Future Investment into Agricultural Science and Production will Need to Focus on Sustainability

By many accounts Australia’s regions are set for a positive future.

But I am an optimist by nature.

However, this is not (just) my optimism bias, Researchers and experts that study forecasting, point towards Australian agriculture as a resilient sector that will move forward post-COVID-19, and came out stronger on the other side. My contribution here is that a conscious effort has to be made by the influencers to ensure future investments in this sector are sustainable across several bottom lines – environmental, social, financial, purpose and ethics – not just the financial one.

What is Happening Financially?

Many industries in this sector export a substantial share of their output. Consequently, global economic disruption caused by COVID-19 represents a significant threat to demand for agricultural exporters. According to the Australian Bureau of Resource Economics and Sciences, the largest threat to agricultural firms comes from declining global incomes, which will likely drive commodity prices down.

Prices have fallen substantially for Australia’s live cattle exports. Indonesia is Australia’s largest market for live cattle and has been significantly affected by COVID-19. In addition, a depreciation of the Indonesian Rupiah has reduced buying power, further pushing down prices.

How agriculture transitions and takes advantage of the coming economic tailwinds will be crucial

In addition, the domestic supply of produce is now higher, placing downward pressure on prices. For example, seafood prices have declined due to reduced demand from export markets and the food-service sector. However, prices for some items, such as beef, are expected to rise as production falls.

I also add that governments across Australia have stepped up and given support to the broader sector as a priority. For example:

• The Federal Government has funded a $110.0 million freight subsidy to assist industry exporters as a reduction in international flights has caused freight costs to increase. The first special flight funded by this subsidy departed in early April 2020. The government has contracted 15 air carriers to conduct freight shipments under its International Freight Assistance Mechanism.
• To ensure a stable labour supply, the Federal Government is allowing working holidaymakers to extend their visas for up to 12 months to work for approved employers, such as agriculture businesses.
• The Federal Government has also worked to ensure that Australia’s freight network keeps moving, classifying businesses associated with agriculture and food security as essential services that would largely be exempt from lock-down restrictions. These measures are expected to support farmers across the agriculture sector.
• The Queensland Government has established a $3.7 million assistance package for the Fishing Industry. This package includes waiving quota fees for coral trout and tropical rock lobster and providing grants to assist in developing new downstream markets.
• The Tasmanian Government has removed the requirement for all seafood businesses to lodge payroll tax for March, April and May 2020.
• The NSW Government has announced a $140.0 million package for firms in primary industries that were affected by the bushfires. This package is anticipated to support businesses in the Forestry and Logging industry, which have faced declining demand due to the COVID-19 outbreak. And there are numerous others - see their website as well as Commonwealth sources that refer to this State's initiatives.

Strong performance is expected across the sector in 2020 with winter crop plantings expected to benefit from lower fuel inputs, much of the eastern seaboard receiving potentially drought-breaking rains, and continued demand for many food crops.

How agriculture transitions and takes advantage of the economic tailwinds will be crucial

Some Sectors will Perform Better than Others and Technology Should Play an Important Role in the Future

There are concerns around domestic labour supply, and the flow-on impact from a severe contraction in the food services industry. And the crash in the exchange rate has also seen the price of machinery, spare parts and inputs such as agricultural chemicals, spike as well. While sector analysts point to strong demand for staples, but not so for high-end products. Wool and cotton growers face the most difficult circumstances, as retail sales - think clothing - plummet.

Technology, in my view, is going to be important in driving future growth in Australian agriculture.

For example, the global industrial robotics market is likely to surpass US$ 24 billion mark by 2025 according to recent market researchers. The demand for industrial robotics is anticipated to grow exponentially during the forecast period driven by advantages such as cost reduction, improved quality, increased production, and improved workplace health and safety. The adoption of automation to ensure quality production and meet market demand, and the growing demand from small- and medium-scale enterprises in developing countries, is fuelling the growth of the industrial robotics market globally. On the basis of segment type, the automotive industry accounted for highest share of this market. Around 32% of all industrial robot installations take place in the automotive industry. The market for industrial robotics in the electrical and electronics industry is probably the one most affected by the China-US trade crisis, and the metal industry has seen an accelerated growth of industrial robotics adoption in recent years. Chemical, rubber and plastics industry is the fourth largest market, while (globally) the food industry [potentially a predictor of investment in agriculture], accounted for the least share of the global industrial robotics market.

Now is definitely the right time to be planning for investments into a more sustainable agriculture for Australia

In terms of geographical regions according to this report, Asia/Australia is the world's strongest growth market for industrial robots. This region accounted for over 67% share of the industrial robotics market in 2019. The main drivers for this growth are the demand for industrial robots from small- and medium-scale enterprises. If played well, Australia could gain market share with a technology-led growth, focusing on modernising our traditional agriculture, as well as building new production capacity based on urban and vertical agriculture models (see my recent article).

