Redefining sustainable agriculture

Foreword:

Since European first settlement of Australia agriculture has been the foundation of the country as well as being the driver of exploration. While there has been some disastrous government policies and some extremely poor land managers the vast majority of primary production has been undertaken by people with sustainability as a fundamental premise. This is evidenced by the vast number of multi-generational families in agriculture with some progressing into the ninth generation.

Firstly, it is important to identify some of the policy failures from the perspective of sustainable agriculture.

  1. Returned soldier blocks after the major wars since the 1870’s – These were far too small and were taken up by people who had no real affinity with the land
  2. Land tenure in all States – This was established based on political drivers and have locked in specific land management practices and production systems that are now irrelevant
  3. Funding policies that are related to political outcomes rather than commercial reality – The loan and grant programs, including training, have an eligibility criterion that supports non-viable production units and poor management practices.
  4. Disaster relief programs (cyclone, flood, fire, drought etc) in the form of loans, subsidies and grants have an eligibility criterion that supports non-viable production units and poor management practices.
  5. Lack of coordination of funding programs as evidenced by the delivery of programs under the administration of various departments – Agriculture, Industry and Environment departments are all funding agriculture however with no strategic purpose and no standardised accountability

Secondly, it is important to identify some of the commercial practices that have also reduced the impact of sustainable agriculture.

  1. Commercial finance has been based on total equity position rather than the more sustainable income to repayment position. This has resulted in a significant increase in “stressed assets” throughout Australian primary production
  2. The taxation system rewards minimisation rather than maximisation resulting in poor financial management practices regardless of the seasonal or market conditions.
  3. Poor land managers are not identified by their peers as being poor land managers and then during an adversity these same people are supported by the public and government.
  4. Non-government groups and agri-political groups supporting primary production are fragmented and agenda driven – In Queensland alone there are more than 450 Not for Profit Associations servicing primary production. The vast majority of these have poor governance and financial accountability resulting in poor service delivery to the target audience and extremely high administration costs and financial waste of government funds

Finally, it is not the intent of this paper to highlight the adverse impact that the current Research and Development (R&D) business model is having on sustainable agriculture. However it is necessary to emphasise the reality that producer generated funds have been “hijacked” by Universities and Research and Development Corporations (RDCs) that are focused on the “road of least resistance” that is delivering extremely low returns to the industry.

Because of the evolution of the global business environment, the implementation of Free Trade Agreements and the disruption caused by the digital economy, sustainable agriculture needs to be supported by a truly collaborative Research, Development, Commercialisation and Extension (RDC&E) business model that is focused on delivering real returns to the production industry.

 

Portrait young sommelier standing at family wine cellar with senior winemaker and tasting a glass of red wine. Small business.
Portrait young sommelier standing at family wine cellar with senior winemaker and tasting a glass of red wine. Small business.

Definition of sustainable agriculture:

The true definition of sustainability encompasses four key areas in a chronological order being economic, financial, social and environmental. Over the past 25 years this has been manipulated by interest groups and redefined as environmental, social and economic. It is critical we come back to the initial framework to ensure sustainable agriculture is identifiable and rewarded.

  1. Economic – The primary production is a multiple billion dollar export orientated industry that achieves a national multiple of approximately seven.
  2. Financial – The generation of profits is critical for a business to access after tax fund capital expenditure that promotes innovation, quality production outputs and land asset improvement. It also facilitates the inter-generational transfer process
  3. Social – Approximately 92% of all primary production businesses are held by multi-generational families who have a strong connection to their local community. This flows into their interaction throughout the supply chain
  4. Environmental – The best primary producers understand that the environment is part of their only real asset base (soil, water, flora, fauna and air) and this drives their production and financial fortunes.

The best primary producers understand the linkages between these four segments of sustainability and how they interact. More importantly they also construct their systems to maximise their activities to achieve long term benefits for future generations.

What does this mean for all stakeholders servicing primary production – It means that government (all three levels), commercial, agri-political and the Not for Profit service sectors have to understand the real drivers of sustainable agriculture, embrace the need for significant rationalisation within themselves and embark on true collaboration.

