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WHERE KNOWLEDGE IS POWER
Phil Ruthven AM, Chairman
Market Trends & The Future of Agriculture
Market Trends & The Future of Agriculture
Water Services Committee Conference
The Parklake Hotel, SheppartonThursday 31 July 2014
TopicsTopics
1.1. Brief Global PerspectiveBrief Global Perspective
2.2. Australia’s Economy & IndustriesAustralia’s Economy & Industries
3.3. The Agricultural IndustryThe Agricultural Industry
4.4. Agribusiness Agribusiness
5.5. The Water IndustryThe Water Industry
6.6. Success in Rural BusinessesSuccess in Rural Businesses
7.7. A Different Industry In The FutureA Different Industry In The Future
1.Brief Global Perspective
The World’s Economic Regions In 2014Share of World GDP (ppp basis)
2014 World GDP, $US 92.5 trillion
C&S America
6.3%
North America
21.9%
W&C Europe18.3%
EasternEurope
4.0%
Asia Pacific
33.0%Africa 3.9%
ME5.3%
IndianS-C
7.3%
IMF/IBISWorld 09/02/14
Asia Pacific Economy2014 (F)
*Korea 6.8%
Australia 3.9%
Singapore 1.3%
Vietnam 1.3% NZ
0.5% Myanmar 0.4%
Cambodia 0.1%
Laos 0.1%
PNG 0.1%Other 0.1%
52.4% China
Japan 16.7%
Philippines 1.7%
HK
1.5%
Taiwan
3.7%
Indonesia 4.9%
Malaysia 1.9%
Others 3.9%
*North Korea 0.2% South Korea 6.6%
25+ nations
$US 30.5 trillion GDP (ppp terms)
Thailand 2.6%
Wikipedia/IBISWorld 12/03/14
Asia-Pacific Arable Land% of total basis
Others
9.5%
Indonesia 7.5%
Myanmar CambodiaVietnam Malaysia Malaysia NZ Laos PNG Other
53.2% China/HKAustralia 17.5%
Thailand 5.3%
Philippines
1.2%
Philippines 2.0%
Korea1.5%
Source: CIA 04/02/12
Taiwan 2.0%
2.7 million sq.km
Japan1.5%
Asia Pacific Renewable Water1
Korea 1.2%A
ustr
alia
Indonesia
Thailand
Singapore 0% Vietnam 7.3% NZ 3.2% Burma 8.6% Cambodia 3.9% Laos 2.7% PNG 6.6%Others 0.65 23.2% China
Japan 3.5%
MalaysiaPhilippines
HK
23.3%
3.4%4.7%
3.9%
Others
3.9%
•North Korea 0.6%•South Korea 0.6%
Source: CIA 30/6/11
3.3%
Other 33.0%
12.2 ckm total
Note: 1 Renewable water, essentially rainfall plus neighbouring nations’ source, desalination
Australia’s Exports Market Merchandise goods 2014
IBISWorld: 22/05/14
$274 billion(year to March 2014)
Other 5.8%
40.3% Greater China China 36.6%
Taiwan 2.7% H/K 1.0%
Indian S-C 3.7%
UK 1.4%
17.9%
Japan Korea S 7.5%
CIS 0.6%
Other EU 3.3%
Asia Pacific 78%Asia Pacific 78%Asia 82%Asia 82%
NZ 2.7%Singapore 2.4%
Other A-P 5.4%
NAFTA 4.6%
Africa & M. East 2.6%
Indonesia 1.8%
Australia’s Exports Market Year 2013
IBISWorld: 11/09/12
$319 billion
Tourism 10.8%
Agriculture
8.0%
OtherServices 1.1%
49.3% Minerals
Other Manufs 5.1%
Freight/Postal1.2%
Mach. & Transp eqpt 4.2%
Metals 8.2%Food Mnfg. 4.2%
BusinessServices
4.0%
Manufacturing26%
Including
non-monetary gold
Other exports 3.9%
Resources57%
Services17%
Australia’s Exports Market By Category share of total (%)
Source: ABS & IBISWorld 2014 Note: 1 Year ending March 2014
$ billion
1898 1972 1992 20141 Fiscal years
Rural
Mining
Manufactures
FreightOther Services
Tourism
Importance Of Rural ExportsShare Of Total Exports F1970-2013
Source: ABS 25/07/11
Sh a
re o
f E
x por
ts (
%)
Year, ended June
“Rural exports” in this chart include processed rural produce; otherwise < 5% of total exports
False dawn or new era?
