Ag's star to rise as mining fades

28 Mar, 2014 03:00 AM
This is a sector in transition, with a shake out of well-established players occurring

THE run of news about Australia's food processing sector has been so gloomy, for so long, that a Deloitte forecast arguing for food processing as part of an agribusiness renaissance is a bit of a head-scratcher.

But it all depends on what you mean by food processing, says Deloitte's agribusiness head, Rob McConnel.

One model, which competes on volume and price, is getting hammered. But another, which competes on quality and brand story, is flourishing.

Exhibit A: in Victoria, source of some headline-making stories about the collapse of food processing ventures, Deloitte has identified about 3500 food processing business employing about 25,000 people.

“According to our analysis, Australia needs to move from producing commodity products to growing, processing and supplying premium produce,” said Mr McConnel.

“This is a sector in transition, with a shake out of well-established players occurring alongside the emergence of specialists operating in the premium space where they are in a great position to exploit new market growth opportunities."

It is the difference between early talk about Australia being the "food bowl" of Asia - impractical, because Australia can only ever provide a fraction of Asia's food requirements - and the idea of being "Asia's delicatessen".

Deloitte, a professional services firm, on Monday released its Positioning for Prosperity: Catching the next wave report, the third in Deloitte’s Building the Lucky Country series.

Deloitte's assessment is that mining, which powered Australia's last wave of economic growth, could be matched or superceded by new growth waves from what the report's authors have called the "Fantastic Five": gas, agribusiness, tourism, international education and wealth management.

"...Australia gets its biggest breaks – its largest wealth-creating waves – when we find ourselves at the intersection of global opportunity and national advantage," the authors wrote.

The "Fantastic Five" sectors are all constrained in some way, Deloitte says: remove these barriers, and they could be worth an extra $250 billion to the economy over the next 20 years, and keep Australia near the top of the world’s prosperity charts.

In Deloitte's assessment, Australian agribusiness is one of the country's most globally competitive and productive sectors - and also one of the least cost-competitive.

That particularly affects the food processing sector, Mr McConnel said. A recent report commissioned by the Australian Food and Grocery Council found that by removing more than $100 million in regulatory costs from the sector, it could contribute more than $250m in additional GDP.

Removing red tape doesn't have to compromise the food safety standards that underpin Australia's reputation with Asia's middle class.

"No industry has more to lose from a failure than the food industry itself," Mr McConnel said.

"Certainly there needs to be checks and balances, but we can do things like better align governance between the departments of Agriculture and Health without compromising food safety."

A case study lies right across the Tasman. New Zealand has built enormous global dairy markets, and captured a sizeable share of downstream processing along the way.

There is a stark difference between New Zealand's oversight regulations compared with Australia.

" manufacturing in NZ is regulated by the Ministry of Primary Industries, (but) here in Australia the matching regulatory oversight comes under the Department of Health – meaning that risk aversion is the order of the day and decision making is glacial."

Australia will always have a place in the global food system, Mr McConnel said: how profitable that position is now a question of whether was are prepared to overthrow past complacency, "and move fast on the opportunities".

The full Deloitte report, Positioning for Prosperity: catching the next wave can be found by clicking here.

Matthew Cawood

Matthew Cawood

is the national science and environment writer for Fairfax Agricultural Media
Date: Newest first | Oldest first


Beef man
28/03/2014 10:09:37 AM

Rob McConnel, you have inspired me to go back farming ... not. Why don't you talk about `we are the food bowl of Asia rubbish or `who will produce the food for all these people'. people in comfortable positions always sprout this rubbish. sure, there is a demand if you want to produce stuff for the cost of production, I've heard it all before. Go and talk to our highly profitable dairy farmers, they're really rolling in dough.
Murph the surf.
29/03/2014 12:25:25 PM

It may be a handy age for those who can transition from bulk supplier to product developer but we are still a long way from sensitive understandings of the desires of these Asian consumers. Additionally this is only fine for those with a vertically integrated system already partly in place,for producers we are still going to be price takers. There are sufficient supplies that events like the recent drought impact prices paid severely and the latest figures from ,I think ABARE indicate that producers would expect price around $2.80 for the EYCI for the foreseeable future .
29/03/2014 12:45:10 PM

I've heard this rubbish before! Our farms are surrounded by dilapidated or closed down rail infrastructure, our country & rural roads are crap, making it more difficult than it ought to be to get produce to our now privately & poorly managed ports in good condition. Manufacturing, a value adding process, is dead. The Ord River flows 7 times Sydney Harbour's volume in fresh water out to sea every day, yet there is no plan to pipe it east or south to lift agricultural irrigation productivity. This country is going backwards. We need nation building infrastructure NOW! What's the plan Mr Abbott?
29/03/2014 1:08:25 PM

Except stagnating, or a death of 1000 cuts, Ag is going nowhere, hampered by a lack of political willingness to look beyond the current term. Mr Abbott, coined his own nickname "Mr Infrastructure" should be titled "Mr Wait & See." He's done little to date & certainly hasn't started any nation building infrastructure project, or talked about one. For a promised action man, he looks more like "Mr Talk & No Action!" Start by piping water from the Ord River to Katherine, Alice Springs, Mt Isa & Adelaide to boost the economy by opening land to irrigation! There's rail line ready to service it all.
31/03/2014 12:07:40 PM

More BS. First we were told "get bigger or get out " then it was the "the level playing field " of free trade, then the "Food bowl of Asia" now the latest crock of BS from the experts is "Asia's delicatessen". When will this dream time crap end and these experts wake up and realise we need to either pay the wages and conditions of our competitors or protect and subsidise industry like the rest of the world does. We need to manipulate our currency down as other exporting nations do and decide if our politicians are Governing for the good of Australians or be the only lap dog for the WTO.


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