The United States’ Packers and Stockyards Act 1921 is a piece of legislation that Australian agriculture is increasingly looking toward as a template to bring much needed price transparency to our national commodity supply chain.

There are some peak industry bodies that have commenced studies into how it could apply to Australia and it has become increasingly mentioned within the corridors of power.

The Act is broadly intended to regulate parts of the supply chain in order to protect the interests of producers and consumers by prohibiting monopolistic or predatory practices through regulation that recognises the unique marketing and distribution practices of livestock production.

It sets out rules that aims to ensure producers are paid promptly based on accurate animal weights and prevents businesses from colluding to manipulate prices or to apportion territory to force sellers to accept lower prices.

Under the act, processors are also compelled to maintain written records to provide justification for differential pricing offered to livestock producers.

Whilst there is work still underway to translate the ideas of this American legislation to the unique needs of Australian beef, we should all be encouraged that a meaningful discussion has commenced about supply chain accountability, openness and transparency.

It’s hard to overstate the urgency of introducing price transparency to the Australian beef industry, given the clear and undeniable concentration of ownership across our supply chain.

As has been reported by some media outlets, my tour of Western Queensland last month served to reaffirm my conviction that debt and profitability are two halves of the same whole, combining to create probably the greatest challenge confronting rural industry.

From the border to the Gulf of Queensland, producers were unbearably frustrated about the fact that they are earning the same level of income per kilogram for their livestock as they were receiving 20 years ago.

These enterprises are reporting, in many cases, zero return on investment and those that are operating effectively are doing so only on about three or four per cent return on investment.

The drought has certainly exacerbated these problems. In the last 24 months, some producers have sold their entire livestock for up to one quarter of the prices per kilogram that they would have received 20 years ago.

Yet it would be difficult for the major supermarkets to argue these pricing issues are also reflected in the retail price.

No other sector would or should put up with such a flat lined earning capacity. And the looming horizon for the cattle market only warns of further pain coming.

Many of the property owners I spoke to during my tour have completely sold their breeding stock, and they are in no financial position to restock their properties – even with a return of fortune with the weather or a restructure of their debt with government support.

Many have 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 certainly showed no return on their investment.

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.

While there is no doubt there will always be ebbs and flows within the market, which will quite often be challenged and influenced by seasonal conditions and associated supply and demand, it cannot be argued that there is a free and transparent market for cattle already in place in this country that enables businesses to rebuild in a fair and reasonable way.

Introducing and enforcing price transparency will be an essential element to rebuilding the sector following this current drought.

There is perhaps no greater tool that we can arm our agriculture sector with than knowledge and information. This breeds confidence and allows businesses to be more resilient to confront any tough cycles.

We need to open the doors and a shine a light on the financial realities of our beef production cycle. Introducing transparency is essential to this.

It is no longer possible for us to overlook this issue. Our beef producers cannot sustain another decade of unviability.

 

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.

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. 

There’s an old joke about an investigator from the Federal Department of Employment arriving at a farm following claims the grazier wasn’t paying proper wages.

The investigator drives through the gate to the homestead, where the grazier has just pulled up for smoko.

“I need a list of your employees and how much you pay them,” the investigator says.

“Let me think,” the old grazier replies. “There are my stockmen who have been with me for six years. I pay them $900 a week plus free room and board.

“There is the cook who has been here for 18 months. I pay her $700 a week with free room and board.

“Then there’s the half-wit who works 19 hours a day and does about 90 per cent of the work. He makes $10 per week, pays his own room and board and I buy him a bottle of rum every Friday night.”

‘”The half-wit!” exclaims the investigator. “That’s the bloke I want to talk to!”

The old grazier wipes the sweat from his brow and tilts his head towards the investigator.

“Well, old mate, that would be me!”

The joke for many is art imitating life.

Life on the land is getting harder and harder for family partnerships and small corporate enterprises.

It is not uncommon to hear some weary landholders say they don’t expect their sons or daughters to remain in the family business.

Even that joke about the old grazier is now probably showing its age. These days it’s harder to find graziers that can afford to employ anybody.

Instead, more often than not, it is family members pulling the extra weight – the kids on break from school; the grandparents who have already battled costly succession planning; or the wife who somehow manages to juggle farm work with home duties and a job in-town.

Commentators have long predicted the decline of the family farm. Yet the agriculture sector has managed to defy the odds with each passing decade.

Despite the fact that iron ore and coal have long surpassed wool and wheat as the guideposts for Australia’s economic direction, agriculture is increasingly returning to the forefront of economic public policy.

There is some speculation that suggests economic growth in Asia – which will push the continent to account for as much as 70 per cent of global middle class food and fibre consumption by 2050 – will bring additional revenues of $710 billion (in 2011 dollars) to Australia over the next four decades.

These are very encouraging figures. But the earning capacity of each farming family will only increase if the sector’s foundations and fundamentals are strong.

The new Senate has generated a lot of commentary and headlines this month as it tests out its new found notoriety.

