The Guardian 31 August, 2005

Big changes down on the farm

Bob Briton

Tractors rumbling into Canberra from Tasmania and Victoria recently were only one sign of the big changes taking place in Australian agriculture. The potato growers’ desperation at the loss of supply contracts from food companies McCain and McDonald’s gave the public an insight into the power of big corporations in the chain of farm-dependent enterprises. It is increasingly the case that the farmers, the actual producers in this chain from the land to the consumer, are by far the most vulnerable link under the prevailing economics. The small farmer is being pushed around and pushed out of business by big capital in the form of agribusinesses and by the likes of McCain and McDonald’s.


Slowly but surely, the farm is being wrenched off the family farmer and integrated more closely into the corporate modus operandi of agribusiness. The advice to farmers about their predicament is oft-repeated; it was the subject of a report in Business Review Weekly earlier this month: "Farmers can solve much of their industry’s malaise by acting less like cockies and more like corporate investors".

Model "modern farmer"

According to the report by Phil Ruthven, the checklist of the steps the modern farmer should take looks like this:

  • Become a business, not a way of life.

  • Do not blame other countries; play a different game.

  • Grow what the market wants, not what has always been grown.

  • Do not pray for rain, make sure there is a supply of water.

  • Outsource activities, such as ploughing, seeding, harvesting and shearing, that can be done cheaper and better by others.

  • Do not own land, buildings, equipment, stock, or debtors.

  • Work the brain (intellectual property) harder than the body.

  • Add value at the farm, not the factory (i.e. high-quality fresh food is often better than processed).

  • Have long-term contracts and relationships, not spot markets.

  • Franchise or be a franchisee wherever possible.

    The small farmer can only stare blankly at this list. The "flexibility" mantra used by big business against workers in our cities clearly has its counterpart in the bush. In years of drought, how does a small farmer simply "make sure there is a supply of water"? By following another mega-trend to relocate in the north of WA, Queensland and the Northern Territory? How do you simultaneously grow "what the market wants" on your farm and have "long-term contracts and relationships" with processors and the rest? In the light of what has happened to potato farmers at the hands of McCain and McDonald’s — where supply contracts were scrapped in favour of cheaper potatoes from New Zealand — how valuable are these "long-term contracts and relationships", anyway?

    Of course, these are not questions that small farmers left to the mercies of big processors, retailers and other corporate heavyweights can answer. That is not the point of the latest changes. As Phil Ruthven says, "It is far better to swap fierce independence for mutual reliance and higher profitability — 40,000 viable farmers are preferable to 112,000 marginal ones." The term "mutual reliance", however, is not used in the sense that workers or small farmers would understand. It is a fuzzy cover for things like property trusts; the Challenger Beston Wine Trust, for example, that has $240 million worth of assets that it leases back to companies like McGuigan Wines. Stand alone businesses are under threat.

    Return on assets in agriculture is lagging behind the rest of agribusiness. Farms return only an average of $25 for every $100 of total assets compared with a national average of $100, $110 in manufacturing and $350 in retailing. According to Business Review Weekly, in the new world of farming, only the farmer with revenues of $1 million is worthy of survival. Unfortunately, while farm numbers fell by a quarter (or 46,000) in the 20 years to 2002-03, only 11 per cent of broadacre (crop and livestock) farms had annual output worth more than $500,000. Only the top eight per cent had a yearly profit of more than $289,000.

    Presumably, the rest of the severely pruned agricultural sector will be undertaken by corporate farming. In 1980, about five per cent of agriculture was corporatised. Today it stands at about 18 per cent and is set to burst its current bounds of poultry, pig farming, cotton, vineyards, aquaculture, hydroponics and cattle feed lots and spread to the rest of agriculture.

    Smaller footprint?

    Does this trend matter? Won’t corporate agriculture be more efficient? Hasn’t the shake-up in agriculture over the past 20 years actually reduced the area under farming by 10 per cent? Won’t it leave a smaller environmental footprint and keep a new group of Generation X investors happy and wealthy? Couldn’t corporate farming, with its economies of scale, be considered in some ways a precursor to socialist agriculture?

