Food Security - Australia's Future Depends On It

By: AUSBUY

"We cannot live only for ourselves. A thousand fibres connect us with others and along those fibres, as sympathetic threads, our actions run as causes and they come back to us as effects" Montaigne

Food Security is an issue which has been under consideration for some time among those who operate in the food industry. It is a complex issue and is discussed here within the context of organisations that represent Australian food businesses and producers. Over the past year they have pooled their resources to share information and develop strategies. The issues need to be addressed with some urgency as delay compounds the stress on our economy and our communities, and exposes our comparative advantages as a clean growing environment. While industry groups have responsibilities for their constituents and businesses, they also have the collective resources and information to identify problems and offer solutions, and to persuade policy makers, buyers and consumers to support a sustainable food industry.

We have stopped talking about productivity and wealth creation for Australia and the consequent benefits to our economy and our communities. We need to take a whole of industry approach which puts Australia's interests as a priority.
 
The issue of ownership is of concern because we are losing control of our wealth creating assets. Certainly there are arguments that we need foreign investment, but we do not need to sell controlling interest in our assets and our land, or more than 51% is majority ownership. If we do not own the assets we do not get the benefit of the productivity and the opportunity to reinvest.

The issue of sovereign risk arises when countries not businesses buy our land or our water licenses. Countries make decisions based on what is right for their country no matter where the assets, businesses make decision based on what is right for the business no matter where the country. Both ways we potentially lose, in the latter option we potentially can win-win if we set the rules at policy level.

To recreate a viable economic base as a nation, we need to invest in our productive assets and our people, not continue to incur debt through consumption of imported goods manufactured off shore. Investment in the agriculture and food industries can provide productive jobs which have a multiplier effect in our communities for skilled and semi-skilled workers, and ownership of our wealth creating assets. How that investment is structured and where the profits go is an issue which will determine our level of reinvestment in our agricultural assets and our long term food security.

This discussion is to address what we can do, not be overwhelmed by what cannot be achieved. Australia should have the capacity to feed a growing global population, however issues raised here highlight the deepening threat to Australia's capacity to feed ourselves. These include the impact of the current global economic downturn; access to credit and burgeoning debt; level of foreign ownership of our major food companies and agricultural land, and loss of income in taxes and export dollars; the threat of environmental disasters and impact of climate change; policies that then impact on food costs and food miles as a deterrent to exports; cheap imports; the threat of introduced diseases; the incursion of mining and urban sprawl into our arable land, and our history of drought, water and soil management.

The importance of food to our economy is not reflected in Government policies. In recent decades these have compounded the decline of our food industry more than our developed world trading partners. This is despite the fact that the agricultural sector and food manufacturing in Australia formed the foundations of our national wealth, nurtured regional development and innovations for the first 170 years of settlement.

Today the food industry is the largest manufacturing industry remaining in Australia, employing over 500,000 directly in manufacturing or food production in urban and regional areas, and represents hundreds $B in turnover These employment and turnover figures exclude the hospitality industry. Food employs more people than the mining or automotive industries, and policy makers need to address this value.

There are several issues of concern:

• Australia no longer counts the real cost and value to the economy or our communities of our food exports and burgeoning imports.
• If a company is owned off shore, profits are siphoned off before tax for local and export sales with no way to measure these.
• There is evidence that high consultancy fees repatriate profits to the parent company.
• Failure to invest in the infrastructure needed to support the supply chain - transport, water, soil quality etc.
• Industry is reticent to raise issues in case they impact our export markets.
• Many of the industry groups are dominated by foreign interests - Grocery Trade and Chambers of Commerce (Australian Made), have  permanent lobbyists advocating their rights, and $Ms are directed to  these groups from the public purse.
• Local voices are lost by working in isolation.
• Free Trade Agreements signed under the WTO have not been balanced with policies to support our comparative advantages.
• Every FTA has cost Australia more than we have gained.
• Tariffs removed for imports, but we failed to negotiate free tariff access to some of our export markets.
• Our farmers exposed to cheap imports and foreign takeovers on the pretext that competition would make us more efficient. More efficient than whom?
• Our trading partners have taken advantage of this and continue to subsidise their farmers and impede imports through their labelling laws and local retail support.
• Our farmers are among the most productive in the world, yet do not get the support they need to ensure good soil quality and better managed water supply.
• Many of our farmers are supported by second off farm incomes even though they are being more productive.
• They compete with cheap imports and loss of market share.
• Are price takers not price makers with foreign companies owning the supply chain between farmers and retailers.
• Regional communities suffer and rising suicide and youth unemployment

