The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) Outlook 2020 conference, held in Canberra on 3-4 March, provided a wonderful opportunity to check-in as to how the agricultural sector can achieve the National Farmers’ Federation’s (NFF) goal of growing the sector to A$100 billion by 2030. M&A Senior Associate Mark Vanderneut attended the conference.
While the conference agenda was broad and varied, we’ve harvested four key takeaways.
Business-as-usual will not be enough to achieve the goal
Agriculture production has increased by 19% in the past 20 years in real terms (adjusted for inflation), from approximately $58 billion in 1999-2000, to around $69 billion in 2018-19. While that is certainly something to be celebrated, a number of speakers expressed the view that the sector cannot merely proceed in a business-as-usual way - reliance on historical trend rates will not be sufficient to achieve the goal. It was further recognised that the ability to achieve the goal will be impacted by a range of recent or ongoing factors, such as the slowing pace of growth globally, bushfires, drought and the novel coronavirus COVID-19.
Adapt or die
As one executive put it at the conference, if you don’t embrace change and move forward, your organisation will not survive. Many speakers spoke from personal experience in relation to two main options.
The first option is utilising technology to improve processes, such as adopting technology to automate. Examples in the horticulture industry include:
- automating on-farm processes such as irrigation and fertiliser application; and
- automating packing operations, including the adoption of a ‘lights off’ packhouse where produce moves through optical sorting and grading, while robotics pack, stack, and palletise.
The second option is for producers to develop their own brands to enable them to move away from being considered a commodity that is more exposed to being dictated a price by retailers. An additional benefit of this approach is that you can create customer loyalty. As one executive explained, you cannot build a personal experience with your products if you are anonymous.
The role of the sector in a changing climate
Consumers recognise that what they eat impacts the environment. Therefore, those operating in the sector need to reflect that consumers will ask what is being done to mitigate adverse environmental impacts. Fortunately participants in the sector are taking on this challenge with vigour. For example, Meat & Livestock Australia has launched a bold aspirational target for the Australian red meat industry to achieve net zero greenhouse gas emissions by 2030.
Impact on foreign trade
At last year’s ABARES Outlook conference it was emphasised that trade is no longer just bilateral, but involves a ‘network’ of global value chains. It was therefore not surprising to see further discussion this year as to the effectiveness of existing free trade agreements (FTAs). While the benefits of those FTAs were acknowledged, many speakers commented that:
- we are potentially moving to a “new normal” where popular protectionism measures (such as tariffs) are re-introduced; and
- the World Trade Organization’s functions (administering multilateral trade rules, serving as a forum for trade negotiations and providing a mechanism to settle trade disputes) are under pressure and in need of reform.