FARM output has stalled over the past decade and requires massive injections of capital, more modern farming techniques, and efficient supply chains to cash in on booming demand for cereals and meat from Asia, according to a report for the ANZ Banking Group.
The farm sector could generate an extra $1.7 trillion for the economy up to 2050, according to the report, which was written by consulting firm Port Jackson Partners, and says that far from facing a food security threat, Australia can cash in on changes to Asian diets as the region becomes wealthier.
One of the obstacles to seizing market share from New Zealand and South America is a lack of capital, a problem exacerbated by foreign investment restrictions, The Australian Financial Review reports.
The report’s findings illustrate the disadvantage of restricting foreign investment in agriculture – a position pushed by Nationals senator Barnaby Joyce and others.
“National interest tests used to assess foreign investment lack clarity and transparency in relation to agricultural assets,” says the report, Greener Pastures: the global soft commodity opportunity for Australia and New Zealand.
The report predicts the real value of farm exports could more than triple by 2050.
The report says strong global food prices have masked a decade of mostly flat farm production and exports, particularly for beef and wheat, which cannot be mainly blamed on drought.
“It would seem that as the world raced to capture global soft commodity opportunities, Australian agriculture came to a standstill, with no major engines of growth currently in motion,” it says. ”Moreover, the period also showed no signs of agriculture shifting to higher value products to compensate for flat production volumes.”
Based on modelling by Port Jackson Partners, ANZ forecasts that by 2050 Australia will have to find $600 billion to improve farm productivity and another $400 billion for older farmers to sell to the next generation.
Without this capital, “Australia faces a collapse in farm values or delays to farm succession, which can only be sustained in the short to medium term,” it says.
Independent MP Bob Katter said he remained opposed to foreign farm purchases, even though he acknowledged foreign investment was “the only thing holding up land values”.
“I’m not ashamed to say I hope I’m a patriot and I don’t want to see my country owned by foreigners. We’re a sovereign power and we will own our own land,” he said.
The Greens want tighter restrictions on foreign ownership of farms. Greens leader Christine Milne has previously argued that “Australia simply cannot afford to make weaker provisions of the Foreign Investment Review Board and the Greens have been arguing for much stronger restrictions because we need to keep control of our own land and water for food production.”The government has argued against this but is investigating an ownership register for agricultural land.
The ANZ report argues that the weak growth in productivity in the agricultural sector over the past decade cannot be fully explained by the drought that broke in 2008.
To take advantage of the significant opportunity to export more agricultural produce, the report argues industries such as grains need to be reinvigorated through innovation and supply chain improvements.
GrainCorp chief executive Alison Watkins said Australia had enormous opportunity to harness growing demand for food but it would require farmers, industry and government to work together.
“We see a massive opportunity for agriculture, particularly grains,” Ms Watkins said.
ANZ’s report raises concerns that farmers are getting older and more indebted and are increasingly reluctant to invest in new techniques that could boost production because it would involve risks and require a long-term horizon.
There is a shortage of graduates in agricultural science and Australia has lost its once leading position in agricultural research and development.
As a result Australian agriculture is increasingly split between efficient and under-performing farms. The top 20 per cent of farms have double or triple the yields of the bottom 20 per cent, even after adjusting for differences in rainfall.
The report quotes estimates that climate change could cut production of some commodities by up to 19 per cent by 2050.
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