Australian provisions are great business that feed the world

It is said in the books of history that Australia was found for three reasons:

• a place for the British to send prisoners because the American colonies had revolted,
• to stop the French from claiming the territory, and
• a place to invest that would also send back produce.

Australia’s first fleet brought with it Spanish Merinos and the sheep joined the fleet in South Africa as the first fleet found its way to Botany Bay.

In 1770 James Cook had identified a suitable location for the foundation of a colony at Botany Bay.

Governor Philip was dispatched with the First Fleet, to botany Bay but on arrival decided to locate Sydney upstream from its famed harbour where it had freshwater.

He needed to find a place where food could be grown rapidly to feed his military staff, their family’s free settlers and the convicts.

The economy rapidly became agricultural and export focused supplying wool, salted mutton and wheat to a growing empire. In two centuries, this evolved dramatically.

Today agriculture is the fifth largest sector in the Australian economy, dominated by beef, wheat and sheep. Some 70% of agriculture today is exported:

 Provisions

It is important to define what we mean by “provisions”.

We need to put accounting concepts and legal ideas to one side and define provisions based on its Latin meaning of ‘preparing for a journey or simply food and water’.

Australia is a large and dry continent, however, with a relatively small population to its landmass, and water management, it has proven to be able to support many more people than actually live here.

Today Australia exports sufficient food to support some 75 million people at a standard of living which we enjoy in Australia – specifically with a high-protein diet.

Provisions are independent of cycles – people must eat!

As world prosperity increases people have more money to spend on their own diet and that of their families.

As the global middle class expands this trend becomes more important.

Australia’ Land use

Three years ago, I visited the Australian exhibition at the zoo in Cali, Colombia, to my surprise Australia was described quite appropriately as “The land where water is gold”.

The enduring theme of expanding agriculture and especially horticulture has been the harvesting and management of water.

What provisions are produced in Australia?

Australia provides a wide variety of food products.

Because of its geography ranging from subtropical to areas with snow-capped mountains, it can produce most things.

Australia is a preferred source for many countries, due to its relatively low levels of pollution and use of fertilisers and chemicals.

Australia produces today a wide range of products for global markets from lavender to truffles, and from farmed fish wood pulp.

Australia has benefited over the last two decades from the exceptionally rapid growth in Southeast Asia and the changing dietary requirements of our neighbours to include increased amounts of protein in the forms of meat, dairy, and legumes.

Australia has grown its ability to produce and meet some of this demand. Australia forever focuses on providing a premium product.

Australia continues to be an exporter into global markets and is a price taker in what it produces.

What is important for Australia is the real price of what it is exporting is increasing.

The Australian provisions market services domestic need for some 27 million people and exports the balance of what it produces.

The market

Investment into the Australian agricultural sector by foreign companies has been a feature since Australia was founded.

Much of the investment in the period 2005 to 2015 was driven by the search for food security, however, since about 2017 the driver has been international funds managers specialising in agriculture not only looking for diversity are looking for quality assets with low-cost production.

The Australian market for provisions has been a driver to apply technology to reduce costs and improve quality.

Whether it is harvesting machines, pest control or water efficiency, Australia has been at the forefront of driving technology.

As a price taker the Australian industry has had to be cost-effective to offset its geographical disadvantage.

Australia’s geographic isolation however has proved an advantage as with strong bio security laws we have not endured many of the diseases and pests, and around the world.

Some areas of the market are truly domestic and do not seek export such as bananas.

On the other hand, some products are produced primarily for the export market such as Wagyu beef and certain species of legumes.

Australia is fortunate in a diversity of what it produces and given its size and number of areas with the same items can be produced.

For example, Australia produces strawberries all year round because they can be grown in deep North of Queensland to the bottom of Tasmania. As such Australia can export fresh strawberries for about 11 months of the year.

As a price taker Australia has had to become a quality exporter so as to retract premiums in the market and loyal customers. In some markets such fresh seafood is flown to market.

The above table demonstrates that recent growth in volume and in price have been in protein and fruit and vegetable exports.

What is being seen is that buyers will pay a premium for quality. This has been an enduring feature of the Japanese market.

Australia in its markets

As in many things, Australia’s distance from alternative suppliers has led to the development of many assets in Australia and the development of technologies. 

Given Australia is a price taker in most commodities coupled with its distance to markets, it is that had to learn to be efficient as a producer.

