industry snapshot of Victoria's food and fibre sector Food and Fibre

Food and fibre Fact Pack

27 February 2015

219720-94 150216 Food and Fibre Fact Pack.pptx 1

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Note to the reader

This material is one of seven fact packs produced by BCG across priority industry sectors in the space of a short,

4 week engagement

In compiling these fact packs, we have drawn on a range of existing sources

• Research and information held within the Department

• Publicly available information and reports

• BCG research and experience

• Discussions within the Department, with a number of BCG experts and with select individuals within the relevant industries

• However, within the available time, we were not able to undertake broad engagement within the industries

Data availability was highly variable across the seven industries covered

• In some cases good public information (e.g. ABS data) was available

• In others we needed to draw on a variety of different (and sometimes inconsistent) sources of varying depth and quality, and to

use proxies and other indicators where data was unavailable

• We have made our best efforts within the available time to synthesise the data available and to develop a consistent basis of

comparison across industries, however, data gaps remain in a number of areas

• We have made an attempt across all industries to provide an indicative estimate of the potential opportunity by 2025. Some of

these estimates are necessarily rough. The intention is to provide some basis for high level comparison of the relative

opportunity rather than to provide an accurate forecast of growth by industry

The objective is that these will form the starting point for further work by the taskforces within each industry

• We have attempted to highlight gaps and questions for further investigation

• We have not had the time to model the potential impact of exchange rate movements on these sectors and that should also be

the subject of future work

• We expect that details, and particularly industry forecasts, will be refined by the taskforces


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Industry snapshot Food and fibre

Defined broadly to include whole market chains – from inputs to the farm production

system, extending beyond the farm gate to consumers nationally or internationally

• Includes ABS categories of Agriculture, forestry and fishing; Food and beverage product

manufacturing; Animal and wood fibre processing

Excludes downstream users such as restaurants and catering firms

Current status (2012-13)

Incremental opportunity (2025)

Definition

Metric Size Growth

(08-13)

Comments/assumptions

GVA $16.2b 1.2% Ag

0.4% Proc

5 year CAGR (2008-13); 10 year CAGR shows higher Ag (2.1%) and

lower food/fibre processing (0.0%) growth

Employment 158K -0.2% Ag

-2.3% Proc

ABS labour force survey estimates used for manufacturing

Export revenue $11.4b 7.8% Growth was slower over 8 years, but increased over the last 4 years

Metric Size Comments/assumptions

GVA $3.8–5.6b CIE modelling; medium-high growth scenario (2013-25); estimates provided

for non-priority sectors for illustrative purposes

Employment 14-27K CIE modelling; medium-high growth scenario (2013-25) ; estimates provided

for non-priority sectors for illustrative purposes

Exports Different export growth is assumed for each priority sector. High scenarios assume 20%

growth in real prices for dairy; 10% for grains; 20% for meat; and 0% for horticulture

Competitiveness

Access to

resources

Infrastructure

and regulatory

costs

Scale

Market position

Innovation

~

Significant strength

Advantaged

On par globally

Disadvantaged

Key

Significant barrier or risk


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Victoria has a dominant position in the food and fibre sector

The food and fibre sector is an important economic driver for Victoria

• Contributes an estimated 4.8% to Victoria's GSP and employs 5.3% of the workforce

• Victoria produces a quarter of Australia's agricultural output and almost 50% of Australia's total processed foods, and accounts for 29% of

national food and fibre exports

• The sector contributes around 158,400 jobs (89,100 in agriculture and 69,300 in food manufacturing)

• 86% of agricultural employment is concentrated in Regional Victoria, while 61% of the food processing workforce was employed in metropolitan

Melbourne

• Exports have grown at 6% pa since 2006. and even faster over the last four years, with meat and dairy accounting for most value and China the

largest buyer of both food (14%) and fibre (58%)

Under a high-growth scenario with favourable market and environmental conditions and uptake of new technologies, the sector could

generate an extra ~27,000 jobs and $5.6b to the Victorian economy between 2013-2025

• Asia is entering a new phase of growth, that will drive a massive increase in demand for food volume and value. Asia will account for more than

70% of the projected global increase in demand for food in value by 2050

Victoria is well placed to capture the Asian consumer opportunity, although there are a number of challenges

• Victoria enjoys many natural competitive advantages and has benefited from decades of innovation in sectors like dairy, lamb, grains, horticulture

• Victoria has good existing market relationships with Asia, with Asian countries accounting for 8 of the top 10 food export markets

• However, global competition is fierce and cost competitiveness, productivity and regulatory/trade barriers will present challenges to growth

Government and industry can work together to support growth and realise potential benefits

• Increasing supply and cost-competitiveness: supporting farm and manufacturing productivity improvements through R&D and achieving

economies of scale; improving capital investment; addressing future workforce needs and skills gaps; improving industry business management

skills, and ensuring legislation and regulatory arrangements are contemporary and provide opportunity for Victorian businesses

• Driving demand: improving market access (trade agreements, phytosanitary requirements and biosecurity procedures); promotion of Australian

industry and products (branding/marketing strategies); facilitating consumer insight into Asian consumers and consumption patterns.


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Food and fibre is a broad industry with large subsectors

Broad industry definition

Begins with inputs to the farm production system,

and extends beyond the farm gate to consumers

nationally or internationally

The proposed definition includes:

• Agriculture, forestry and fishing

• Food and beverage product manufacturing

• Animal and wood fibre (paper) processing

It excludes wholesalers, retailers and downstream

users such as restaurants and catering firms. It

also excludes suppliers to the agricultural industry

(e.g. agricultural equipment, fertilisers and

pesticides)

Value chain highlights breadth of sector

Source: ABS Australian and New Zealand Standard Industrial Classification (ANZSIC) 2006

Ag inputs

Production assets

Primary processing

Further processing

Food manufacturing

E.g. Seeds,

Fertiliser

E.g. Livestock

E.g. Milk

E.g. Cheese

E.g. Wine

Transport/Freight Packaging Wholesale/retail


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Food and Fibre is an important economic driver Victorian,

and a strength relative to other states

Food and fibre sector

contributes 4.8%1 to GSP

Victoria has second largest

share of Ag commodity value

Victoria accounts for 29% of

all Aus food and fibre exports

24% 24%

22% 25%

54% 51%

20.0

0.0

60.0

80.0

100.0

40.0

2008-09 2012-13

% State Gross

Value 5yr

real CAGR

1.4%

5.9%

2.7%

Gross Value of Agricultural Commodities

Produced, Australia

Estimated industry GVA contribution to

Gross State Product, Vic

0

5,000

10,000

15,000

SA NSW Other2 TAS VIC QLD

$m

WA

Food

Fibre 29%

17% 16% 16%

13%

7%

2%

1. GVA figures at 2-digit ANZSIC level derived by NIEIR Consulting and may not directly align with ABS reporting 2. 'Other' includes NT and the ACT

Source: ABS Cat. No 8155; ABS Cat No. 8159; ABS Cat No. 7503.0; Victorian Department of Environment and Primary Industries 'Victorian Food and Fibre Export Performance Report 2013-14';

Victorian Budget 2014-15 Budget Briefing Seminar by David Martine Secretary, Department of Treasury and Finance (7 May 2014)

How can Victoria grow from this relatively high base?

