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How to capitalise on the 2022 agricultural boom

Posted by: Danielle Moore at January 25, 2022

Australia is on track to record our largest total volume of agricultural commodities ever. A result of exceptional seasonal conditions where production forecasts are set to increase in every major livestock and almost every commodity. The anticipated boom is being supported by very strong global commodity prices.

While this is a reason to be confident, agriculture in Australia is notoriously fickle, and we need to make sure we don’t take this forecast bumper season for granted. Like many other parts of the economy, agriculture is facing some headwinds, which need to be carefully managed, so the expected windfall actually materialises.

Labour shortages

COVID-19 has disrupted every sector of Australian agriculture and particularly horticulture. The Australian Industry and Skills Committee (ASIC) says that even in a ‘normal’ year more than 40% of farmers report labour shortages during peak times.

The pandemic has worsened this situation by forcing the closure of state, territory, and international borders and negatively impacting workforce assistance programs like the Government’s Pacific Labour Scheme and Seasonal Worker Programme. Consequently, employers are struggling to fill many positions and there is an urgent need to replace visa, seasonal, and backpacker workforces in entry-level roles.

The good news is that the sector and government have initiatives in place to help counteract the impact of Covid on labour supply. Here are some key ones:

1. Innovation

While labour is an essential component of a successful agricultural sector, innovation also has a critical role to play. This is particularly evident when we see how those in the agricultural industry are surviving better today. Farmers are increasingly using technology to reduce their reliance on the highly volatile labour force as well as improve efficiencies and profits, but it’s important to pursue even more highly evolved IT solutions. Here are some technologies you’re likely to see coming to a farm near you:

2. Attracting and upskilling new industry workers

Australia’s agriculture industry struggles to attract workers. There are also barriers to mobility and insufficient workforce training. Research among young people also found that the sector doesn’t appeal to them. However, initiatives like the Regional Jobs Vacancy Map and AgDraft are helping farmers find and fill job opportunities in the sector.

3. Australian Government Support

The Australian Government have announced support with the following two initiatives. The extent to which this will help farmers is widely debated, however it’s still worthwhile to be in the know and investigate if there are any opportunities available for your business.

National Agricultural Workforce Strategy

The Australian government established the independent National Agricultural Labour Advisory Committee in 2019, who released the National Agricultural Workforce Strategy and Roadmap last year. The Strategy includes 37 recommendations and recognises the importance of quality labour in Australian agriculture. It highlights the need to modernise agriculture’s image, attract and keep workers, embrace innovation, build skills for modern agriculture, and treat workers ethically.

Agriculture 2030 package

The Ag2030 package, announced in the 2021-22 Budget, responds to several of the Strategy’s recommendations and helps Australia’s farmers, fishers, and foresters recover from COVID-19 and build toward the National Farmers’ Federation (NFF) vision for a $100 billion industry by 2030.

The $29 million invested over four years aims to improve agricultural and employment opportunities. While this figure may appear generous, Australian farmers, are in fact, some of the least subsidised in the world. As measured by the OECD, just over 2% of Australian farmer revenues in 2016-18 were derived from government support. This compares with Norway (61%), which has the highest level of agricultural support.

Supply chain disruptions

While COVID-19 is partly to blame for the headline-grabbing supply chain issues around the world, we need to take responsibility as co-architects of this problem. That’s because decades of globalisation and offshoring have left our supply chains vulnerable to the disruption we’re now experiencing.

Bulk freight vessels and shipping containers are scarcer on many routes. This – combined with a rebound in oil prices – has led to increased freight prices and shipping delays. Additionally, once goods get to Australia – or our exported products reach their destination – a shortage of staff from truck drivers through to supermarket workers means further delays before consumers can get their hands on them.

AdBlue shortages

Some other ‘left-field’ disruptions are also causing headaches for our agricultural industry. For example, the AdBlue fuel additive is in short supply. Due to offshoring, we produce very little of AdBlue’s key ingredient – urea – and the shortage has already pushed up diesel prices by 10c a litre.

