Resilience in Australian agriculture

Australia has faced continuous and concurrent crises over the past few years. The nation’s resilience has been tested by challenges ranging from Covid-19 to economic coercion and from drought to floods.

While we have weathered these challenges, climate change and geopolitical uncertainty, among other factors, ensure we’ll face increasing exposure to crises. As a nation, we’re great at pulling together to respond to a crisis. However, we can’t keep relying just on our strength in responding; more is needed. Threats to resiliency require prompt attention even in our most vital industry sectors, like agriculture.

Secure maritime supply chains and relative geopolitical stability helped to make globalisation irresistible. For the private sector, economic liberalism made offshoring, just-in-time supply chains and centralisation of production the central tenets in the pursuit of growth and profit. For Australia, the market economy seemed to provide all the answers—and who could argue when the nation was awash with ‘rivers of gold’ as a result of high commodity prices?

In Australia, around 22 million hectares of commercial grain crops are planted each year. Despite increasingly frequent and intense weather events, Australia is a net food producer and a global breadbasket. Our high-quality and environmentally responsible food production is world-renowned.

The scale of our agriculture and cropping industry provides food-security assurance to many Australians. Our status as a food exporter of choice provides many Australians with equal measures of confidence in the industry’s economic resilience. However, the sector is precariously reliant on several critical inputs that make it vulnerable to disruption.

Crop-protection products are at the top of the list of critical agricultural inputs. In 2018, Deloitte Access Economics estimated that up to $20.6 billion of Australia’s agricultural output (or 73% of the total value of Australian crop production) could be directly attributed to chemical crop-protection products.

Farmers use crop-protection products to eliminate pests, weeds and diseases that would otherwise damage crops, reduce yields and compromise food safety. These products allow farmers to produce more food on less land.

Over the past several years, Australia has increasingly relied on imported crop-protection products, particularly from China. Chinese producers have invested significantly in new manufacturing capacity. The investment leveraged the direct access they had to raw materials and low labour costs in mainland China. These efforts were also aided in no small part by trade incentives. In the last five years, China has become a major global supplier of crop-protection products and has market control of many chemical precursors.

Only some countries have passively allowed China to dominate the global crop-protection product market. Major grain-producing jurisdictions like the EU, Brazil and the US protect their local manufacturing of crop-protection products by applying tariffs to imports.

Australia is the only major grain producer that doesn’t apply tariffs; indeed, it has the lowest barriers to entry worldwide for crop-protection products. For years it has been removing tariffs under free-trade arrangements, which has made it more challenging for local production.

Australia’s crop-protection industry is also vulnerable to unfair trade practices. Since 2003, the Anti-Dumping Commission has implemented measures to prevent China from dumping a widely used herbicide, 2,4-Dichlorophenoxyacetic acid, in Australia.

China also continues to expand tax rebates for glyphosate production, which makes Australian products less competitive. As a result, Australia’s domestic capacity for manufacturing and formulating crop-protection products has contracted sharply.

The Australian agriculture sector’s reliance on Chinese products leaves the industry increasingly vulnerable to international trade distortions, coercion and supply-chain shocks. Adverse trade sanctions on these ingredients from China would threaten the viability of Australia’s $40 billion crop market and put the broader $71 billion agriculture industry at risk.

There are other practical challenges arising from a global supply chain for crop-protection products. Australian farmers face unique conditions in terms of soils, weeds, pests and diseases. We need chemical formulations that are specific to our requirements to increase domestic farming production and its ongoing viability.

We need constant research and development focused on enhancing existing formulations and developing new products that add value to our agricultural sector’s performance. We also need a focus on formulating products with less toxic and destructive environmental impacts. Generic global formulations, while not without utility, won’t allow for this.

Market forces cannot, on their own, mitigate this vulnerability. Investment capital is like water: it follows the easiest path. Unfortunately for Australia, private investors looking at investing in the manufacture and formulation of crop-protection products in Australia are aware of the challenges.

Our high-cost environment, vulnerability to global supply-chain disruptions and unfair international trade practices hardly make such investment attractive. That means the government can’t rely solely on private capital to expand manufacturing.

Government and private-sector collaboration and co-investment are essential to maintaining a resilient sovereign crop-protection manufacturing capability. This investment would strengthen Australia’s food security and national resilience.

For the Australian government, finding and prioritising the right places to invest in national resilience will be challenging. However, shoring up the resilience of our food production to reduce vulnerabilities is a logical place to start.

This article was published by The Strategist.