breaking rural debt’s shackles”

22 August 2014

 

There are many graziers and farmers across the nation who would argue that drought and debt are not the biggest problems facing the bush.

There is no doubt communities are being crippled by certain contract agreements with banks and their associated, and oftentimes, unreasonable penalty clauses.

The desperate need for decent summer rain is also destroying confidence, especially in our northern beef industry.

In the repeated rush to roll out knee jerk public policy, we neglect that other ‘D’ word – debate.

And we overlook it to our own peril.

Solid seasons will improve the market. Restructuring debt issues will enable farms to reconfigure their business outlook.

But a lack of clear debate in the rural sector undermines these gains and increases doubt and uncertainty.

When I speak about debate, I am referring to how rural industry and communities collectively work towards generating wealth and prosperity.

I refer to the open exchange of ideas by stakeholders with a shared vested interest.

When debate prospers, the group is able to reach a conclusion or outcome, with each of the participants understanding how this endgame was reached.

This position can then be taken to key decision makers who can act with the knowledge it reflects a majority view.

The fact is we already have this system in place between landholders, peak industry bodies and rural MPs.

A distant observer with no knowledge of agriculture would argue this long standing communication chain should make rural industry a formidable bloc in parliament.

Yet it is difficult to argue that is the case.

Simply put, peak industry bodies are not open and transparent enough with the agriculture sector about their decisions and decisions and landholders have often stopped demanding answers.

As the ongoing Senate Inquiry into Grass-fed Beef Levies has quickly established, many graziers do not trust, nor wish to participate in, their peak industry bodies.

And it is to their own detriment.

I have just completed a week-long tour of Western Queensland, holding meetings in shearing sheds, machinery sheds and community halls between Toowoomba and Mount Isa.

Whether it is kangaroos, wild dogs or access to rail – it becomes glaringly obvious as you travel across western districts speaking with people on the frontlines of industry that we are all in furious agreement that there are significant problems hindering economic growth in agriculture and rural communities.

However, it is less clear what channels of communication are in place that enables the farmer to confidently lobby the rest of his industry mates to push government to bring about change.

Many of the peak industry bodies would struggle to argue, under scrutiny, that they are the true voice on their sector.

From the point of view of the politician in Canberra, it is similarly unclear who government should be speaking to about industry concerns, given the freefalling memberships of peak industry bodies and sheer number of rival splinter groups.

There is also not the necessary coordination between rural politicians and peak industry bodies to actively campaign for public policy.

This hinders the public policy decision making process and further stifles debate for a sector where there are only ever a small handful of politicians that show any interest in rural affairs.

Unless we begin to address these problems with debate and communication in our rural sector, I am concerned that Australia will simply not be prepared to capitalise on the spoils of the Asian Century.

Our geographical proximity to these Asian markets should not be translated to mean these nations will always trade with us.

We need to promote a new debate, which places the cynicism of the past actions behind us.

If our agriculture sector is ever going to be able to service the economic promises we are making in these free trade agreements, we need peak industry bodies that can truly speak on behalf of their sector and can also better coordinate with rural politicians so that we will collectively roll out a swag at the door of any relevant minister’s office and refuse to leave until we have achieved a result.

We need to reenergize these peak industry bodies, through government support and higher participation among landholders, if we are going to confront this battle head on.

We should all be in furious agreement that things cannot go on in their current form.

There are genuine efforts in motion to re-lay these foundations.

However, perhaps the greatest tragedy is that it takes a crisis in debt and drought to begin this important conversation.

While we work on these urgent drought and debt issues confronting the bush, we must also be working to iron out the long term structural and communication creases.

It will take honest and openness from every corner of the sector.

But the stakes are too high for us to not take action.

Bush Matters Op-Ed – “Seafood strangled by green-tape ‘snakes'”

8 August 2014

What’s the difference between an Aussie cow and an Aussie prawn?

For starters, you are much more likely to find a slab of Aussie sirloin on a plane or boat headed for the bright lights of Asia because Australia exports between 60 and 70 per cent of its beef output.

In stark contrast, around 50 per cent of our prawns are imported, mostly from Thailand and Vietnam.

In fact, about 70 per cent of all the seafood Australians consume is imported.

At a time when most of our broader agriculture sector is engaged in a national discussion about how to best capitalise on the economic spoils from exporting produce into Asia, our Australian aquaculture industry is rigorously combatting Asian imports.

The market strength of imports means the Australian seafood industry is missing out on more than $1.5 billion worth of domestic consumption every year.

Seafood is the most consumed animal protein in the human diet. It comprises about 30 per cent of all animal protein in-take.

It’s also the most traded global animal protein.

Aquaculture has been the fastest growing food production sector internationally since the 1950s, roughly doubling production each decade.

The global growth of aquaculture is about 7 per cent per year. It far exceeds that of human population growth (about 0.5 per cent per year) and that of food production on land (about 2 per cent per year).

