Tuesday, 22 January 2013

Can a ‘good’ farmer in Australia still earn a good living?

Given that there will always be good years and bad years, can a ‘good’ farmer in Australia still earn (on average) a good living?

I doubt there is anyone in Australia, no matter how disconnected from the madding crowd they may be in their multi-million dollar capital city penthouse, who isn’t aware of a sense of crisis in our rural economy. So in terms of my question, what’s ‘good’? Let’s say money – wise, would $80K +  after tax, as a running 7 year average, be fair? And farming – wise (taking farming in a broad sense to include croppers, graziers, orchardists, other fruit and veg growers etc), would that be someone applying the latest proven technological and agriscience knowhow? If the answer is “No”, then I humbly think we have a big national problem.

Firstly though, a little background / history. Whilst a capital city dweller for coming on 50 years (never in a penthouse however J), my formative years, up to early teens, were spent in or around the Bundaberg, Rockhampton and Murgon / Kingaroy districts. Back in those days when we still had droughts, floods, fires and gluts, farmers generally were looked up to as much for the fact that they were the ones driving big cars, sending their kids to grammar schools and so on, as much as for their hard work and productivity. The rest of the rural communities worked in shops, for the railway, the PMG, at the mills, in garages, drove trucks and buses, ran small stores, taught and nursed etc. Few of them showed the trappings of wealth, save for the odd very successful medical / dental practitioner, engineer, architect, stock and station agent or the owners of emporiums like Millroys in Rocky, or Buss & Turner’s in Bundy. Successful farmers were the landed gentry, but that never included small (subsistence) dairy farmers. Later on, in the early 60s, I enjoyed the eye – opening experience of getting to know some of the largest grazing properties west of Collinsville, and their legendry family owners were plain evidence that the landed gentry were still alive and well!
Sorry for the big segue, back to the question! Accepting that the vicissitudes of the weather will always impose cyclical problems, and we are certainly experiencing them right now, are all farmers being robbed and bankrupted by unfair, uninformed government regulation? Such as locking up of land for carbon credits, ‘green’ policies precluding proper fire protection and the live export fiasco? And as many now seem to be claiming, the ‘robber baron’ foreclosure actions of the self – same banks that played a key role in saving Oz from the depths of the GFC fallout, and remain the cornerstone of millions of superfunds?
Or, are ‘good’ farmers following sound agrinomical and management principles still able to ‘do OK’, managing their relationships with banks and government?.

Coming from a city background in business and finance (not banking!) as I do, I could assure any reader that I have known a heap of small businesses, and big ones too, that have sadly gone down due to the economy and changed circumstances. In many cases, no fault of their own, other than perhaps of not having ‘read the signs’, and adapted. Some complained bitterly of the support available to farmers and farming organisations but not to them, pointing out that those organisations continually fought to reduce / remove tariffs which supported other industry. Sadly that’s life and while bank lending is no doubt an important part of the mix, in the harsh world of survival, is it the entire cause of failures? So is farming so different? Are 3rd generation plus farmers failing because the banks pulled the plug on them unfairly, in hard times, or as some ‘globalists’ might say, are they also victims of bad management, lack of forward planning and ‘we’re farmers, and therefore owed a living’ mentality? Or perhaps above all, of poor, fragmented and unsophisticated representation in what is an increasingly competitive and technological world? The ubiquitous small corner stores of the 50s – 60s are long gone, as increasingly are stand alone pharmacies, medical practices, butchers, bakers and candlestick makers ........

I really worry about this, I think it is an extremely important question. What do you think?

Cheers al


  1. Of course, I'm sure you know, there's no black and white answer to your question (or many questions)... But here are some ABS statistics that go part way to answering your questions about farming income...

  2. There certainly isn't any black or white answer; it is in fact quite a complex subject and worthy of in-depth discussion.

    One thing though the landed gentry of your youth are long gone. They have either gone out the back door living a life style not suited to their income or they have humbled themselves to take the ranks of rest of us.

  3. This might go some way to answering your questions about productivity and whether it's possible to earn a decent wage in the ag industry - http://www.mla.com.au/Research-and-development/Final-report-details?projectid=14980. Basically, there are people making a decent living, but they're the ones with sufficient scale to be efficient and they're really focussed on running a business, not a lifestyle. Whilst this report is only based on the cattle industry I would guess the same is true for many industries. In my experience as a regionally based economist for a state ag department my experience would suggest that there are a lot of people doing it hard for a whole host of reasons and some of these aren't prepared to recognise that if they want to make more money they may have to forsake some of their 'lifestyle' attitudes. However, there are certainly a lot of (mostly young but not always) people who are very business focussed and doing ok but fighting a seemingly never-ending battle against government regulation, mining encroachment (on land and labour), consumer demands, and in some cases the banks. So, as the others have said, there's no black and white answer but definitely a topic that needs discussing. One final point, while some may say that 'farmers shouldn't be owed a living' the reality is that everyone needs to eat and with a growing population demanding ever greater amounts of clean, 'green', food I think Australian farmers should be given the support and respect they deserve.

    1. cant believe i reply to you 3 years later wow

  4. Good article Al and good comment, Rebecca. One has to wonder about priorities and the eventual outcome of the great supermarket price wars which seem good for the consumer initially - but what will happen to the dairy farmers, fruit and vege growers and other producers facing cuts to their supply prices and mounting costs? Dairy farmers can't survive when Coles sells milk for around a dollar a litre. All good for cheap Asian imports but not so good for the consumer seeking quality local product. Same applies to seafood producers and beef and grain growers, I would imagine.

