Asia won’t buy much unless ag (air) lifts its game

Ag's $100b goal at risk without supersized infrastructure push


Business
Australia needs to significantly improve its agricultural and transport infrastructure, including develop regional airports like Queensland’s new Toowoomba Wellcamp Airport, to link farming regions directly to Asian markets says KPMG.

Australia needs to significantly improve its agricultural and transport infrastructure, including develop regional airports like Queensland’s new Toowoomba Wellcamp Airport, to link farming regions directly to Asian markets says KPMG.

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Australia's not making enough ground fast enough to be a serious long-term contender in Asia's food boom

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Australia must get cracking and build more international airports in regional areas and vastly improve other transport and agricultural infrastructure if our farm sector is to hit its $100 billion production goals by 2030.

We are not making enough ground fast enough to be a serious long-term contender in the Asian food sector says leading Asia watcher and business adviser, Doug Ferguson.

While burgeoning Asia’s share of Australia’s total farm exports jumped from 52 per cent to 69pc in the past decade, the efforts of our 90,000 farmers and farming companies need more logistical support and a greater productivity focus to adequately service Asian hunger for food imports.

“Asia remains a massive market opportunity, but international competition from traditional and new players is building rapidly,” warned Mr Ferguson, who leads business services company KPMG’s international markets business, and lived in China for a decade until 2012.

He is also chairman of the Asia Society in Australia and former vice president of the Australia China Business Council of NSW.

He highlighted how new multilateral trade agreements were helping trading rivals access valued Australian export markets such as China, South Korea, Vietnam, Indonesia, and many more.

China’s influential new “Belt and Road” initiative was also building trade, infrastructure and political ties with new food suppliers in Africa, Eastern Europe, Central Asia and the Asia-Pacific region.

Our proximity to Asian markets is a clear competitive advantage, however we need to quite urgently fix some of our own supply side issues by building greater production scale - Doug Ferguson, KPMG

In fact, Mr Ferguson believes northern Australia’s much-debated infrastructure development agenda should be seriously considered as a candidate to link with China’s Belt and Road program, taking advantage of China’s global infrastructure and food bowl development initiatives.

“Our proximity to Asian markets is a clear competitive advantage, however we need to quite urgently fix some of our own supply side issues by building greater production scale,” he said.

“Priorities include upgrading and building better regional transport and water infrastructure, and delivering more high quality, fresh food faster than our global competition.”

However, at this point he said the National Farmers Federation’s goal to lift the value of farm production from today’s $59b to $100b within 15 years looked unattainable unless aggressive approaches were adopted to boost production and food processing scale, improve export branding and shake up our export market expectations.  

Regional airport hubs

He noted at last week’s agricultural Outlook 2018 conference in Canberra the federal government’s inland rail project offered considerable scope to link a series of inland freight hubs and airports servicing direct exports of perishable fresh produce to markets in Asia, and elsewhere.

Pointing to the success of southern Queensland’s new Toowoomba Wellcamp Airport, which promises to connect the agriculturally rich Darling Downs and Lockyer Valley directly with overseas buyers, he said other similar airport developments could also be privately financed, using Asian capital and construction expertise, if needed.

“If an airport already exists, these aren’t big ticket projects,” he said.

KPMG’s Asia and international markets business leader, Doug Ferguson.

KPMG’s Asia and international markets business leader, Doug Ferguson.

“You’d only need $50 million to $100m (each) to get these facilities handling product from various food production zones around the country.

“Back in the mid 1990s the Inland Marketing Corporation, at Parkes, which is a key road and rail junction in central NSW’s food producing heartland, had visionary plans to air freight fresh produce overnight to the supermarkets of Asia.

“It failed to get necessary government backing, so perishable food still goes by truck to Sydney and then via passenger flights, which limits its supermarket shelf life in overseas markets.”

Mr Ferguson said northern Victoria, Canberra and northern Queensland regional centres were other areas which seemed logical as serious export hubs and could also lure inbound tourists from Asia’s fast growing urban middle class.

“The inland rail link and the Western Sydney Airport freight precinct are positive developments, but Australia needs a co-ordinated comprehensive and funded solution for rural and regional infrastructure.”

On average, costs associated with moving product to its domestic or offshore destinations ate up 21pc to 38pc of farm gate values.

Simply sealing rural roads could cut livestock and grain transport costs by about 24pc.

He believed establishing such nation-building infrastructure should be a priority for government, which could then sell out to private investors.

China can help

China, meanwhile “does infrastructure better and more cost efficiently than just about anybody in the world” and could be a valuable capital and construction partner in critical infrastructure projects.

“Chinese road and rail construction companies like local firm John Holland’s parent company, CCCI, may help deliver major road, rail, port and water projects, including northern Australian agricultural developments,” he said.

However, Mr Ferguson conceded Canberra had taken a cautious approach towards major Chinese investment in agriculture, and particularly Beijing’s Belt and Road agenda.

We must start focusing on what Asia wants - growing products that may be different to what they do now - Doug Ferguson, KPMG

Recent public controversy over a Chinese state company’s long-term lease on the Port of Darwin had also prompted stricter national interest protocols, which seemingly made Australia appear “no more welcoming of Chinese investment in big infrastructure opportunities than five years ago”.

It was unfortunate big scale ag-related investments continued to be low priorities for the short-term focused local superannuation industry, despite some increased activity of late.

Australia also needed a “big bold” water blueprint and investment to better use the nation’s water resources, overcome historic water claims and political rivalries, and move water from northern high rainfall areas to southern regions to foster greater agricultural scale and grow crops Asian markets desired.

“We must start focusing on what Asia wants – educating and encouraging farmers to be confident about growing products that may be different to what they do now,” he said.

“That may mean many more vegetable crops and probably aquaculture.”

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