agribusiness in australia and new zealand

Agribusiness In New Zealand and Australia

Nic Lees

Website:Nicleesagrifood.com

Nic Lees – NicLeesAgrifood.com Agribusiness in New Zealand and Australia

South Island

Christchurch

Canterbury Plains


Oceania


Main Exports

Dairy Products,

25%

Meat , 11%

Logs, wood, 7%

Crude oil , 4%

Mechanical machinery ,

4%

Fruit , 3%

Fish, 3% Wine , 3%

NZ Main Commodity Exports

Iron ore, 29%

Mineral fuels (coal),

28%

Gold, 7%

Cereals, 3% Meat , 3%

Machinery, 2%

Inorganic chemicals,

2%

Aluminium, 2%

Australia Main Commodity Exports


Beef Exports

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

20.00%

India Australia Brazil United States New Zealand Canada EU-‐27 Uruguay ArgenNna Mexico

Beef Exports % Of World


Dairy

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

World Dairy ProducTon % (FAO 2009)

0%

5%

10%

15%

20%

25%

30%

35%

40%

New Zealand

European Union

Australia United States

ArgenNna

World Dairy Exports % 2009


Wheat


World Sheep Production

02040

6080100120

140160

China European Union Australia Former SovietUnion

Iran New Zealand

Sheep (M

illion

Head)

0%

10%

20%

30%

40%

50%

New Zealand Australia United Kingdom Ireland Spain Belgium

Exports of Lamb and Sheepmeat % FAO 2010


Tropic of Capricorn 23°

ArcTc Circle 66°

Temperate Zone

Tropical Zone


Climate Zones

Humid subtropical climate Desert climate Semi-arid climate

Humid continental climate


Temperate Climates -‐ Where Else?


Australian Geology


Tectonic Plates


Geology of New Zealand


Summary

•  New Zealand and Australia are very different in climate and geology

•  This has shaped their agribusiness industries and their relaNve compeNNve advantages.


Australian Agribusiness Resources and CompeNNve advantage

•  Climate •  Soils •  Rivers

•  Land Uses •  Industries


Droughts, flooding rains, and the lucky country


Some challenges There are big quesNons relaNng to sustainability of the Australian lifestyle:

1. Water resources

2. Dryland salinity

3. DepleNng natural resources (but mineral reserves are considerable)

4. Extreme climate with extreme variability

5. Farm structural problems


Size


Canberra Sydney


Agricultural Zones Three zones – pastoral, wheat-‐sheep and high rainfall.

2. Wheat–sheep zone -‐ cropping (principally winter crops), and the grazing of sheep (for wool, lamb and mu]on) and beef ca]le.


Climate

•  Australia – mostly conNnental climate: hot dry summers. Poor growth of C3 (ryegrass, tall fescue) grasses. (grow poorer ME C4 [Kikuyu, Cynadon] grasses). Heat stress can limit animal performance (especially dairy)

•  NZ – temperate mariNme climate: mild summers and winter. Grow quality C3 grasses


Agricultural ProducNvity

NZ ProducTvity


Water Resources-‐ Rain IrrigaTon

Australia •  Australia has mostly low rainfall and is extremely variable rainfall. This results

unreliable pasture feed supply and need for irrigaNon •  Limited irrigaNon – reliant on Murray Darling Basin. Low rainfall has reduced river

flows and irrigaNon allocaNon. NZ •  NZ has moderate high rainfall and good reliability. Enable reliable pasture based

agriculture •  Good sources of irrigaNon water from rivers, lakes, groundwater and reservoirs


Water Resources •  Water – criNcally important for rice,

cogon, grapes fruit and vegetables, sugar and dairy.

•  The gross value of irrigated agricultural producNon (23%) on less than 1% of agricultural land.

•  1/3 Australian rivers are degraded by extracNon and nutrient run-‐off.


IrrigaNon


Water

Murray Darling Basin


IrrigaNon

2510

2520

2530

2540

2550

2560

2570

2580

2590

2600

2610

2006 2009

('000

ha)

Australian Area irrigated ('000 ha)


Murray – Darling Basin 2008


Murray – Darling Basin 2011


Land of Drought and Floods


Seasonal Rains •  Australia's seasonal

pagern of rainfall has a 'flip-‐flop' character

•  It is wet in the tropics and dry in the south during the southern summer, and the reverse occurs in the southern winter.


Rainfall & Climate Variability

•  High Climate Variability

Spring Summer


Australian Soil Resources •  Australia – old soils generally poor

quality , low organic mager, low ferNlity, poor structure & water holding capacity

•  NZ – recent soils, moderate ferNlity,

high organic mager, good structure and water holding capacity.


Australian Soils

•  Many soils affected by salt (sodium), either now or in earlier geological Nmes

•  Sparse sheep and beef cagle grazing in arid regions


Soils Cracking clays that are relaNvely ferNle but exhibit physical limitaNons


Soils – South Australia •  Soils formed in aeolian (wind) sands


Desert Soils

•  The remaining ancient land surfaces (parNcularly in northern Australia) have very deep and strongly weathered soils with very low levels of nutrients


Industry groupings

•  Australian agribusiness industries can be grouped into two main categories.

•  First there are the major climate-‐driven commodity based industries, such as wheat, beef and wool.

•  Then there is another set of industries, such as dairy, sugar, cogon and rice, that sNll have a commodity focus but are somewhat less climate driven.

