Saturday, June 14, 2008

Not everyone laughs

In the whole of the industrialized world, the OECD ranks Australia's and New Zealand's farming sectors as the healthiest. Not coincidentally, they are also the freest and least dependent on government handouts. Lorne Gunter - National Post

I don’t necessarily accept the OECD take on healthiest. Given the choice, if I were a farmer, I would prefer to farm in Canada. As a consumer I think our antipodean produce is far superior, but I’m damned if I can afford a good feed of fresh veggies, or a succulent piece of fresh meat or fish here.

Given all that, the world is moving toward a food crisis and it’s time for me to resurrect a long held vision. Whenever I suggest the idea of Canada and Australia, and lets throw in New Zealand here, forming into a tight trading bloc I get laughed at. Well, not everyone laughs, most people just yawn and turn their attention back trimming their toenails. But hey! If I repeat it often enough…

Ok, all up the two countries have a population just one sixth of the US, a rest room queue in China; but they are also major mineral and agricultural sources. The synergies are all too obvious, with cross holdings between Canada and Australia in the mining sector and a shared reputation as food bowls.

The countries have every similarity except that Kiwis and Canucks talk funny, but there is a major fundamental factor which could turn these geographically separated economies into trade powerhouses: they are both gateways to major markets.

Well I shouldn’t need to draw a map here for you to realize the importance of Canada’s position in the Americas, and Australia is increasingly a part of economic as well as geographic Asia.

The main problem seems to be that we are out of synch politically. No sooner does the Conservative Harper become Canadian PM does the conservative Howard lose power in Australia. But we now have Rudd and the Kiwi honco Helen Clarke. If they aren’t the epitome of modern economic pragmatism I’ll give the game away.


abi said...

I would think Australia's relative proximity to the emerging giant market of China would be an tremendous advantage for your economy. It looks like your corner of the world will be booming in this century.

Cart said...

Abi, if Rudd can pull it off we will be. Otherwise we'll be run down by the Asian behemoth.
I still believe a Canadian/Australasian (Aust and NZ) trade alliance would be positive for everyone.

D.K. Raed said...

hey, the tighter the trading bloc the better, I always say! You guys are spread out a bit, but with such common interests & diverse climates, not to mention the gateway to the huge asian market aspect, why would anyone slough off such an idea?

now, if the native produce is so good there, why is it unaffordable? is it the long transportation issue?

here, we import so much produce from the south american countries, and even with the long transport issues, it's still cheaper (just watch out for the avocado mites).

Cart said...

Australia is still largely in the grip of drought, though you would never know it around the coastal regions. While last seasons rice crop was well down Australia has still developed the most effective water use to harvest volume regime.
But drought or not investment in agriculture production depends on scale of economy, like any other sector.
For example; with progressive market deregulation over the past 15 years Australia and New Zealand have are considered now to have to most efficient ag sectors in the developed world.
All very well for farm efficiently, but this has not related to an equal development of wider market potential. To my knowledge we have not really gone down the road of factory farming, with producers still depending largely on the traditional markets.
A decade after dairy deregulation that sector is only now seeing potential for a return to anything more than sustainable production. That is because thy have tended to stay under the price thumb of the domestic supermarkets.
I’m suggesting there is a big hungry world out there who would make the necessary investment in more cost efficient production technology very attractive if we start thinking outside the old models.

Cart said...

I should add that more efficient and increased production would not guarantee lower domestic food prices. We local consumers would still need to compete on a global market. In fact some populations could/would buy cheaper than us because their imported food products might be subsidized.

lindsaylobe said...

Interestingly enough you idea is somewhat timely as the Free-trade policies are rapidly losing favor with developing countries in Africa, Asia and Latin America and elswhere. They are now find themselves in the position of being unable to buy enough food to feed their people: becuase food costs have risen 60 percent from 2007, sparking riots in 30 countries, a rise in malnourished people to just under 1 billion.

The answer is not to export more, particually over vast distances; that doesn’t make sense, but rather the only answer, I think, harsh as it may seem, is for developing nations to nourish their populace by growing more food themselves as opposed to an overreliance on what was previously cheap imports.

The $1 trillion in annual food trade is now on the ropes and we may see more moves ahead towards higher agricultural tariffs and subsidies around the world. Hence self sufficiency will become the new goal.