    1. Might be interesting to see what eventuates if the big supermarkets go too far and break the farmers and they have to give it away.
      I don't think that the smart overpaid CEO's of the big supermarkets have given a thought to what would transpire if this was the case.
      If they actually caused the Australian farmers to close down, it is fine to say that "we could get our food from overseas" but they have not factored in that, if this was to happen, they would not have the overseas producers by the short and curlies like the locals and supply would be on the terms of the overseas supplier and not on the terms of the Big Supermarkets as is now the case here. That would serve them right and in a strange sort of way would be justice served.
      No matter how it turns out, the Australian public will still be the losers as always.

    2. Not trying to be nasty Peter, I like and agree with a lot of what you write. But here, I think you have been way too misanthropic, and simplistic. Woolworths have been excellently guided for years, but of more recent times, Coles, as part of Wesfarmers, have at least matched them in terms of management and forward planning.

      I don't think for a moment that either the CEOs, the Divisional GMs or the Boards at large want to destroy our agricultural sector, as distinct from wanting to see it change. They should also be trying to help and support it in changing (for the better, for all) and if farming organisations know that they aren't sincere in that, well this should be something to attack. But it's funny you know, whenever I mention anywhere that there were many previously viable sectors of Oz manufacturing industry which blamed 'the farming lobby' for helping to undermine them via the (successful) demand for lower tariffs, no one says boo! 'Go figure', as those young Gen Xers like to say!

      I truly believe that young to middle aged working people in the major urban areas (who, let's face it, comprise by far the majority of Australians) want farmers, and farming, to succeed. They might not think about it as often as we older types in general, and farmers per se would like, but it is something that farming organisations should be building on.
      Cheers al

  5. Appreciate the interesting comments, and glad that no-one (thus far at least :-) has thought I was setting out to 'have a go' at farmers, which I wasn't. To Anonymous I would say that while I wasn't talking about "average income" which is useful in looking for trends, but something else really, the ABS Report does contain many interesting observations.

    Such as: "Income and wealth.
    Despite working such long hours, the average weekly disposable income of farmers in 2009-10 ($568) was considerably lower than that of people working in other occupations ($921). However, the fact that most farmers own and manage their own businesses means it can be difficult to analyse their personal financial circumstances in isolation from the financial arrangements of the farm. Losses from farm income, for instance, can be deferred over subsequent years and profits are often reinvested into the business.

    While the reported income of farmers might have been relatively low, it is important to recognise that income is only one aspect of economic wellbeing. Wealth, in the form of bank accounts, shares, superannuation or property, is another important component, and can be drawn upon to smooth and support consumption over time, including during periods of low income. Indeed, wealth is particularly crucial for farming families given that farming income is often at the mercy of climatic conditions. The average equivalised net worth (taking into account both assets and liabilities) of farming households in 2009-10 was $1.3 million, much higher than the average across other households ($393,000). However, such high levels of wealth are not enjoyed by all farming households. In fact, 10% of farming households could be classified as having relatively low levels of wealth (i.e. in the lowest 40% of the wealth distribution). However, the bulk of farming households (71%) were in the top 20% of the wealth distribution. The high levels of wealth explain why, despite relatively low income, only a fraction (5%) of farming households are classified as having low economic resources, compared with a fifth (21%) of other households......"

    To John, I would say that what the Coles / Wesfarmers competition is now doing to farm gate prices is exactly analagous to those manufacturers who were suppliers ('OEM's) to our once - burgeoning automotive and white goods industries, when tariffs were cut. Cars, washing machines and fridges became heaps cheaper, there was a vast increase in choice available and your average Joe and Joess Blow cheered loud and long. Except for those who had invested in those industries and went broke, and their workforces. As Dale and Rebecca have said, these are very complex issues and they are deserving of a lot more thorough and long range analysis and clear, brave thinking than they have sadly been receiving of recent years in Oz. I put someone's nose way out of joint in another forum, not EG, when I responded to their pontificating about the evils of McDonalds by pointing out that while concern over fatty foods was fine, such businesses provided many low income families to take themselves out for an affordable treat, which would otherwise be unavailable. Not everyone can afford Vue de Monde!

    Dale, I'm sad that those 'landed gentry' have gone, I did enjoy my 'ancient' visits to fabulous stations like Strathmore and Havilah in the central north, and Walla and Rockybar nearer Bundy. And Rebecca, your comments on scale of operation, and the need for modern farmers to have a business - focused approach are no doubt on the money. it's great to see young people involved, and we need a lot more of that, including hearing from them.

    1. Oops, I obviously meant Coles / Woolies supermarket competition above - "To John, I would say that what the Coles / Wesfarmers competition ..." refers.
      Cheers al

  6. The end result will still be more Asian imports, less local products which is fine if you want your milk with a dash of melamine, basa and Vietnamese prawns reared in sewers ... it's happening now in a vast range of packaged products from nuts to canned food - read the labels - "packaged in Australia, including local and imported product.." No prizes for guessing how much is local and how much is imported.
    At least we don't have to eat cars for breakfast :0)

  7. Back to the central topic. Dale Stiller sent me an email saying his connection speed was currently so bad that he couldn’t open this discussion at present, to post a comment. He wished to include links to recent articles in Queensland Country Life and Beef Central, dealing with an industry / government meeting set up by the RDRWG (Rural Debt Roundtable Working Group) in Brisbane late last year. The Beef Central link is to a summary of a paper titled “Rural Australia: Crisis 2012”, presented to the meeting by leading economist and farmer Dr Ben Rees, who is also a neighbour and friend of Dale’s. The paper discusses farm debt levels and low farm incomes, and argues that the crisis is the consequence of policy failure.

    The roundtable was attended by federal Treasurer Wayne Swan and members of his staff, Primary Industries Minister Joe Ludwig, federal independent Bob Katter, and representatives from AgForce and ABARES, together with the heads of most major banking institutions and QRAA, along with primary producers from most states of Australia.