•  These industries rely on irrigaNon. They are limited in scale by these water requirements.


Wheat •  Commodity based: non

processed, non specialist, non branded product, sold on price and grade

•  Typically low producNon per ha (1-‐2 tonnes (14 bu/acre) depending on season)

•  Very high producNon per labour unit

•  Capital intensive (big machines)


Wheat •  Large producNon volaNlity (range

from 10-‐26 million tonnes in recent years).

•  Huge income variability. Hence difficult to service debt.

•  Typically 10% of internaNonally traded wheat.

•  Large increases in both producNon and producNvity (efficiency).

•  Given the climaNc drivers, this industry is likely to always be commodity based.


Wheat


Beef Meat – beef

•  64% exported •  25 million cagle (NZ 4 Million) •  19% of world trade •  Australia’s principal export markets for

beef are: –  Japan –  United States –  Korea


Beef •  Widespread over Australia, based on mainly naNve pastures. Northern Region 72%

of beef •  Australian beef cagle industry occupies an area in excess of 200 million hectares

(500 million acres)


Beef •  Makes up 19% of world trade in beef, mostly finished on feedlots using

cheap grain. •  NZ makes up 7% world trade, grass fed.

•  Japan largest Australian market •  NZ – Industry based on dairy beef with majority exported to USA as

manufacturing beef. Blended with USA beef to reduce fat in hamburger meat.

•  Many of the beef cagle from northern Australia are shipped live to southern Asian countries, such as Indonesia and Philippines, for finishing using by-‐products from palm oil and rice industries.


Beef – ProducNon & ConsumpNon

•  USA exports about 10% of producNon


Feedlots •  Increasing amount of feedlot producNon (Japan removed quotas in early 1990’s).

•  60 % of feedlot producNon to Japan

•  24% DomesNc


Dairy •  2 million Dairy cows

•  Produces 2% of global producNon; third behind EU and NZ for world dairy trade.

•  57% Exported •  NZ Ownership


Ownership

Fonterra processes 21 per cent of all Australian milk


Lamb/Sheep


Lamb/Sheep •  45% of Australian lamb exported, mostly from high rainfall zone •  91% of NZ lamb is exported, more reliant on world prices •  Most Australian sheep fine wool Merino (19 – 24 micron). Produce 50% of

world fine wool trade •  Most NZ sheep cross bred duel purpose. NZ produces more coarse wool •  Sheep number declining due to poor wool prices. •  Sheep number declining due to poor wool prices and compeNNon from

dairy •  Main markets for lamb USA, PNG, Japan. Has small EU quota for lamb

(20,000 t) •  Main markets for lamb -‐ EU, large favorable quota (230,000 t)


Sectors – Sheep Meat Meat – sheep •  Affected by wool industry –

wool used to be driver, now other way around.

•  53% exported, Good producNvity gains


Animal Welfare – Live Sheep Exports •  Every year millions of Australian animals

are exported live for slaughter. Ca]le, sheep and goats are sent all through the Middle East and South East Asia — to countries where animal welfare laws do not protect them.

•  The RSPCA has campaigned against this trade, arguing the animals suffer too much on the long journey and at the Nme of slaughter


•  Tens of thousands of animals don't survive the sea journey and those that do, disembark into countries where they are transported, handled and then slaughtered in appalling ways. Most animals slaughtered overseas have their throats cut while they are fully conscious, leading to an incredibly painful and prolonged death.

http://www.banliveexport.com/1/#stories


Sectors -‐ Wool •  36% of the flock is in New South

Wales. •  Produces 50% of the world’s Merino

wool •  Australia produces nearly a third of

the world’s raw wool. •  Sheep numbers

–  1984: 150 million (28% WP) –  2005: 100 million (22% WP) –  2010: 75 million

•  A major part of the decline has been in cropping areas


Animal Welfare Mulesing •  Mulesing was 'invented' in 1923 by a farmer called

Mules as a 'cure' for flystrike •  is done to remove folds of skin which agract the

blowfly to lay her eggs


Wine

•  The Australian wine industry has been a major Australian success story but it is now in major difficulty.

•  Most Australian vineyards are irrigated and hence producNon variability is much less than for most Australian agribusinesses.

•  The major markets are the EU (over 50%) and USA (35%)

The monthly value of Australian alcoholic beverage exports since 1988 (A$millions)


Sustainable management

•  Climate change. Big factor for Australian agriculture.

•  Planning and strategies underway between industry, government and research groups.


Some Conclusions •  Australian agribusiness is climate driven.

•  ProducNon variability creates major problems in developing a ‘market led’ approach.

•  For most products, Australia’s compeNNve advantage lies in cost efficiency combined with being able to achieve high technical specificaNons.

•  The big quesNon is: will agricultural commodiNes tend to decline in price in the future as in the past, or are we entering a new era of volaNle but increasing commodity prices?

•  Long investment cycles increase risk, parNcularly for branded products


Further InformaNon •  Australian Bureau of Agriculture and Resource Economics (ABARE)

www.abare.gov.au (This is an excellent site and is worth navigaNng around)

•  Rural Industries Research and Development CorporaNon www.rirdc.gov.au (Mainly for new industries)

•  Dairy Australia. www.dairyaustralia.com.au (This is a comprehensive source of informaNon)

•  Grains Research and Development CorporaNon www.grdc.com.au

•  Cogon Research and Development CorporaNon www.crdc.com.au

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