Of the 10 major issues identified by Robert Poole as affecting agricultural production across Australia, the two with the most impact are market volatility and climate volatility.
“I think it is important to find ways to offset some risk,” Mr Poole said when he was addressing Landmark clients at a recent seminar in Wagga Wagga.
“This is the hardest thing to deal with for a farmer in Australia and it probably always will be.”
The message would have been immediately understood by everyone in the room, and Mr Poole has the right background to make the connection.
He grew up on a sheep and wheat farm near Wedderburn, in north-western Victoria, and after a long and extensive career in corporate agriculture he joined KPMG as a partner focusing on advising the agribusiness sector.
“If you talk to any farmer the two most important topics of conversation are the weather and commodity prices,” he said.
“As long as we farm they will be the top two issues – the price and the weather.”
Mr Poole said his concern was that volatility in farmgate pricing and seasons was getting harder to deal with instead of easier.
“When I started in agriculture 20 years ago I thought we would have risk products that would help us manage market volatility.”
Tools such as forward sell contracts, new pricing models, multi-peril insurance, hedge or futures products, input pricing contracts and weather forecasting tools had not developed to the extent needed to effectively manage risk.
But to me the volatility is about the same or growing and we have not developed an effective tool kit to deal with it,” he said..
“For example I think the markets in agriculture are now well-informed and when markets start to fall it is very difficult for farmers to take risk positions as there are no parties willing to sit on the other side of the trade,” he said.
“When you have a low price due to market volatility and a seasonal crisis, particularly a drought, that is when we are under the most pressure to do something about it.”
Mr Poole noted the agricultural industry is performing as well as it can in a difficult environment and research is pointing to better farming practices.
“If we look at the WA grains industry, for example, it has been drier in the past 20-30 years but they are managing to maintain or grow yields through the adoption of new agronomic practices and better varieties,” he said.
Also in the top ten trending issues addressed by Mr Poole were:
Changing consumer wants and needs driving a desire for more food assurance – Australia was well placed to take advantage of provenance as an issue based on a strong food safety and quality record.
Being successful in China and southeast Asia – most Australian food sectors would seek to grow and capture value in these fast growing markets.
Global disruptors driving down margin – agriculture and food would be impacted by disruptors just like other sectors of the economy – for example we await the arrival of Amazon in the Australian retail market. Agriculture services would also be disrupted
Corporatisation of farming – would change the way farming was structured and serviced.
Automation on farm and in processing – provided the capacity to improve labour efficiency and improve Australia’s competitiveness – was also having a huge impact in the service sector.
Cyber security was an emerging concern for all companies including in food and agri-business.
AgTech, Internet of Things – digitalisation of the supply chain was on the minds of Boards and executives as it has the capacity to deliver real time information and improve procurement, transport, manufacturing and quality – while providing the basis for improved transparency and assurance of the food chain. The connectivity of regional Australia remained a barrier to growth in some regions.