Not sure you guys will agree Canada v Australian Ag

[malleefarmer]

Higher domestic prices and effiecient rail system in canada read on!!

http://www.weeklytimesnow.com.au/agribusiness/decisionag/canadian-agriculture-on-par-with-australia-with-room-to-differ/news-story/7505adfd0fd3ac15cabca27d84c03149

[malleefarmer]

THEY are the global odd couple.

Despite being at opposite ends of the planet, Canada and Australia have long been soul sisters. Canada has its sweeping plains, Australia the outback. Canada has ice hockey and Australia AFL. Canadians love to joke about their neighbour, the US, while Australians enjoy poking fun at New Zealand. And both countries are looking to redefine themselves as they emerge from mining booms.

But it’s in agriculture where the similarities come to the fore, with very similar commodity profiles, particularly for grain, dairy and protein.

And despite very different target markets, trade agreements and government attitudes, each country’s agricultural communities are after one thing — a profitable and expanding appetite for their produce.


Some of the biggest agribusinesses in Australia are owned by Canadian businesses like Saputo.
Each has established markets that form the backbone of agriculture trade. For Canada, there’s the not-inconsiderable matter of the United States, a $A345 billion export cash cow sitting beyond Canada’s border. The US is Canada’s largest agricultural market, worth $A22 billion in 2016 and accounting for more than half Canada’s agricultural exports.

“They’ve got very high dependence on a single market,” says NAB agribusiness economist Phin Ziebell. “If you compare it to us, we’ve got a much more diversified set of markets.”

Australia’s agribusiness export money maker is Asia. In 2015-16 Asia took $32 billion worth of our agriculture goods, or 72 per cent of our total agricultural exports. China topped the charts with $9 billion, with Japan buying $4.3 billion.

But we also have a huge slice of US action. Australian exports to the US in 2015-16 were $4.7 billion. We even managed to send $537 million of agricultural products to Canada.

Yet Canada sent us $1.5 billion of agricultural goods in 2015-16 (headed by processed pork) putting us on the wrong side of the ledger, and making Australia Canada’s 10th-biggest export market.

However, Canada is entering a challenging period, with historically stable markets beginning to source product elsewhere as new competitors emerge in Asia, South America and Africa.

Last year three of Canada’s top 10 importing countries cut back their Canadian purchases, namely Netherlands (down 12 per cent), Australia (down 5.8 per cent) and Germany (down 5.6 per cent). However, China, India, Mexico and Hong Kong ramped up their Canadian imports.

On the ground Australia and Canada are two similar agribusiness beasts. Both are committed to innovation and new technology, and both have a reputation for clean and green farming.

Canadian agriculture employs almost 289,000 people (1.5 per cent of the population), and Australia 314,000 people (1.3 per cent of the population).

Agriculture accounts for just 1.1 per cent of GDP in Canada, while in Australia it’s a significantly greater 2.6 per cent. The gross value of Australian agricultural production rose a staggering 23 per cent in 2016—17 to $A62.8 billion. Canada’s ag production sits just shy of that mark, at $A58.6 billion.

But differences emerge when you look at the spread of farming across the two large nations, with Canada’s production compact and Australia’s sprawling.

According to the World Bank, Australia farms a whopping 52.9 per cent of its land, while Canada farms a meagre 7.2 per cent — a vast difference for similar-sized countries. The difference comes down to arability. Canada has only 50.5 million hectares of “dependable” agricultural land that isn’t arctic tundra, while Australia has 264 million hectares.

Another big difference is exports. In 2016-17 Australia exported nearly 80 per cent of its agricultural production, due mainly to a bumper grain harvest. Canada exports about 58 per cent of its agricultural production annually.

The reason, according to Rabobank food and agribusiness research boss Tim Hunt, is that Canadian farmers are shackled by the “golden handcuffs” of high domestic prices.

A supply management scheme run by government and industry effectively gives production quotas to farmers and imposes high tariffs on agricultural imports from other countries.

