Economic planners flag more stimulus in the pipeline, but there may be a wait on the details
Insight
August 11, 2016
Unlocking the agribusiness potential of Australia’s north
With Asia estimated to account for two thirds of the global middle class economy by 2030, northern Australia’s potential for agricultural expansion to meet the impending demand is being examined.
Grand plans to exploit the potential of Australia’s vast, sparsely populated and largely undeveloped north have been floating around at least Federation. For one reason or another, they have never really come together. That may be about to change according to Patrick Vizzone, NAB’s Head of Institutional Banking and Regional Head of Food and Agribusiness for Asia, and John Avent, NAB’s State Head of Agribusiness for Queensland and the Northern Territory. Agribusiness View spoke to them about the future opportunities Northern Australia offers.
So why are governments and private companies now going to start pouring money into developing the north?
Patrick Vizzone: Supply and demand. On the supply side you’ve got 17 million hectares of arable land. That’s an area the size of Uruguay or Cambodia. On the demand side, and I say this as someone who has been based in Greater China for two decades, you’ve got massive consumption shifts. There’s been an explosion in demand for Australian food and agricultural products from China, where they have a stellar reputation. Something similar is likely to occur with other developing countries such as Vietnam.
John Avent: The dynamics of population and demand. Within a reasonably short flight, there are billions of people to our north, and with trade agreements in place with some of the more developed markets such as Japan, Korea and China, we will continue to see growth in demand from these already big markets. Now we’re also seeing growing demand from Indonesia, Malaysia, Thailand, Vietnam and other south Asian countries for Australia’s clean, green products and commodities. By 2030, it’s estimated Asia will account for some two thirds of the global middle class by number and by consumption; ignore that forecast at your peril.
Patrick Vizzone, NAB’s Head of Institutional Banking and Regional Head of Food and Agribusiness for Asia
What needs to happen to turn northern Australia into a food bowl for the burgeoning Asian middle class?
Patrick: Large-scale agribusiness doesn’t emerge in isolation. There needs to be an ecosystem. That means infrastructure – roads, ports, rail, dams. It also includes people and facilities for those people, such as schools and hospitals. Is all that expensive? Yes, but developing agribusiness is a lot cheaper than, say, resource extraction.
John: Firstly, there’s a public awareness issue. Many Australians don’t realise there is the arable land and rainfall to sustain agriculture in the north. That’s important because it’s going to be down to governments to get the ball rolling by supporting development of the infrastructure needed to attract private investment. If you need to get product to market, you need road, rail and ports to be able to meet that demand.
John Avent, NAB’s State Head of Agribusiness for Queensland and the Northern Territory
Are there opportunities for enterprising agribusiness types up north?
Patrick: The three key areas the government have earmarked for investment are, reasonably enough, beef, aquaculture and horticulture. The north will make a great production base for large-scale beef production. Australia can leverage its IP in that area in terms of R&D into genetics and experience with value-added processing. There are long tracts of bio-secure coastline available. There are already barramundi farms operating and lots of talk about shrimp projects. Plus, there are lots of interesting things happening in horticulture. I was in Darwin recently speaking at the Northern Australia Food Futures Conference to some Australian farmers of Asian background. They were producing Asian tropical fruits. I think that’s the way to go – rather than saying we’ve always grown mangoes so we’ll grow more then try to sell them, smart operators will investigate what the Asian consumer wants then supply it.
John: A lot of it comes down to having a secure supply of water. Once that’s available there is the opportunity for all kinds of agricultural pursuits to be developed in northern Australia. There is also an opportunity to embrace technology and get a head start. Such technologies as crop sensors, air and soil sensors, automation across the supply chain right through to livestock biometrics will see those who are willing to embrace these technologies get the early mover advantage. We know that potential customers from the north expect and demand all of life traceability and technology will assist savvy operators to meet these expectations.
How will the private investment side of things work?
John: Aside from supporting infrastructure development, the government will have to consider things such as minimising red tape to fast track development. Once that’s all in train, domestic or foreign investors would be wise to leverage local knowledge. Northern Australia is a unique environment with unusual challenges and opportunities. I think of it like Asia – it can be difficult entering a new market, but once established, the opportunities are significant. NAB is well placed to support customers going to Asia, seeking FDI from Asia or looking for offtake agreements. We have a dedicated team to support our customers with accessing these key markets.
Patrick: I’d predict there will be a lot of joint venture-led development. Agribusiness is complicated and I can’t imagine too many foreign companies would be well suited to going it alone. What we at NAB are interested in facilitating is partnerships that combine foreign capital and local know-how.
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