    So, on behalf of Dale, here are the 2 links which you can copy and then paste into your web browser: http://www.queenslandcountrylife.com.au/news/state/agribusiness/general-news/roundtables-rural-debt-focus/2643499.aspx and
    From the Beef Central article, you will find a direct link to Ben’s own website where there is a pdf of his whole paper – well worth reading when you have the time.

    The overall understanding with which I came away is that while farm debt is indeed a massive problem, it is a symptom, or an outcome if you prefer; the underlying malaise is low farm income. And perhaps unbelievably, as the disposable income of societies increases (ie as they become richer), they spend a decreasing percentage of that wealth on food! Ben ties it all together very convincingly albeit that some of the in depth economic / banking theory stuff requires some concentration ;-)

    The RDRWG made some strong recommendations to Treas. Swan and Co, so let's hope they were listening more attentively than to the current hospital financing debate!
    Cheers al

  8. I have seen that Roger (of The West) is a member of EG, and I have been hoping that given his immense knowledge, interest and indeed personal skin in the area of this topic, he would have been in here commenting. Come in, Roger!
    The data that is readily available from ABS, ABARE, Ben Rees et al makes it clear that the fundamental issues have been the reducing value of rural assets as a basis for lending, stagnation in real farm income whilst everything else is rising, and the resulting rise in rural indebtedness to 'keep going' at the same time as assets backing the lending have been falling in value in rel terms.

    Some, dating back to Nugget Coombes in 1976, see that 'getting bigger, or getting out' is the answer, while Ben's economic analyses lead him to claim that 'this ain't necessarily so!'. Increasing efficiency on the other hand gets a tick, meaning plenty of water, good rotations and other up-to-date agronomical practices, and good marketing with some effective co-ordination.

    Now, how to start achieving all of that, when the farming community itself seems so fractured?
    Cheers al

    1. Second that, bro al. I think we all respect Roger (of The West)'s opinions.

  9. I have bin tryin' to add my bit for a while so now here it is in 2 parts as its too big for 1 post, sorry and it is thoughs from Athol Economou:
    Part 1.
    "The Australian Cattle Industry is in a sorry state. A decade of mismanagement has sapped its intellectual and financial capacity. It has come to the point where it is unlikely to ever again be; an Australian controlled and environmentally, financially and socially sustainable food supply.

    The Economic Facts


    Since 2000

    The retail price of beef has increased 50% from $10/kg to $16/kg
    Consumers are spending an additional $3billion on beef per year
    Domestic consumption of beef has declined 8.4%, from 37.7 to 34.5 kg per person per year

    The ‘nominal’ farm gate price of cattle has remained unchanged since 2000
    ($A1.80/kg LW in 2000, and still $A1.80/kg LW in 2012)

    Cattle producers have not captured a single dollar of the additional $3b (an estimated $700 per head slaughtered) spent by Australian consumers
    Virtually all of this additional consumer expenditure was absorbed by the processing and retail sector (some as costs, some as margins)
    Cattle Producers’ terms of trade have decreased 30%. (The ‘real’ farm gate price of cattle has declined about 30% since 2000. Farm costs have increases 30%.)
    And did Exports contribute?

    Since 2000

    · The volume (tonnes) of exports has remained the same for the past decade

    · The value (A$) of exports has remained unchanged

    · The unit price of exports (A$/t) has remained unchanged

    · The combined value and volume of beef exports to premium markets in Japan and South Korea are currently at about the same levels as they were in 2004 after peaking in 2006 following the ban on US imports due to BSE

    Japan and South Korea apply a 35% import tariff on Australian beef. It was originally applied in the early 1990s because Australian beef was too cheap. (The Japanese government still collects about $500m pa by counting the containers as they cross the wharf! Good on them, if we are so stupid.)
    Farm Productivity

    “ . . . with productivity growing between 1% and 2.5% per year over the past few decades. MLA’s investment in R&D . . . . . have yielded returns of $3.40 and up to $3.70 for every dollar invested”

    (Managing Director MLA, Scot Hansen, Corporate Plan 2012-15, August 2012)
    The reality is:
    There has been zero productivity growth. Australia produces the same amount of beef in 2012 as it did in 2000 from the same number of cattle. Based on Mr Hansen’s claims we should be producing 15-20% more beef from the same inventory or the same volume from less cattle.
    There is no evidence that MLA’s $700m of Producers and tax payers R & D expenditure has delivered any productivity gains for Cattle Producers.
    The above statements by a Beef Industry Bureaucrat is delusional.

