Address to Australian Food and Grocery Council



SEPTEMBER 30, 2014

Food processing, agriculture exports, free trade agreements, certification schemes


Thanks Gary.

It's good to be back at another one of your events. I think last year I was about the 11th Parliamentary speaker at your forum and I could have excused you all for being fairly jaded with that by the time I got to my feet by the end of the second day. I'm really pleased with the order of events this time because I'm the first one up. So I hope my message isn't lost by the end of tomorrow night.

To consider the process we went through with the food processing inquiry, which reported in August 2012 so it's only a couple of years old, you're right there's a whole heap of stuff in that report that's still relevant. In fact I got it out this afternoon to have a bit of a flick though and see what was there. It is very pleasing that some of the things we talked about in that report have come to pass, particularly the recommendation about a review of the Competition and Consumer Act. The Harper Review draft report is now out there and I understand Ian's talking to you tomorrow. We are very close to putting the Green Paper out for agriculture and I know Barnaby is very focused on that and I had a conversation with him about that this morning.

There are some key elements in the report that are showing up in other pieces of work; the Paddock to Plate Report that came out recently and the work that you published over the weekend around the State of the Industry as it stands at the moment. They go to a whole heap of the big ticket issues for the food processing sector but also for the economy in general.

There is also the work that Warren Truss is doing around coastal shipping, because you can be as efficient as you like but if you can't get your product efficiently out of the country there is not much point. The work that we're doing to focus on bringing forward key infrastructure projects so that we have an efficient transport system, and I note the transport sector was a part of the Paddock to Plate report that was presented recently.

Things like getting some harmonisation between states and their regulatory frameworks are also really important. We talk about red tape reduction, and I know the committee that Tony Abbott put together prior to the election went around looking at that as an issue. We found that something like 65 percent of the regulatory impacts were at a state level not commonwealth level.

I still vividly remember going into a business premise in Western Australia which had eight QA systems that they had to comply with and were audited for each of them, yet they still got a visit from their local council to do a health inspection report on Easter Thursday, when they have 65 tonnes of fish to process. They did suggest it wasn't an appropriate time to conduct that audit since they were accredited until April for export, but the council officer said 'well if you like we'll call the police and close you down'.

That sort of attitude, quite frankly, is absurd and we need to be able to negotiate and encourage from the commonwealth level for that attitude to change. We need to recognise across state boundaries and within our existing frameworks how we can have some mutual recognition in those certification schemes. I do note each one of the supermarkets have their own certification scheme and they talk to us consistently about wanting to remove cost from the supply chain, well if you want to do that then stop applying it. So that's my message back to the industry.

A lot of these reports come to us and they ask us to do a whole range of things. There are some things that we should do from a regulatory perspective and the Paddock to Plate report gives a perspective from the NFF right through to retailers and that's really positive. But there are things I think that get missed out of these reports. They are often directed at government but the thing that I think is missed on a lot of occasions is what industry can do for itself.

I think in respect of some of these certification systems and programmes we only have to look at Europe, where for example the British retail standard for certification systems already exists. They've already woken up to the fact there is all this cost in the supply chain that can be removed by some mutual recognition. We should be doing that sort of thing too. Because when Barnaby and I talk about returns to farmers and returns to the farm gate, the thing that affects that is costs in the supply chain.

There is a retail price and the farmers get what is left down through the supply chain unless there's a tension in the market that provides them with an alternative place to sell their product. I suppose dairy would be a great example of that, where through the $1 milk campaign the guys that felt the pressure there were the processors in the middle because the dairy farmers were getting paid based on the global dairy price. That was the thing that put the floor in the price of the market and so the pressure came into the processing sector from that particular marketing campaign by Coles. So unless there is another outlet the farmers are going to get what's left at the end of the day.

That's why the work that we're doing at the moment and our focus on the perspective free trade deals is so important, because if farmers are going to get a higher return at the farm gate they need an alternative market and it's also an issue that you as an industry need to understand.

The work that Barnaby has done in particular in opening up markets for live exports is impacting positively on returns to farmers for sheep and cattle. That is going to impact on what happens through to the supermarket, because they now have an alternative place to go. We're focusing very heavily on that and that's going to be an issue in time in respect to food prices here in Australia. Because if you can go somewhere else and get a better price, why wouldn't you.

So we've got the Korea free trade agreement, we've got the Japan free trade agreement and we're really working hard on China. I've spoken to you previously about the importance of that and there are opportunities I think, not just for farmers but for food processors.

The one statistic that stood out to me out of the report that you released over the weekend was that the trade surplus in the food and beverage sector for 2014 has been growing at approximately 9 percent per annum for four years. So the processing sector is seeing it and the food and beverage sector in particular is seeing it as well. When you look at the statistics for China, where it grew from around $650 million to over $2.1 billion in five years, that's an extraordinary growth in the market.

So there is opportunity for the food processing sector, as well as for raw agricultural product and I think we need to be looking out rather than focussing a whole heap on our own navel. For too long we've done that. Yes there are things that we need to do at a local level within our own markets and within the country and all the regulatory things that you talked about in numerous reports are taken on board. We need to continue to push on that both within business and from a government perspective, but there are enormous opportunities coming.

We're never going to be food bowl of anywhere - if you look at the numbers of people we'll feed by 2050, by doubling our production, we'll feed ourselves plus 1.3 per cent of Asia, that's all. It's not a food bowl. My analogy is that we'd be lucky to be the caviar on the hors d'oeuvre. But what a value proposition if we could be the caviar on the hors d'oeuvre into that market, and that's what I think we ought to target.

So there are really exciting opportunities I think. I know that my colleagues and I are really keen to work with you on a regulatory process, I see Bruce Billson, I see Barnaby and I see Ian Macfarlane on the program tomorrow to talk to you all about what we're looking to do and where we're looking to take the country_msocom_2 but it fundamentally is about the economy and the economic settings for everybody. If we can get you guys doing well, everybody is going to do okay.

I think we're on the cusp of some real opportunities. If that 9 per cent growth rate in terms of trade can continue for the food processing sector, not only will you remain one of the biggest manufacturing sectors in the country, but I think you will have an enormous future. There are opportunities right through South East Asia, our closest market and a region that acknowledges we provide a safe food product.

I was talking to somebody today who has a supply chain organised and they are really struggling to get hold of product particularly in the baby food sector into China. They've got people prepared to put a million dollars down in advance of an order right now to get hold of product from Australia into China, because they know it's safe. So the systems that we have in place which might cost something, are also a huge asset and we need to make the most of it.

I wish you all the best for the rest of your time here. Thanks for the opportunity to speak to night.

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