    While the big stakeholders in capitalism certainly strategise and lay plans, they do not "plan" for the same type of future that progressive people would plan for. For example, in Phil Ruthven’s article and numerous other pieces advising investors, cotton is given as a hot tip. This water guzzling, river draining example, so inappropriate for Australia, reveals the sorts of priorities that finance capital pursues in agriculture.

    Capitalism makes its plans on the basis of profits alone. The rest of us would be genuinely concerned about the effects of the cotton industry on the health of Australia’s rivers. While companies cry crocodile tears about environmental threats like profligate water use and the pollution of waterways, money talks and it says things like this: "Swing your funds over to the agribusiness sector, with a particular focus on Queensland Cotton", as Les Pulman of Reynolds Stockbrokers said recently.

    Why Queensland Cotton? Because the former government-run marketing authority turned agribusiness giant is on an acquisitions spree. It has bought several southern California farming companies and is said to be about to buy out Namoi Cotton — the corporation that grew out of a former growers’ co-operative. The combined entity would control about 55 per cent of Australia’s rising cotton output.

    "We also like the Australian Wheat Board, Australian Agriculture, Warrnambool Cheese and Butter Factory (WCB), which is our only listed dairy/cheese producer and, despite its current damages claim against environmentalists, we see Gunns as a strong buy around $3.90," Mr Pulman went on to tell The Gold Coast Bulletin.

    "Yes money grows on trees — investors plough into forests", ran a headline in Brisbane’s Courier Mail last month. The article went on to say that "high income professionals have ploughed more than $1 billion into rural tax shelters this year." The capital inflows to timber projects (about $750 million) will include about 94,000ha of short-rotation eucalypt pulpwood, 8000ha of long-rotation pine and 3000ha of tropical timber. The big punters poured money into investments like: Great Southern Plantations (with about 35 per cent of market share); Integrated Tree Cropping; Gunns Plantations; Macquarie Bank’s forestry investment arm Macquarie Alternative Investment Management Limited; Forestry Enterprises Australia; Willmott Forests; and Rewards Group.

    Again, genuine long-term planning issues like the environmental impact of the land use, the consequences for native flora and fauna and questions of how to reduce consumption just do not get serious consideration. They are growing money, not planning for healthy prosperous communities in a sustainable environment. The answer to questions about the possible good effects of corporate agriculture is "No"; corporate agriculture does not throw up all sorts of win/win scenarios. It benefits already wealthy investors and leaves an almighty footprint on the environment about which it cares nothing. It is the antithesis of a future socialist agriculture in Australia.

    Democracy

    The disruption to the lives of thousands and thousands of farmers and their families is also of little consideration. The workings of markets dominated by agribusiness corporations are deeply undemocratic — like the workings of capitalism in general. The quest for maximum profit alone is reshaping society in rural Australia and similar industrialised countries and it is not only bad news for family farmers.

    The Swinburne Institute of Social Research is currently conducting a survey to test anecdotal evidence of labour shortages in horticulture between Swan Hill and Mildura. It is part of a bigger project being undertaken by Sunraysia Mallee Economic Development Board, the Swan Hill Rural City Council and Oxfam Community Aid Abroad to see if Australian horticulture should have a foreign seasonal workers scheme.

    "There appears to be a neat fit between labour shortages in Australian horticulture and the labour surpluses evident in many Asian and Pacific economies", research project spokesman Peter Mares said. The Gippsland Agribusiness forum wants a number of pilot schemes set up across Victoria straightaway. Because of "Australia’s historical and geopolitical relationship with Pacific Island nations", the first batch of guest workers staying for a limited amount of time with costs part funded by growers could start arriving in the near future.

    Presumably, the new generations of black-birded workers would be expected to work for the unlivable piecework rates that are failing to attract young Australian workers. Agribusiness is not about to accept that the laws of supply and demand should cause a major boost to pay for labourers in horticulture and will go to great lengths to keep it that way. Nor is it interested in co-operating to rebuild the devastated economies of Pacific Island nations.

    The aggressive new push of the big agribusiness players into the agriculture end of the industry mirrors the one that has been going on over recent decades in other areas of the economy where unions have been a form of defence against the worst excesses of capitalism. The "worker/small farmer alliance" has got to become much more of a reality — and soon — if we are to avoid the type of future being mapped out for us by big capital.

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