Agriculture remains one of the most capital intensive industries in Australia. That means the need to attract significant new capital underpins the drive towards a $A100 billion industry by 2030.
“It is clear the Australian agriculture industry is hugely dependant on strong export demand, and a stable and growing global economy.”
To attract new capital, the Australian agriculture industry will require existing producers to be ‘investment ready’: they must have strong financial and operational frameworks capable of proving to external investors the investment potential.
Due to the volatile nature of agriculture, it has traditionally struggled to attract external investment. However, producers are increasingly adopting corporate structures and stronger financial management and reporting to help them make better informed decisions for themselves. That also helps external parties judge the merit of investment and potential partnership.
Attracting capital and improving financial management in the agriculture industry requires planning for Australia’s changing seasons, potential droughts and ensuring on-farm sustainability. This is key to ensuring strong farm and environmental stewardship and also for achieving strong returns and productivity growth over a long period of time.
Methods to improve financial outcomes through environmental measures include better soil management, access to water resources, crop and livestock management and breeding techniques. To manage seasons, drought and sustainability, producers also require access to strong financial management tools and training to ensure long-term investment in land resources.
China’s risk and reward
It is clear the Australian agriculture industry is hugely dependant on strong export demand and a stable and growing global economy.
Australian producers have delivered strong output growth in recent decades which means Australia now produces far more than we consume domestically. To date, Free Trade Agreements with South Korea, Japan and China have all delivered appreciable benefits to local producers as - whether selling into the local market or exporting - greater demand has pushed prices higher.
However, the strategy of pursuing bilateral trade agreements leaves Australian exporters open to other countries doing the same and achieving more favourable market access agreements with our key trading partners.
The Australian export market continues to be heavily concentrated in Asia and in particular China. China is the largest importer of Australian agricultural exports, taking 25 per cent or almost $A12 billion of Australian exports in 2017-18.
While China’s rise in importance to Australian exports has been rapid, China is still taking less Australian exports than Japan did in the early 1990s, showing heavy export concentration is not an unusual situation for Australian exports.
It does pose a risk, however, particularly in light of the ongoing disturbances to international trade, with that risk particularly focused on a few key commodities - sorghum, wool, forest products and seafood.