An Overview of Australian Agriculture

An Overview of Australian Agriculture

Australia is a significant world producer of many agricultural products, including wheat, wool and beef. Major commercial crops include broadacre grains, oilseeds and legumes to more intensive crops such as rice, sugar, cotton, grapes, bananas, and potatoes. Major livestock products include beef, wool and dairy products, and sheep, pig and poultry meats. In 2010-11 total farm production was $60 billion and exports were around $45 billion.

Relative to its size in the Australian economy, agriculture provides a disproportionately large share of Australia’s exports: 21 per cent of merchandise exports compared to 3 per cent of GDP.

Agriculture is one of the largest employers in Australia, providing over 350,000 jobs in 2010-11. Agriculture also represents a significant input into many other industries, particularly the food processing industry, which had a turnover of $65 billion and a value added of $24 billion.

It is generally acknowledged that Australia has a strong comparative advantage in the production of agricultural products. This is a result of our size, geography, use of tech-nology and workforce skills.

Consequently, agriculture is one of the most productive and internationally competitive sectors of the Australian economy. Productivity is expected to increase quite considerably over the next few year due to the ending of the recent drought which lasted around 10 years in some areas.

Market opportunities

Export markets take the bulk of Australian wheat, beef, cotton, sugar and wool production. Domestic markets are as important or more important than export markets for mutton, dairy products, coarse grains, pulses and horticultural crops.

Around 70 per cent of Australian farm production is exported. Strong opportunities for food exports have emerged in the Asian region, with rising living standards and changes in dietary preferences create demand for more food and for a wider variety. Processed food exports have increased, on average, by 10 per cent over the past 10 years.

Weather

Climate is a significant influence on Australian farm production. With the ending of the recent drought the value of farm production increase considerably in 2011-12. The effect on some commodities is very large, with the value of rice and cotton production expected to increase by as much as 50 percent after recent heavy rains.

Economic climate

Australian farm industries operate in an open economy with little or no domestic price support or protection, so the incomes of farmers are closely linked to movements in international prices and exchange rates. Australia generally has little influence on market prices, the principal exception being wool.

Cycles in commodity prices have a significant influence on the economic conditions in Australia. The largest fluctuations have been in the agricultural sector commodity prices, and the underlying trend over the past 20 years has been downwards. This combined with rising input costs has resulted in pressures for producers to become more efficient (as noted above, Australian farmers are amongst the most productive in the world).

Farm industries have also adapted by producing products that are more attractive to consumers and their changing needs. They are becoming more closely involved in the downstream processing of agricultural products and establishing more effective links between producers and consumers.

Hydroponics rapidly growing

Growing vegetables hydroponically has a lot of potential in Australia.

Australia has a largely middleclass population who are very health conscious. They have ample disposable income for first class, safe products and are very health conscious. Large retailers are concerned about the environment and safe food. They know consumers want to eat food that tastes good and is grown in a biological fashion, with very low chemical inputs. Hydroponics, a method of growing vegetables without the assistance of soil, delivers on all these counts.

There are many opportunities for investment in growing vegetables hydroponically – tomatoes, cucumbers, capsicums and eggplant for example.

Currently in Australia, greenhouse investment is being driven by consumer demand – consumers want the superior hydroponic tomato rather than outdoor tomatoes. Also, older style greenhouses with outdated technology need to be replaced, particularly in Sydney, New South Wales and South Australia to produce the quality tomatoes the market requires.

Flavorite is Australia’s largest hydroponic tomato grower with a grower network in every state of Australia. It has a substantial greenhouse area in Victoria and a nationwide marketing and distribution system throughout Australia.

Hydroponic tomatoes account for 30% of tomato sales in Australia at the moment, with the potential over the next 20 years to take all the market (this has happened in America and New Zealand for example). The proximity of Asia and New Zealand offer export and growth opportunities as the industry gathers critical mass.

Substantial opportunities exist for investors to enter the industry as growers, and become part of a dynamic network of similar producers. Or there is a need for infrastructure, in the form of glasshouses, packing sheds and cool rooms, to be developed.

There are many avenues of entry into an industry which is now having a growth spurt in Australia. This growth is being driven by strong consumer support and retail pressure for quality produce. Substantial investment is required to satisfy the demand.

Farm structure and workforce

The dominant farm structure in Australia remains the family farm. The government calculates that 85per cent of broadacre farms and 95 per cent of dairy farms used more than 48 weeks a year of family and/or partner labour. Women are making an increasingly important contribution to the farm business.

The number of farms has declined by 20 per cent since the 1950s to currently stand more than 150,000 with approimatley 55 per cent of Australia’s landmass being farmed.

The agricultural sector directly accounts for 4 per cent of Australia’s workforce, or 370,000 people. This workforce has undergone tremendous change as a decline in farmers’ terms of trade has forced greater output from fewer inputs. This has been possible through the introduction of significant advances in technology, with large capital investment and an increasingly skilled (but smaller) labour force. The cereal grains, sheep, cattle and pigs sectors remain dominant areas of production. These farms have undergone major structural change as farms have amalgamated to utilise new technology such as large machinery and to take advantage of significant economies of scale.

The labour force has grown in the more labour intensive industries such as horticulture, where production has increased significantly.

Bright future

In spite of the difficulties that farmers face, the future of Australian farming is bright. Demand is being stimulated by the growing world population and its food requirements, the growth in the Asian economies and the dismantling of restrictive world trade barriers. Australia is geographically, technologically and agriculturally well placed to capture these opportunities.