Aussie farmers champions on a level playing field, if one exists

AUSTRALIAN farmers often battle the perception that agriculture is highly subsidised — but nothing could be further from the truth.

The reality is that Australia’s support for farmers is among the lowest in the world.

This is quite amazing, remembering that Australia is one of the world’s largest agricultural exporters — competing in markets where farmers receive whopping handouts and have the benefit of a range of other protectionist policies.

The Organisation for Economic Co-operation and Development (OECD) recently released its Agricultural Monitoring and Evaluation report, assessing subsidy levels across 52 countries. This is the most indepth research to date on the topic of farm subsidies.

The results speak for themselves. The report found that Australia’s ‘Producer Support Estimate’ (an estimate of public money which flows to primary producers — not necessarily as cash) was one of the lowest in the OECD, at 1.4 per cent of GDP, marginally behind New Zealand.

By contrast, producers in Iceland, Norway or Switzerland receive more than 50 per cent of their farm income as government support measures. The average support level is around 20 per cent.

The study found that Australia made no payments for commodity production, which is how other OECD countries calculate and pay producers.

The largest component (42 per cent) is channelled into programs to help manage seasonal variability.

In most developed countries, farmers can access insurance schemes that enable them to insure against climate and weather-related losses. These schemes, known as “multi-peril risk” insurance, are subsidised or even totally funded by governments.

Given our variable climate, it is surprising to learn that it is almost impossible for most farmers in Australia to insure against natural disasters or weather events. Instead, the government has established schemes whereby farmers in need can access concessional loans to reduce the burden of interest payments in difficult times. Rather than being a handout, these programs are genuine loans — and farmers are expected to pay back every cent.

We also have programs like Farm Management Deposits, which help farmers save money in good years to help them last through downturns when they come.

Most of the remainder of our subsidies take the form of environmental programs. Australian farmers look after 70 per cent of Australia’s landmass and they play an important role in making sure our natural resources are protected for all Australians. In turn, the government works with farmers through Landcare, the Murray Darling Basin Plan and other programs to help implement

Our producers don’t benefit from protectionism like some overseas, says Jan Davis

positive environmental changes.

In contrast, in many other countries, farmers receive stewardship payments or other forms of direct funding support to deliver environmental outcomes.

Let’s unpack this information a bit further.

Our best estimate is that, overall, it is 30 per cent more expensive to farm in Tasmania than anywhere else in Australia; and another 30 per cent more expensive to farm on mainland Australia than New Zealand).

The last year for which reliable figures are available is 2014, when the average Australian farmer received $US1360 per annum in government assistance. American farmers got US30,170 pa; $US106,975 in the EU; and $US165,591 in China.

Wage rates provide a good basis for comparison of input costs. In 2014, the average hourly rate for a farmhand in Australia was $US16.88 for a 38-hour week. The equivalent NZ farm worker was on US11.18 an hour for a 40-hour week; in America, $US7.25; in the UK, $US10.02; and in China, $US1.19.

Furthermore, there are no tariffs or quotas on most food products imported into Australia. The equivalent tariff rates are 5 per cent into the US; 18 per cent into the EU; and 20 per cent into China. In the recent free trade agreement with South Korea, tariffs of 36 per cent on cheese and 89 per cent on butter will be eliminated over the next 15 years. Australian dairy exporters will also benefit from growing duty free quotas for cheese, butter and infant formula.

There is no doubt that our farmers are on any measure among the most efficient in the world. On a level playing field, they can compete with anyone.

However, there is no level playing field — and the elastic is stretched to breaking point. With continual downward pressure on returns at farm gate; and continual and rapid upward pressure on input costs, anyone can see the approaching iceberg.