The survival of the fittest is about to be turned on its head. Darwin’s theory will not apply in the trade world where weak – in efficiency terms – American and European farmers may survive thanks to generous taxpayer subsidies, while fit and competitive Australian farmers may fall.
The US Farm Bill, which has just gone through the US Congress, will pour over $US180 billion worth of taxpayers’ dollars into American farmers over the next ten years ensuring that some 60% of their income will come not from what they produce but from taxpayer handouts.
In a triumph of the persuasive over the productive, an American sugar farmer will receive – thanks to American taxpayers – US19 cents per pound while an Australian sugar cane farmer receives the world price of US6 cents per pound – well below cost of production.
If people receiving three times your wage or salary, and doing the same work but less efficiently, is not enough to raise your ire, then their subsidised income suppressing what you earn most certainly will.
It is not unlike failing to receive a Christmas bonus year after year while the less deserving fellow at the next desk gets one, but part of it is taken out of your income.
That is the case for hard-pressed Aussie cane farmers, who have to accept that the subsidies paid to US farmers depress world sugar prices by 17% and strip $US1.5 billion out of the income of sugar exporters such as Australia, according to studies by the Australian Bureau of Agriculture and Research Economics.
But are Australian cane farmers efficient and productive?
Yes they are – Australia produces 100 tonnes of cane per hectare compared to the 50 to 75 tonnes per hectare produced by their nearest competitor, Brazil. Even with Brazil’s minimum wage structure of $1,308 per annum in 1995 to 1999, Australian farmers were still competitive.
However the 24% devaluation of the Brazilian currency, which boosted their income by 40%, has dealt a severe blow.
Comparative advantage cannot compete with a massive currency devaluation when the Australian dollar is rising in value, nor can it compete with the might of US Treasury subsidies.
The Australian sugar industry has become the “canary in the coalmine” of globalisation – because 92% of raw sugar from Queensland is exported onto the corrupt world market – it is the first agricultural industry to show the sickening effects of that corrupt world market.
However, it is far from alone, with pressure on the beef and dairy industries already beginning to show and other agricultural sectors set to follow suit.
Australian agriculture’s tragedy can be attributed to the elite thinkers who crafted what passed for “rural and regional policy” in a succession of governments spanning the past quarter century.
Still frozen in a post-colonial theory that revolves around “get big or get out’, economies of scale, point theory, and the cherished hope that eventually the world would adopt a truly free market philosophy, they have instead delivered an economically and ecologically unsustainable future.
It is not that past governments or the current Liberal-National Government are to blame for the current difficulties of agriculture generally or sugar specifically; they are not. Low commodity prices, an appreciating Australian dollar, the US Farm Bill and other international factors cannot be blamed on the Federal Government.
In fact the Liberal-National Government has done more than any other government to assist by implementing the Sugar Assistance package that delivered financial assistance in the form of household support, and paid the interest on loans for thousands of sugar cane farmers.
However, the old theories are now found wanting, and it is time for a new paradigm for agriculture and the rural and regional communities that depend on it.
A new paradigm should firstly shed some long-held but flawed beliefs: that the future of agricultural industries can be de-coupled from the future of those making their livelihood in the industry; that deregulation is good; that small farms are necessarily inefficient; that ever increasing economies of scale will overcome problems; that science can be at arm’s length from the subject of its studies; and the centrist view that Canberra knows best.
The linkages between agriculture and the well-being of rural and regional communities has been demonstrated by an Australian Bureau of Agricultural and Research Economics study entitled Country towns – Impact of farmers’ expenditure on employment and population by Caroline Levantis in the Australian Farm Survey’s Report 2001. It showed that for the 467 towns across Australia ranging in size from fewer than 1000 to more than 50,000 people, each resident received on average $6,200 from the expenditure of the surrounding farm community.
Small farms efficient
The inverse relationship between farm size and output – which debunks the theory that small farms are inefficient and in fact shows that they produce far more agricultural output per unit area than larger farms, whether it is an industrialised country or a third world country – is outlined in an article ” The Multiple Function and Benefits of Small Farm Agriculture” by Rosset and published by Food First – The Institute for Food and Development Policy at www.foodfirst.org.
Partnerships, driven by local leaders in rural and regional agricultural industries, and encompassing farmers, processors, marketers, government and researchers are needed to identify and implement new farm structures such as co-operative farming that reduces the capital cost per production unit, new value-added products such as ethanol that offer an alternative to the corrupt world market and new best management practices that focus on profitability and sustainability.
Australian agriculture may not have to work harder but the stakeholders will have to work smarter and that includes advisers, scientists, government departments and others.
Australian farmers can either be victims from globalisation or masters of globalisation, but the outcome depends on government leadership.
- De-Anne Kelly is the National Party Federal MP for Dawson, whose electorate produces more than 50% of all sugar produced in Australia