0

2

4

6

2012

2010

2013

2011

2009

Agriculture, forestry

and fishing

Food and fibre

manufacturing

VIC

NSW

Rest of

Aust.

10yr

0%

2.1% VIC

NSW

Rest of

Aust.

Food and fibre exports, Aus (2013-14)

5 yr

0.4%

1.2%

Real GVA CAGR


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Total number of farms and food and fibre employment have

declined in last five years

Number of farms shrinking;

Victoria's share unchanged at 25%

Food and fibre industries account for

over 5% of Victorian employment

1. ABS categories included 'Food product manufacturing', 'beverage & tobacco product manufacturing', 'Wood product manufacturing' and 'Pulp, paper and converted paper product manufacturing'. Please note that the total ABS Labour Force estimates are based on a small survey sample and should be interpreted with caution Source: Victorian Department of Economic Development, Jobs, Transport and Resources unpublished data (2015); ABS Cat No. 6291 Labour Force, Australia, Detailed, Quarterly; Australian Department of Employment 'Agriculture, Forestry and Fishing Employment Outlook (2014); ABS Cat. No. 7121 Agricultural Commodities, Australia, 2012-2013

Industry employment as share of total employment, Vic

Industry

employment

5yr CAGR

-2.3%

0.2%

0

2

4

6

8%

2013 2012 2011 2010 2009 2008

Food, beverage & fibre manufacturing1 Agriculture, forestry & fishing

0

50,000

100,000

150,000#

NSW

VIC

QLD

SA

WA

TAS

NT

ACT

2012-13

120,112

2006-07

134,353

31% 32%

25% 25%

21%

21%

10%

9%

10%

9%

Number of agricultural businesses, Australia

Employment decline drive largely by decline in the food

and fibre manufacturing workforce


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Victoria has had largest national net growth in Ag employment Workforce projected to grow in the short term

Additional growth predicted in the short-term

Vic has seen largest net growth in

Agriculture employment since 2009

4.9

12.2

-30 -20 -10 0 10 20

SA

NT

Tas

QLD

ACT

WA

NSW

Victoria

('000)

Note: Some of this growth is assumed to be due to increase in demand from China (particularly in dairy, beef) and end of the drought in 2010-11 Source: Australian Department of Employment 'Agriculture, Forestry and Fishing Employment Outlook (2014)

Five years to May 2014, Agriculture Forestry and Fishing industry,

employment change by State

-3.8

-1.5

-1.3

-1.0

-0.1

0.0

0.0

4.4

-30 -20 -10 0 10 20

QLD

SA

WA

TAS

('000)

NT

Victoria

ACT

NSW

Five years to November 2018, Projected employment growth ('000)

in Agriculture, Fisheries and Forestry by State

Figures do not include food and fibre

manufacturing employment


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Agricultural employment is concentrated in Regional Victoria Employment can be volatile, but strong growth seen in 2013

100.0

80.0

60.0

40.0

20.0

0.0

%

2013 2012 2011 2010 2009

Regional Victoria

Melbourne & Greater Melbourne

Employment in agriculture, forestry and fishing by

location, Vic

0

20

40

60

80

100%

2013

Ballarat

Shepparton

Hume

Bendigo

Geelong

Latrobe-Gippsland

Warrnambool & South West

North West Victoria

Regional employment in agriculture, forestry and

fishing, Vic

86% of Ag employment is in

Regional Victoria

With most in Latrobe-

Gippsland and South West

Victoria

Source: Victorian Department of Economic Development, Jobs, Transport and Resources unpublished data (2015)

Changes to employment levels in agriculture will have a

significant impact on Regional Victoria

Agriculture accounts for

11.6% of all regional

employment

5.0

10.0

0.0

15.0 %

2013 2012 2011 2010 2009

Agriculture, forestry and fishing as a share of

total employment, Regional Victoria


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Food and fibre processing employment largely metropolitan

Majority of food processing

employment is in Melbourne...

...although a number of clusters

evident across regional Victoria

30

6 7 5

20

42

0

10

20

30

40

50'000

Food product Pulp & paper Wood

2

Beverage

& tobacco

Regional Victoria

Melbourne

Food manufacturing industry, Employment by Region, Vic (2011) Food product and beverage manufacturing employment by place of work,

regional Victoria (2011)

Source: Victorian Department of State Development, Business and Innovation 'Victorian Food Processing Industry draft report' (2013); Industry Atlas of Victoria (2013)


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Workforce is older and less qualified than other industries

1. Food processing data only available for 2011

Source: ATSE 'Food and Fibre: Australia's Opportunities' (2014); ABS 'Australian Social Trends December 2012: Australian farming and farmers'; Victorian Department of State Development,

Business and Innovation 'Victorian Food Processing Industry draft report' (2013)

15

22

19

19

15

7

3

4

14

21

22

23

10

6

0 5 10 15 20 25

65+

55-64

45-54

35-44

25-34

20-24

15-19

%

All Industries

Agriculture, Forestry and Fishing

Employed persons by age, % share of

employment, Aus, 2014

60

19

9

12

51

20

17

8

40

21

11

28

0 20 40 60 %

No post-school

Cert III & IV

Diploma, Adv Dip

Bachelor & above

All Industries

Food processing1

Agriculture, Forestry & Fishing

Highest educational attainment, % share of

employment, Aus, 2011 and 2013

Majority of workforce is 45

years or over...

...and more than half have no

post-school qualifications

However, younger farmers

tend to be more qualified

0 15 30 45

Farmers 2011

Farmers 1981

%

Changes in tertiary qualifications of farmers,

1981-2011

Certificate

Bachelor degree or above

Diploma

Trend towards formal education

among farmers in proportional terms

has outstripped that among other

occupations – partly due to the entry of

younger generations of farmers

• In 2011 half of farmers aged 25-44

years had non-school

qualifications, compared with just a

third of those aged 45 and over.

This is reflected by an overall

increase in the number of farmers

with post-school quals since 1981

Food processing workforce profile is

similar; in 2011 ~25% were under 30


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Majority of agriculture businesses are SMEs, but small

number of large farms produce 70% of value

66% of Victorian agriculture

businesses are non-employing...

