Approximately one year ago KPMG had the privilege of supporting the National Farmers’ Federation in the development of Talking 2030 – a discussion paper about how the farm sector could almost double output in the next 12 years to $100 billion.
The target is audacious but achievable and has struck a chord within the food and fibre sector.
In developing the paper we relied on the expertise of approximately forty experts from the industry and from KPMG. The themes were as expected but key points of note were:
- become more customer-focused as a farm sector,
- move towards digital supply chains as fast as possible,
- support community services,
The demand growth on the back of global population and income growth is a mega-trend (and essential element) of our time so all industries and governments must be preparing to be part of this.
So what are some of the areas where tough decisions toned to be made to make such an ambitious target?
In the midst of a severe drought in many parts of Australia and severe floods in others, it is impossible not to discuss climate risk, climate volatility and climate change.
The paper touches on several aspect of climate change policy. Energy policy and energy costs have become a first order issue – especially over the last three years in the food processing sector with pressure from customers and governments. One example is the meat vcsector’s goal to reduce net emissions but also is the readiness of the sector to mitigate risk and the introduction of business models and services that can mitigate risk.
No one can deny that dry seasons (droughts) continue to stress the Murray Darling Basin Plan so it’s important the plan does not look to fall apart every ten years or so when a drought hits. At the same time we have to decide if there is a pathway to expanding existing storages or building new storage to collect the rain when it comes rather than letting it flow off the land. The effective operation of water markets remains a question and the use of technology in effective monitoring is a no-brainer.
The future of the research and development model
The world market place for venture capital and fast-paced research is changing fast and this presents challenges and risks to funding models and governance. This change will likely decentralise research and development. It is time to prepare our industry and government models for a new market place.
It is also vital that the policy settings for the regulation and market understanding of new technologies e.g. breeding technologies and blockchain are carefully planned and communicated.
How do we maximise the benefits of digital for farm services, forecasting, markets, banking, insurance, export, quality assurance, compliance, people management?
One way is to dramatically reduce the cost of compliance and dramatically increase its effectiveness so we can more easily connect the consumer to our farmers. Connectivity is now an essential service alongside health and education.
The people and skills we need
A key theme of Talking 2030 was providing the critical basic services to regional Australia required to attract the workforce of the future – health, education and childcare for example. It is important that these issues are closely examined in our second and third tier country towns.
The utilisation of an international workforce in conjunction with the local workforce remains critical and visa policy remains an important issue when a large seasonal workforce is needed.
To truly meet our target we need to address risk and improve the attractiveness of the sector to capital with new market and contract structures to meet customer needs and replace commodity markets. We need to develop new plant strains and animals to add-value, differentiation, and resilience to climate and new capital models to reduce reliance on debt finance are needed.
Although there are many challenges, for me, the combination of finding new ways to mitigate risk – which will in turn improve returns and attraction to capital – is the biggest issue to be addressed if we are to achieve our goal of $100 billion of farmgate output by 2030.