In the last week the chief executives of two of our largest rural enterprises, Elders and GrainCorp have stepped down. The circumstances of those resignations have obscured the enormous opportunity now offered by agriculture in Australia. And to kick off that opportunity our trade and investment minister, Andrew Robb, met with Indonesia’s minister for trade, Gita Wirjawan.
Robb declared: “This will be the century of food and water security.” I believe that the agriculture opportunity will in time overshadow the problems that arise from leaks of unfortunate security practices conducted by Australia in Indonesia and probably other parts of Asia.
Paradoxically, one of the best descriptions of the opportunity facing Australia came from outgoing GrainCorp chief executive Alison Watkins in her KGB interview earlier this year (watch below). Watkins explained that Australia could increase grain production by 50 per cent and would need to do that to maintain market share until 2050. She believes that there is tremendous opportunity for “best practice transfer between different categories of farming enterprise”.
Watkins also said that Australia needs better application of fertiliser technology to improve productivity on existing land, and that there are important opportunities in new varieties, including genetically modified crops. “We’ve got to be willing to have the GMO debate and get over that particular emotional barrier which I think has slowed us in that area,” she said.
In infrastructure, Watkins explained that transportation costs are boosted in Australia because “of our sub-scale trains and the poor condition of some of our tracks”.
GrainCorp has had success in co-investment in rail infrastructure with the Victorian government. Similar measures need to be taken in Queensland and New South Wales. And of course that’s exactly what the Americans planned to do. With the ADM bid blocked, the way is now open for an infrastructure company to provide upgraded rail services funded by a contract with GrainCorp.
Australia has a remarkable convergence of opportunities. We have new chief executives at the top of two rural players; many older farmers want to exit; the markets are improving; the dollar is falling and we have capital in abundance (via self-managed superannuation funds) to re-engineer our infrastructure.
But we also need to recognise that the Americans have developed great skills in agriculture and we need to study them. In particular, our high cost of gas will lift our fertiliser costs, which will require the world’s best practices. I suspect we are going to see a number of surprise mergers.