Source: ABS Cat No. 81650 Counts of Australian Businesses, including Entries and Exits, Jun 2009 to Jun 2013; Victorian Department of Economic Development, Jobs, Transport and Resources

unpublished data (2015)

% of total agriculture businesses by size, Vic (2009 and 2013)

Declining small farm profitability has resulted in difficulties

in retaining labour in this sector

Scale of businesses are increasing, even if the

number of employees remains small

0%1%

29%

70%

0%1%

33%

66%

0

20

40

60

80

Non Employing

%

20-199

Employees

1-19 Employees 200+

Employees

2009

2013

...however, the largest 15% produce

almost 70% of value of production...

0

20

40

60

80

Middle 25% Smallest 60% Largest 15%

% of total

Value of production Area of farms Number of farms

Contribution to total farm numbers, area and value of production of

(financially) small, medium and large farms, 2011


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Food manufacturing SMEs are growing and have significant

potential for growth

Majority of food and fibre manufacturing

businesses have <20 employees

The number of firms with 1-199 employees has grown

since 2009, at the expense of non-employing firms

% of total food/fibre manufacturing businesses by size, Vic (2013)

1%

11%

49%

39%

1%

15%

53%

31%

0

20

40

60

1-19

Employees

Non

Employing

%

200+

Employees

20-199

Employees

2013

2009

Multinationals have large revenues, but

SMEs will likely drive export growth

In addition to employing larger workforces,

multinationals tend to generate a disproportionately

large share of industry revenue

• 25 largest food processing companies account for

more than half (55.4%) of food industry revenue

Although multinational companies are a critical

source of industry revenue, their regional arms tend

to produce primarily for local markets and are less

focused on increasing exports

Companies like Murray Goulburn highlight the growth

potential of smaller firms. Founded in 1950 as a small

co-operative, Murray Goulburn now accounts for almost

33% of national milk output and is Australia's largest food

processing exporter

Given the right support to access the global supply

chain and key export markets, SMEs present a

significant growth opportunity for the food

processing sector

Source: Victorian Department of State Development, Business and Innovation 'Victorian Food Processing Industry draft report' (2013); Dairy Australia 'Australian Dairy industry in Focus 2013'


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Australia is currently a small exporter in global terms

Victoria is the national leader in many of these categories;

accounting for ~1% of world export total

Australia's relative export strengths

are in wheat, barley...

...and meat, particularly beef,

and milk products

0 20 40 60 80 100

Barley

Rice

Other cereal grains

Maize

Eggs, albumin

Wheat, meslin

Cocoa

Fish, live or fresh

Live animals except fish

Shellfish

Vegetables

Fruit, nuts

US$b

Oilseeds, soft oil

Oilseeds, not soft oil

FIsh, dried, salted or smoked

Rest of world Australia

World exports of minimally transformed food, 2012

0 20 40 60 80

Beverages, non-alcoholic

Cheese, curd

Flour or meal from wheat or meslin

Cereal flour or meal, nec

Vegetable oil or fat, soft Beef, fresh, chilled, frozen Coffee, coffee substitutes

Milk products ex butter, cheese Cereal etc, flour, starch

Sugar, molasses, honey

Meat or offal, preserved, nec Chocolate, cocao preparations

Fish or shellfish Vegetables, prepared or preserved

Fruit, prepared or preserved

US$b

Margarine, shortening Tea, mate

Vegetable oils, fixed Edible products

Animal feed Meat, fresh, chilled, frozen

Beverages, alcoholic

Butter, cheese

Animal oil or fat

Fruit or vegatable juices Animal or vegetable oils, processed

Meat or offal, preserved

Sugar confectionery

Spices

Rest of world

Australia

Source: ABARES, UN Comtrade database (2014); Department of Economic Development, Jobs, Transport and Resources internal data (2015)

World exports of substantially transformed food, 2012


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Food and fibre exports have grown at an annual rate of 6%

since 2006 with much faster growth over the last four years

Source: Victorian Department of Environment and Primary Industries 'Victorian Food and Fibre Export Performance Report 2013-14'

0

4,000

8,000

12,000

+0.1%

+11.4%

$m

2013-14 2008-09 2007-08 2006-07 2005-06 2012-13 2011-12 2010-11 2009-10

8 Year Real

CAGR

6%

3%

-15%

6%

2%

10%

13%

6%

18%

1%

7%

Meat

Dairy

Grains

Animal fibre

Prepared foods

Horticulture

Forest products

Skins & hides

Top 10 Victorian food & fibre exports by commodity group

Wine

Seafood

Primary export

markets

Vietnam, Hong Kong

China, UK

China

Hong Kong, India

NZ, China

China

China, Indonesia

China, Japan

USA, China

Top five markets account for 46% of total exports,

with China the dominant market at 24%

Victoria's exports have grown 6% pa since 2005-06 Rapid growth of 11.6% pa since 2009-10 driven by a rebound in grains exports


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Victoria has a premium position in meat and dairy...

Source: Department of Environment and Primary Industries unpublished report (2015); UN FAOStat database (2011); UN Comtrade database; Coriolis analysis (2014)

Sector Victoria's position Challenges

Meat

• Beef

• Sheep meat

• Offal

• Poultry

• Pork, etc.

Although Australia is a relatively small producer of meat, it is

the world's largest goat meat exporter and second largest

exporter of beef and sheep meat

Meat is a large subsector for Victoria

• Meat was Victoria’s largest rural export commodity in 2013-

14, valued at $2.3b

• Victorian sheep meat industry accounts for 44% of national

lamb production

Victoria has strong reputation around high-quality grass-fed

or range-fed beef

• Other natural products including grain fed beef, organic beef

and breed-specific products such as Wagyu and Angus

(particularly for Japanese, Asian markets)

Supply chain efficiencies

Maintaining and enhancing reputation of

safe, high-quality meat

Alignment of products against demand

(e.g. beef and sheep meat vs chicken and

pork)

Dairy

• Milk

• Milk products

Globally, Australia accounts for 7% of world dairy trade,

making it the world's 10th largest dairy export market by

value

• Victoria produces 66% of Australia's overall milk production

(~6.1b litres in 2013-14)

• Victoria supplies 85% of Australia's dairy product exports

($2.3b in 2013-14)

Victoria's comparative advantages in dairy include a

temperate climate and availability of cheap grain

Productivity

Supply

Application of science and research


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...and some strengths in grains and horticulture

Source: Department of Environment and Primary Industries unpublished report (2015); UN FAOStat database (2011); UN Comtrade database; Coriolis analysis (2014)

Sector Victoria's position Challenges

Grains

• Wheat

• Barley, etc.

