Outlook and challenges for Australian farmers

1. Outlook and challenges for Australian farmers Peter Gooday Australian Bureau of Agriculturaland Resource Economics and Sciences 15 June 2018 Research by the Australian Bureau of Agricultural and Resource Economics and Sciences

2. Australian Bureau of Agricultural & Resource Economics and Sciences (ABARES) Statistics Forecasting Analysis

3. Australian agriculture • 50% of the landmass is farm land, but much of this is extensively grazed by cattle and sheep at very low density • Major industries—meat & livestock, grains, dairy, wool, cotton, horticulture, sugar and wine • Contributes 2.6% to GDP • 70% of production is exported • Deregulated markets with limited government assistance • Free of all major livestock diseases, including BSE and FMD Each dot represents the location of a business’s main agricultural property

4. History of key agricultural reforms 2007 Deregulation of exports of wheat in bags & containers 1989 Deregulation of domestic wheat industry 1995 Tariff and border protection measures removed 2008 Deregulation of bulk wheat exports 2000 Deregulation of the dairy industry 1986 Reductions in price support for domestic dairy 1991 Wool reserve price scheme dismantled 1988 Phased reduction of tariffs for commodities

5. Commodities – what we grow Gross value of agricultural production, 2016–17 $62.3 billion Source: ABS

6. Australian agricultural zones Pastoral zone 12% of agricultural GVP High rainfall zone 37% of agricultural GVP Grains/grazing zone 51% of agricultural GVP Source: ABARES

7. Share of agricultural production exported Source: ABARES

8. Australian agricultural products are exported to a diverse range of countries—around two-thirds exported to Asia Australian agricultural exports, 2006–07 $27.5 billion Australian agricultural exports, 2016–17 $48.7 billion Source: ABS

9. Gross value of agricultural production has increased steadily over recent years f ABARES forecast. z ABARES projection. Source: ABARES; Australian Bureau of Statistics

10. … and we’re forecasting the gross value of production to be around $63 billion in 2022-23 f ABARES forecast. z ABARES projection. Source: ABARES; Australian Bureau of Statistics

11. Long term trends shaping Australian agriculture • Markets for farm inputs and outputs • Technology development and uptake • Structural change • Climate change • Society’s expectations of farmers

12. Competitiveness: the race for advantage

13. Maintaining competitiveness is key Productivity growth has offset a declining terms of trade

14. Asian growth Well over 3 billion people in high income nations by 2050, driven by Asia Distribution of historical and projected real global GDP per capita by countries and regions a Includes Asian nations Japan and South Korea, and non OECD countries Bulgaria, Croatia, Lithuania and Romania. b Emerging and developing Asia.c Brazil, Russia and South Africa. Note: High income threshold US $12,000 GDP per capita (World Bank (2014) Source: Data from Hatfield-Dodds, Schandl et al. 2017

15. China and Indonesia food imports – 2009 and 2050 China Indonesia $US billion (2009 terms)

16. Resource scarcity “Buy land, they’re not making it anymore” Source: Shutterstock 2018

17. Resource scarcity … makes it crucial to support efficient resource allocation Historical water use in southern Murray-Darling Basin Water use by irrigation activity and water allocation price Source: ABARES; Australian Bureau of Statistics

18. Producer support is trending up in key emerging markets Nominal producer assistance ratio, selected countries –14% +15% –4% (The difference between the value of gross farm receipts at the farm gate relative to farm output valued at border prices.) Note: Numbers indicate percentage change from 1996 to 2016.Source: OECD 2018

19. FTAs improve access • ASEAN-Australia-New Zealand FTA 2010 • Korea-Australia FTA 2014 • Japan-Australia EPA 2015 • China-Australia FTA 2015

20. Multilateral agreements help too Regional Comprehensive Economic Partnership (RCEP) (under negotiation) Map shows trade in grains and oilseeds

21. Non-tariff measures Australia faces low or no tariffs in many markets, but non-tariff measures remain …affecting grains and oilseeds only NTMs affecting grains and oilseeds + other Source: UNCTAD TRAINS database (2018)

22. Productivity growth Australian productivity growth is keeping pace with advanced economies, but emerging producers are catching up Change in productivity from base year, selected countries (Index of total factor productivity at constant real prices. Average of 1962 to 1967 = 100) Source: US Department of Agriculture Economic Research Service 2017

23. Value of Australian rural R&D funding Technology development and uptake Includes agriculture, forestry and fisheries, related inputs and downstream processing

24. Structural change Share of farm numbers and output by farm size 1978-1980 and 2014-2016

25. Adaptation to climate change

26. Climate adjusted productivity Total factor productivity (TFP)

27. Climate adjusted productivity Total factor productivity (TFP) Climate effect (15 year average) Climate effect

28. Climate adjusted productivity Climate adjusted TFP Total factor productivity (TFP) Climate effect (15 year average) Climate effect

29. Farm sensitivity to climate

30. Farm sensitivity to climate

31. Consumer preferences Reputation is a common property resource Live sheep being loaded in Freemantle Source: The West Australian, 27 March 2018

32. Consumer preferences Attitudes are complex and will continue to evolve Dominant concerns today … mapped to GDP in 2050 19% 29% 1% 8% 8% 35% Source: Concerns from Edelman (2015) applied to projected GDP in 2050 from Hatflield-Dodds, Schandl et al. (2015) Source: Edelman Trust Barometer 2015

33. Society's expectations of farmers

34. agriculture.gov.au/abares