Despite this, the emerging gap between global seafood demand and supply represents a challenge for the world, as well as a big opportunity for our local industry.

This week I was invited to give the opening address at the Australian Prawn and Barramundi Farmers Symposium on the Gold Coast.

The gathering saw industry share some of the ground-breaking work that truly places our product heads and shoulders above our nearest competitors.

But the theme that rang loud and clear was that the environmental constraints on aquaculture are more restrictive than other industries in agriculture.

It seems the more the seafood industry does to address the concerns of greens groups, the more that is demanded of them.

As I told the symposium, the impediments confronting the industry reminded me of the story of the barramundi farmer who found – near one of his above ground ponds – a snake with a frog in its mouth.

Feeling sorry for the frog, he bent down and pulled the frog out of the snake’s mouth and watched him hop away.

Then feeling sorry for taking the snake’s dinner, the barramundi farmer pulled out a hip flask and gave the snake two nips of rum before the snake slithered off happily.

The farmer was feeling pretty content about his good deeds until there was a sudden knock on the side of the pond and he looked down to see the snake eagerly staring up at him with two frogs in its mouth.

The moral of the story is sometimes your good deeds only serve to encourage others to demand more.

No one doubts that we need to be sustainable. However, it must also be balanced with economic viability and commercial imperatives.

Take for example Australia’s $75 million prawn farming industry, which is one of the dominant seafood sectors in my state of Queensland.

Australian prawn farmers are among the only groups in the seafood industry to have a compulsory levy for research and development.

The money has been well spent, with research programs developing new efficiencies and sustainable practices that would be the envy of other agriculture sectors.

While most prawn farmers can only manage one harvest per year, the Holy Grail is to develop the industry to be capable of two harvests – specifically targeting Christmas and Easter, which are the two peak periods for prawn consumption.

The industry is getting ever closer to its goal. In recent years the CSIRO last year released the Novacq prawn feed additive.

Like many intensive livestock operations, feed is the greatest expense for prawn farmers, accounting for about 26 per cent of input.

However, repeated studies have shown that farmed prawns fed with the CSIRO developed Novacq grow, on average, 30 per cent faster.

So not only does it provide a clear economic benefit but it has also been celebrated because it will reduce farmers’ reliance on so-called ‘trash fish’, which have previously been criticised by environmental groups for depleting the number of fish in the ocean.

Prawn farmers around the world have traditionally needed to feed their prawns with a pellet that includes some fish meal or fish oil, in order to ensure that the prawns grew fast, and were a healthy and high quality product for consumers. The development of Novacq provides a clear alternative.

Similarly, the CSIRO has also released research that enables the Australian Black Tiger Prawns spawning to be grown domestically, reducing the need to collect parent stocks from the wild – a practice that means growers cannot fully control the prawn production process.

Not only does domestic breeding reduce the number of commercial fishing boats on the seas, which is another criticism of environmentalists, but it has also proven to vastly increase yields at farms.

For example, selective breeding at one Australian farm growing black tiger prawns saw an average yield of 17.5 tonnes per hectare, vastly higher than the industry standard of about 5-6 tonnes per hectare.

According to the CSIRO, if the entire Australian black tiger prawn industry adopted this new breeding technology it would increase the industry’s production from 5000 tonnes to 12,500 tonnes and add $120 million to the value of the industry by the end of the decade.

Finally, a strong dedication to research and development has seen the CSIRO release data heralding the Australian prawn industry as leading the world in minimising its environmental footprint.

The CSIRO states there is a large body of scientific research on the environmental impacts of prawn farm discharges that has led to the introduction of a discharge treatment system and among the strictest discharge water quality standards in the world.

As a result, there have been no adverse impacts on surrounding ecosystems for more than two decades.

Despite these commendable efficiency gains and underpinning independent scientific research that affirms the industry’s marginal environmental footprint, there have been no new aquaculture farms approved in Queensland in the past decade.

A key problem is that relentless pressure from green groups has created a spider’s web of green tape that virtually halts any development proposal and intimidates any investor interest.

Top on the list of grievances is the Great Barrier Reef, which covers a significant proportion of Queensland’s coastline and also happens to be the area that is most attractive as a location for prawn farms.

As I said earlier, no matter how many frogs the farmers save, the snakes keep returning with more in their mouth.

By 2025 Australia’s population will exceed 35 million and our national seafood consumption will have increased by 50 per cent.

This important and popular protein will need to come from somewhere.

Among the many challenges will be to secure our food supply as well as contribute to the food supply of the region and be competitive in global food markets.

So with such important crossroads confronting the nation, it is time the green ideologues began working with genuine industry efforts towards environmental sustainability rather than repeatedly raising the goal posts to the levels where economic viability is crushed.

** Senator Barry O’Sullivan will be meeting with a range of landholders as he embarks on a tour of Western Queensland next week. Stay tuned to FarmOnline for updates on his progress.