If well managed, Australia has the capacity and the skills to feed more than our population. We need to:

• Reassess how we can capitalize fully on export opportunities
• Difficult when our dollar is so high and imports cheap,
• Ensure equitable ROI for farmers and reinvestment in their businesses
• Secure long term local job opportunities for a burgeoning population here and overseas,
• Institute economic reforms which support investment in infrastructure (water supply, transport, ports),
• Educate our farmers to embrace change and sustainable land practices,
• Redefine how we differentiate Australian foods for quality and integrity rather than as commodities and this should be reflected in the market place
• Rethink how we plan our cities to ensure that we retain arable land within city precincts.

A problem is that many of the profits from the food industry in Australia are not available for reinvestment here.

• Foreign companies manufacture here, but do not pay the same taxes here (withholding tax of 15% to zero) compared to local businesses (30% company tax).
• Many profits are siphoned off before tax in consultancy fees to the parent company and the ATO has trouble tracking these transactions.
• Export grants are available here for foreign companies to sell to themselves.
• Australia does not receive the full value of export dollars which foreign owned companies sell to themselves off shore, and use transfer pricing to lower the income here.
• For example, more than half our beef industry exports are owned by overseas interests. Our wheat buyers are foreign owned who then sell into the export market.
• In addition, food imports are growing rapidly as many countries seek new export markets to stimulate their economies, and local retailers source off shore for their private labels to make greater profits.
• Our export markets are under threat if we lose our comparative advantages of quality, disease free status.
• For foreign interests off shore operations here are a source of revenue or provide new opportunities to buy land, businesses and brands.
• In recent times we have seen several foreign companies operating here and seek opportunities to cut costs by moving operations off shore and supplying back into Australia, with the loss of skilled jobs here and markets for our farmers.
• We do not know where the foods are sourced, if not from our farmers.
• Only one major food processor remains in chilled and frozen and they are foreign owned Simplot.
• Foreign companies do not necessarily buy the farms, but the channels of distribution for domestic and export markets.
• The threats are compounded by the domination of just a few retailers making our farmers price takers not price makers.
• Many products are sold as commodities and are not differentiated for quality in the market place.
• Our labelling laws are not policed and consumers are confused about what they mean.
• We do not identify Country of Origin for processed foods and Australians continue to buy known brands which are neither owned or sourced here although they may or may not be made here e.g. Nestle Uncle Toby's ( imported and local ingredients); McCains frozen vegetables (Made in New Zealand); Kirin Japan bought Dairy Farmers and cite National Foods the local subsidiary on the pack.
• Australia has only recently set up a review into "Truth in Labelling" whereas other countries instituted change several years ago, and use labels to limit imports and support local producers at the import and retail levels.
• While the issues affecting each group's constituents are managed by the Federal Government (Trade, AQIS, ACCC, FIRB, Environment, Agriculture, Infrastructure), the impacts are felt at local and regional levels. We have systemic issues which compound our plight.
• Water, property and mining rights are the responsibilities of the States and random policies impact on the whole.
• Experts work in isolation, and Governments and their advisors have no real experience in the industries they oversee and do not seek wide advice.

Our farmers and our businesses need our support and we need to support those leaders who are prepared to give Australians a "fair go". The reality is it is not a level playing field. All we are asking for is a balanced approach to support our clean green growing environment our capacity to feed ourselves and to give priority to our own.

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