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Agricultural ignorance no problem for those with an opinion about Graincorp

Mick Keogh - Sunday, December 01, 2013

The spate of media commentary in response to the announcement by Treasurer Joe Hockey that the ADM takeover of Graincorp would not be allowed to proceed highlighted  that most Australian economic commentators are either lazy or have a pretty poor level of knowledge about Australian agriculture, but also revealed that there are some who have an almost breathtaking level of ignorance, and are not shy about revealing it.

The media response to the Treasurer's announcement last friday ranged from neutral (ABC News) to highly critical (Sydney Morning Herald - although in this case the story did not contain a single quote that supported the headline). The Australian Financial Review coverage and editorial was generally critical, although a considered and well-informed piece by Laura Tingle actually involved an analysis of the competition issues that were at the nub of the decision, rather than just resorting to the "Australia opposed to overseas investment" tone of most of the other commentary. Commentary in the Australian newspaper was generally critical of the decision, with no analysis whatsoever of the competition issues involved, and most seeing it simply as the Treasurer having caved in to pressure from agrarian socialists.

The award for the most ill-informed and ignorant commentary on the issue must surely go Union leader Paul Howes, who spoke about the issue on Sky News. He criticised the decision, but also broadened this criticism to include the agriculture sector more generally, saying that major reform is needed in the farming sector, and that “It essentially means the day of ma and pa farming in Australia needs to end. We need to have a transformation,”

Small farms, he said, were hostage to the Australian climate. “You have droughts and you have floods and if their produce is wiped out by that particular element then you have those companies falling over.”

To future-proof the farming sector, Mr Howes said it needed to look to the United States where “you have large scale conglomerates that can diversify across different states and different feedstocks and take advantage of those different elements to be able to have sustainable, long-term investment into the sector.”

Mr Howes is obviously completely unaware of the realities of the farm sectors in the USA and Australia. 

The USA's 2.1 million farmers receive generous subsidies from their taxpayers, and their numbers have remained largely unchanged since the 1970's. Over 98% are family run farms, and more than a million of them do not generate profits from their farms, relying on off-farm income. American farmers rely largely on their domestic market, and are protected from international competition by a wide range of tariffs and trade barriers. American farms pay approximately $7 per hour for labour, and utilise a large proportion of immigrant workers, especially in their horticulture sectors. 

Australia, by contrast, does not provide subsidies to farmers, and has completely deregulated the post-farm sector. Farm numbers in Australia have virtually halved over the last twenty years and are now approximately 130,000, as the sector has consolidated and farms have increased in size. In Australia, the post-farm processing and marketing sector is almost completely dominated by overseas investors, while may sub-sectors of US agriculture remain heavily regulated by government. Australian farming receives virtually no trade protection from imported products, and relies on exports for almoist two thirds of the total revenue generated by the sector. The minimum wage rates for workers on Australian farms exceed $20 per hour, and Australian farmers are also required to provide a range of conditions and benefits that far exceed anything required in the USA.

The list of points of contrast between the farm sectors in the USA and Australia is very long, but even the few listed above highlight how ridiculous Mr. Howes comments were.

For someone like Mr. Howes, who makes his living representing participants in the most regulated sector of the Australian economy (the labour market) to criticise Australian farming (one of the most deregulated sectors of the Australian economy) and say it is in need of reform, shows a level of ignorance or hypocrisy that is almost breathtaking.

Mad commented on 01-Dec-2013 06:40 PM
The wikileaks diplomatic cables named Paul Howes as a protected source, so perhaps he is speaking for the interests of US state/corporations.

"When we reminded Paul Howes (protect), head of the right-wing Australian Workers Union, that ALP Qof the right-wing Australian Workers Union, that ALP politicians from the Left, no matter how capable, do not become party leader, he said immediately: "but she [Gillard] votes with the Right."
via the cables held by The Australian
Anonymous commented on 01-Dec-2013 10:59 PM
Maybe we shud be paying our farmers
Sandra commented on 02-Dec-2013 02:27 PM
If you take away the "Ma and Pa" Farmers - where are you going to find the people that do it "for love not money" and stick with the land through the droughts, floods, fires and tough times.
Where are your future farmers going to come from that are the children of those "Ma and Pa" Farmers with the same love?
Bruce Hutchinson commented on 03-Dec-2013 10:39 AM
The prime commentary above is a more valuable insight into the true composition of USA / Australian agribusiness. If Australia had rural underwriting like PL480 then maybe we might be better off, but I doubt it. One cannot compare apples and oranges and draw constructive conclusions. What we do know and should accept is that for the foreseeable future family farms will play a significant role in Australian production systems. Many of these farm families will work at pay rates below other Australians. The average age of such farming communities is over 55 yrs and agricultural enrolment in higher learning is way below national requirements or self interest. This obviously is a driver of change. So, irrespective of what Paul Howes says or thinks I believe he has picked up on home truths. Apart from issues of Australian climate impact on small production units, our competing export countries in Asia and Latin America are changing their agribusiness model to supply larger markets in ways we have not previously encountered. There will be niche suppliers and there will be mass market suppliers but one certainty is that Australian agribusiness supply chains need to change if we are going to share in the growth. Apart from bulk commodity, "ma and pa" farms working alone, will struggle to reap the benefit of scale required. This does not imply they are inferior producers, it is merely an observation that the present industry structure will move with the demand of the market place. Change is evolutionary not revolutionary in this country. In that situation there will be pain in the change.
Marie O'Dea commented on 03-Dec-2013 02:17 PM
Commentary on The Conversation is much better on the topic as at least some have some experience of research into agriculture trade and supply chain. The Ma & Pa farmers or an idyllic version are what makes the Farmers Market and celebrity chef scene get excited about. We do have split personalities about how we want to be perceived as farmers and farm businesses. The idea of paying farmers as per US & EU is not the way to go, but we should stop thinking that cheap food is a goal in itself.
Anonymous commented on 06-Dec-2013 10:45 AM
Now I've heard everything. Paul Howes, a union leader, lecturing farmers on how to run their businesses. What next? A dissertation on trade union reform by the NFF President?

And he surely couldn't have been serious in suggesting Australian farmers should model thir businesses and industry structures on what American farmers do?

If ever there was an unsustainable farming industry, it is that in the US. The 2.1 million farmers are so heavily subsidised by the state that they are essentially protected from any market forces. The cost of the current US Farm Bill is hard to determine, but the fact that there is outrage over talk of cuts of some $40 billion to one part of the program alone makes it clear we're not talking chicken feed.

As AFI points out, American farmers pay $7 an hour for labour. When they can, many use immigrant workers who are often illegal and so outside the regulated wage system altogether.

Did you not know that, Mr Howes?

Did you not know that in Australia we have a deregulated, unsubsidised agriculture sector?

Did you not know that there is virtually no tariff trade protection for Australian agriculture?

Did it slip your mind that the minimum wage rate for Australian farm workers is more than $20 an hour and their conditions are far better than in the US? I am sure your AWU members will be impressed to hear that you think they should now be earning $7 an hour instead of their current award rates.

Next time do your homework, Mr Howes. Or, better still, stick to talking about things you actually know something about.

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