This rationalisation needs to be implemented across three of the four levels nominated above;

  1. Government – There needs to be a truly “whole of government” approach to agriculture that is guided by a master agriculture policy and strategy. This policy and strategy needs to be accompanied by three other master Policies and strategies i.e. Regional Development, Infrastructure Development and Biosecurity,
  2. Government – Departments must rationalise their administration to enable the flow of funds to be channelled through a standardised set of criteria aligned to the master policies and strategies. This criterion must demand the service delivery organisations have robust governance systems (corporate and operational), financial accountability systems and direct producer interaction
  3. Agri-political associations must clearly demonstrate their ability to stand alone without the support of “administration” cross funding from their project divisions.
  4. Not for Profit associations must completely adhere to the governance standards of the Australian Not for Profit and Charities Commission (ACNC) and the relevant legislation instruments at the federal and state levels. This must also be supported by robust financial accounting systems.

It is to be noted that none of the above four points is current the case.

By redefining sustainable agriculture in the above manner it will shift the target audience from the lower quartile of the bell curve towards the upper 50% quartile. This is critical because this segment of the primary production industry is responsible for more than 80% of the total production output. More importantly, this quartile is responsible for almost 100% of the total export volume of primary production.

The added benefit of targeting this quartile will be the preservation of Australia’s competitive advantages in food and fibre production

  1. Biosecurity and product integrity
  2. Environmental and social management
  3. Volume and quality standards
  4. Family business and ownership longevity

Pasture full of brown cows.

 

What could be done:

While it is acknowledge that change is difficult the future of Australia’s primary production is far more important than the survival of sub-segments of service providers that have at best dubious benefits to the industry. There are three immediate actions that could be implemented within a very short period of time i.e. less than three years. These include;

  1. Development of standardise criterion for all funding that targets agriculture.
    1. This requires leadership and commitment from the Federal and State Governments to effectively the funding divisions of their respective Agriculture, Environmental and Industry Departments.
    2. All recipients of funding MUST clearly demonstrate that they have an integrated approach to sustainable agriculture that incorporates the four levels of sustainability PLUS has reach along the supply chain
  2. Rationalisation of the agri-political and NfP service sector through amalgamation or closure.
    1. This is to be based on their ability to demonstrate they have a clear history of successful service delivery, robust governance and financial accountability systems and have direct producer interaction
    2. There needs to be the ability to be across industries and have the professional support mechanisms for the project / program delivery resources
  3. A full and frank review of the R&D business model without the influence of the key interest groups of Universities, State Government Departments, RDCs and Agri-political organisations
    1. While these four groups have a position within the review they MUST be limited to a combined influence of 25% of the review.

The longer term actions include

  1. Review of the policy framework to align with the requirement of having four master policies and strategies
    1. Agriculture
    2. Regional Development
    3. Infrastructure Development
    4. Biosecurity (human, animal, plant, soil, water and atmosphere)
  2. Review of the taxation system
  3. Review of the adverse event policy

 

Young agronomist or a student checking results of his experiment in the wheat field
Young agronomist or a student checking results of his experiment in the wheat field

Conclusion:

This paper is not designed to be extensive rather its purpose is to prompt critical thinking for the benefit of Australia as we move into the Asian Century. Australian agriculture is well positioned to capitalise on these opportunities however the systems nominated above are actually counter-productive to facilitating this.

 

 

 

 

Lloyd Russell is a 4th generation family business member and an accredited family business advisor who is based in Brisbane while servicing clients throughout Australia and internationally. Lloyd is a specialist in family business strategy and governance with a particular focus on inter-generational transfer. He has more than 30 years’ experience in senior management and is an accredited neuroscience practitioner.

Contact Lloyd on 0413 549 748 or lloyd@tcbsolutions.com.au

Website – www.tcbsolutions.com.au

 

 

Windmill pumping water for the cattle on a flat-land ranch.
Windmill pumping water for the cattle on a flat-land ranch.