During the events of the Covid-19 pandemic Australia’s fresh food meat and grain sectors have proven to be the most reliable to the world.

The sector has sustained itself because of the labour-saving technologies developed in the country, which enable remote operations of large production in both the energy and resources areas, and support logistics .

Markets

Who were the clients? Over the last decade the significance of the export to China has continued to grow.

Also, market studies suggest that in the next decade, as the Indian and MENA markets develop, Australia will have an increased share of their food supply.

Projects RH

Being based in Sydney, Projects RH sees many projects across Australia and increasingly across the world.

This is especially the case with respect to parties wanting to invest in the beef sector but recently also in dairy and vegetarian foods.

We are seeing people choosing to live in Australia because they want personal food security and feel that they can make a contribution to Australian society via the development of agricultural technologies.

Australia is not only an exporter of mining, medical and financial services technologies, but also agriculture. We are seeing people who want to invest in themselves and in Australia with the plan to stay.

We expect to see two areas of growth in the post Covid 19 world:

• People seeking to come to Australia on investment visas,
• People seeking to invest in Australian agriculture, services and establishing Australian produce stores in other countries.

There are already Australian produce stores in the United States and in China, and at projects RH we have been asked to assist with the development of a chain of Australian produce stores in India.

Historically we have worked with parties wanting to import beef into Indonesia and pink food into Vietnam.

Our Strategic Partners

We have been very fortunate that through our personal relationships we have developed strategic partners, specifically, Bill Cameron, Director: Grain Meat Fibre Australia Pty Ltd and Chris Todd, Director: CSMG Pty Ltd a registered primary production property valuer. Bill brings to our team many years of experience in crops, beef and property management whilst Chris has a long experience in the beef supply chain and how this impacts not only on the price of beef but the pricing of underlying assets.

Projects RH is able to identify and procure opportunities in the agricultural sector which meet the provision requirements of many organisations.

Projects RH is also involved in the supply of poultry from Latin America into the Asian market and we thank our team in Colombia for their ongoing support.

Conclusion

Whilst Australia continues to be a significant exporter of wheat and sheep meat, other sectors such as beef, and more recently vegetables, have grown in line with demand in Asia. 

Following Brexit there is increased interest from the UK in re-establishing historic ties.

The demand for quality clean fresh food will continue to grow along with global prosperity and the emergence of middle classes in more countries.

What is important is Australia not only exports the provisions but the technology of how to make them.

Australian Agri-technology is a growing annuity for the investment has been made by Australian industry and, in particular, through grower levies paid to development bodies such as the CSIRO. 

These developments -such as crops that use less water- are a benefit not only to Australia but also bring in revenue from user countries.

One of the wonderful things about agriculture, and provisions generally, unlike the extractive industries, is that they do not consume their resource; rather, they increase it.

This is a progressively attractive investment opportunity as over the last 20 years Australia has seen a significant growth in the value of agricultural land due to the augmented profitability of agriculture in the country.

Australia’s position as a high-quality exporter with more than adequate self-sufficiency across the entire provisions’ spectrum makes it an attractive place to invest and to live.

Many companies and people who work in the provisions area are choosing to make Australia their home as it offers them a wonderful lifestyle plus the opportunity to work within the fastest growing area of the world which is Southeast Asia.

Paul Raftery, CEO, Projects RH – August 26, 2020

Source: https://www.beefcentral.com/news/australia-has-world-leading-food-security-abares-assures-consumers/#gallery-1 Viewed 23-08-20

Source: https://www.agriculture.gov.au/abares/publications/insights/australian-agricultural-trade-and-the-covid-19-pandemic#demand-for-essential-food-products-is-stable-and-will-likely-see-less-impact-than-other-sectors . Viewed 22/08/20.

Source : https://www.agriculture.gov.au/abares/publications/insights/snapshot-of-australian-agriculture-2020

Source: https://www.agriculture.gov.au/abares/publications/insights/snapshot-of-australian-agriculture-2020#agricultural-production-is-growing. Viewed 23-08-20

Source :https://www.agriculture.gov.au/abares/publications/insights/snapshot-of-australian-agriculture-2020 .Viewed 23-08-20

Source: https://www.agriculture.gov.au/abares/publications/insights/snapshot-of-australian-agriculture-2020#agricultural-production-is-growing.  Viewed 23-08-20