  10. Part 2.
    Processing Chain Efficiency
    The US Department of Agriculture has for decades calculated the share of the retail dollar that is captured by the farmer. It’s a relatively simple calculation: for a typical 220kg carcase you workout what the farmer was paid, and the gross value of the meat sold by a butcher.
    The data shows:
    • US farmers capture about 50%, of the retail value
    • New Zealand farmers about 40% and
    • Australian farmers about 30%.
    (And, by the way, that’s not 20% more – it’s 60% more.)
    US farm gate cattle prices are currently about 40% higher while average US retail beef prices are about half those in Australia.
    This data suggests a mix of poor efficiency leading to high costs and/or a rip-off. It also indicated a lack of innovation and investment and constructive competition.(Finished steers in the US are currently trading at A$2.75 LW. While a 430kg LW steer in Australia is about $1.90/kg LW. The average price in the US for USDA Choice Grade Rump is A$14.00/kg and lean mince is A$7.40/kg)
    So where is the industry now?
    • In the decade since 2000 rural debt has increased from $30billion to $62billion while the value of farm production has remained unchanged at about $10billion2
    • The Queensland cattle industry debt was $1billion in 2000. It is now $9billion3. (cattle numbers have remained unchanged)
    • On a per head basis, in 2000 the Queensland cattle debt was about $70 per head. Today, the average debt is about $750/head.
    • It is estimated the first $350 of each animal sold in Queensland is needed to service debt. This is in addition to a 30% increase in operational costs since 2000.
    2 RBA, 3 QRAA
    (I suspect there will need to be a lot of bail-outs presented as “foreign Investment” to solve this debt crisis)
    Age: The Old and the Young
    The average age of cattle producer is 58 and getting a year older every year.
    Quite rightly, young people do not want to enter an industry with poor lifestyle and financial prospects.
    Agricultural course have the lowest entry scores of any vocational course due to lack of demand
    Internal Issue
    Coles and Woolworths account for about 50% of retail meat sales, yet meat accounts for less than 5% of their total sales. Coles is owned by Wesfarmers that also owns Bunning, Officeworks, mining and finance companies. Woolworths is also the biggest operator of gaming machines in Australia.
    Two foreign owned companies account for half of Australia’s processing capacity. But Australia is only a small part of their business.
    Brazil based, but also the biggest livestock processor in the US, JBS kills 8,000 cattle per day in Australia, less than one tenth of its global daily cattle kill of 90,000 head (in addition to 48,000 pigs and 7.6m chickens per day). Cargill, a US based private company, employs 130,000 people in 63 countries. Its Australian operation accounts for about 1% of its US$119.5 billion global sales.

  11. Part 3.
    Power and price
    The chronic lack of competition in the supply chain for beef has stifled innovation, undermined productivity gains, increased costs and reduced margins.
    On the surface, it seems the Coles and Woolworths duopsony drive hard bargains with suppliers that seem to lower prices to consumers. But in reality they make their profits by screwing their suppliers, stifling innovation and investment and passing on the cost to consumers.
    Their corporate culture demands they do this. Quite rightly, investors want their profits now. The CEO cannot choose to take the slow road to profit through long-term investments in education and technology in their supply chains, particularly in a segment of the business that represents a small proportion of sales.
    Executives can and have to take shortcuts. They are obliged to stifle competition and innovations that may challenge their volumes or margins. If it remains within the law, executives and directors are absolutely obliged to do whatever provides the easiest, low-cost, low-risk, and quickest profit for the company.
    After more than a decade of supermarket dominance, Australia has one of the most inefficient meat industries in the world.
    Industry Structure
    The Australian cattle industry is made up of mostly small to medium enterprises spread across the continent and operating in a wide range of environments. Further, the cattle industry is physically and culturally isolated from its primary customers - multinational meat processors and its consumers - urban communities in Australia and overseas.
    Due to its geographical fragmentation and it relative isolation the cattle industry, more than most industries, needs an insightful and effective platform for collective thought, planning and action.
    The present arrangements – Cattle Council of Australia and Meat and Livestock Australia - have been totally ineffective. After a decade of inaction and waste the cattle industry is in a perilous situation.
    Australia’s pasture and rangeland resources are significant national assets. But to create food and value on an ongoing basis, cattle producers need sustainable prices.
    Cattle businesses now operate in a commercial environment increasingly dominated by domestic and international corporations along with unprecedented environmental and financial challenges.
    A responsive and competent platform for collective thought, planning and action is essential if cattle producer are to equitably and sustainably manage rangelands, produce cattle and compliment corporations in our joint goal - to deliver food to consumers in Australia and abroad.

    Source Athol Economou.

  12. Hi Dixie, good contributions. Meanwhile apart from the wider economic debate I still think procedures at the supermarkets have a bearing on end results both for producers and consumers. This piece in the SMH today which harks back to what I was saying about labelling which makes it almost impossible to tell if what you are buying is an Australian product:


    Your shopping trolley may be filled with Belgian potatoes or American oranges, but as far as you're aware they're all "made in Australia".
    Consumer groups are calling for an overhaul of food labelling in Australia, saying it is "confusing" and "often misleading".
    It is mandatory for all packaged foods in Australia to carry a country of origin claim, but currently there is nothing to specify which terms are used, consumer groups say.
    Under current federal laws, food can be labelled "made in Australia", "Australia made", "manufactured in Australia", "grown in Australia", "Australian owned" and "product of Australia", even if the food is from other countries.
    The "product of" claim is much stricter than the general "made in" claim, according to the Australian Competition and Consumer Commission.
    Consumer group Choice is now seeking the support of the federal government to simplify the country of origin claims, reducing the labels to just three claims: "Product of Australia", "manufactured in Australia" and "packaged in Australia".
    Food policy advisor for Choice, Angela McDougall, said the proposed reforms will give credibility to the terms "product of Australia" and "manufactured in Australia".

  13. I agree, very thought - provoking posts, Dixie. But I see that cattle grower, newsletter owner and editor and Australian Beef Association board member Athol Economou also has his strong critics. This angry comment (top of page) on his criticisms of the duopoly whilst claiming that he relies on them for revenue at the same time, pulls no punches: http://www.meattradenewsdaily.co.uk/news/140312/australia____for_simmental_bull_.aspx (The'x' is on the end - ie 'aspx'. Copy and paste into your browser).
    Still, what he says makes much sense to me, at least insofar as the cattle growing sector of farming is concerned. But what about the rest, a much bigger combined sector? MLA, the Cattle council etc surely have nothing to do with the plight faced by other farmers?

    And then, there's "Choice". Ah yes, "Choice" magazine, and their reviews and rankings. I well remember when they assidulously reviewed and ranked Australian - made Hoover, Lightburn and Westinghouse washing machines, Kelvinator fridges etc. So that all helped our Aussie manufacturers with Aussie buyers, right? Afterall, there were proud, Aussie flag - featuring "Made in Australia" stickers on the products?