Agriculture has an Important Role and Sustainability Needs to be Front and Centre

The business leader hand-picked by Australia’s Prime Minister to shape Australia's post-COVID economic recovery has warned against sinking public money into "nation building" infrastructure projects that are not commercially viable.

Neville Power, Chair of the National COVID-19 Co-ordination Commission, said in a recent article published in the SMH, part of his work will be helping to identify and promote major projects which can help restart the national economy as it emerges from its greatest contraction for a century. Post-shutdown, infrastructure projects will need to be able to pay their way. He is also advising state and federal governments to pursue tax and regulation changes that will deliver "immediate kicks" and build greater economic self-reliance, nominating business investment incentives, the re-skilling of displaced workers and cheaper gas supplies as priorities.

He said that, provided the right tax and cost settings, this could include high-tech, precision design and manufacturing and the domestic, industrial-scale production of largely imported goods. He also pointed out that the country needs competitive energy prices, particularly for gas, to attract large-scale manufacturing like fertiliser and petrochemicals.

I think we have an opportunity to harness the bioenergy sources we have in abundance in Australia agriculture, along with sunshine and the storage capacity offered by batteries and other natural sources such as dams, to create sustainable investments in energy.

Even if we have some factors of production that are higher cost, like labour, we can offset those with a strong domestic market and lower energy costs. There is great opportunity in those areas...

Neville Power, Chair National COVID-19 Co-ordination Commission

The recent disruption to global supply chains presents Australia with an opportunity to revive its manufacturing sector. This is of particular importance for Australian agriculture, and its value chain, and how we think through what future investments in this sector would look like.

With the right tax and cost settings, this could include high-tech, precision design and manufacturing, and the domestic, industrial-scale production of (now) largely imported goods. A key ingredient is the supply of cheap energy to industry. Again, another opportunity for smart, high-tech agriculture.

On another aspect of rebuilding post COVID-19, Mr Power said that if the Australian economy is to build greater self-reliance after the pandemic, it cannot rely on skilled migration – at least in the short term – to fill labour shortages. Skill development and retraining should become central to the national agenda.

From an agricultural perspective, we in the Ag Institute should be keeping our minds focused on professional development and re-skilling and up-skilling. Effective professional development requires this and again I encourage professionals and practitioners in agriculture to gain accreditation relevant to their career stage. 

A Road (or Track?) Less Travelled

To chart a Roadmap to Recovery, Australian universities convened a group of over a hundred of the country’s leading epidemiologists, infectious disease consultants, public health specialists, healthcare professionals, mental health and well-being practitioners, indigenous scholars, communications and behaviour change experts, ethicists, philosophers, political scientists, economists and business scholars from the Group of Eight (Go8) universities. Good thinking and necessary and it was done fast.

The group developed their roadmap and suggested that priority can be decided by Governments, but should focus on:

1. manufacturing, construction, mining, agriculture, forestry and fishing;
2. wholesale and retail trade; and
3. tourism, education, media and communication, arts and recreation. 

I was pleased to see agriculture was seen as one of their priority sectors as part of their message to government and other stakeholders. They are on the right track. Science underpins these priorities and in particular, this is vital for agriculture.

Now is definitely the right time to be planning for investments into a more sustainable agriculture for Australia, and we should be optimistic about this sector's future.

Further Information and Sources

The recent study which I draw upon here provides excellent information on impacts of COVID-19 on the agriculture sector: https://www.ibisworld.com/industry-insider/coronavirus-insights/coronavirus-update-industry-fast-facts/

Read the recent article published on the Prime Minister’s taskforce to think through strategies post COVID-19: https://amp-smh-com-au.cdn.ampproject.org/c/s/amp.smh.com.au/national/recovery-tsar-eyes-gas-tax-and-skills-to-get-economy-up-and-running-20200422-p54m4x.html

The universities (Go8) have collectively turned their minds to the issue of recovery. See their recent study here.

The ABC has captured the essence of the positive outlook in this article: https://www.abc.net.au/news/rural/2020-05-01/australian-agribusiness-is-bucking-the-covid19-trend/12173268

See also how the world's leading central banks are now transitioning to include sustainability into their business models.

For sustainability professionals, getting traction within your respective organisations will require a very clear understanding of how your business works. The questions provided in the linked article will help when working with your board and executive team.

About the Authour

Turlough Guerin is a senior leader in corporate environmental management, governance and sustainable development. He has program and project leadership experience in government, as well as the clean energy, communications technology and construction sectors. He is currently the Chair of Ag Institute of Australia and a Board Member of community organisations.

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Opinions are those of the author, photographs and images are courtesy of 123rf.