That means high domestic prices for products such as milk and eggs, but ensures those sectors remain inefficient to the point they cannot compete on world markets.

It is not dissimilar to the marketing boards and interstate trade barriers once evident in Australia. The Canadian scheme is most prevalent in the dairy, poultry and egg sectors.

“It means the farmers benefit from stable and profitable milk prices, which a lot of Australian dairy farmers, of course, would like to see,” Hunt says.

“The cost of that is borne mainly by the Canadian consumers. They pay far more for milk, cheese, butter and yoghurt than you’d see in most places around the world.

“The downside of this is that the farmers and dairy companies are largely confined to domestic market sales.

“Their cost base (comprising high wages, expensive inputs and regulatory burden) is too high to compete in world markets and World Trade Organisation rules prohibit them from offsetting that through subsidisation.”

Australian farmers, on the other hand, while frequently hit with cripplingly low domestic prices, are mastering the export game. Hunt puts Australia “decades” in front of Canada in the way it has used a liberalised domestic market to pursue growth opportunities overseas.

“While deregulation was not an easy road to travel, we’ve been able to focus on improving market access into markets like China and South-East Asia and that puts us decades in front of Canada when they eventually liberalise,” Hunt says.

“At one stage, I think inevitably, they’ll liberalise their system and they’ll find they’re able to grow and export, but don’t have anywhere near the market access and relationships Australia has built up.”

While a regulated dairy market has given Canadian dairy farmers a steady average income — $A81,731 a year — it has dampened expansion, to the point the Canadian dairy market is no longer growing. But Rabobank’s Tim Hunt says Canada seems to be changing its tune on letting the world in.

Some effort has been made to open the Canadian dairy sector in recent years, including a (still to be ratified) free-trade deal with Europe that will allow cheese into Canada. And even though the Trans Pacific Partnership has fallen apart, Canada was willing, through the TPP, to grant some incremental access to its market, particularly to the US dairy industry.

“There’s a fair chance that these small changes represent the thin end of the wedge and we’ll see Canada gradually liberalise over the coming decade in dairy,” Hunt says.

Canadian dairy farmer Doug Matheson says while all the milk from his Embro farm goes to the domestic market, which supplies him with a reliable price, he can see an opportunity in exports. “Once things start moving it will go both ways — in and out of the country,” Matheson says.

“It is yet to be seen how the opening of the market will affect us domestically, it will depend a lot on the retailers and what price they set the imported products at.”

But some Canadian companies can’t wait. Faced with a stagnant domestic market, they have started buying assets overseas. Canadian dairy company, Saputo, bought Warrnambool Cheese and Butter for $520 million in early 2014, and then the “everyday cheese business” (including brands such as Coon, Mil Lel and Cracker Barrel) from Lion for $137.5 million the following year. Some of the biggest agribusinesses in Australia are now Canadian-owned — Saputo (dairy), Viterra (grain) and Hewitt Cattle Australia (beef).

“These companies are in a comfortable position domestically — they’re not struggling — but they can’t grow, which is something corporate and farm-level operations find extremely frustrating,” Hunt says. “Instead they invest in countries such as Australia that have less regulation and more trade opportunities.”

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Not all of Canadian agriculture exists under the umbrella of protectionism.

The Canadian Wheat Board, which operated as a single-desk selling system for all Canadian wheat and barley, was disbanded in 2012, throwing open the grains industry to global market forces. Australian grain growers would be familiar with that scenario, with the Australian Wheat Board disappearing four years prior in the wake of the Iraqi oil-for-wheat scandal.

Rabobank senior grains and oilseeds analyst Cheryl Kalisch Gordon says the Canadian grains sector has since invested heavily in industry feedback, monitoring every aspect of the supply chain to increase efficiencies.

“That is everything from transport weight and volume, export — and they make all of that data available transparently,” Kalisch Gordon says.

The types of grain grown by Australia and Canada have traditionally mirrored each other, but that is changing. While wheat and barley continue to dominate Australian production, with canola and pulses rounding out the balance, canola has recently become Canada’s biggest crop, pushing wheat into second place. Soybean production is also rapidly increasing in western Canada.


