11 Royal Tues 1400 1530 JAMMIE PENM
Good afternoon to all the delegates. There has been renewed interest in developing agriculture in
northern Australia, partly reflecting the opportunities presented by expected growth in food and
fibre demand in Asia and the proximity of northern Australia to Asian markets.
Agriculture is a significant contributor to the Northern Australian economy. With cattle, sugar,
horticultural products, cotton, and cereals [INAUDIBLE] industries. Around 45% of the national
herd is located in northern Australia. The gross value of agricultural production is estimated to
have been over $5 billion a year.
Expanding agriculture in northern Australia presents a number of challenges. It will require
capital investment for infrastructure support and developing efficient supply chains for
agricultural commodities that are suited to the environment of the North. It will also be critical to
identify and establish export markets for agricultural products that are currently being produced,
or could be produced, in northern Australia. Because growth opportunities in domestic
agricultural markets are relatively limited, and prices decline when domestic supply exceeds
demand.
This can pose particular challenges for agricultural production in northern Australia, which is
exposed to relatively high transport costs when selling into markets in southern Australia.
Therefore, developing export markets is essential for expanding agriculture in northern Australia.
Today, I will use a few examples to demonstrate the market opportunities in Asia. I understand
other speakers will address the issues of investment and regional development for northern
Australia.
Over the past few years, ABARES has undertaken significant research on the prospects for
growth in Asian food demand to 2050. Food demand in the Asian region is expected to increase
because of larger population growth in per person incomes and increasing urbanisation. This
growth in food consumption in Asia is expected to provide many export opportunities for
agriculture in northern Australia.
But realising these opportunities can only be achieved if agricultural production can be profitable
and competitive in northern Australia. At [? the outlook ?] conference last year, ABARES
presented its projections of long time food demand for a number of major Asian economies,
including China, Japan, the Republic of Korea, and Southeast Asia as a whole. Delegates who
are interested in opportunities in these markets can download the relevant research papers on the
ABARES website.
As food consumption patterns in emerging Asian markets continue to shift from traditional diets
to more varied diets, growing demand for meat, dairy products, and horticultural products is
expected. Import demand for agricultural products in Asia will increase to supplement domestic
production in meeting the rising food consumption.
Rising meat consumption in Asia will lead to expansions of Asian [? peak ?] and poultry
production as well as cattle feedlots, presenting opportunities for exports of feed grains and other
stock feeds, such as [? oil ?] [? seeds, ?] milk, and hay.
Over the past year, ABARES has continued its research on food demand prospects in Asian
markets. And I will present our recent work on long term food demand in another two important
Asian markets. They are India and Indonesia.
I'm using India as an example to demonstrate the emerging opportunities that are expected to rise
in the future. Currently, Australian agricultural exports to India are less significant in value terms
compared with some other Asian markets.
In 2013/14, Australian agricultural exports to India were around $600 million, consisting mostly
of [? pulses, ?] tree nuts, and [? wool. ?] The importance of Indonesia to northern Australia will
be obvious to many delegates. Indonesia is the largest export market for agricultural production
in northern Australia. For Australia as a whole, Indonesia is the third largest export market for
agricultural products only next to China and Japan, and the largest market for live cattle and
sugar exports.
Now let me start with India. India has been one of the world's fastest growing economies and has
a food self-sufficiency policy. The Indian government subsidises consumer prices on staples
such as rice and wheat and provides guaranteed producer prices for many agricultural
commodities.
With the population of India projected to increase from 1.2 billion in 2010 to about 1.6 billion in
2050, there will be significant challenges for India to maintain its self-sufficiency policy. Toward
2050, rising household incomes and urbanisation are expected to lead to higher intake of
vegetables, fruit, wheat and dairy products.
Between 2009 and 2050, the real value of vegetable consumption is projected to rise by over
180%. Fruit, by close to 250%, dairy by over 130% and wheat by over 40%. The increases are
driven by greater quantities demanded and not because of higher prices.
For these commodities, the projected increase in domestic production in India is smaller. As a
result, imports are projected to increase. By 2050, imports of vegetables and dairy products are
projected to be around US $47 billion and US $13 billion in 2009 US dollars, respectively,
compared with [INAUDIBLE] vegetable or dairy trade in 2009.
Imports of fruit are projected to be around US $58 billion in 2050, compared with exports of less
than US $1 billion in 2009. Projected higher input demand for fruit and vegetables in India may
be of particular interest to northern Australia. Of course, it is noteworthy that market
opportunities in India and other Asian markets will also be available to producers and exporters
in southern Australia, as well as our competitors around the world.
Now what about Indonesia? Indonesia is a growing market for Australian agricultural exports. In
2013/14, the value of Australian agricultural exports to Indonesia was around $3 billion. Wheat
exports were around $1.2 billion, and exports of livestock and livestock products were over $1
billion. The value of Australian live cattle exports to Indonesia was close to half a billion in
2013/14.
Over the next few decades, sustained economic growth, population increases, and continued
urbanisation are expected to change Indonesia's demand for food. Not only will total food
consumption increase, but diets are expected to become more diverse. With the population in
Indonesia projected to increase from $240 million in 2010 to $320 million by 205, the value of
food consumption is expected to be four times larger in 2050 compared with 2009.
For many commodities, the value of consumption is projected to rise from a very low base,
reflecting widespread poverty and a large rural population in 2009. By 2050, 72% of the
Indonesian population is projected to live in urban centres, with higher incomes than the rural
cohort. It is this expected transition of the population and income growth that are driving the
magnitude of projected food consumption growth.
The real value of Indonesia's [? agri ?] food production is expected to more than double by 2050
compared with 2009. This expected increase is driven by higher production of beef, poultry,
starch staples, vegetables, fruit, and rice. For some agricultural products, such as rice and beef,
projected higher production partly reflects Indonesia's domestic policies that favour their
production.
However, there will be increased competition for resources for food production in Indonesia,
because Indonesia has a comparative advantage in the production of non-food and cash crops
such as palm oil, natural rubber, coffee, cocoa, and spice.
Despite Indonesia's policies, which support food production and food self-sufficiency, the
competition for resources from non-food crop production is expected to impact on food
production. As a result, food imports are projected to rise over the long term.
Toward 2050, Indonesia is projected to increase imports of a wide range of agricultural products,
including beef, horticultural products, dairy products, sugar, and wheat. Because of its proximity,
northern Australia is well placed to benefit from increased food demand in Indonesia, especially
for beef, horticultural products, and sugar. However, there will be strong competition in the
Asian market.
Australian exports, whether they are produced in northern or southern Australia, will compete
with not only domestic production in Asian countries, but also products from other international
suppliers, because other exporting nations can be expected to also respond to increased Asian
demand by increasing their exports.
Finally, let me summarise. Renewed interest in agricultural development for northern Australia is
being driven, at least in part, by increased food and fibre demand in Asia. As demonstrated by
my presentation on market prospects in India and Indonesia, growth in Asian food demand
presents significant export opportunities for agricultural development in northern Australia.
However, growing food demand in the Asian economy does not necessarily guarantee
businesses' success for agricultural development in northern Australian. Agriculture in northern
Australia needs to be competitive to capitalise on the opportunities higher Asian food will
provide. To improve the competitiveness of agriculture in northern Australia, significant
investment is needed, especially in securing water for irrigated agriculture and improving labour
supply, supply chains, and infrastructure. Successfully addressing these challenges is the key for
agriculture in northern Australia to benefit from the rising food demand in Asia and other parts
of the world.
This concludes my presentation. Thank you very much.