I come from the
North-West coast of Tasmania. Agriculture and, particularly vegetable
production, is an industry I can’t escape.
Everybody there knows where to find me, where I live,
and I’ve had a long association with the industry over a period of time.
I was Parliamentary Secretary for Agriculture in 2005
when the tractors came from Tasmania to Canberra when McDonalds changed their
potato contracts with Simplot.
The farmers and I spent hours sitting in my office,
chewing over that conversation, deciding where we might go, what we might do
and what the options for the industry were.
I’ve maintained that interest over a long period of
time.
So, in 2010, I drafted the terms of reference for the select committee on food processing and
then chaired that committee and the report for that was brought down in August
last year.
And I’ve also participated in workshops, particularly
in Tasmania, around the development of the Food Plan.
There seems to be a confluence of events that are
occurring around food and food supply at the moment following on from the food
processing inquiry that we did and also the Blueprint for Agriculture the
National Farmers Federation is putting together.
And just recently I commissioned an intern in my
office to do a project on supply chains and exporting vegetables into China.
The issues we’ve just heard from Meat and Livestock
Australia (MLA) are important - the research, the market research, the
relationships, the market development.
So why did I pick exporting vegetables to China as a
topic?
Well, one of the things that has become apparent to me, and I think it was just
demonstrated to you all by the last presentation, was the discussion around the
importance of export markets to industry more generally.
I notice that we’ve got the supermarkets here, as part
of the deal today, and it is good to see them. But one of the things that came
through to me in the food processing inquiry was that having alternative
markets, having options for your markets, was absolutely vital.
We had experts from Australia and also from overseas
tell us about the importance of market options. And so that led me to look at
what the market options for a vegetable industry were here in Australia.
And I’ve been following the trade figures for a
considerable period of time.
ABARES each quarter publishes trade figures for our
exports and our imports and where the markets are, where the markets are
growing and where the trends are moving to.
So, when you look at the numbers, it was more than
evident to me that China had to be part of the equation.
Last year the opportunity came up to grab a spot on a
delegation to go to China and set some of the
agenda for that delegation.
One of the things we pushed really hard for was to
talk about vegetable exports, and food exports and food security into China.
It was a difficult conversation, because when we
wanted to talk about food security in China, they sent a representative to talk
to us about food safety.
That is how they see food security into their country
- it is about food safety.
And that leads again to one of the real features of
what we provide out of Australia.
We provide a high quality, safe food product.
I had that demonstrated to me very, very graphically
while we were there.
We were talking to a young mum who runs a very big
business, something of the scale of David Jones, in a small provincial
south-western city in China called Kunming.
"Small provincial" means seven million
people.
But she was buying Bellamy’s baby food from Australia
for her toddler because she knew it was safe. And she was prepared to pay the
premium for that food because she knew it was safe.
We have heard about the melamine stories, we have
heard about Asian demand for baby formula stripping supermarket shelves here in
Australia last summer because they are looking for a safe supply of food.
Now there has been a lot of rhetoric, a lot of
rhetoric, about Australia being the food bowl for Asia. I’m not going to go
down that track, because as you just saw in the MLA presentation, those numbers
just don’t stack up. You are talking about a population in China alone of 1.2
billion people. When we talk about what
our capacity is to enter into that market, at current population levels
Australian farmers can supply enough food for Australia and less than 1% of the
broader Asian population.
If food production can be doubled by 2050, and that is
not unrealistic, Australia will be able to feed the projected population of
Australia and less than 1.3% of the Asian population.
So we are never going to be the food bowl of Asia.
But, as MLA has done, the opportunity is to identify niche markets into that
huge market in Asia.
So when we look National Food Plan that was released
last weekend the work around investigating markets, looking at market
opportunities, looking at supply chains and developing supply chains, the brand
ID work, all of those things are really very important parts of what we ought
be doing.
The food processing inquiry found the same thing. The
NFF’s blueprint found the same thing.
The National Food Plan found the same thing. And our
intern Tegan Bensley’s report reinforces that yet again.
So, all
important opportunities and when you look at the actual numbers around
what’s been happening with the food supply in the region and look at the growth
in those markets, there is one market that stands out yet again, and that’s
China.
We hear a lot about the food imports that come to
Australia from China and that is part of the local campaign about buying
Australian, and I understand that and that is important.
But food imports from China to Australia have grown by
about $300 million since 2006-2007. So in 2006-07 they were $536 million.
In 2011-12 they were $841 million. But that’s only
half the equation. If you look at the other side of it, that’s where the
opportunity is. In 2006-07 food exports to China from Australia were $664
million.
