Megatrends that will shape future Australian farm production

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As a nation that largely exports its agricultural production, Australia faces a range of challenges and opportunities from both home and abroad that will determine its farmers’ success in a rapidly changing world market
Australia cannot ignore the forces that are rapidly remaking the world if it wants to remain competitive as an agricultural exporter – Image courtesy of ABARES

Having come through a severe and prolonged drought only to be hit by China’s capricious disruption of established export trade, Australian farmers are well aware of the outsize impacts of external forces on their lives and incomes.

Taking that theme and running with it, ABARES says it has identified five megatrends that will shape Australian agriculture into the future.

Situated on the doorstep of Asia with its burgeoning wealth and population but with a climate sorely exposed to the weather extremes generated by global warming, Australian agriculture is faced with both great opportunities and challenges ahead.

The ABARES stocktake identifies the five megatrends as:

Growth juggernaut: Three billion empowered consumers

Fractal politics: Beware the dance of giants

More from less: The permanent race for advantage

Cascading planetary risks: Coming, ready or not

Disruptive technologies: Opportunities for the brave 

“The article seeks to help farmers, government and industry make informed decisions about an increasingly uncertain future,” ABARES acting executive director Jared Greenville said.

“Each of the megatrends, and the sub trends we explore, involves challenges and opportunities. While the full implications of these megatrends might take decades to play out, it is useful to consider how we are positioned to respond to the changes coming our way.

“We find Australian agriculture has some crucial strengths, including a positive a long-term growth outlook in key markets, and our track record of market-driven productivity growth, innovation and competitiveness.

“Australian agriculture is well positioned, but it is critical that industry, government and communities have the tools and information they need to understand the risks and opportunities they face, so they can create a future they want.

“Well-informed decision making and risk management will remain central to Australian farming and we hope this Insights article supports this process.”

Asia is rapidly rising up the economic rankings, creating whole new markets of consumers – Image courtesy of ABARES

Growth juggernaut: Three billion empowered consumers

Rising incomes are expected to raise 3 billion new consumers into the high-income group by 2050 and the majority of them will be in the emerging economies of Asia. Over the same time frame the populations of these countries will also increase by a third.

Rising incomes are proven to create dietary change as people move away from grains, rice and other starchy staples to demand the likes of protein-rich animal products, plant-based sources of oils and protein, and fruit and vegetables.

The opportunity for Australia is that these new consumption demands tend to be largely met by imports, particularly in the case of red meat, fruit and vegetables and dairy. You may have noticed Australian billionaires snapping up beef stations in the Northern Territory and Queensland as fast as they come on the market and you may well note the proximity of Northern Australia to Asian markets.

At the same time consumer attitudes and expectations are also evolving with rising demand for increased convenience, healthy choices, and ethically and environmentally sustainable production. The experience of COVID-19 is likely to reinforce these trends, giving increased weight to food safety, traceability and assurance systems.

These same concerns are also expected to create new opportunities for diversifying farm income and developing new or expanded non-agricultural rural businesses, particularly around food, tourism, hospitality, and appreciation of nature and rural landscapes.

While these opportunities are significant, Australia will also have to ensure that its reputation for food safety, quality, governance, and environmental performance is carefully safeguarded if its wants to take full advantage.

Seven giant nations and regions dominate will dominate global politics and economics as we move away from an East vs West divide

Fractal politics: Beware the dance of giants

The eruption of Australia’s trade disputes with an ever more powerful and assertive China is a good early lesson in the global shift of economic, military and cultural power. The ABARES report identifies seven nations and regions that will wield significant influence and likely seek to serve their own interests ahead of any global concerns.

These seven giants comprise the United States, the European Union, Brazil, China, India, Indonesia and Russia.

Anyone paying attention to global events will know the United States has only just shrugged off four years of Trump’s America First rhetoric, the European Union recently settled the bitter Brexit with the UK, Brazil and India are run by nationalistic populists and Russia and China are in the grips of men who have made themselves their nations’ leaders for life.

Together, these countries and regions account for between half and two-thirds of global population, economic activity, energy, food production and resource extraction.

Essentially, we are moving from an East and West global divide to a more fluid multi-polar world with more complex and unstable geopolitics and economics, making international cooperation both more difficult and more important.

For Australia to succeed in this environment where trust in institutions and scientific evidence is also in decline and mass misinformation is on the rise, it will have to work hard at building international cooperation.

For agricultural exports that will mean ensuring ongoing global market access and discouraging protectionist policies.

Once again, we are led back to the current situation with China where the Australian federal government’s ineffective approach has led to nothing but stonewalling and forced exporters to rapidly look elsewhere for new markets.

Australian farmers have done well to boost productivity but other countries have done better and it’s an ongoing challenge to stay competitive – Image courtesy of ABARES

More from less: The permanent race for advantage

Increasing productivity is crucial to maintaining agricultural competitiveness and on the whole, Australian farmers have proven to be very good at it. Key to productivity gains is innovation that leads to more efficient use of materials, energy, water, land and labour.

Australian farmers have managed to boost overall production by 25% over the past three decades but have also increased value added returns by an impressive 75%.

Much of this productivity growth has been driven by the increasing size of farms, improved genetics (including GMO) and varieties, and continuous innovation in management practices.

At the same time, however, it has meant a 25% reduction in on-farm employment with its obvious ramifications for regional and rural communities.

These broad trends are expected to continue with the National Farmers’ Federation’s stated goal of lifting agricultural output to $100 billion by 2030.