Australia is the world's fourth largest wheat exporter, and

Victoria is Australia's fourth largest grain producing state

• Victoria accounted for 16% of Australia's production in

2012-13

• In 2012-13, the gross value of Victoria's wheat

production was $1,038.5 million, with barley at $533.0

million and canola at $454.85 million

Victoria's wheat is highly regarded by international

markets due to its superior physical quality attributes of

white seed coat, cleanliness, and freedom from pests

Transport and logistics

Research and development

Horticulture

• Grapes

• Almonds

• Vegetables, etc.

Australia is a very small player in globally, representing

less than 1% of world trade

• In 2012-13, the gross value of Victorian horticultural

production was $2.4b

• In 2013-14, Victoria accounted for over 50% of

Australia’s horticulture exports valued at $894m

Victoria's has natural resource advantages in this sector

(seasonality, climate), and is emerging as a key almond

exporter, with export volumes doubling between 2012-13

and 2013-14

Phytosanitary conditions

Scale and capability


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Victoria faces strong competition in export markets,

particularly in low-value, high-yield crops


Opportunity to position Victoria's food sector to produce

more higher-value commodities

Key competitors are

increasing exports...

...in sectors similar to

Victoria's key sectors...

• Grains

• Pork

• Dairy

• Lamb

• Beef

• Corn and soybeans

• Table grapes

• Oranges

• Corn and soybeans

• Beef

• Wheat

• Beef/lamb

• Dairy

• Grains

• Horticulture

...and many have

competitive advantages

• Strong R&D, climate, and

scale/production efficiencies

• FTAs (China), strong branding, low

domestic demand, natural resources

• Low cost inputs, agricultural

expansion

• Low cost inputs, FTAs with China,

Japan and South Korea

• FTA (Korea), quality, large-scale

farming systems

• FTAs (Thailand, ASEAN, recently

China), land resources, innovation

Competitor exports to Asia, 2006 and 2012

0 20,000 40,000 60,000 $m

New Zealand

Brazil

Canda

Relative to Aus

USA

Chile

2012

2006


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Unprecedented global food demand expected by 2050 Growth today is already in line with these expectations

Rapid population and income growth

expected over coming decades

Developing country per capita incomes are

projected to grow 3.1% p.a. through to 20301

Growth in incomes will be led by East Asia,

South Asia and the Pacific with forecast per

capita income growth between 4-6% p.a.

The expected net result will be that the global

middle class will grow from 5% to ~15% of the

world’s population by 2030

Understanding the China market is critical –

Victoria needs to focus on growing its share of

high value, niche products – not focus on low

value/high volume commodities.

Global food demand expected to

increase by 70%, driven by China

1. World Bank. 2. Food and Agriculture Organisation of the United Nations 2009

Source: ATSE 'Food and Fibre: Australia's Opportunities (2014); Victorian Government Budget 2014-15 Strategy and Outlook; Peter Walsh Minister for Agriculture and Food Security Media Releases

Feb 2014; Australian Bureau of Agricultural and Resource Economics and Sciences 'Food demand to 2050: Opportunities for Australian agriculture' (2012)

How can Victoria capitalise on this growth opportunity?

0 10 20 30 40

Wheat

Beef

Dairy

Sugar

Sheep meat

US $b 2050 2007

US$b projected food demand for five major export commodities, China


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2,705

Increasingly affluent Chinese consumers are rapidly

shifting to more meat consumption

6760

40

28

23

22

10

15

20

8

7

9

9

18

22

10

26

0

00 65100

0

25

50

75

3

4 1

4

4

Consumption (%)

1 2

2

Total per capita

calories per day

28 19 11 Percentage from

chicken and pork

1990 2010 2020

3,200 3,505

Source: US Department of Health and Human Services;;National Heart, Lung, and Blood Institute, http://www.nhlbi.nih.gov/health/public/heart/obesity/lose_wt/fd_exch.htm; Healthy Eating Club, http://www.healthyeatingclub.org/info/food-comp/serving-sizes.htm; USDA Economic Research Service; National Bureau of Statistics of China; Economist Intelligence Unit; BCG analysis

1960

1,950

4

All other

Dairy

Fruits

Fish

Chicken

Vegetables

Pork

Grains

Victoria's strengths are in beef and sheep meat; can it

develop stronger capabilities in poultry and pork?

'Other' includes

beef and sheep

meat

http://www.nhlbi.nih.gov/health/public/heart/obesity/lose_wt/fd_exch.htm

http://www.healthyeatingclub.org/info/food-comp/serving-sizes.htm






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Asian consumer preferences largely align with Victoria's

strengths in primary production and processing

Source: Victorian Government 'Food to Asia Action Plan' (2014); Victorian Department of Environment and Primary Industries

Asian consumer preferences What does it mean for Victoria?

Safe, reliable products that come from trusted or

‘clean and green’ sources

Food products that meet cultural or religious

requirements

Branding and marketing of food should

focus on safety and quality

Increasing importance of premium

foods including meat and high quality

fresh foods

Increasing importance of processed

foods and beverages

Functional, nutritious and fresh foods

Fresh fruit, premium confectionery and high-end

beverages

Convenience foods such as pre-prepared meals

and high quality, single-serve portions

Retail-ready snack foods and non-alcoholic drinks

for an expanding and more affluent youth market

Safe &

reliable

Fresh &

nutritious

Convenient

High quality


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Capturing this opportunity will require targeted action

Common challenges across

food and fibre sectors

Targeted action can address

most of these challenges

Brand advantage

Promoting clean, green Australia

Value-added products

E.g. UHT milk, white wheat

Structural advantage

Leveraging proximity to Asia

Source: Australian Academy of Technological Sciences and Engineering 'Food and Fibre: Australia's Opportunities' (2013); BCG Analysis

International competition

Strong traditional competitors (US, Canada, EU) and

emerging players (Brazil, Chile)

Reliance on raw commodity exports

Majority of Australia's agrifood products are exported as

raw or minimally transformed commodities

High costs

High production costs in labour, inputs, and regulatory

compliance

Market access

Non-tariff trade barriers, even under FTAs; cost/language

barriers for SMEs

Productivity

Ageing workforce; difficulty retaining labour; difficulty

accessing capital; applying technology

Infrastructure

Ageing infrastructure; high freight and transport costs

Reform & advocacy

Improving coordination & efficiency

Attracting skills & investment

across the sector

Coordinated investment

Modern infrastructure & systems


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BCG's Center for Consumer & Customer Insight

highlights competing global trends

Additional technologies for productivity

Next Green revolution may depend on

bringing new technologies into agriculture.