In 2011-12 they were $2.174 billion. They have over
trebled in that period of time. That gives an indication of what the market
opportunities are. And that number stands out amongst all of the other numbers
in the report that comes out quarterly from ABARES.
If you look at the United Kingdom, for example, they
have gone from $1.2 billion, our exports to them, down to $614 million. So
where do we focus our effort? Where do we put the research? Where do we develop
the relationships? It’s quite obvious. Hong Kong has gone from $827 million to
over a $1 billion.
Indonesia $1.5 billion to 2.2, nearly $2.3 billion.
Those near neighbours that are looking for a safe, reliable source of food,
where we can target specific markets.
That is the role I think that we need to look at,
having somewhere else to go where if you don’t think you are getting the terms
and conditions that you think you deserve, you need an alternative market.
So in that context what is the role of Government? Now
we’ve heard lot recently about Free Trade Agreements with China, with Korea,
South Korea and Japan, and the role of Government in my view is to ensure those
market access issues are dealt with.
At the launch of the blueprint, when the NFF were
asked what was the first priority if a Government could do something for them,
their response was get the FTA with South Korea signed.
We are already starting to suffer a considerable
disadvantage on price with our beef competitors into South Korea because the US
has a free trade agreement and we don’t.
And the same thing occurs in China where New Zealand
has negotiated a Free Trade Agreement and they have that 15% advantage over us
on price and they are also a quality supplier of product. So we are in direct
competition. They are the one country that is in direct competition with us
into that market. Like for like. And we are already seeing the effects of them
having a Free Trade Agreement and us not.
And it is not so much in vegetables, but it’s in
seafood. Where seafood out of Australia is already being shipped via New
Zealand to take advantage of the tariff advantage. And considerable competition
for high-value products like lobsters which are $75 to $95 per kilo – a 15%
advantage in those sorts of markets is quite significant.
It’s not going to be easy. There is a lot of work that
has to be done. But it has to be one of the opportunities.
All of those south eastern Asian nations have to be
opportunities for us.
You can see the growth in those markets. You can see
where the opportunities lie.
And when it comes to having those alternative markets
to put your products into, the opportunity to have a premium product and with
the huge numbers of people who are prepared to pay a premium. And that’s one of
the things that Tegan found in her report.
An estimated
83% of Chinese middle class consumers are willing to pay more for safe food
products. Let’s take that marketing advantage that we have.
Let’s take that understanding that already exists in
that market about the safety and the quality of our food, and let’s leverage
off that so that we can turn around the very difficult circumstances that we
are in here in Australia with our vegetable industry, and let’s make that part
of the path and see if we can duplicate what we’ve done in the lamb industry.
I mean those numbers were quite profound. The
turnaround in that industry by developing, doing the research, understanding
the market, developing the supply chains and the relationships, and
getting into those markets.
I’m aware the major supermarkets are already looking
at virtual type supermarkets into Hong
Kong. I’ve spoken to people who won’t buy poultry in Hong Kong because of the
current bird flu circumstance.
So what opportunity does that create for the poultry
industry in Australia if there is a supply chain?
Because we have a reputation for a high quality, safe
food product. We have certification systems. We have all of the precursors that
you need and so it then comes back to the role of Government to develop those
country-to-country relationships.
And in respect of the market access issues, in my
view, what’s happened too much of late is that Government has been out in front
and there hasn’t been enough of a partnership with industry alongside them to
help to negotiate those things.
It is vital to have that solid industry knowledge,
partnership and relationship and walk into the markets together so the markets
can understand that you as an industry come with the imprimatur of government,
and the government has an understanding of what the industry needs are as part
of the negotiations so that we can get it right.
So revitalising some of the older-style campaigns,
like a "Supermarket to Asia" type of campaign, is part of our
marketing is important.
But, as I’ve
said, we must leverage off the high-quality, high-value markets and target into
those markets that will provide that premium and provide that opportunity to
pick up a bit of cream. And make sure that the continued investment in research
and development, which we’ve done quite successfully since the R&D
Corporation model’s been put in place is continued.
People ask me about whether I see a positive future
for agriculture in Australia. And when I’m standing in front of a group of
industry leaders like we have here, I can comfortably say yes, because I know
that there are really, really innovative farmers out there who are looking for
the opportunities and be prepared to work.
In my view there
are huge opportunities for this industry into that larger Asian market and I
would really look forward to assisting industry to make some real leaps and
bounds into the future.
Senator The Hon Richard Colbeck
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Health care and Life Science with expertise in ASEAN 's area.
We are currently changing the platform of www.yourvietnamexpert.com, if any request, please, contact directly Dr Christian SIODMAK, business strategist, owner and CEO of SBC at christian.siodmak@gmail.com. Many thanks.