    Sadly, 100% wrong. I stopped listening to Choice (except occasionally when like everybody else, a result which I could Cherry Pick happened to suit me!), years go. For me, their motives are just as dubious as are those of the supermarket duopolies, for many of you.

    Coming back to Mr Economou (wonder in he is related to prominent, left leaning - in my view - policial scientist / commentator Dr Nick, from Monash Uni?), I think he is right on the money when he identifies the duality (not of Coles / Woolies) but of foreign subsidy and protection policies, as a principal evil. I believe that also applies in spades to grain, and other agricultural produce. But realistically (if Choice ever rated Australia high for Realism ......), what chance have we got to change countries like the USA, Japan, France, Canada - heck, throw in the rest of the world - on this, to meet our noble 'Level Playing Field concepts? Buckley's? You really think THAT good? Or is it time to belatedly bite the bullet, and match their cunning subsidy ('incentive') and protection programs (don't have to be by tariffs) where it is in our genuine national interest. Of course the immediate beneficiaries of that improved 'playing field' would have to come to the party, and sincerely attack improved productivity, and 'getting on with it'. If we had done that years ago, who knows, we might still even have a manufacturing sector to be proud of ;-( But not if the parties involved are neverendingly occupied in petty, internicine battles (as to at least one outsider, the red meat industry seems to be), featherbedding, bureaucratising etc etc.
    Cheers al

  14. Jo Rea as Anonymous in desperation
    The comments here basically recognise that the problems of rural industry are structural rather than through any fault of individuals.
    Primary industries have always been price takers. The proper description of this is that there are more sellers than buyers.
    This situation has become very pronounced in Australian agriculture where if Coles or the largest livestock processor set a price the farmer has few options.
    A farmer with a bank expecting payment has even fewer options.
    Cheap Australian (and export)food is being subsidised by increasing farm debt, sale of assets and off farm income.
    Dixie, Thank you for Athol's analysis. He may have detractors but they are being picky.

  15. Talking about Choise they have just launched yet another campaign about clear labelling of country of origin of food products.
    "CHOICE is proposing reforms to simplify country of origin labelling in Australia, after a survey found that 90% of respondents are not clear about where their food comes from.
    We also know that Australian consumers are finding country of origin labelling confusing with a proliferation of vague and muddy claims like ‘Made in Australia from imported and local ingredients’, which mean little.”

    In a recent CHOICE survey, 90% of respondents said country of origin labelling is unclear, but how important it is varies by type of food. Respondents placed the most importance on primary produce such as meat and vegetables, followed by foods like dairy and bread. Origin was least important when it came to highly processed foods like soft drink and confectionery."


    1. That's the basis of the SMH article I posted above, Dale. Nothing asbout ratings but about our right to clear labelling, which I think should be mandatory. Who could argue against that. As I said earlier, checking the labels at the major supermarkets is very confusing with things like packed in Australia using local and imported product, etc.

    2. The labelling that we can trust the most is product of Australia - (From Choice)

      “Product of Australia” means all the significant ingredients must originate here, and almost all the manufacturing or processing must be done in Australia.
      “Made in Australia”, “Australian Made” and “Manufactured in Australia” claims mean the product must be substantially “transformed” in Australia – it must have undergone a fundamental change in form, appearance or nature, such that the product existing after the change is new and different from the product beforehand – with at least 50% of production costs incurred here.

      Choice source - http://www.choice.com.au/reviews-and-tests/money/shopping-and-legal/shopping/made%20in%20australia.aspx

    3. No argument with you guys. my negative (jaundiced?) comment probably reflects what I think was my justified disenchantment with Choice, many years ago now. Lots of water under the bridge since then (oops, no pun intended re Qld floods, which again are starting to look diabolical), and no-one could sensibly argue against the real need for honest, simple labelling. And linking that to a genuinely reinvigorated plan to "Buy Australian".
      Perhaps my gripe was / is that many of the people who shout loudest about how they seek out, and only buy 'Australian' (no, no - one here!)speak through their teeth. Actual results sadly don't bear out such claims. But maybe plain, prominent flagging and a strong campaign, can make a useful contribution to re-awakening our nationalism.
      Cheers al

  16. Falling land values impact upon farmer viability is yet another aspect that was covered in an article at Beef Central today. You will need to copy & paste the link and read the entire article to grasp what it is saying. I will try & get a revelant short extract.

    "Making money out of cattle can be a challenging business. But when you have increased the required cashflow in line with inflated property values, and not in line with increases in the productivity of the property in question, you are likely to face financial difficulty at some point.

    Any reduction in property values will merely add stress to this scenario. Banks do have strict lending criteria and will be looking to maintain the equity values of the money they have lent out. In other words they will want to maintain the agreed 40pc limit. If values have fallen the borrower will find they may be asked to put up more collateral - which they won't have - or they may find that the interest rate they are charged is increased as the bank prices in the increased risk of the money not being repaid."


  17. At present this discussion has focused on the beef industry, with the root problem seeming to be that farm gate prices are way too low to return a liveable income to growers, letalone an acceptable return on investment. This in turn leads to the need for continued borrowing against assets which in many instances are falling in value, higher servicing costs, foreclosures ..... a very vicious circle. So how realistically can farm gate prices be improved to a sustainable level? How can it be that export prices are more attractive to Australian producers than are local market prices? While this seems to me to be a crazy conundrum, maybe I am just being thick and too simplistic. But if it is true, should Australian growers focus even more on export markets, and can THEY provide a sustainable income?
    Cheers al

  18. " should Australian growers focus even more on export markets, and can THEY provide a sustainable income" from Al.....Well they seemed to be able to in the case of nothern beef producers prior to live export fiasco, even for family owned properties. And of course the flow on effects of demand in the north put a baseline on markets down south to some degree. I had not associated Athol Economou with any organisation other than the publication "Beef Improvement News" which gave us much food for thought back in 80s and 90s. Sustainability in any primary industry will in my opinion only ever be attainable with diversification ie. second jobs, investments, opportunity income generated on property etc and hard work and scimping on the non essential luxuries. ( I have never owned anything except second hand cars so that may point to my weaknesses.)

