2014 Winter - Can agriculture grow if food processing dies?

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FPJ1102D - Watson, A (2014), Will the Demise of the Australian Food-Processing Sector have a Negative Impact on Australian Agriculture?

Watson, A (2014), Will the Demise of the Australian Food-Processing Sector have a Negative Impact on Australian Agriculture?, in Farm Policy Journal: Vol. 11, No. 2, Winter 2014, pp. 23-31.

Food processing is often in the news in Australia for a variety of reasons. The extent of food processing, and conduct of processors, for both local consumption and export has been contentious in recent years. On the local market, major issues have been the amount of foreign ownership and the justification for government assistance in cases where farmers are dependent on food processing to bring their produce to market. For exported agricultural commodities, the main issues for discussion have been the pros and cons of exporting a higher proportion of commodities in processed form. The underlying economics of further processing or value adding is discussed in some detail in this paper. The main conclusions are that these questions are empirical and need to be tackled on a case-by-case basis. A key component of the analysis is the way the risks confronting the Australian agricultural sector (climatic, marketing and financial) are best handled. The answers are different for different commodities, regions and market structures. There is a role for government in some aspects of food processing but not others. A subsidiary conclusion of the paper is that farmers are not always the beneficiaries of expanded food processing. Dairying, meat, stone fruits and wine are used as case studies in this paper. Part of the debate over Australia’s food processing sector follows from contemplation of the implications of economic growth and increased incomes in Asia. Will Asian demand for Australian agricultural output favour increased exports in processed or unprocessed form? It turns out that this is also best thought of as an empirical question. Changes in market opportunities and agricultural technology have also revived interest in agricultural development in northern Australia. This is another issue where the respective roles of governments and the private sector have to be seriously considered, for processed and unprocessed agricultural products alike. 




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