SYDNEY, AUSTRALIA — GrainCorp Chief Executive Officer Alison Watkins spoke Nov. 6 at the Australian Farm Institute’s conference. Below is the text of her speech.
Australian agriculture is on the cusp of its greatest era of opportunity ever. An era with the potential to dwarf the post WWII wool boom.
Our acknowledged skills as efficient, professional producers of high quality food and fiber, combined with our proximity to Asia: the epicenter of growth and economic activity, effectively give us an inside run in the race to meet the world’s growing demand.
It’s not all just thanks to circumstance; our sector has also embraced extraordinary change to put ourselves into this prime position. To make sure we don’t squander this unique opportunity, we must remain open to the world and continue to back ourselves in the competition for this extraordinary market.
Through embracing this openness our industry has come a long way already. It was not so long ago, that as a grain grower, you’d plant your crop, apply the inputs, hope for rain at the right times, and drop the harvest off at your local bulk handler. Once that was done, it was quite a passive process — a matter of waiting for the cheques to arrive every couple of months.
In those days, our industry was a lot more static and change happened slowly. Growers were largely isolated from end customers and there wasn’t much change in the varieties that were planted, because all the market feedback came back through the filter of the AWB, ABB or the applicable marketing authority.
Farmers were less incentivized to differentiate their product or pursue particular qualities.
Since those days, the Australian grains industry has been through enormous changes as part of the process of globalizing our national economy. We are now undeniably – and inextricably — global.
Our industry and politicians of all complexions have shown leadership and enormous courage to:
• Dismantle tariffs and other trade barriers;
• Remove statutory marketing authorities that were the only interface between our industry and the world;
• Float the dollar and expose our exports to global foreign exchange markets; and
• Create the conditions to encourage others to invest in our country, to build on our own relatively limited resources and population.
Our farmers are resilient and innovative – and the vast majority have embraced these changes and are clearly leaders among their international colleagues. In fact, I would argue Australian growers are closer to their end markets — and therefore more flexible and responsive — than any growers worldwide.
Nonetheless, these reforms were not easy. Industries and policymakers don’t embark on such journeys lightly. There has to be strong and compelling reasons to take such political risks.
In the case of the grains industry, there are clear reasons Australia’s push to globalize makes a lot of sense:
• Our industry is outwardly focused. We produce far more than we can possibly consume ourselves and so we need access to global markets to buy our products. Without access to the world, our industry would be substantially smaller, if it existed at all.
• To compete in the increasingly global marketplace, we need to be flexible & responsive; shaking off the rigid structures that might appear to offer security, but in the long term would allow others to outpace us.
• Given our small population, and long supply chains that constantly crave extra money; we need to attract capital to maintain and improve our competitiveness.
Of course, there are also broader benefits of Australia’s progressive approach to globalization:
• Australians have continued to enjoy one of the world’s highest standards of living globally – over a sustained period;
• Despite being outside the top 50 countries in the world by population; our economy is the 12th largest;
• We’ve opened many new and formerly closed markets for our produce;
• Our economy has proven more resilient than any other, being pretty much the only economy in the western world to deliver sustained growth over two decades, in the face of the global financial crisis, Asian crisis and other shocks;
• We’ve also successfully attracted billions of dollars of investment into our economy from a variety of sources — including international — helping us grow and pursue new opportunities.
ADM’s strong interest in GrainCorp is a case in point here.
Its offer is a large and very meaningful vote of confidence in Australian agriculture. Here is a company that is so confident about our product, capability and future that wants to invest billions of dollars here.
It’s as good an indicator as any that our industry is globally respected and has huge opportunities open to it around the world.
Globalization has also substantially increased the incentives, competition and options open to Australian growers.
Just five years ago, there was only one export buyer for your wheat. Now there are 20 exporters with connections to hundreds of end-users in every continent.
Growers now have a huge amount of choice who they store their grain with. There is now a staggering 40 million tonnes of grain storage across eastern Australia for an average winter crop that is well under half that size. Growers are no longer locked in to just delivering to their local bulk handler — in fact, many of them have built their own highly sophisticated storages.
In GrainCorp’s catchment, up to half the crop bypasses our export supply chain altogether and is sold to over 100 domestic customers.
If you look at the grain that does leave the country, there are more than 50 different container packers in eastern Australia that now account for fully one-quarter of all grain exports.
Even at the ports, which have been the focus of so much attention, there is growing competition, with four bulk terminals operating in competition with GrainCorp’s ports.
Of course, strict ACCC regulation also applies at our ports, which ensures that they remain open to all exporters, notwithstanding the new competitive pressures they are subject to.
In short, where our road to the world used to be one giant funnel; growers now have choice; there are multiple pathways to market.
Despite our progress and the clear successes, I recognize there are some industry observers who yearn for a return to more insulation from global dynamics — for us to turn back inward.
But it is pure fantasy to think it would somehow be worthwhile or even possible to pause or even turn our backs on the process of globalization that has delivered us such success. There is no other word for it.
It’s a fantasy that assumes that the global environment will remain static, predictable and unchanging. That we don’t have to be flexible to adapt to changing tastes or trends. In fact, change is the only constant, as both our domestic and international markets continue to demonstrate. For example:
• Growing consumer demand for healthier oils and spreads has seen canola go from barely planted in Australia to one of our most significant winter crops.
• The end uses of our wheat have branched well beyond the plain white bread that dominated local palettes 20 years ago – and we create flour that is suitable for baking, frying, steaming, noodles and endless other applications.
• Our beer market was also totally different. Relatively few, solid state-based lagers have mushroomed into hundreds of craft brewing varieties seeking better and better malts.
• Of course, we’re also seeing a lot more legumes and pulses being planted, much of which is finding attractive new markets in the subcontinent or further abroad.
If we stay the course, our world-leading growers are ideally positioned to play a pivotal role in feeding the world as we head towards peak population within the next generation:
• Another 70 million new mouths to be fed each and every year for the next 40 years – many of them on our doorstep;
• A doubling in global grain exports to meet this demand.
Yet we can’t just assume that we’ll take part in the benefits of this just because we’re close to Asia.
There are plenty of rival exporters in the wings who are just as hungry — probably even more so having watched our success — than we are. They are investing billions in improving their processes and supply chains and we can’t afford to stand by.
The UN’s World Investment Report of 2013 shows that Australia’s rank as an attractive destination for foreign investment has fallen from 6th last year to 13th this year, and our international rankings of infrastructure has consistently been outside the top 25 countries (33rd on rail and 40th on roads) in recent years.
For an industry that has relied on the rest of the world for so much of our demand and investment we simply cannot afford to ditch an approach of proven success at this critical time.