Pressure for efficiency, scalability

• GMO crops

• Robotics

• Use of cell phones, satellites

• Increased use of irrigation

• Farm consolidation, "professionalisation"

Some consumer desires

Some consumers increasingly seek foods

whose origins are known with few pesticides

and chemicals

• Large focus on healthier eating

• Increasing concern about animal welfare

• Big concern about obesity

• Desire for organic, pesticide free food now

2% of global food system

• Seek local food that is "authentic"

Source: BCG Center for Consumer & Customer Insight

How can Victoria improve agricultural productivity while

meeting global consumer desires?


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Mois

ture

data

Servers

Weather and

forecast data

Yield and

sensor data

Moisture sensor

Planting

prescription

Technology has potential to revolutionise agriculture More rapid adoption of technologies will lift future productivity

Rise of precision

agriculture supported

by trends

Consolidation of farms and 'professionalization' of farming Input and commodity prices rising, raising stakes Growing technology familiarity among new generation of farmers Increasing importance of data for maximizing yields and productivty

Robotics

Cloud computing

Sensors GPS Telematics

Controls

Leading farmers already using advanced technologies –

more rapid adoption and scale-up will increase benefits

Source: BCG


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Victoria is a leader in food and fibre R&D, and home to

leading research centres and partnerships

Significant business and government

spend on agriculture R&D

Victoria is home to extensive food & fibre

research centres and networks

AgrioBio

• Joint initiative between Government & La Trobe Premier

Bioscience facility – 12 academic staff, 13 joint appointments

Dairy Innovation Australia

• Partnership between Dairy Innovation Australia Ltd and

University of Melbourne, 30+ technical staff

Dairy Futures CRC

• $128m partnership between La Trobe, Monash, Melbourne

Uni, focused on pasture productivity

CSIRO Agriculture, Food and Health Sciences Division

• Looks at issues in food security, food processing and rural

productivity, 35+ staff

Other facilities include

• National dairy centre of excellence, Ellinbank

• Red meat innovation centre, Hamilton

• Grains innovation park, Horsham

• Horticulture centre of excellence, Tatura

• Biosecurity incident control centre, Attwood

• Native fish and salmonid production facility, Snobs Creek

• Aquaculture mussel/scallop hatchery, Queenscliff

• Melbourne Showgrounds (Royal Agricultural Society of Vic)

• 84 other DEPI sites across Victoria

Source: ABS Cat. No 8104.0 Research and Experimental Development, Businesses, Australia (2013); ABS Cat No. 8109 Research and Experimental Development, Government and Private Non-Profit Organisations, Australia, 2012-13; Invest Victoria 'Agriculture and Food Security' (2015)

% Australian business food and fibre R&D spend, Ag (2005, 2012)

In 2014, the Victorian Government through the Agriculture

Group Division in the Department invested ~$50 million in

agriculture Research, Development and Extension

• This leverages an additional $59 million of external

investment from Research and Development Corporations,

the Australian Government (including Cooperative Research

Centres) and private companies

Victorian businesses spend more on R&D than other States

0

10

20

30

40

QLD

+12.3%

VIC NSW NT SA TAS WA ACT

2005

2012


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Innovation and technology clusters could help bridge the gap

between research and implementation

TRL 1 TRL 2 TRL 3 TRL 4 TRL 5 TRL 6 TRL 7 TRL 8

Basic

principles

observed and

reported

Technology

concept and/or

application

formulated

Analytical and

experimental

critical function

and/or

characteristic

proof of

concept

Component

and/or

validation in

laboratory

environment

Component

and/or

validation in

relevant

environment

System model

or prototype

demonstration

in a relevant

environment

System

prototype

demonstration

in an

operational

environment

Actual system

completed and

qualified

through test

and

demonstration

TRL 9

Actual system

proven through

successful

operations

Experimental research Applied research Technology implementation

Note: TRL stands for 'Technology Readiness Level' Source: Justin Carline (2015); Victorian Department of Economic Development, Jobs, Transport and Resources

A network of Agriculture and Food

Technology Centres

(sector focus e.g. dairy, or process focus

e.g. packaging, pressure processing)

Universities, research organisations

and innovators

(largely public investments)

Industry, businesses, private sector

funds

(largely private investments)

Harnessing collective efforts on strategic goals could lead

to sector-wide productivity gains


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Starting situation

Case study: Mondelez chose Melbourne as their base

for food innovation and research

Background Intervention Outcome

Industry role

Actions & Objectives Government role

Mondelez (formerly Kraft Foods) is

the world’s second largest food

company, producing spreads,

chocolate, confectionary and other food

products in ~170 countries

Their wholly-owned subsidiary,

Mondelez Australia, is based in Victoria

The centre is home to the largest food

R&D team in Australia, comprising

more than 100 food scientists,

technologists and graduates.

Industry

• Currently the Centre is helping ~20

SMEs boost their manufacturing

and innovation capabilities, and

help them gain insights into Asian

consumer behaviours and market

levers

Victoria

• Created 63 new jobs, further

growth expected as centre expands

Acknowledging the importance of new

technologies and innovation, Mondelez

opened its Asia Pacific Chocolate

and Confectionery Centre for

Excellence in Melbourne in Feb 2013

The Centre's aim is to support

collaboration with and between SMEs,

offer open access innovation programs

and deliver bespoke postgraduate

courses in food innovation

The centre was jointly funded by the

Victorian Government, as part of the

Food to Asia Action Plan

Source: Mondelez International website (2015); Victorian Government 'Food to Asia Action Plan' (2014); Former Premier of Victoria Denis Napthine Media Releases 29 October 2014


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Competitiveness assessment Food and fibre

Access to

resources

• Temperate climate

• Access to the Murray Darling Basin

• Quality farming workforce who can adapt new technologies, particularly in key sectors such as dairy

• However, there are increasing resource limitations (water supply, climate risks, constrained productive land)

Infrastructure

and regulatory

systems

• Australia's largest container port (Port of Melbourne); no curfews on airports

• Efficient transport supply chains with good road and rail connections to ports, freight precincts and distribution

centres, although efficiency and capacity could be improved in some areas

• Robust biosecurity and safety regulations

• Strong manufacturing infrastructure

Scale • A few large MNCs tend to dominate, e.g. 25 largest food processing companies account for 55% of revenue

• Large number of SMEs and smaller players who tend to have challenges reaching scale

Market

position

• Clean and safe reputation, supported by strong biosecurity regulations

• More than 100 export markets served

• Strong trade relationships with Asia; eight out of the top ten food and fibre export markets are in Asia

• Strong presence at regional trade shows

• Recent FTAs with Japan, Korea, and China are opening new trade channels but non-tariff barriers remain

Innovation

• Diversity of products

• Cluster-led innovation (e.g. dairy)

• Exposure to local competitive markets (e.g. New Zealand)

• World-class universities and agricultural research centres, e.g. the AgriBio Research Centre

• Strong investment in R&D, advanced manufacturing and biotech, e.g. Hamilton Red Meat Innovation Centre

~ Significant

strength Advantaged

On par

globally Disadvantaged

Significant

barrier or risk Key

Competitive advantage


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What does this opportunity mean for Victoria?

