Future challenges for Australian agriculture
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1 Future challenges for Australian agriculture Mick Keogh Executive Director, Australian Farm Institute.
2 Future challenges Global competition Water People and skills Climate change policies
3 World per capita food production has increased steadily.. Per capita food production Index (1970 = 100) World Developing Countries Developed Countries
4 Total world agricultural exports steadily increase (US $ millions) $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $
5 Strengthening competition..
6 World biofuel production
7 Australian agriculture is no longer low cost Beef production costs Wheat production costs Labour costs
8 Comparative costs - horticulture Australia global export unit price US$/kg 2004 China global export unit price US$/kg 2004 China as % of Australian price Apples % Pears % Mandarins % Table Grapes % Oranges % Peaches % Plums % Source: Horticulture Australia Ltd
9 ..increasing farm land values land values Index - nominal Pastoral zone Wheat/Sheep zone High Rainfall zone
10 Crude oil prices $US/barrel (NYMEX)
11 Increasing input intensity (Intermediate input costs as a % of Gross Value of Ag. production) 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Source: ABS
12 Future challenges Global competition Water People and skills Climate change policies
13 Murray River Riversdale
14 Water salinity and turbidity - Murray River Salinity Turbidity 1/01/1980 1/01/1982 1/01/1984 1/01/1986 1/01/1988 1/01/1990 1/01/1992 1/01/1994 1/01/1996 1/01/1998 1/01/2000 1/01/2002 1/01/2004 1/01/2006 1/01/1978
15 A highly variable water supply
16 Secure, tradable water rights? In October, 2006, the NSW Government took 20% of all water in irrigators high security water accounts, without compensation. Three weeks later, the NSW Government took a further 32% of water from irrigators accounts, including any water irrigators had purchased to compensate for the first cut. It is estimated that $57 million worth of water was taken, without compensation, from irrigators.
17 ..and increasing water prices Water prices per entitlement - Permanent trade Murray Irrigation ( ) 14/11/06 14/03/06 14/07/05 14/11/04 14/03/04 14/07/03 14/11/02 14/03/02 14/07/01 14/11/00 14/03/00 14/07/99 14/11/98 14/03/98 14/07/97 14/11/96 $ $ /03/96 $ $ $ $ $ $0.00
18 Agricultural water value Gross value-added per Megalitre - Agriculture $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $- Vegetables Fruit Grapes Dairy Cotton Other Livestock Sugar Rice
19 Future challenges Global competition Water People and skills Climate change policies
20 Change in the Number of Farm Businesses Australia 120,000 50, ,000 farms Number of commercial 110, , ,000 95,000 90,000 Farms with EVAO greater than $22,500 Farms with EVAO between $5,000 and $22,499 40,000 30,000 20,000 Number of small farm ms 85,000 80, ,000
21 Share of the total value of farm output produced by categories of broadacre farms. 70.0% 60.0% 50.0% % 40.0% 38% 30.0% 20.0% 10.0% 11% 6% 23% 10% 29% 19% 0.0% < $100,000 $100-$200,000 $200-$400,000 > $400,000
22 Return on Investment - Australian broadacre farms (Includes capital appreciation) All farms $400k + $200 - $400k $100 - $200k < $100k
23 Importance of off-farm farm income EVAO Four years to %Farms %OFI Four years to %Farms %OFI <$100k $100k-200k $200k-400k >$400k
24 Farms respond by reducing labour Employment in Australian agriculture and services to agriculture (,000s)
25 F/T Female employment becomes more significant Rural and rural service employment (,000s) Males Females Males - services Females - services
26 Decline in female P/T employment Part-time employment Agriculture (,000s) Males Females
27 Demand for undergraduate agriculture places falls 19% Trends in applications for undergraduate University agriculture places 6,000 5,000 4,000 3,000 2,000 1,
28 Trends in undergraduate enrolments 16,000 14,000 12,000 10, , , ,000 2,000 0 Agriculture Horticulture and Forestry Studies Fisheries Studies Environmental Other Agriculture, Sub-total Viticulture Studies Environmental and Related Studies
29 Trade-level enrolments (agriculture) VTE Student enrolments in Agricultural courses 100,000 80,000 60,000 40,000 20,
30 Future challenges Global competition Water People and skills Climate change policies
31 Current ETS proposal A national emissions trading scheme to start biggest emitters required to participate (55% of national emissions) Wholesale fuel distributors required to participate. Emissions-intensive and trade-exposed businesses (participants) compensated with free emission permits. Long-term aspirational target with shorter-term targets every 5 years. Initial emissions reduction rates (glide path) slow. Agriculture not required to participate, but recognition of agricultural offsets desirable in the future
32 Implications for agriculture progressive increase in fuel, energy costs. progressive increase in energy-price sensitive costs (freight, contracting, chemicals). progressive disadvantage for Australian farmers relative to developing-nation competitors. potential for plantation forestry offsets to be advantaged during early stages of trading scheme. increasing pressure on farmers to demonstrate GHG credentials in affluent markets (Tesco)
33 Farm greenhouse emissions Wheat-sheep farm, 10,000 dse, 700 ha crop 1,700 ha cropping enterprise Nitrogen - animal wastes 2,689 Tonnes per annum. Burning - CO2 660 tonnes per annum Nitrogen - soils Soils nitrogen Nitrogen fertiliser Livestock - methane Nitrogen fertiliser Electricity and fuel Fuel CO ,000 1,200 1,400 1,600 1, Tonnes CO 2-e Tonnes Co 2-e per annum 300 cow dairy farm, 200 hectares Animal wastes NO2 Soils nitrogen Nitrogen fertiliser Effluent ponds NO2 Effluent ponds CH4 Livestock methane Fuel and electricity 1,283 tonnes per annum Ruminant livestock emissions are a major part of agricultural emissions Tonnes CO 2-e per annum
34 Input costs All broadacre farms 40% 35% 30% 25% 20% 15% 10% 5% 0% Fuel Electricity Crop contracts Fertiliser Freight Chemicals
35 Share of farm input costs (%) (Average ) Sub-sector Energy Energydependent Total Wheat/crops Mixed Livestock Sheep Beef Sheep/beef All broadacre
36 Offset revenue - an agricultural dilemma 110% 100% 90% Big cuts later Impact on energy costs less initially. Value of offsets low in early stages. 80% 70% 60% Big cuts early 50% 40% Impact on energy costs high initially. Value of offsets high in early stages.
37 Potential offsets Offset Tonnes CO 2 -e / ha / year High rainfall timber plantation 30 Low rainfall timber plantation 5 Soil carbon management Cattle management to gain 10% lower emissions (3 5 t CO 2 -e / head / yr) Sheep management to gain 10% lower emissions ( t CO 2 -e / head / yr )
38 Offsets Activities by non-participants, recognised as reducing net emissions. Permanency and additionality two key concepts.? Permanent carbon stocks Low-emission agriculture
39 Agriculture has already given 140% 130% 120% Combined Energy, Industrial and Waste 110% Total Australian emissions 100% 90% 80% 70% 60% 50% Combined Agriculture and Landuse change emissions Agriculture has received no credit for this reduction in emissions. 40%
40
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