Given that scenario it makes sense to trade with our immeadiate neighbors.

Notwithstanding it is true that it is still principally U.S. and Europe who continue to be the key subsidizes of production of grains and other commodities, which enable their farmers to undercut the prices of all competitors in the developing countries, who are disadvantaged.

Best wishes

Cart said...

Lindsay, someone whom I have rather strong feelings for is a former dairy farmer and current dynamic IT professional in Canada. She talks about a dream of melding the farming and technology experience into a business proposition.
Personally I’m in favour of agrarian socialism; or prairie socialism as some Canadians style it, including supporters in the Conservative government there. Even so I fear Canada will roll into ag sector liberalization, even well after it has been shown as a dubious proposition.
Now supporting the proposition of evidence based policy (the ultimate social pragmatism?) I figure if Canada do swing to the so called free market, unlike the US socialized ag market) then small farmers need to be better equipped than their Aussie counterparts were a decade or so back.
It should be obvious, to a socially aware administration, that local needs should be met first. My real argument is that countries like Australasia and Canada, with large productive land to population ratios could both provide for the local market and be global providers as well, with appropriate programs.
I guess what I would aim for is a specialized product single desk model. Well let’s say a range of market compatible specialized products. As an example, and with no real emphasis on this one product, let’s take cheese. Small producing units in the three countries could easily be turning out a variety of cheeses which suit the local dynamic, but sell them through a collective marketing regime. I know it sounds fanciful, but it is almost like taking unwieldy globalism and converting it to the marketing and distribution of local product.
Ok, what is the business model? I really don’t know. I know the farmers, I know consumers, I know the potential; I don’t know how to bring all that together.
For the poor countries think they really need to tell the World Bank and IMF to go jump, then look after their own.

lindsaylobe said...

Having spent my childhood on a farm and having lived near them whilst growing up and hopefully gaining some wisdom I have a keen interest in such ideas: it strikes me as an absolutely brilliant idea!

Its one that offers much promise and makes a lot of sense to me in today’s unwieldy world of back flips in home spun agri policy. I like your example!

It’s no use trying to trade with guys who don’t want to play the game and at the slightest change in the breeze are likely to throw the rule book out the window and leave you sitting high and dry as they say; you finish up with no patience or pay cheque or both ; enough is enough, we have had a gutful of it! ! On to a better solution!!

The best business model I think would be to extend local co operatives and encourage those existing to create new enlarged ones to take in overseas growers , by product group. Hence the co op is expanded to include the overseas counterparts so that they are able to make agreements to on sell surplus productions etc .

You can obtain credit insurance, product cover and other types of protection for the grower partners who have shares in the co operatives and to whom the co operatives pay dividends.

The proceeds go directly back to the growers less expenses, just as co operative already operate in those countries to day, but through a single desk marketing and administrative authority made up of grower partners.

The AWB was far too big and disjointed; it ended up also making bad hedging policies. Nothing new here; but the concept is to accelerate new partner grower co operatives within similar minded trading countries by product type. The cooperatives could help the developed world do the say within their regions or on their home based turf.
Best wishes

Cart said...

The terminology is always a problem, co-operative for eg is as popular a word as socialist. But it certainly would need to be a matter of partnerships. I was thinking the law and accounting firm model, with partners and associates, could provide an answer.
If the average farmer is going to buck at terminology, how much more difficult is it to actually get them to take the risk of a whole new production/marketing regime?
I was asked, back in BC, to research the viability of converting animal waste into energy. In fact, on paper, a medium sized operation could not only produce an excess of heat and power, but also provide an inert fertilizer for their own crops or to market on.
Bear in mind, the BC farming regime relies on housed animals and the collection of waste is not only easier, but also presents a disposal problem. They overcome the latter by spraying it onto the fields raw, or at least fermented. It is a rich odour.
But, despite the ease collecting the material, and converting it to usable power and inert fert products, no-one was willing to try it without heavy subsidies; the prospect of saving tens of thousands of dollars on a mid sized farm operation and on-selling the excess raised interest but not commitment.
My fear is that farmers would be inclined to risk losing any control over these operations by insisting on outside investment.
I’m sure Mac Bank would love the concept, but the producers would soon be reduced to little more than share farmers. I guess my point is, any plan would need to be compelling enough to induce producers to take the plunge.