In late 2014, the Victorian Department of Environment and Primary Industries explored a

number of scenarios around the future growth potential of Victoria's four priority sectors:

• Dairy and milk products

• Cereals, oilseeds and pulses

• Livestock (beef, sheep meat and wool)

• Horticulture (pome fruit, stone fruit, almonds, table grapes, citrus, seed potatoes, wine grapes)

In the original scenarios a number of sectors were excluded, including poultry, pork, eggs,

aquaculture, nursery and amenity horticulture, nuts other than almonds, vegetables other

than seed potatoes, olives, mushrooms, and berries

Estimates of the potential growth in these non-priority sectors have been included for

illustrative purposes

• These non-priority sectors are largely non-exporting industries, comprising ~21% of total value

of Victorian agricultural production in 2012-13. Production growth in most of these other

sectors is expected to be linked to cumulative growth in domestic demand to 2030 (estimated

to be between 30-45%)

Source: DEPI Food and Fibre Production Scenarios (2014)


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In a low growth scenario, food and fibre's contribution to

GSP and employment would decline by 2025

Employment could

decline by ~4,800 people

By 2025, sectors could be worth

$456m less to the economy

Low growth scenario assumes significant climate

variability and limited productivity increases Note: Original modelling done for time period 2010-30; these estimates have been pro-rated for target years 2013-25. All estimates should be interpreted with caution 1. Based on assuming a 5% decrease in gross value for non-priority sectors (agricultural commodities and manufacturing) between 2013-25. 2. Based on projected -1% growth p.a. Source: CIE; DEPI Food and Fibre Production scenario modelling (2014)

-935

-481

-1,047

-605

-1,697

-5,000

-4,000

-3,000

-2,000

-1,000

0People

-4,764

-3,829

-112

-42

-189

-63

-51

-344

-500

-400

-300

-200

-100

0

-456

$m

Dairy Grains Livestock Horti-

culture Total Dairy Grains Livestock Horti-

culture Total

Non-priority

sectors

est1

Non-priority

sectors

est2


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A medium growth scenario could be worth additional

$3.8b and ~14,500 jobs by 2025

...and ~14,500 jobs could be

created by between 2013-2025

An additional $3.8b could be

injected into the economy...

Assumes a "normal" market and conditions with some

technological and productivity improvements Note: Original modelling done for time period 2010-30; these estimates have been pro-rated for target years 2013-25. All estimates should be interpreted with caution 1. Based on assuming a 30% increase in gross value for non-priority sectors (agricultural commodities and manufacturing) between 2013-25. 2. Based on projected 1% growth p.a. Source: CIE; DEPI Food and Fibre Production scenario modelling (2014)

1,044

7703,670

3,400

5,600

0

5,000

10,000

15,000

Horticulture Livestock Grains Dairy

People

14,484

Non

priority

sectors

est.

13,440

Total

3,178

670

462

1,195

799

722

0

1,000

2,000

3,000

4,000

Dairy Total Non-

priority

sectors

est.

3,848

Grains

$m

Horticulture Livestock


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Under a high grow scenario, priority sectors could be worth

an additional $5.6b and ~27,000 jobs by 2025

High growth scenario could see ~27,000

jobs gained by 2025

Sectors could contribute an additional

$5.6b between 2013-25

Assumes strong export demand, productivity

improvements and increase in inputs

1,005

717

1,787

1,099

1,031

0

2,000

4,000

6,000

Livestock Dairy Horticulture

5,639

Grains Total

$m

Non-

priority

sectors

est.

2,208

1,853

7,014

6,435

9,750

0

10,000

20,000

30,000

Non-

priority

sectors

est.

Dairy Horticulture Livestock Grains

People

Total

27,259

Note: Original modelling done for time period 2010-30; these estimates have been pro-rated for target years 2013-25. All estimates should be interpreted with caution 1. Based on assuming a 45% increase in gross value for non-priority sectors (agricultural commodities and manufacturing) between 2013-25. 2. Based on projected 2% growth p.a. Source: CIE; DEPI Food and Fibre Production scenario modelling (2014)


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Potential government actions to achieve growth Food and fibre

Ongoing R&D investment

Facilitating dissemination of knowledge across small businesses

Supporting increased use of ICT and advanced manufacturing technologies

Targeted initiatives to support long-term workforce needs (e.g. retention of young farmers, dependence on

seasonal workforce)

Targeted state-wide planning and infrastructure investment (e.g. freight road and rail upgrades (particularly

for grains sector)

Phytosanitary requirements and biosecurity procedures (especially in horticulture sector)

Lowering costs of doing business (e.g. licencing, codes of conduct)

Reducing non-tariff trade barriers (including phytosanitary requirements above)

FTA advocacy and compliance

Trade missions and in-market Victorian Government Business Offices

Branding and marketing – quality and safety promise

Facilitating further development of clusters and networks across the sector

Supporting development of consumer insight into the Asian market through fostering linkages between

researchers, producers and manufacturers to disseminate insights

Exploring new models for owning and operating farms

Facilitating industry restructuring

Attracting new capital and investing in manufacturing technology

Developing a prospectus for international investment on intensive, high value production

Productivity

Investment

Workforce

Infrastructure and

transport

Market access

Innovation

Competitive

positioning

Challenge Potential actions

Regulation and

compliance


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Questions to be answered Food and fibre

Agricultural

productivity and

efficiency

• How much growth can be reasonably achieved over the next 10 years, given current and expected levels of

natural resources?

• How significant are the risks to productivity (e.g. climate, water, pests and diseases) and how can they be

best managed?

• Is Victoria achieving the best value from innovation and R&D investment?

• Are levels of investment sufficient to enable production growth and farm turnover?

• To what extent are capital constraints limiting productivity enhancing investments? Can alternative capital

structures (e.g. equity partnerships, take-off agreements) release capital for needed investments?

• What are the potential impacts of limits to foreign investment in agriculture? What can government do to

encourage international investment in intensive high value production (meat, horticulture)?

Food manufacturing

• Is there an opportunity to significantly improve productivity in food processing (in priority sectors e.g. tertiary

dairy processing, or specific processing capabilities e.g. packaging, high pressure processing) through the

application of engineering and technological capability from other sectors (e.g. automotive)?

• How can Victoria support SMEs to achieve scale and access global markets?

Workforce needs

• To what extent will increased scale and automation reduce employment opportunities?

• How is technology changing skill requirements in primary production, processing & logistics?

• How can Victoria best manage the volatility in agricultural employment?

