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US and Australian agriculture - many similarities and some critical differences

Mick Keogh - Saturday, December 22, 2012

As 2012 draws to a close, the opportunity to travel extensively and talk to many people at all levels of the agriculture sector in the US provides an opportunity to reflect on the similarities and differences between agriculture in the USA and Australia. The two agriculture sectors have a lot in common, but there are also some critical differences.

With gross output in excess of $330 billion for the US farm sector compared to around $50 billion for Australia, the scale and diversity of US agricultural production dwarfs that of Australia. However, US agricultural output accounts for around 0.8% of US GDP, while Australian agriculture accounts for 2.6% of Australian GDP, making Australian agriculture more than three times as significant to the national economy. In addition, US agriculture exports around 20% of total production, compared to Australia where agricultural exports account for around 60% of total production, meaning that Australian agriculture is three times as dependent on exports as is US agriculture. 

Major US export markets include Canada, Mexico, Japan, China and South Korea, suggesting that the US is a competitor for Australia in Asian markets, although the US tends to export some different products, including poultry and feed grains, as well as being a competitor in red meats, wheat and cotton. 

Interestingly, the net trade position of US agriculture (value of agricultural exports - value of agricultural imports) is around $35 billion, not that different to the Australian figure of around $28 billion, again highlighting the export dependency of Australian agriculture. The US has around 2.2 million farms compared to Australia's approximately 150,000, although these numbers are distorted by the different definitions of 'farms' used by each nation.

Farmers in the US and Australia are equally challenged by issues such as environmental regulations and community expectations about chemical and technology use and animal welfare, although it seems that, in reality, US farmers are much less impacted by these issues than Australian farmers. Trying to explain Australian native vegetation laws to a Texan farmer is a major challenge, and one suspects the Texan would quickly resort to armed resistance if a lawmaker even attempted similar controls on US farm land. Similarly, consumers and policymakers appear to have much less impact on issues such as the use of GM crops or animal welfare standards in the US than is the case in Australia. 

Leading US and Australian crop farmers appear to be equally adept at using the latest production technologies, although the impression is that minimum till and GPS-controlled cropping systems are at very low adoption rates in the US compared to Australia. US crop farmers are also much less exposed to production and market risk (generally experiencing more predictable and higher rainfall, and having a significant suite of Government farm programs in place to protect against drought or market downturns) and also have a large domestic biofuels sector that 'underwrites' more than a third of total US corn production.

US cattle producers appear to run more tightly managed businesses than their Australian counterparts, which in part seems to be a product of the more specialised production systems. The US beef industry is divided into three distinct segments - cow-calf breeders, stocker feeders, and feedlot finishers, with cattle traded between each sub-sector and very few farms involved in both breeding and finishing, in contrast to Australia. Improved pastures and pasture management as practiced in Australia seems non-existent in the US. Crop-pasture rotations as practiced in Australia are almost non-existent, and grass-fed cattle in the US are either grazed on native pastures, or on sown crops such as winter wheat.

A major concern in the US (as in Australia) is the challenge of attracting young farmers and labour in general to the agriculture sector, although there is a stark difference in the US compared to Australia. In the US, many of the more intensive agriculture industries (pork, poultry, horticulture)  utilise labour at pay rates starting at around $8 per hour, compared to minimum rates in Australia in excess of $20 per hour. It also seems that in the US, there are much less onerous regulations around the provision of 'benefits' such as superannuation and health care, and a significant amount of the labour employed in some regions is immigrant labour that may not even be receiving the minimum award rates.

Farm workers on a Florida vegetable farm.

While low labour costs provide some short-term advantages to US agriculture, it seems in some regions that workers are hard to find, and in particular trained and skilled employees are in short supply. A challenge for US agriculture arises from this dependence on low-paid workers, in that there has been less focus on developing labour-reducing mechanisation or automation, and if the US economy recovers and workers are attracted to other sectors of the economy, these labour-dependent sub-sectors of agriculture will struggle. Australian agriculture seems to have done more to reduce reliance on labour (by necessity) which probably places Australia in a more competitive position in the medium term.

At a policy level, it is very noticeable that there is a very strong focus on Government policy interventions to address issues that are challenging farmers - much more so than is the case in Australia. There is also a much more nationalistic approach taken, with farmers strongly of the view that the wider community depends on the American farm sector for their food and fibre, and therefore should strongly support American farmers and American farm products. 

As noted in earlier posts, there is a very strong belief amongst US farmers that Americans enjoy the cheapest and best food in the world, and should be grateful for that. While such patriotism is not necessarily a part of the culture of Australian agriculture, there are perhaps some lessons here about the need for Australian agriculture to better explain to consumers the advantages of Australian farm produce.

In conclusion, the US and Australian agricultural systems have similar challenges, but also some critical differences, in part of a product of the different cultural heritage of each nation. While US farmers have some advantages that can appear attractive from an Australian perspective (less regulation, lower labour costs and stronger government support measures), the impression gained is that Australian farmers are in general more resourceful, self-reliant, flexible and business-focused, and probably in a better position to take advantage of future Asian demand growth than their American counterparts.

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