    1. Dixie, when you say ".... Sustainability in any primary industry will in my opinion only ever be attainable with diversification ie. second jobs, investments, opportunity income generated on property etc and hard work and scimping on the non essential luxuries. ( I have never owned anything except second hand cars so that may point to my weaknesses.)", I think it is both sad and unacceptable that a hard working, efficient, business like and technically savvy cattle grower can't aspire to enjoying 'luxuries' that many, many employed city workers take for granted! Given the funds tied up in the basic asset, the property, that REALLY isn't sustainable, IMHO. Why, in the medium to longer term, would ANYONE saddle up to that? 9Rhetorical question).

      One gets the impression these days that many experienced bloggers (I'm not one, and don't aspire to be - too much else to do in what time might be left available to me :-) - hate the so - called MSM, and rely on their exchanges to learn 'the truth' about everything. Which of course is frequently distorted. To get a REAL understanding going amongst good, average suburbanites still requires an MSM heavyweight or three to take up the story, and hammer it. Does Athol ever contribute to the MSM?
      Cheers al
      PS Dale, I must really get around to mastering your well - researched and much appreciated instructions on using html edit tools, so that, eg, I can put quotes as above (of Dixie's words) properly in Italicas! al.

  19. Had not heard from Athol since the 90s Al so not sure and I don't see MSN of any kind in my days.

    I am not being the least bit disgruntled when I say getting any more good average suburbanites onside is, I think, necessary but basically only to spread brotherhood and increase warm nationalism. I really think heaps of them are on side but as powerless and flat out as the farmers.

    And blaming green politicians, ENGOs etc for balance of power decisions or the forestry debacle in Tasmania or $1 a litre milk being CEO of Woolies sole responsibility is dodging the blame. Then remembering lots of for instance Tasmanians voted for the green people in both the senate and the state so ultimatly they are harvesting what they sow. I can't see any of them wanting less dividends from their Woolies shares however. Its just the way people are- survivors in our own little spheres of influence. A slighly confused post but basically I farm cause I know it, I love it, I am challenged by it every day and thats the way it will always be I guess. For a real charge though I so enjoyed the link I found on this site to the blog "Farmer way of life". What a read and the uTube video of the Perth protest was really well done for an ? amateur. Think I'll put my protesting efforts into the active protests in my old age. Maybe sell the farm and become a nomad, rent a protester, professional placard maker or somesuch.

  20. No doubt like a lot of others, I listened to / watched the National Press Club questions to PM Gillard following her predictably dreary presentation at lunch time today, enlivened only by her announcement of the Election Date, for 14 Sept.

    The final one, from a rural press editor with impressively gelled hair, really got my interest as it dealt with issues facing farmers, specifically mentioning the live export hasty ban. Her response was an object lesson in political platitudinous gobbledygook. ALL farmers are being well cared for by the Gillard Govt and the Ministers most involved, and we will all see further evidence of this caring support and nurturing, producing huge and highly financially rewarding new outcomes.

    So graziers, farmers, Rejoice!! You are already benefiting from this benign regime, and Good Times are set to improve even further before 14/09. :-( Or perhaps I heard her wrong, and she meant that Good Times will slowly start to revive and grow, after she, Swanny, Ludwig, Burke, Albanese, Roxon, Combet and co Exit Sage Left, AFTER 14/09 :-)
    Cheers al

    1. Interesting discussion on radio this afternoon. The guy on the radio asked the Governor General's son in law, Bill Shorten who was the main engineer in stabbing Krudd in the back to get Gillard up if she had discussed the calling of the Election and his reply was that she has not even spoken to him about it.
      She has had discussions with the Greens, Bob ducks hit, Tony whinger and several others but still at that time had not even mentioned it to Shorten. Now there is loyalty and gratitude for you

  21. Briefly referring to Dixie's spot-on diversifying income comments, I just included the following in a comment on Dale's largely ignored (from early Jan) "PRA Water Management for the CSG Industry" discussion:
    "..... I would put to you all, revenue to the farmer from CSG extraction may be the difference between remaining viable or turning off the lights, so do NOT dismiss it lightly, or without really trying to get a thorough understanding of what is going on. I for one know of good farmers who are quite happy with CSG arrangements they have been able to make, although I am a mere urbanite".
    Cheers al

  22. Hi Al, just had a look at Dale's PRA discussion too. One point I would make is that some landowners have been dealing successfully for years with gas companies connected with local domestic and industrial users such as the gas lines from Roma to Brisbane (which I inspected many years ago as part of a flying tour of then CSR's coal and gas interests back in the 80's) and the more recent line to Gladstone supplying the likes of QAL's alumina refinery and some other local industries but they are very small projects and very small pipelines compared with the burgeoning CSG/ LNG export industry with its 500km- 42 inch diameter imported steel pipelines to Curtis Island, and the mad rush to get as many gas wells in production in as short a time possible. The Qld and Federal Govt's stuffed up by approving multiple projects without putting proper safeguards in place for combined impacts or as is the case with Gladstone Harbour, not policing the measures which were imposed.

    1. John, I have absolutely no issue with " ..... The Qld and Federal Govt's stuffed up by approving multiple projects without putting proper safeguards in place for combined impacts or as is the case with Gladstone Harbour, not policing the measures which were imposed....."