This is affecting our air quality and agricultural and transport industries, which means reduced availability of goods and increased costs from the petrol pump to the supermarket.

Some good news is that, while we’re facing higher freight rates across all channels, we’re not the only country affected – our competitors are too. Australia has a geographic advantage in getting grain to key markets in South-East Asia, so the shorter shipping times from our ports mean our products are relatively more affordable for importers. We need to continue to press home this advantage.

And, despite freight disruptions and much higher shipping costs, our agricultural export volumes so far have remained relatively steady. As Deloitte puts it: ‘People still need to eat’.

Natural disasters

Natural disasters are always with us and – despite a bumper agricultural year – 2021 was no exception. Insurers AB Phillips note the Queensland hailstorm, Perth Hills bushfire, East Coast storms and floods, Cyclone Seroja, and the Victorian storms and floods as significant events that impacted our agricultural sector.

What’s the solution?

While our agricultural sector can’t protect itself from the factors outside of its control, like COVID-19 and the weather, we can be a lot more proactive in areas where we do control our destiny.

1.     Labour

With labour shortages, for example, we can lobby state and federal politicians to get their house in order with respect to importing workers. Federal Agriculture Minister David Littleproud late last year accused state governments of not being courageous enough to bring offshore workers in, claiming Ag Visas were ‘up and going’ and there had been 25,000 men and women in 10 Pacific nations ‘literally on the tarmac’ for the previous 12 months.

2.     Traceability

Traceability in food production is another way that Australia can differentiate itself in world markets. In recent years, consumers’ interest in where their produce comes from has grown significantly, together with farmers wanting greater visibility of their products’ journey along domestic and international supply chains.

Our National Traceability Project is helping fund 30 tech innovations to improve traceability by 2023 – potentially using leading technology like blockchain. One such innovator is Aglive, which enables beef traceability from farm to table using AI and IoT.

3.     Manufacturing

Manufacturing contributes around 6% Australia’s GDP and supports more than 850,000 jobs. We hope manufacturers and government have learned from the mistake of letting our domestic capacity drop in favour of cheap offshore alternatives.

The Covid crisis will likely reintroduce a focus on lifting local manufacturing for critical industries. KPMG says this is especially true for advanced manufacturing, which can supplement local operations with technologies like 3D printing, high-tech automation, and robotics.

As technology is used more in manufacturing, intellectual property becomes a more important component in the value chain. New policies that support local R&D, as well as moves to resolve long-term issues such as energy costs will also be needed.

To compete with Asian countries, Australia needs to develop highly skilled manufacturing capabilities that position us to compete on value, rather than on cost alone.

The economic importance of manufacturing in Australia cannot be underestimated and it’s essential we rebuild a resilient, thriving, and internationally competitive manufacturing industry.

Thankfully, the Australian government has identified manufacturing as a key component in our economic recovery and growth in coming years, launching the Modern Manufacturing Strategy in the 2020 Federal Budget. This $1.5 billion investment supports our competitive strength and strategic national priorities in short- and long-term initiatives over the next five years, with one of the three streams focused on building supply chain resilience.

How Rebus can help

Have you thought about where you’d like your business to be in 12 months’ time? Are you capital-ready? Are you set-up and able to accelerate your growth through these ever-changing times?

We’re hearing from the market there’s likely to be a backlog for funding as the economy continues to open back up and particularly in the agri sector. If you want to grow your business to capitalise on the agricultural boom, or just safeguard what you have already, it’s wise to plan for funding now.

Here at Rebus, we like to start conversations with funders well ahead of time, so our clients’ future is secured. Get in touch and let’s talk about your plans.

Danielle Moore

The Trustee for the Rebus Capital Partners Unit Trust ABN 88 452 904 420. Authorised Credit Representative 523233 under Australian Credit Licence 536100.