But while Australian farmers have done well to boost productivity, other countries like China and Brazil have grown their output much more and that likely means a larger role for government in tuning Australian economic policy settings to better facilitate ongoing innovation and investment in agriculture.

Productivity gains are one thing but returns to farmers are another with real prices for agricultural commodities trending steadily down for more than fifty years.

This, of course, has benefited consumers but it risks becoming a Catch-22 for growers with ever-growing productivity leading to ever falling prices.

The trend may reverse with the increase in demand from larger and wealthier populations but there is also a case to be made that Australia should look to capitalise on the quality and sustainability of its agricultural exports to demand a price premium on overseas markets.

Australian farmers know only too well the threats of accelerating climate change and its impact on their livelihoods – Image courtesy of ABARES

Cascading planetary risks: Coming, ready or not

Ravaged in recent years by drought and fires, few countries could be more aware than Australia of the risks posed by climate change. Farmers are on the frontline of this change and are already being forced to adapt despite the current federal government’s intransigence in downplaying the need to take action.

On the ground, however, ABARES research has found that hotter and drier conditions since 2000 have reduced the profitability of broadacre farming by 22%, relative to estimated output under pre-2000 climate and seasonal conditions.

Cropping farms are particularly effected, with profit down 35%, while livestock farms have been less effected. Adaptation efforts have reduced, but not eliminated, the impact of the observed shift in climate over the last two decades.

Global greenhouse gas emissions continue to rise and the world is currently on track for temperature increases this century of around 3°C above pre-industrial levels.

Research from the CSIRO and BOM suggests Australia will become hotter, and that southern areas are already experiencing a shift towards drier conditions with lower streamflow.

Droughts, storms, fires and heatwaves will become more intense – and perhaps more frequent – creating significant challenges for agricultural producers and regional communities.

But climate is not the only the risk with human pressure on natural ecosystems also producing emerging threats like the extraordinarily destructive COVID pandemic. While COVID has been a human tragedy and economically debilitating, new threats have the potential to directly affect agriculture such as the African swine fever outbreak that decimated production over the past two years. Growing resistance to herbicides, pesticides and antibiotics will also make managing these increased biosecurity risks more challenging.

While it is now likely too late to avoid some of the consequences of climate change on agriculture, it is still possible to take effective action and there is now a rapidly growing global will to do so.

The ABARES report notes that this is likely to mean climate and emissions reductions policies around the world will become more stringent over time.

There will be increasing demand for land sector carbon credits from planting trees as well as for reducing greenhouse emissions from livestock and other agricultural activities. Consumers, too, will gravitate to products that can demonstrate their sustainability.

For farmers and the broader economy, there will be both risks and opportunities because of these changes. Developing carbon markets have obvious potential for landholder’s who can turn areas of their property over to forestry and ecosystem services may also become a burgeoning industry.

We hear a lot about the potential benefits of technology in boosting agricultural productivity but a robust data management framework is needed to really reap the rewards technology promises – Image courtesy of ABARES

Disruptive technologies: Opportunities for the brave

“Exponential advances in digital technology, automation, genetics, and synthetics will disrupt and change how food and fibre products are made, marketed, and delivered.

Production systems, supply chains, and customer engagement will become more agile and interconnected, requiring new skills and partnerships, and creating risks and opportunities for agricultural producers and regional communities.”

Big Data is the new resource for agriculture and how it is collected, analysed and deployed is a brave new frontier. The ABARES report promises that “the era of harvesting information from embedded devices and putting it to use to improve systems is only just commencing.

Connectivity across billions of devices, often described as the ‘Internet of Things (IoT)’, will transform production systems and supply chains over coming decades.

Examples include real-time knowledge of the location and health status of each farm animal informing mustering and other management actions; data driven planting, spraying, and harvesting machinery.

Including gathering precise spatial data on yields and adjusting seeding and fertiliser application to maximise profitability; and automated irrigation systems that account for soil moisture, water prices, weather forecasts, and plant needs.”

In addition, “new types of robotics will unlock new data streams, creating a transformational cycle of data collection and automation. Low-flying drones, equipped with sensors and digital imaging will monitor crops and orchards for flowering, water stress, nutrient deficiencies, disease, and weeds – informing automated responses such as robot or drone-based weed control.”

At the same time, “integrated data will see supply-chain management reach back onto the farm in ways not seen before, with real-time tracking of quantity, quality and characteristics of food and fibre products.

This will build on current best practice, involving fully integrated tracking systems that allow companies to track and manage the flow of product through their distribution systems – from farm to fork – and trace-back items in the advent of a food safety concern.”

This all sounds great, of course, but robust data sharing agreements will be needed to make it work and that will require the cooperation of both private sector and government bodies.

The report also notes that to be effective, collaboration and information sharing needs to be established across farming sectors, something that is not currently the case.

If this data ecosystem can be made to work, the report suggests it will provide “new options for managing volatility and uncertainty, including just-in-time production and supply chain management; improved transport and logistics; and new forms of insurance, finance and risk sharing.”

Similarly, it can “shape access to capital, including through unlocking new forms of investment and risk sharing, including equity investments in family farms.

New business models and partnerships will emerge for farming, and food and fibre supply chains. In some cases, this will provide opportunities to capture the value of intangible attributes of farming systems – requiring new skills in marketing, engagement, and relationship management.

Conclusion

As an independent trading nation, Australia has regularly reset itself to meet changing market realities and if it can step up to the plate and meet these megatrends head on, it will be cleaner, greener and wealthier for it into the future.

The ABARES Insight report was compiled by Dr Steve Hatfield-Dodds, Dr Stefan Hajkowicz and Dr Sandra Eady.