Farming value over volume

16 Mar, 2015 03:00 AM
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Rabobank’s Gilles Boumeester.
Target the consumers at your doorstep - that could be a way to create further exports
Rabobank’s Gilles Boumeester.

HOLLAND is half the size of Tasmania, but the value of its agricultural exports is about two-and-a-half times the value of Australia’s.

It’s not raw resources, but resourcefulness that has made Holland the world’s second-largest agricultural exporter (in value terms) after the United States, Rabobank’s Gilles Boumeester recently told ABARES Outlook 2015.

Using the Dutch example, the bank’s global head of food and agri coverage gently challenged Australia to make more of its own comparatively lavish resources, and the customer base that has suddenly appeared on its doorstep.

Dutch agribusiness resourcefulness is typified in the long and ongoing relationship that the Netherlands has with cocoa.

Holland grows no cocoa beans, and annually imports about US$4.3 billion in cocoa products, but on the other side of the ledger, the country exports US$5 billion in value-added cocoa products like chocolate.

That trade flow leaves behind a tidy US$700 million in Holland, along with all the associated returns generated by manufacturing and employment.

Mr Boumeester told Outlook the Dutch agricultural sector is a product of extreme resource pressure, which drives innovation; and of its proximity to the 503 million inhabitants of the European Union, which rewards that innovation.

Dutch farmland now costs about AU$100,000 a hectare, but the returns are commensurate. Typical farmland can return about $67,000/ha from a rotation of sugarbeet, wheat and potatoes.

If the farmer builds a glasshouse at a cost of around AU$1.5 million per hectare, returns leap to AU$1.2m/ha. In 2010, about 10,000ha of glasshouses were built in the Netherlands.

Because of its resource constraints, Holland has built a strongly interlinked research, education and extension network to drive productivity based on value, not volume.

For Australia, Mr Boumeester acknowledged that there are no easy answers to the “value versus volume” question, but he clearly finds holes in Australia’s commodity-centric approach.

Australia and Holland earn roughly the same from bulk agricultural exports and “intermediate” products with a small amount of value-adding, although the ratios differ.

But Holland earns far more income from Australia in “consumer orientated” products - the difference between creating value, and accepting a globally-determined price.

If Australia doesn’t have the challenge of extreme resource pressure as a spur to supply chain innovation, it does have growing costs of production.

In wheat, Australia’s eastern States have costs significantly higher than competitor countries. In dairy, grass-based production systems give it an advantage, but that is also being eroded by innovation in other nations.

Mr Boumeester suggested that Australia re-examine the long-term future of its commodity focus, perhaps even to the extent of “de-commoditising” commodities to help increase exports and fend off competition from lower-cost nations.

“We can’t be cost-efficient and cost-effective in production, then get completely lost at the end of the supply chain and lose our competitiveness,” he said.

“I think the integration of value chains to create specialist products, to target the consumers at your doorstep - that could be a way to create further exports to improve and increase the capacity of the Australian food and farming industry.”

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FarmOnline
Matthew Cawood

Matthew Cawood

is the national science and environment writer for Fairfax Agricultural Media
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READER COMMENTS

Jock Munro
16/03/2015 5:34:47 AM

Yes, we were a small country with a large premium quality wheat export program unto the Rudd Labor Government and the Liberals under Brendan Nelson abolished the single desk. Wheat industry commentators are saying that we are becoming the "white trash" of Asia and our customers are telling us that they longer trust our quality.
Hick from the sticks
16/03/2015 5:36:29 AM

How much help does the Dutch farmer get from EC Ag subsudies? Answer from An article the UK version of The Guardian last year was €700 per acre as a base line no matter what, more help is available if you change your farming practices, eg build a glasshouse.
Clint
16/03/2015 7:25:00 AM

Great article and exactly what we need to strive to do as farmers and agribusinesses with the full support of the government. Clearly we are efficient pre farm gate but its all lost in the supply chain before it gets to the consumer. We are also the deli (not food bowl) of Asia and as farmers we need to re-focus on higher value products (not base line commodities) to succeed. Sell the poles and wires and invest in our greatest renewable energy being agriculture, through R&D, training and infrastructure (rail).
conistonfarm
16/03/2015 8:00:36 AM

if only we had the eec agricultural subsidies here, imagine what we would produce
Cronus
16/03/2015 8:27:28 AM

Why the different outcome? Boumeester pointing to a commodity based mentality that has driven agriculture is an argument that makes sense of events. Australia has shown little capacity to think and act beyond commodities. Countries such as the Netherlands have no choice – they must do as they do to have a future whereas Australia remains locked into bulk goods. Our anthem has “We've golden soil and wealth for toil”; the image of the hard working farmer shipping product to market. Money is to be made in what is done between the farm gate and the dinner plate; but that takes intelligent labour.
angry australian
16/03/2015 9:44:41 AM

It also helps when you have a market of around 350 million within about 1500 km. And, of course, as well as the subsidies what about those artificial laws placed on non EU nations, such as Australia, that are blatantly protectionist and designed to hike up the cost of our exports to make them non competitive. One of the things Mr Boumeester got very right was " In wheat, Australia’s eastern States have costs significantly higher than competitor countries." This doesn't only apply to wheat but to all our primary industries, it's why we have hardly no processors left. We must change this.
King Billy
16/03/2015 10:01:13 AM

We buy Australian Flour milled in Singapore. The reason its manufactured and packaged overseas is Australian labour laws and tax regimes.. No incentive to value add agricultural products here,
Oketex
16/03/2015 12:04:04 PM

At Outlook 2015 Mr Boumeester selectively used statistics to suggest that the Netherlands is some sort of agricultural powerhouse - which common sense tells us it is not. With the exception of flowers they import a lot of the raw materials to produce manufactured products that are largely consumed within a single market entity - the EU. To use the gross value of such 'exports' to claim that the Netherlands is second only to the US as an agricultural exporter is misleading.
angry australian
16/03/2015 12:17:52 PM

Perhaps while we had the pleasure of Mr Boumeester's company he could have also explained how Holland could export to Australia a low value commodity, such as chips, and remain competitive with a product from Tasmania,Ballarat or Mt Gambier?No value adding,no special sauce! I am sure last time I was in Aldi I saw Dutch chips!
BB
17/03/2015 7:38:48 AM

Its amazing what a sector can do when its government can recognise stupidity of other countries not investing (subsidising) in their own countries industry or making sure they are able to compete equally in the market, Like all investments this creates a return on investment and creates wealth. " Dutch farmers get €1299 per hectare" (2008)

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Sorry did i get it wrong..? Rankins Springs is still open..?!
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No doubt a few frosted Freddies out there who will wish they had taken a closer look at the AGC
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Matthew, I was wondering if you had followed up this story with the farmer after the whole