      Why it all has to be exported per se, letalone all through Gladstone whilst other options could be available, beats me, too. We should firstly be maximising our own use of a brilliant resource to foster our own industries. It seems unbelievable now that once we had the cheapest power (at least in Vic) in the OECD. Now, I think, we are 'top of the pops'. The aluminium and steel industries would never have been seriously dreamt of, if the entrepreneurs of the day had had access to a crystal ball. :-(
      Cheers al

  23. True, Bro Al. We should have more access to the CSG/ LNG rather than the mad rush to export it even down to the level of using it as a cheap fuel for our cars, or converted to conventional fuels, but if that did happen, the governments would put their hand out for a hefty slice of excise and we would be paying much more than Japanese LNG buyers.

    1. Well John, that's right back to the ridiculously Don Quixotish 'level playing field' delusions of successive Oz governments, and government taxation policies. Governments will always tax, as indeed they must, unless we go the whole hog into some anarchistic, nihilistic "new paradigm". (To borrow from the worthy Kat in the Hat :-) If we do, I'm outa here!

      But of course we won't, so it comes down to what and how much you tax, and how you spend it. The Japanese tax and subsidise as do the much vaunted Scandinavians, whereas we just tax :-( But boy, those Scandinavians tax hard!

      So personally, I wouldn't mind at all if our government started to tax (excise) all transport fuels, with exemptions (or partial subsidies) for genuinely productive usages, would you?
      Cheers al

  24. No, not really (and they did recently add excise on LPG) Al, but at this stage its hypothetical and Japan will be getting our cheap natural gas/ LNG regardless, unless they start to eye off those even cheaper new horizons in the US and elsewhere. If they made the gas available to us for transport (as used in many major bus and truck fleets in Australia already) and applied a reasonable level of excise, it would probably still be much cheaper than what we are paying for petrol and distillate. Which in the long run would help the farmers and the rest of us and boost productivity.
    Would be good to see Tony Abbot seize such an opportunity.

  25. Ben Rees presented this paper to the Rural Debt Roundtable attended by the Treasurer and Minister for Agriculture among others in October 2013.He argues that the exponential rise in rural debt, the ever increasing gap between Gross Value of Farm Production and debt and declining rural terms of trade in contrast to increasing terms of trade in the rest of the economy, is the result of policy failure since 1983.
    Policy failure comprises three components: blind adherence to supply side economics, a changed financial system, and, a high level of monopoly power in both input and output markets facing agriculture.
    The abridged version of the paper can be found at Beef Central. http://www.beefcentral.com/p/news/article/2463
    The entire paper, whose charts tell a clear story can be found here.

    1. Hi Jo, good to see that you have overcome earlier posting problems! ;-)
      Re your reference above, I understand that negotiating this blog structure is a bit cumbersome, so no surprise really that you may have missed this comment I posted back on 23 Jan, up near the top of this thread:

      "Back to the central topic. Dale Stiller sent me an email saying his connection speed was currently so bad that he couldn’t open this discussion at present, to post a comment. He wished to include links to recent articles in Queensland Country Life and Beef Central, dealing with an industry / government meeting set up by the RDRWG (Rural Debt Roundtable Working Group) in Brisbane late last year. The Beef Central link is to a summary of a paper titled “Rural Australia: Crisis 2012”, presented to the meeting by leading economist and farmer Dr Ben Rees, who is also a neighbour and friend of Dale’s. The paper discusses farm debt levels and low farm incomes, and argues that the crisis is the consequence of policy failure.

      The roundtable was attended by federal Treasurer Wayne Swan and members of his staff, Primary Industries Minister Joe Ludwig, federal independent Bob Katter, and representatives from AgForce and ABARES, together with the heads of most major banking institutions and QRAA, along with primary producers from most states of Australia.

      So, on behalf of Dale, here are the 2 links which you can copy and then paste into your web browser: http://www.queenslandcountrylife.com.au/news/state/agribusiness/general-news/roundtables-rural-debt-focus/2643499.aspx and
      From the Beef Central article, you will find a direct link to Ben’s own website where there is a pdf of his whole paper – well worth reading when you have the time.

      The overall understanding with which I came away is that while farm debt is indeed a massive problem, it is a symptom, or an outcome if you prefer; the underlying malaise is low farm income. And perhaps unbelievably, as the disposable income of societies increases (ie as they become richer), they spend a decreasing percentage of that wealth on food! Ben ties it all together very convincingly albeit that some of the in depth economic / banking theory stuff requires some concentration ;-)"

      Cheers al

    2. Alan,
      Thank you for pointing that out. I had missed the comment although I had seen the articles.
      I am just glad that someone is doing some serious economic analysis for a change and not just implying that we are incompetent managers.
      For years now we have been told by MLA that there are always 20% of producers who make a profit. (This would be greeted with outrage in any other industry).
      They usually do not mention the fine print. Namely that the figure is before interest and tax and we have seen the debt burden of the sector. It is also a rolling group. It is relatively easy to look profitable before interest and tax in a year of low capital expenditure or in a good season. As we know that is not sustainable.
      In other words they accuse us of being poor managers while not taking into account all the economic indicators themselves.

    3. Serious question, Jo. Does MLA have ANY supporters amongst producers. if so, can they be called on by people like you, Dale, other articulate players, to explain why?

      If there are NONE, then who ARE their supporters? If they (the supporters) and MLA are harming the broad body of producers, are there not ANY regulatory bodies, or active members of government who can be called on to take up the cudgels? If the developments in the industry over the past 10 years or so, as documented in links here and elsewhere, were written up in a "story", many would think that it HAS to be science fiction :-(
      Cheers al

    4. This comment has been removed by the author.

    5. I deleted a comment because it had a dopey typo ;-( What I MEANT to say was: Should explain that by the above I did not mean to imply in the slightest that it was FALSE, but rather that the litany of the real data / statistics is SO bad, you would normally only expect to find it in some tale of fantasy, not in the record of a major and proud industry.
      Cheers al.