Canola has recently become Canada’s biggest crop.
Canada produces about 50-60 per cent more grain than Australia, which makes its cost of production much lower. And, according to Kalisch Gordon, that output gap will only widen as more Canadian land becomes available for farming.

“It’s not a lovely thought to imagine the ice caps melting, but what it does mean for a country like Canada is that more area becomes arable for cropping,” Kalisch Gordon says.

Canada produces about 28 million tonnes of wheat each year, ahead of Australia’s 24 million tonnes in a good year. Both countries export about 70 per cent of that wheat.

Kalisch Gordon says it’s not just the size of the crops that counts. Australia’s inconsistent annual production reduces external investment incentive, as growers can’t count on a definitive outcome each season.

“In Canada you are going to have a solid return annually with consistent production so there’s a great appetite to invest in the market there,” she says.

Australia Milling Group chief executive Peter Wilson says one advantage the Canadian grain industry has is that the country is blessed with similar soil types and climate across its growing regions. “It’s a very compartmentalised growing area, you don’t have big longitude or latitude,” Wilson says. About 80 per cent of Canada’s gain come from the central-south prairie provinces of Manitoba, Saskatchewan and Alberta.

“In Australia, we’re operating across different soil types from west to east and south to north,” Wilson says. “Breeders have a much more difficult time here because we’re trying to breed wheat from Geraldton in Western Australia to Mt McLaren in central Queensland and everything in between.”

Despite this, the two countries have found some common ground.

“There’s a fair bit of collaboration between bodies such as Pulse Australia and Pulse Canada,” Wilson says. “We’re clearly competitors, but at the same time we’re collaborators, because a lot of the research and market access issues are very similar.

“We tend to work closely with our Canadian colleagues on market access issues and we certainly don’t see the Canadians as vociferous competitors.

“I think farmers on both sides of the Pacific think that’s sensible.”

The key is for the two not to step on each other’s toes.

“There’s some variations around what is being produced. We don’t produce a lot of green lentils but Canada does, so they tend to have a lot more exposure to places like Algeria and South America,” Wilson says.

“With red lentils Australia and Canada are head to head in places like Pakistan, India, Bangladesh, Sri Lanka and the Middle East/North African markets.

“In fava beans we’re likewise, and yellow peas. We sort of compete on yellow peas along the east coast of India.”

The Australian production cycle gives it advantages over Canada, growing crops in winter, allowing “hard, hot finishes” at summer harvest for a cleaner grain.

Canada, however, grows crops in spring and summer, harvesting in autumn when daytime temperatures are dropping rapidly. This, Wilson says, means more moisture in the crop, requiring the use of desiccants and other applications to make harvesting possible.

The two countries differ significantly when it comes to handling grain. Most Australian grain is sent off farm immediately to be processed or exported, while in Canada, 90 per cent of the grain stays on farm and “crawls to port”. Distance may play a part in that. “A long haul in Australia to the ports would be 500km,” Peter Wilson says. “The closest haul in western Canada is probably Alberta to the west coast and that’s probably 1000km. Most of Saskatchewan is probably 1800-1900km from the west coast.”

But Canada has a high-tech rail freight system that leaves Australia’s road and rail freight for dead. “Their rail logistics are a lot sharper than ours but their time to port is a lot longer — you win some, you lose some,” Wilson says.

“And they don’t have any post-harvest insects. We have insects that will devour a crop.”

Unlike Australia, Canada has been an early adopter and prolific planter of biotech crops. “We’ve had conditions where it’s been very dry and there’s been virtually no soil movement from wind or erosion and that’s a direct correlation with biotech crops,” Canadian Canola Growers Association president Jack Froese says.

“Canadian growers are usually ahead of the curve on uptake, and certainly with biotech.”

Meanwhile, Australian growers are fighting a battle to grow biotech crops, with genetically modified crops banned in some states.