But once the upper house wakes from this media bender, will it be the electorate left with the hangover?

Having sat in the parliament for the past fortnight, it is concerning to think there is an increasing potential that the apparent instability in the new-look Federal Senate could entangle the process of government in bureaucratic brinkmanship.

As each piece of legislation is blocked by a Senatorial Mexican standoff and each major government decision is scuffed by prolonged debate, so too are the intended cost savings for the small business and household budget.

This is wasted time that the average farming family cannot afford. For my money, this is a pox on our own house.

Rural debt has skyrocketed 75 per cent in less than a decade and farm gate returns are in alarming decline. No week goes by without some rumour of more properties unable to be re-financed.

The times call for swift and pragmatic policy that focusses on tangible outcomes. The public are sick to their back teeth of politicians not doing our job.

It will be difficult for my new Senate colleagues, of all political persuasions, to not become ensnared by the political grandstanding and power plays that is actively applauded by the Canberra press gallery.

But Australian voters are tired of personality and ego driven politics.

The majority of those among the new Senate crossbench have politically-conservative leanings – some have rural knowledge – and it is these individuals who should respect the clear mandate delivered by the electorate.

Antagonistic attitudes and obstructionist politics will only further strain the hip pockets of farmers at a time when their budgets are already at breaking point.

And rural Australians will neither forgive nor forget such political games when they next cast their vote.

I say to my colleagues, right across the chamber – do your job or do the nation a favour, and go home.

The commencement of the 2014-15 financial year has brought the troubling news that banks are forcing more Queensland rural properties onto the market.

Some of these financial institutions have reported that the current value of non-performing agribusiness loans is the largest of all their banking categories.

Yet the representative body of the financial sector, the Australian Bankers’ Association, continues its inaction on these crippling rural debt loads.

In fact, the Australian Bankers’ Association claims there is no rural debt crisis.

This organisation claims the banks will no longer participate in rural debt surveys, which for more than a decade have measured the debt levels and provided context to assist the decisions of public policy makers.

Both Federal and State governments have outlined policy goals to double the real value of agricultural exports by 2050.

Some speculate this could result in additional revenues of $710 billion (in 2011 dollars) for the nation over the next four decades as economic growth will push the Asian continent to account for as much as 70 per cent of global middle class consumption by 2050.

But how do we ensure Australia’s rural communities and family farms are the beneficiaries of these unprecedented opportunities?

Future success in agriculture requires a deliberate focus on fostering globally competitive industries with high potential for growth.

This takes long term thinking and strategic capital injections. Banking loans are an important facility for business growth. This is necessary and unavoidable debt.

But there is another, more alarming, debt stream that is damaging the viability and survivability of many farms.

In 1980, output per dollar of debt in Australian agriculture peaked at $3.12. By 2010, output per dollar of debt had fallen to just 64 cents.

Some of this shift could relate to the increases in cost outlays and operating expenses.

But, overall, it is obvious this trajectory is not sustainable.

I have stood in the Senate chamber multiple times since taking office in February to call on the banks to participate in a rural debt survey.

These calls have been met with stubborn indifference, if not silence.

The last available data on debt was compiled by the Queensland Rural Adjustment Authority (QRAA) in 2011 and it proves the importance of understanding the industry’s financial trends to create better public policy.

The 2011 survey found the number of beef enterprises deemed ‘non-viable’ in the state had increased from less than 1 per cent in 2009 to 6.9 per cent in 2011.

Many graziers have struggled, and many others had been unable, to secure financial assistance because of this ‘non-viable’ standard, compounding the family pain and troubles.

Since 2001, the average debt of beef industry borrowers in Queensland has increased by more than 300 per cent.

Land purchase was the largest single contributor to the increases in farm debt over this period, followed by borrowing to meet spiralling operating costs.

Spending borrowed money to meet operating costs is also unsustainable.

The key economic indicators for Queensland producers since the 2011 debt survey only further point to a sector that is not generating sufficient income to alleviate debt stress.

The past two summers have delivered rainfall well below the 324mm state average and while the EYCI has solidly recovered from the lows of last year, when it lingered below 300c/kg, it is still 60 and 80 points shy of the weekly averages of recent, better seasons.

Everywhere I travel across the state I am confronted with stories of producers staring down foreclosure or, in some cases, banks permitting families to remain on the farm because it is

cheaper to hold the property and wait for an upsurge in the real estate market than it is to send in the receivers – taking people from lord of the manor to little more than a caretaker.

The social cost to rural communities has been immense and will likely never be adequately measured.

The grazier’s wife doesn’t come into town anymore for a morning at the saleyards and an afternoon shopping.

Families have spent their savings, sold their cars, machinery and jewellery. Parents have pulled their children out of boarding schools.

Allied businesses have shut their doors and left town.

Maintenance programs have been scaled back and there is a reduction in employment opportunities because businesses cannot afford to take on or retain workers.

Bankers will privately disclose they hold concerns that any debt survey that paints a truly accurate picture of the intensity of debt stress across the state’s rural sector will only further hamper their moves to sell-off non-viable properties.