  26. Alan,
    This has taken a while but my problems with the site are not at an end.

    I don't know anyone who loves MLA in its present form although I do know a lot who think something is better than nothing.
    To change the structure requires political will as the government has the final say. There is no reason to believe the opposition would restructure either.
    When the structure was formed I had high hopes as we no longer had to be part of an organisation with processors. They would be working solely for us, the shareholders. There would be no holding back on the effectiveness of the market intelligence we thought and if there was a shortage we would know about it. I am now deeply sceptical about whether they are dedicated to this job. Instead we are regularly told that profitability has nothing to do with price.
    One of the early things to happen in this structure was that there was always a processor on the Board. Until recent years the processor has always been a representative of a relatively small Australian company.
    This changed with the appointment of Iain Mars of JB Swift, the largest meat processing company in the world and operating on five continents.
    He has now returned to Brazil to take up a position with the company there.
    Ordinary members of MLA are nor routinely able to obtain minutes of Board meetings but the largest meat processing company in the world knows all the strengths and weaknesses of our industry.
    I am told there is a revolving door for those who declare conflicts of interest but there is still a great deal of strategic information to be gained.
    Being an ordinary member and trying to have your opinion heard, particularly at AGM's is an impossible task. They are there to manage dissent not determine what problems we see nor to gain a new perspective.
    In 2011 they even had the audacity to have a meeting of the largest players a couple of weeks before the AGM. They knew before the meeting that there was enough support to direct calls for a restructure at Cattle council and not at MLA.
    The government and opposition regularly refer to "the industry" as if we and processors are one homogenous whole.
    The fact of the matter is that we are in competition with processors and each other and are required to be by law (Australian Competition and Consumer Act). We are also price takers which means more sellers than buyers (this is so across all primary industry) and the practical reality of this is that we have to take what we are offered.
    I hope this answers a few questions.
    I have more but will have tto come back later

  27. Ben Rees in his paper made reference to "perfect knowledge" for a free market to function effectively. Even the most dedicated producer is unlikely to have that.
    An effective free market also requires "perfect competition" with enough players (there are not) who are all actively competing against each other. Usually the largest or two largest set the price and the others fall into line.
    This is all a slow downgrade over years and the real impact is not realised (and there are many in authority who do not want to realise) for years.
    The instant kicker is sovereign risk and poor policy and we have seen many examples of this across industries. Most examples are trumped by the live export ban.
    A recent article in Beef Central listed 21 properties in Northern Australia on the market rangong in size from 429 square km to 3016 square km. Most of these would be at risk of forclosure. Killarney has already been foreclosed on by NAB.
    Realistically, only overseas buyers will have sufficient funds to buy most of them.

  28. Things must be bad in the WA wheat belt. WA Farmers president president Dale Park is quoted as saying,
    "farm debts have surged and now a host of farmers are struggling to secure finance for this year's crop.As a result, the agricultural sector is now brushing close to Great Depression conditions.

    "I believe that we are actually going to see agricultural land in Western Australia not being farmed in this coming year and that'll be the first time really since the 1930s that we've seen a situation like that," he said.

    Mr Park says Australia's national farm debt is more than $65 billion, which he believes is about twice what it should be.

    "The ironic or silly part of this is that farmers need to borrow more money to put the next crop in," he said.

    "So we're really in a situation where it's getting close to catastrophic."

    More in the article, Farmers walk away as finance and climate dry up
    Confirms what our friend Roger from WA has been saying all along.

  29. "The foundations of Australia's prosperity and national contribution have been white-anted by ill-conceived thinking that was carelessly adopted,'' Dr McGovern said ahead of next week’s crisis summit.

    “Australian agriculture is operating on an unsustainable basis.

    “Current debt stresses are the logical outcome of decades of unbalanced markets, inappropriate finance, untoward practices and inept policies.

    “We all need a new way forward.''"

    This quote comes from a Beef Central article published today,Inept policies threaten farming future: business academic
    On Monday Dr Mark McGovern will give an address to the Agriculture in Crisis summit in Merredin, West Australia. Mark McGovern is QUT Business School senior lecturer and a close associate of Ben Rees who has been mentioned in the comments above.

  30. This topic is as relevant now as when Al first published it a bit over a year ago.
    Benn Rees an economist who is mentioned above told a meeting of cattlemen on 11th December, 2013 in Hughenden that each industry had its own catalyst for disaster.
    • Northern cattlemen: closure live cattle export market.
    • Wheat industry: post GFC falling land values eroding credit worthiness
    • Dairy: monopoly power in retailing forcing down farm gate prices
    • Horticulture: low commodity prices, cheap imports, and contracting processing sector

    I would argue that the closure of the live cattle trade affected all cattlemen in the face of drought. This was an outcome which was predicted by many knowledgeable commentators at the bottom of articles on live export two and a half years ago.
    Interestingly no-one from Cattle Council of Australia (CCA) nor MLA acknowledged the part played by the live export ban on poor prices except for MLA Chair Michelle Allen who is not from the cattle industry. All others including Andrew Ogilvie, Chair of CCA just blamed the drought. It is logical that if a significant market for light, young cattle was disrupted two and a half years ago they had to go somewhere when the grass ran out.
    Nothing has changed for the better since the Ben Rees paper of a year ago.
    The Minister for Agriculture, Barnaby Joyce has announced a White Paper into Agriculture. We can only hope that it throws up some solutions to the considerable structural problems.

    The duopsony of Coles and Woolworths is well aware of the effect on the industry of their pricing policies and the fire sale of dairy processing assets.
    One of the leaders of the dairy industry told me more than two years ago that their ultimate aim was to have all UHT milk and they could import it from any country in the world with no refrigeration required.
    There is much more to say but it will have to be in pieces.


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