Agricultural ignorance no problem for those with an opinion about Graincorp

Published 20131201

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.

Scroll to Top