However, the concern of our government is to seek solutions that will keep families on the farm and place their ledgers back into the black.

A better return at the family farm gate must always be government’s driving force.

I will crawl over burning coals from Burketown to Bollon before standing by mutely and watching overseas investors and their pencil pushing lackeys pick off multi-generational family farms and corporatize the Australian rural landscape.

But, to prevent this significant shift that many city commentators believe is inevitable, we need to accept that rural debt is a ticking time bomb that jeopardises the ability of family farms to increase competitiveness, innovate and upgrade.

Alarmingly, financial stress is occurring across the rural sector at a time when the Reserve Bank of Australia’s (RBA) official interest cash rate sits at only 2.5 per cent – the lowest rate in half a century.

Interest on debts grow without rain, and repayments will only become more difficult as rates rise.

The aftermath of the ‘get big or get out’ mantra is strangling our beef sector.

During the property boom in the early years of this century, the banks were compliant in easing loan requirements to escalate borrowings and maximise their business growth.

No doubt some people borrowed more than they should. But the bankers’ hand also signed the paper.

Before we can fully lock our sights on the spoils of Asia, we must reverse the trend of declining productivity, unsustainable debt loads and stagnant earnings.

A fair dinkum rural debt survey will prove essential to understanding and repairing the road blocks to industry progress.

Don Chipp launched the Australian Democrats in 1977 with his now infamous commitment to “keep the bastards honest.”

Readers might claim this catch-cry is still a relevant yardstick to measure the current political climate.

But it could also, just as easily, be extended to the Australian banking sector in the 21st century.

Since the deregulation policies of the Hawke Government enabled banks to widen their scope, the financial sector has grown into a Goliath of commerce, with an unprecedented stranglehold of the market place.

It is estimated the Commonwealth Bank, Westpac, National Australia Bank and ANZ will report combined profits of $29.7 billion this year.

For four years in a row, our major banks have recorded better returns than lenders in 10 major developed countries, including Canada, the US, Britain and Europe.

So where is a social license to operate buried among the Australian banking sector’s dazzling mountain of money?

This week I stood on the floor of the Senate chamber and again spoke out about the complacency and arrogance of the banks in refusing to participate in a rural debt survey.

Such a survey would provide a vital platform to understand the true extent of the rural debt problem and enable public policy and social services to be better directed to those who most in need.

The Australian Bankers’ Association has espoused a steady stream of excuses in recent months as to why the banks are refusing to participate in proposed surveys in Queensland and New South Wales.

One of the major complaints is that the process costs the banks too much.

It is a disingenuous claim, given the world-beating profits of the bankers.

Equally, it is an offensive statement to the thousands of landholders who are being forced to tighten their belts more and more, with little else than hope and perseverance pushing them to hold on for another week or month.

At a time when Australian agriculture is looking to capitalise on the economic spoils of “The Asian Century,” we find ourselves confronted with a sector hampered by unsustainable debt loads and stagnant earnings.

Australian agriculture is existing in a space where, increasingly, the value of farm production is being significantly outpaced by the levels of farm debt.

In 1980, output per dollar of debt in Australian agriculture peaked at $3.12.

By 2010, output per dollar of debt had fallen to just 64 cents.

This debt issue is no more evident than in my state of Queensland where the latest available figures indicate total rural debt is $16.97 billion, more than half of which is with the vital beef sector, which has spent years struggling under drought, flood, fire and the 2011 Live Export Suspension.

The warnings signs are glaringly obvious despite the Australian Bankers’ Association steadfast claims there is no rural debt crisis.

Australian farm debt has increased by almost 75 per cent in a decade – from A$40.3 billion in 2004 to an estimated A$70 billion in 2014.

Land purchase is the largest single contributor to the increases in farm debt over the past two decades.

We are now experiencing the fallout from the “get big or get out” mantra.

MLA’s recently released Northern Beef Situation Analysis reports that the majority of northern beef producers are not generating profits sufficient to fund current and future liabilities.

The report states that across all 14 regions surveyed – stretching from the Queensland/New South Wales border to Central Western Australia – have reported average business returns of -2.9 per cent between 2010 and 2012.

The double lives the Australian banks are living are coming under increasing scrutiny as the divide between their public façade and their masked intentions begin to show cracks.

Questions have again been raised about honesty and integrity of our bankers with the release last week of a Senate report into fraud, forgery and cover-up in the financial planning division of the Commonwealth Bank.

Away from their public statements of contrition, we can only presume the head honchos at our major banks are reviewing their social license to operate policies.

Admitting there are concerns about rural debt loads and agreeing to assist in a survey would be a reasonable start.

It would provide some direction in the effort to address the current troubles confronting the agriculture sector.

Only a pigeon knows how to get to where it is going when it doesn’t know where it is.

Landholders across the nation expect the banks to clear a pathway for a rural debt survey.

And their collective patience, like their capacity to survive this financial crisis, is running thin.