“I look at farms in western Canada and sustainability has come as a result of a lot of these biotech crops.

“Particularly Roundup Ready has led to single pass seeding, no more soil erosion, less greenhouse gasses, less carbon footprint, and if we lose those biotech crops, we’re going back 20 to 25 years in sustainability.”

In the wider adoption of technology, Doug Fitch, chief executive of startup AgWorld, which operates in Australia and North America, says Australia and Canada are world leaders in terms of farming sustainably in tough conditions.

“In terms of the use of technology Australian farmers use technology at about the right rate, they (Canada) are … not getting distracted by shiny objects such as drones.”

Meat is a more lopsided game. Canada swamps Australia when it comes to pork production. Australia produces 2.28 million pigs each year, a mere fraction of Canada’s 21.26 million.

And there’s no point comparing lamb production; Australia wipes the floor with Canada.

So it comes down to beef where the countries are fierce competitors. Canada imports about 200,000 tonnes of beef annually, a massive 60 per cent of which comes from the US and 20 per cent from Australia. It runs about 11-12 million cattle to Australia’s 26 million head.

With a similar feedlot-style setup to the US, Canadian production is 95 per cent intensive, meaning its average slaughter weight is 380kg compared with Australia’s smaller range-fed 300kg.

Beef consumption is lower in Canada than Australia, with Canadians consuming an average 18kg of beef a year compared with Australians’ 24kg.

Rabobank senior animal proteins analyst Angus Gidley-Baird says a large focus of the Canadian beef industry is the US market — where Australia and Canada compete head to head — either in boxed form, as feeder cattle coming off the feedlot and being slaughtered in the US.

The Canadian processing industry is similar to Australia’s, dominated by Cargill and JBS, which effectively have three main processing plants. Two of those are operated by Cargill and one by JBS — exactly the same as Australia.

Both countries have meat traceability. But Canada’s national tracking system, unlike Australia, isn’t mandatory.

Which shows that for two countries that share similar values, similar outlooks and, on the main, similar agriculture industries, there is room to differ. In other words, they can do their thing and we’ll do ours. And both are doing their respective things pretty well.

BRITISH COLUMBIA HORTICULTURE, DAIRY 17,500 FARMS (148HA)

YUKON CATTLE, FORAGE 145 FARMS (N/A)

NORTHWEST TERRITORIES GREENHOUSE CROPS, TURF FARMS 35 FARMS (N/A)

NUNAVUT CARIBOU, MUSK OX N/A FARMS (N/A)

QUEBEC DAIRY, PIGS 28,900 FARMS (113HA)

NEWFOUNDLAND AND LABRADOR DAIRY, EGGS 400 FARMS (70HA)

PRINCE EDWARD ISLAND HORTICULTURE, DAIRY 1400 FARMS (172HA)

NOVA SCOTIA HORTICULTURE, DAIRY 3500 FARMS (106HA)

NEW BRUNSWICK HORTICULTURE, DAIRY 2300 FARMS (150HA)

ONTARIO DAIRY, GRAINS AND OILSEEDS 49,600 FARMS (101HA)

MANITOBA PIGS, GRAINS AND OILSEEDS 14,800 FARMS (483HA)

SASKATCHEWAN CATTLE, GRAINS AND OILSEEDS 34,500 FARMS (722HA)

ALBERTA CATTLE, GRAINS AND OILSEEDS 40,600 FARMS (501HA)

A TALE OF TWO NATIONS’ FARMERS

CANADA

â—† Average age 55 years old

â—† 9.1% under 35 years of age

â—† For every 5 male farmers, there are 2 female farmers

â—† 51.7% worked 30 hours or more per week on the farm in 2015

â—† 44.4% worked off the farm in 2015

Source: statcan.gc.ca

AUSTRALIA

â—† Average age 57 years old

â—† 13% under 35 years of age

â—† For every 3 male farmers, there is 1 female farmer

â—† 73% worked 35 hours or more per week on the farm in 2010-11

â—† 12% of income is from off-farm activities