According to a report by the ANZ Banking Group, Greener Pastures: The Global Soft Commodity Opportunity for Australia and New Zealand, the new-found wealth of emerging Asian countries is leading to increased calorie consumption and higher-protein diets. In turn, these are pushing for 60% more agricultural output by 2050 compared to 2005-07.
On the face of this, Australia and New Zealand could become food bowls for a developing Asia as both countries have the land, water, skills and proximity to benefit from huge middle-class populations emerging with sophisticated tastes and rising incomes, the report said.
But the most crucial ingredient for this is investment—between now and 2050, around A$600bn and NZ$210bn in additional capital will be needed to generate growth and profitability in the country’s Agrifood sectors.
A further A$400bn and NZ$130bn will be needed in the countries to support farm turnover, as aging farmers make way for the next generation.
Asia could unlock true value
According to the report, both countries could more than double the real value of annual agricultural exports by 2050. This would result in an additional A$710bn and NZ$550bn of revenue over the next four decades.
Moreover, the prize could increase to AU$1.7tn and NZ$1.3tn respectively if global demand for agricultural products grows faster, and if both countries boost production volumes and shift to higher value products.
The report also predicted a number of opportunities for Australia and New Zealand to capture price premiums, given the increasingly affluent and discerning global middle-class.
“This includes expanding the production of differentiated commodity products and, in some cases, manufacturing value-added products for export markets, albeit in niche areas.”
The report suggested that the two counties could work selectively to reinvigorate stalled industries with growth potential, such as Australian grains and oilseeds, and sustaining and strengthening existing high-growth industries like New Zealand dairy.
In addition, fostering new and emerging agricultural industries around high-growth opportunities, such as new varieties of oilseeds and advanced biofuels, could also unlock value for the countries’ agrifood sectors
The race is real
But this would not be without any obstacles—the biggest of them being competition. The report pointed out how countries like Brazil, Malaysia and Indonesia currently lead the way in tapping growth markets.
Brazil has swept aside global competition to capture the market for soybean, while Malaysia and Indonesia dominate the production and marketing of palm oil. However, New Zealand has to its credit created and consistently grown a globally successful dairy industry.
Brazil, the report pointed out, has built this success by reinforcing areas of high capability with extremely efficient supply-chain research and development capability, innovative financing, clear strategic vision and productive farms with the requisite scale, organisation, funding and skills.
“This kind of success, based on clusters of highly competitive activities, has not emerged in Australian agriculture in any substantial way for some years; nor in New Zealand outside the dairy sector.”
The report said that while it was understood that Australian agriculture has been preoccupied with survival during the country’s recent drought, there is further need for Australia and New Zealand to overcome a series of growth-limiting hurdles.
The sourcing of capital for farmers was one, with farm debt levels already high and few external sources of equity capital being available to farmers, particularly in Australia.
“New structures for owning and operating farms need to be encouraged to attract investment from domestic and foreign investors and capital markets,” it said.
Other goals include attracting skilled labour to the agrifood sector, increasing access to land and water, growing R&D to identify the highest potential opportunities and improving supply chains.
Outside production challenges, the report said it is crucial to be able to identify key markets, and further work is needed to understand consumer requirements and explore more innovative ways to access new markets.
“In addition to striking free trade agreements, strategic off-take agreements should be explored particularly in return for capital investment. There should also be a conscious effort to capture premium market opportunities.”