Asian opportunity

• Can Victoria develop stronger capabilities in chicken and pork to meet Asian preferences? To what extent is

growing demand for meat also driving demand in Victoria's strengths of beef and sheep meat?

• How can Victoria enhance and further market its 'clean, green' reputation? How should position itself relative

to key competitors?

• What is Victoria's role in overcoming non-tariff-barriers to trade? How can Victoria best influence the

Commonwealth in areas of importance to Victoria?

• Where are there opportunities for Victorian producers shift to value-added products, rather than just raw

commodities? What are Victoria's core strength in value-added foods?


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Draft Taskforce brief Food and fibre

Develop a set of targeted initiatives to support the growth of the food and fibre sector, i.e.

• Set of initiatives for improving industry productivity, based on robust understanding of current state and challenges

• View on and required regulatory reform

• Costs and benefits and indicative timing of government actions and outcomes

Objective

Explore feasibility and risks of increasing agricultural production to meet the estimated high-growth scenario, and

the required government actions to support these productivity increases

• Current productivity levels (vs key competitors) and key challenges by industry sectors (e.g. workforce, R&D)

• Risks associated with climate variability, water limitations other environmental issues and options for managing risks

• Role of R&D and application of new technology in increases productivity by sector

• Extent to which capital constraints are limiting productivity enhancing investments, and options to address; including

attracting international investment for intensive, high value production and options for alternative farm capital structures

Agricultural

Productivity

Market

access and

Asian

demand

Food

manufacturing

opportunity

Evaluate the market position and the impact of non-tariff trade barriers to access in important markets, and propose

government role in achieving market access and the positioning of Victorian products

• Assess impact of biosecurity and phytosanitary requirements on trade opportunities

• Assess the current risk management approach and the efficiency and efficacy of licencing and compliance procedures

• Understand the direct role of the State Government vs lobbying of the Commonwealth

• Explore the alignment of Asian demand and preferences with Victorian strengths, and the potential opportunities to build

stronger capabilities in high demand areas (e.g. pork and chicken; processed convenience and functional foods)

• Explore the role for Government to support growth through branding position in key markets and sectors

Identify opportunities to drive growth and significant improvement in the productivity in food manufacturing

• Work with industry to understand opportunities to leverage engineering capability from adjacent industries (e.g.

engineering, auto) into specific food sectors or food manufacturing processes

• Develop a view on game-changing processes/technologies that would have tangible productivity benefits (e.g. robotics)

• Assess the government role in supporting SMEs to gain scale and access research and technology


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Starting situation

Case study: New Zealand

Background Intervention Outcomes

Objectives

Government role

New Zealand has a natural environment

highly conducive to pastoral agriculture

and have traditionally had a strong food

and fibre sector

• Food and beverages contribute

10% to New Zealand's GDP

• Food and beverage manufacturing

worth ~NZ $38b

• Food and beverage exports worth

NZ$23b annually, compound

annual growth rate of 7% (1995-

2010)

• Auckland's food and beverage

sector is worth $3b annually to the

city's economy

• Brand New Zealand voted #7 in

recognition by the Reputation

Institute (2013) and #5 in country

brand perception by the

FutureBrand index (2012)

• In the mid-2000s the Government

made targeted efforts to capitalise

on the fast-growing food and

beverage sector through the

creation of a Food and Beverage

Taskforce

• More recently, Auckland's 2012

economic development strategy

aims to double the food and

beverage sector's annual exports to

more than NZ$6.37b by 2025

Ease of doing business

• No capital gains, no gift, stamp and

estate duties, 100% foreign

ownership permitted, no restrictions

on inflow and outflow of capital

• NZ has Double Tax Agreements

with 37 trading partners, removing

double taxation on the same

income in different countries

Brand New Zealand

• Strong investment in marketing and

branding imagine of clean, healthy

environment

Investment

• NZ spends more than $500m per

year on agrifood research

• NZ Government sponsored The

FoodBowl, a commercial scale food

and beverage pilot plant near

Auckland airport. The facility is

available to all firms in the industry

and forms part of the New Zealand

Food Innovation Network

Source: New Zealand Food Technology News 'Boosting Auckland's food and beverage sector' (2013); Auckland Tourism, Events and Economic Development Invest Auckland 'Food and Beverage' (2014)


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Backup: New Zealand’s success in food & beverages in

underpinned by long term drivers

Source: Coriolis Research 'An investor's guide to the New Zealand Food & Beverage Industry' (2014)

Drivers of success Key sectors

Value-added

products

Natural resources

• Water-rich

• Isolate, pest/disease free

• Low intensity, free-range farming

Human resources

• Ethical culture

• Educated professional farmers

• Universities with AgScience strength

Research & development

• NZ$1b/year invested in research

• World leader in dairy/pastoral R&D

• R&D at scale at Crown Research Institutes

Supportive government

• Strong food safety standards, systems

• Robust biosecurity and border control

• Respected sustainable fisheries management

Dairy

Meat

Seafood

Fruit & Vegetables

Specialty grains

Infant formula

Confectionery

Jams & jellies

Frozen meals & sides

Soups & sauces

Pasta products

Breakfast cereal

Biscuits & other baked

Pet foods

Nutraceuticals

Innovative foods

Beverages


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Backup: New Zealand Food Innovation Network provides

open access commercial scale pilot plants

Source: Coriolis Research 'An investor's guide to the New Zealand Food & Beverage Industry' (2014)


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Appendix

Appendix


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Victoria's agricultural employment growth belies national

trend

80.7 85.2

0

10

20

30

40

50

60

70

80

90

100

No

v-03

No

v-04

No

v-05

No

v-06

No

v-07

No

v-08

No

v-09

No

v-10

No

v-11

No

v-12

No

v-13

No

v-14

No

v-15

No

v-16

No

v-17

No

v-18

Department of Employment - Hodrick-Prescott Filter ABS Labour Force Survey (four-quarter average) Department of Employment Projection to November 2018

Nov-

Nov-18

(Projection)

Note: Excludes food manufacturing and processing Source: Department of Employment (Commonwealth) employment projections, five years to November 2018

National agriculture employment

forecasted to decline...

