Is it in Australia’s interests for small farms to be replaced by larger corporate entities?

An article was published in the AFR with the headline “It’s time to get tough with unviable farmers” by Alan Mitchell, an economics editor. The opening blurb states

It is in Australia’s interests for small farms to be replaced by larger corporate producers. Australia cannot afford to protect family farms from the economic pressures of the global food market.

The article was also co-published (and some of the wording softened) in The Land under the Headline “Ag needs to get tough

Whilst understanding that newspapers rely on brevity, broad brush-strokes and shallow commentary, it is important to remember that brevity is actually the enemy of information and does absolutely nothing to build knowledge nor understanding.

My initial reaction to this article, after being made aware of it on a LinkedIn group, was of (emotive) outrage. My automatic translation of the piece was that there was no attempt to provide any form of discussion or even well balanced nor logically infallible argument for the premise of the headline nor the entry blurb. It was not an unbiased view to determine the “best thing for Australia” nor was this covered under the general “without prejudice” clause of an opinion piece.

Apparently, this article (and by extension, the author) seems to believe that the “economic pressure of the Global Food market” is the only major factor to be considered in this argument. It argues that is in Australia’s interests for small farms to be replaced by larger corporate producers.

To me, all I could do was fail to see this as anything but an article that was an unadulterated cry of potential shareholders who wailed:

“What!? There’s money in them there fields!? Well, let’s rustle them small time operators out of there and hand it over to the corporations with shares so we can make some real cash here!”

This conclusion is based on a dissection of the article – one that first and foremost – fails to cite any of its sources, which is weird since it continually alludes to an apparent ABARES source that underpins the premise that “It is in Australia’s interest for small farms to be replaced by large corporate producers”.  Without the ability to determine the source, let alone the opportunity to verify nor discredit the interpretation, it is impossible to determine if the author’s view is based on an official view, misquoted or simply misguided.

In dissecting the article, I see a number of  irregularities. Some are due to the aforementioned brevity, others are simply slight of hand misdirection which preludes to the pre-arrived conclusion of the initial premise.

The first point of order is that Asia’s middle class will have more than trebled in size to 1.7 billion people by 2020 and doubled again a decade later.

Thus, with that growth comes greater demands for food, and, the article continues in an attempt to enlighten us, therefore

“We’re likely to see a significant increase in demand, particularly from China, for high-end agricultural products like fruit, dairy, high-grade meat and seafood”

This guides us to the discussion that this will be a huge opportunity for farmers … investors and the economy.

However Farmers – small, medium, large – and Agribusiness providers alike, know this. They have known this for some time. You know who didn’t know this? Financial Speculators. These “investors” who, it seems, would help the economy if they could only get involved and remove these small, financially non-viable, farmers.

The author fails to acknowledge that for at least the past five years, these trends have been in play with demand from South East Asian (and the obvious giant, China) growing whilst demand in the Baltic and ex-USSR nations have also been growing as their economies begin recovering as well. These are facts that have been iterated, documented and distributed through ABARES, RIRDC, NFF, MLA and a half dozen other industry bodies for some time now.

The article then segways into a few paragraphs of what I like to consider nothing more than useless political something-nothing filler before it follows on with the fact that ABARES has (and continues to) argue that reduced government spending on agricultural research (which has been declining over the last 40 years) should be reversed.

The author just leaves this there … hanging.

It is like a double-edged sword of concession. On the one hand, the lack of R&D is partially responsible for the declining ability to increase productivity … on the other, it alludes to the assumption that politicians have been and are continuing to mismanage the entire sector and need to step back and get out of the way.

The other unspoken element here is a seeming predetermined assumptions. Corporations, especially large ones, will pay for R&D. Corporations will make the investments. Corporations can do this better.

These unspoken assumptions are enforced with the next point that government should promote rationalisation. They should promote foreign investment. They should do so by no longer providing support and relief to the small farmers that are “economically inefficient operators”.

The justification for this assault on the small and family farmer is provided with the evidence that  20 per cent of the most-efficient broadacre farms in Australia accounted for nearly two-thirds of total production in 2005. Whilst a mere 36 percent was produced by the remaining 80 per cent of smaller property holders.

Now, if I recall my Pareto principle, does this not, in fact, actually prove that those small players are far more efficient than they should be? A fact that is even more amazing considering that the data mentions figures from 2005 – after 30 years of declining R&D, minimal support, no subsidies, in the aftermath of deregulation, water reforms, duopoly markets, kneejerk legislations declining economic and quarantine protections and, most telling of all … smack bang in the middle of a continent wide thirteen year drought!

Yet, somehow, the author fails to highlight this and continues to provide an unsubstantiated attack on the 80 percent by providing further unsubstantiated claims, with the following statement

“Australia cannot afford to protect undersized, under-capitalised, overgrazed family farms from the economic pressures of the global food market”

No evidence or support is offered as part of this statement, except as a supposed conclusion to the article where we are treated to further lazy journalism and logic fallacy that states that the “economic relief” the government provides to those “graziers who are fundamentally unviable” who apparently “have succumbed to the moral hazard of drought relief”.

To be clear, the author is referring to the poverty line level, minimum, unemployment benefit equivalent, means tested and limited drought relief payments.

These investors only understand the large corporate world. They understand how larger businesses work. They understand there is more profit from servicing larger firms. They understand that shareholders can wield more power to ensure dividends.

Small business do not benefit the investor.

That does not mean they do not benefit Australia or its economy.

What this article fails to answer, from its assertion that these changes are required in Australia’s interest to meet the economic pressure of the Global Food market is how this is true.

There are a wide variety of farm businesses which are both productive and efficient. The slight increase in food production that may (or may not) occur from having larger farm businesses is insignificant. If we fail to understand the impact of the contribution to our communities and our nation – then any economic benefit may be lost before we commence.

There is no mention on the impacts of soil, water, livestock or the environment.

There is no consideration of efficient food pathways, distribution logistics nor any mention on how to deal with 50% of global food wasted.

There is nothing in this article that even begins to support the initial supposition that larger corporate producers will make any real difference, let alone a positive one.


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