More than just apples in Apple Isle agriculture

It’s a good thing the success of Australian agriculture isn’t measured solely by the number of farming business in operation. 

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The declining number of farmers in Australia may imply a downward trend in output from the industry but the opposite is true: a smaller number of farmers have managed to achieve a steady 5 per cent per annum increase in both the quantity and value of production over the past 10 years. 

"Tasmania may represent to mainland Australia what Australia represents to international markets.”

A new report from ANZ’s Agri InFocus series, Treasured Island’ recaps the trend of consolidation in Australian agriculture, documenting the number of farming businesses has reduced by around 5 per cent per annum over the past 10 years, with no signs of slowing.

According to the report, Australia continues to see a relatively small proportion of farms, being those farms that turn over greater than $A1 million per annum, contributing to the majority of output from agriculture. The Tasmanian agricultural industry is part of that national trend, with some variations.

Nationally,  large farmers were responsible for around 60 per cent of agricultural output value in 2016-17, a figure that has grown from just 25 per cent 40 years ago. Large turnover farms are also increasing in their representation within the industry, accounting for 16 per cent of the total farming population, increasing from just 3 per cent over the same period.

Achieving gains in production and value has not been easy for our farmers, with an array of challenges including droughts, floods, increasing costs and a rise in global competition for key export commodities among the list of things to contend with. While the industry finds a new normal through continued consolidation, the impact of this trend on regional communities must also be considered.

The Island State

Tasmania, the island state responsible for around 2 per cent of Australian agricultural production value, represents a unique and diverse agricultural landscape.

In some ways we see that Tasmania may represent to mainland Australia what Australia represents to international markets, whose own perception of us as a food producing nation are so vitally important.

Changing communities

Farming was once the backbone of many of Australia’s regional towns but a reduction of farming businesses points to real and justified concern for the demographics and futures of these localities.

The employment profile of agriculture, explored through ANZ’s analysis of the Australian Bureau of Statistics’ (ABS) census and the Australian Bureau of Agricultural and Resource Economics (ABARES) farm survey data, demonstrates a declining overall trend in the number of direct agricultural employees and also change in composition of those employees that remain in the industry. It also highlights a clear trend in the average age of farmers across different sized farming operations.

As farms become larger, and arguably more corporatised in their structure, there is a clear reduction it the contribution from family members and an increase in the relative proportion of employees.

While it is positive that good employment opportunities still exist within agriculture for those who don’t own any land, the overall decline in the number of employees remains a significant contributor to change in regional communities.

ANZ’s research points out the average age of operator of Australia’s largest farms – measured by revenue - is significantly younger than those operating smaller farms. The data suggest that, in agriculture, with relative youth comes a willingness to access technology, seek efficiency gains and drive productivity growth – common traits of Australia’s largest farms.

The decline in the overall number of agricultural employees, combined with a reducing number of farming businesses, creates a twofold impact on communities.  

The impact of these trends can also be viewed on a broader scale with impacts across an entire state. This also gives insight into where opportunities may lie from the structural shifts occurring in Australian agriculture.

Vitally important

Bordered by ocean and upholding an excellent image of being clean, green and highly productive, Tasmania has a great story to tell. That story of food, through a concentrated effort to highlight provenance and quality via the Brand Tasmania trademark, are valued traits of Tasmanian agriculture.

However analysis demonstrates the trend toward a lesser number of larger and more productive farms is also playing out in Tasmania. The beef industry represents a clear example, with Tasmanian beef cattle producers reducing in number from around 1,600 in the 1970s to just over 600 in 2018.

Commodity prices received by Tasmanian producers demonstrate that despite the excellent perception of quality of Tasmanian produce, no price premium is offered to the state’s growers when compared with mainland Australian prices. Beef, lamb and farm gate milk prices in Tasmania are generally below their mainland counterparts’ prices, as proximity to major markets and cost of freight impact the cost competitiveness of Tasmanian produce both domestically and abroad.

Survive and prosper

An opportunity to capture some of the price premiums for quality produce is demonstrated through the supply chain via first and second stage processing of agricultural produce.

The value of Tasmania’s raw produce increased by 92.1 per cent in 2016-17 to a wholesale value of over $A4.16 billion. Further value is added to food sold throughout the state through both retail and food service outlets, taking gross value to around $A5.8 billion.

This multiplier effect of agricultural produce along the supply chain is important in the context of farm consolidation, providing alternative employment and economic benefit to regional areas utilising the raw products of agricultural production.

Employment opportunities in the processing, packaging and branding of Australian produce is playing out in real terms, with increases in employment in the sector clearly demonstrated through ABS census data. This may create opportunities for regional Australia by attracting investment into food and beverage manufacture close to where raw production takes place. 

Brand Tasmania

More than a quarter of Tasmania’s land area of 68,300 square kilometres is committed to agriculture, with dairy products, meat, vegetables and fruit esteemed in key markets.

Brand Tasmania is the first statutory place-branding authority to be established in Australia to facilitate and create collaborative partnerships, ensuring that the Tasmanian brand is owned and promoted by all levels of government, business and the community.

Nick Haddow, founder of Bruny Island Cheese and Beer Co, says Tasmania is home to many large industries which benefit from Tasmania’s reputation of being home to quality goods and services.

Haddow says being on an island means Tasmanian farmers, in particular, are very resourceful. “It’s unsurprising that a lot of our farmers do more than one thing… We have to be a mutli-faceted economy, we can’t just rely on small, niche products.”

While there remains a place for small niche agricultural production, especially in places like Tasmania, the states’ bulk commodity producers are likely to continue to compete on price so long as their end market remains the same as their mainland competitors.

This poses the question of the role of branding and marketing in price premiums for agricultural produce - and also for the communities that have previously relied so heavily on the farmer to survive and prosper.

Alanna Barrett is Associate Director Agribusiness Research at ANZ

The full version of the report can be downloaded from ANZ Business Hub.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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