...Victoria's sector, however,

expected to grow

Agricultural employment is volatile by nature;

figures are estimates only


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Victoria's largest food export markets are in Asia

Source: Victorian Government 'Victorian Food and Fibre Export Performance Report 2013-14'

Top five markets account for 46% of total

Victoria's top ten food export markets

are worth $5.2b to Victoria today

Market Share of total 5 year CAGR

China 24% 13.9%

Japan 7% -3.9%

USA 5% 7.8%

New Zealand 5% 2.1%

Indonesia 5% 10.2%

Total share 46%

China

$2.7b

Japan

$0.76b

USA

$0.61b

NZ

$0.59b

Indonesia

$0.57b Malaysia

$0.46b

Singapore

$0.45b

Hong Kong

$0.38b UAE

$0.37b

Thailand

$0.33b


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Capturing the Asian opportunity will require deep

understanding of market capability

Not demanded

Primarily produces itself

• Duck meat

• Soy sauce

• Garlic

• Chillies

• Eggplant

• Asparagus

• Spinach

• Cabbage

• Sweet potatoes

• Coconuts

Core imports

Imports more than it

produces

• Soybeans

• Wheat

• Maize

• Linseed

• Pork

• Beef

• Sheep meat

• White fish

• Milk powder

• Cooking oils

Emerging opportunities

Low/no production

• Salmon

• Barley

• Blueberries

• Raspberries

• Pistachios

• Virgin olive oil

• Champagne

• Brandy

• Whiskey

Asian opportunity

Producers should focus on growing core import categories

but seek opportunities to tap into emerging areas

Note: Strength determined by Source: Coriolis analysis (2014)

Area of Victorian

strength


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Productivity growth may not be sufficient to fill the gap

Average annual growth rate by period

0.5% 0.6%

0.9%

1.5%

1.3%

2.8%

2.6%

2.0%

1.6%

1.0%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

1961-69 1970-79 1980-89 1990-99 2000-07

Grain yield

Total Factor Productivity

Possible range of future demand growth

during 2010-2050

Rapid convergence scenario

FAO scenario

Note: Global production of maize, rice and wheat divided by area harvested of these crops Source: Total factor productivity in the global agricultural economy: evidence from FAO data’, Keith Fuglie (2010)


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Scenario modelling: Overview Top down macro assumptions and bottom up industry assumption used to model scenarios

Analytic process

• High, medium and low 2030 scenarios were developed by Department Industry Leadership Groups, with industry consultation

and economic input from the CIE

Drivers, assumptions and conclusions

• In the 2030 high scenario, Victorian agriculture and food production grows 2.7 fold, and the value of production grows 3.4 fold.

Jobs increase by 39,000 to 2030

• Each industry deploys a variety of strategies to achieve this scenario including more rapid adoption of new technologies,

investment in new equipment, growth in scale, intensification, reduction of input costs, improving labour productivity, improved

supply chain efficiency, and/or the development of new and valued products.

Drivers by industry

• Increased Dairy production is driven by recovery in the NW irrigation region, expansion in the SW region, intensification and

scale, better pastures, better cow performance and genetics, increased supplement use, and the development of specialised

dairy products and markets

• Increased Horticulture production is driven by better producing varieties of fruits and nuts, improved water use efficiency, an

export focused culture, scale and mechanisation, and improved pack-out rates

• Increased Grains production is driven by better genetics, managing diseases, further intensification and mechanisation,

improved transport infrastructure, and HRZ cropping

• Increased Sheep meat, wool, beef production is driven by quality meat products, better pastures, intensification, improved

fertility, increased lamb survival, improved supply chain efficiencies and through-chain linkages.

Source: CIE (2014)


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Scenario modelling: Market and environment assumptions

Low

• Only modest increases in export

demand from Asia and Middle East

• No change in world food prices

• Tariffs and quotas unchanged

• Exchange rate parity with the US$

• 30% increase in domestic demand

• Little industry adjustment and

transition

• Safe, clean, green, and animal

friendly food production

• 3% less land

• 5% less rainfall

• 37% less irrigation water

• 50 ppm more CO2 in the atmosphere

• Significant climate variability with

more heatwaves, frosts, droughts,

floods, fires, pests and disease

• Significant shifts in seasons with

impacts on chilling, flowering, plant

maturity

Medium

• 100-300% increase in export

demand from Asia and Middle East

• 10% higher world food prices

• Lower tariffs and quotas

• Exchange rate is 0.93 with US$


• Some industry adjustment and

transition



• 2.5% less land




• More climate variability with more

heatwaves, frosts, droughts, floods,

fires, pests and disease

• Some shifts in seasons with impacts

on chilling, flowering, plant maturity

High

• 500% increase in export demand

from Asia and Middle East

• 20% higher world food prices

• Much lower tariffs and quotas

• Exchange rate is 0.8 with US$


• Incentives lead to significant industry

adjustment and transition



• 2% less land




• Slightly increased climate variability

with slightly more frequent

heatwaves, frosts, droughts, floods,

fires, pests and disease

• Minor seasonal impacts on chilling,

flowering, plant maturity


Ma

rke

t E

nviro

nm

en

t


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Scenario modelling: Drivers and assumptions

45

BASELINE

(2010-2011)

Low

2030

Medium

2030

High

2030

1a. DOMESTIC DEMAND - population growth

1b. PER CAPITA CONSUMPTION 1c. IMPORTS 1d. INTERSTATE TRADE DEMAND SIDE 2a. EXCHANGE RATES & TARIFFS

2b-c. EXPORT DEMAND 3a,c. CLIMATE 3b. IRRIGATION WATER RESOURCE BASE 4. LAND AVAILABILITY

5a. SKILLS 5b. ATTITUDES 5c. INFORMATION 6a. LABOUR 6b. WATER USE EFFICIENCY

6c. FARM SCALE SUPPLY SIDE

6d. INPUTS

6e. WASTE 7. PESTS & DISEASE

8a-b. GENETICS & FARMING PRACTICES

9a-b. NEW TECHNOLOGIES & INNOVATIONS

10. OTHER (e.g. Transport, Manufacturing)

Source: CIE (2014)


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PRODUCTION 2030

Low

2030

Medium 2030

High

Dairy x 0.9 x 1.8 x 3.2

Grains x 1.4 x 1.5 x 2.4

Horticulture x 0.9 x 1.2 x 1.7

Sheep-meat, beef, wool x 0.9 x 1.3 x1.8

TOTAL x 1.1 x 1.6 x 2.7

VALUE ($ real) 2030

Low

2030

Medium

2030

High

Dairy x 0.8 x 2.1 x 4.8

Horticulture x 1.3 x 2.3 x 4.4

Grains x 1.3 x 1.6 x 3.1

Sheep-meat, beef, wool x 0.8 x 1.5 x 2.7

TOTAL x 0.9 x 1.7 x 3.4

Scenario modelling: Fold change from 2010 baseline to 2030

Source: CIE (2014)


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x 1.5

x 2

2010 2030

STEP CHANGES

via the development of new

technologies and business innovation

Increased adoption

of existing know-how

Current practice

Future best practice with existing know-how

Future best practice with step changes

base

x 0.5

High

Medium

Low

Targeted

interventions

Scenario modelling: Agri-food production scenarios

Source: CIE (2014)


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