2.Australian Economy
& Industries
Australia’s Economic Growth Annual real GDP growth (%) progressed in quarters to March 2014 (and forecast to March 2019)
Source: IBISWorld: 05/06/14Years, ended June
3.5% pa (52 years)3.2% pa (since 1987)
Australia’s Economy & Population
F 2014
23.6 million
IBISWorld: 21/05/14
Queensland20.2%
NSW 32.0%
SA
7.2%
Population GDP
$1.6 trillion
WA 10.9%
Victoria 24.9%
Tas2.2%
ACTACT1.6%1.6%
NT1.0%
NSW 31.3%
Victoria 22.2%
Queensland
19.1%
WA 15.9%
SA
6.3%
Tas1.6%
ACT2.3%
NT1.3%
Source: ABS/IBISWorld 29/10/13 Year, ended June
Rea
l GD
P o
r G
SP
gro
wth
(%
pa)
Victoria’s Economic GrowthVictoria’s Economic GrowthReal growth Real growth F1991-2013F1991-2013
Ages Of Economic ProgressGDP @ Constant F2011 Prices Australia 1788-2013 and onwards
GD
P $
bil
lion
IndustrialAge
0
200
400
600
800
1000
1200
1400
1600
1800
2000
220017
8017
9018
0018
1018
2018
3018
4018
5018
6018
7018
8018
9019
0019
1019
2019
3019
4019
5019
6019
7019
8019
9020
0020
1020
2020
3020
4020
5020
6020
7020
8020
9021
00
HuntingAge
AgrarianAge
InfotronicsAge
IndustrialAge
Year, ended June IBISWorld 24/09/13
An Industrial Age is when Manufacturing and Construction
dominate the economy (c. 30-50%+ of GDP)
Agriculture,Mining,
Banking, Commerce
Transport the major
utility
Quaternary service
industries
Hunting, trapping, fishing,crafts, religion
Enlightenment Age ?
Quinary service
industries
Imbedded intelligence,
neural network Programs.
More electronic “guardian
angels” and other new
technologies
Power the major utility(electricity) and
telephony
IC&T
Outsourcing Creates Most IndustriesOutsourcing Creates Most Industries
We outsourced the We outsourced the growinggrowing of things to create the of things to create the agriculture industry, aided by new technologiesagriculture industry, aided by new technologies
We outsourced the We outsourced the makingmaking and buildingand building of things to of things to create the industrial age industries of manufacturing create the industrial age industries of manufacturing and construction, aided by new technologies and and construction, aided by new technologies and utilities.utilities.
We are outsourcing We are outsourcing services services ((householdhousehold services and services and business functionsbusiness functions) to create the current infotronics ) to create the current infotronics age from 1965-2040s, aided by new systems & age from 1965-2040s, aided by new systems & technologies and a new utility sectortechnologies and a new utility sector. . These created These created $ 1.2 billion in extra revenue pa by 2014$ 1.2 billion in extra revenue pa by 2014
1800 1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020 2050
Importance of Industries Shares of GDP by Industry Division, 1800-2050
180
0
182
0
184
0
186
0
188
0
190
0
192
0
194
0
196
0
198
0
200
0
202
0
205
0
AgricultureMining
ManufacturingUtilitiesConstruction
W’Sale TradeRetail Trade Transport, Postal
Media & Telecom
Finance & Insurance
Rental, Hiring. R Estate
Dwelling O’Ship
Prof & Tech Services
Admin ServicesPublic Admin/Safety
Ind taxes less subsidies
EducationHospitality
Health & Social AssistArts & Recreation Personal & Other Serv
PrimarySector
SecondarySector
TertiarySector
QuaternarySector
QuinarySector
New Age Industries1965 – 2040s+
Household Outsourcing Hospitality (meals, accommodation) Entertainment (clubs, casinos) Household services (everything!) Personal services (beauty, fitness) Health (everything!) Tourism (transport, agencies) Education (pre-school, tertiary) services) Child minding (pre-school, nanny services) Finances (advice, management) Other services (inc. unmentionables)
Overseas Outsourcing (To Us) Mining (energy minerals) Tourism (inbound) New era in agriculture? Education (mainly tertiary) Health Aquaculture (& crustaceans) Manufacturing (smelted ores) IP (royalty arrangements)
Business Outsourcing Trucking Facilities management Business services (A/C. legal, computing) Knowledge services (data, consulting) Cleaning. Catering HR services (recruitment, staffing). Security Call Centres/CRM services Operations (via franchising)
New Enabling Utilities (& technologies) ICT Nanotechnology Biotechnology Just-in-time systems Self-service systems
IBISWorld
Australia’s Industry Mix Shares of GDP, in F2012 price terms Year to March 2014
ABS 5206-26 IBISWorld 05/06/14
Agriculture
2.2% Utilities 2.4%
4.7% Transport
GDP $1558 billion
Finance & Insurance
4.1% W’Saling
Mining
10.3%
Govt. Adm. 5.2%
O’Ship Dwells. 8.1% 4.5% Retailing
7.6% Construction
2.7%
8.2%
Info Media & Communications
Prof. & Tech Serv 6.4%
Education 4.4%
Health 6.4%
Cult & Rec. Serv. 0.8%
1.7%
Pers. & Other Serv.
Hospitality
6.5% Manufacturing
Sectors Primary
Secondary Tertiary
Quaternary
Quinary
Ind. Taxes1 5.9%
Admin. & Support Services
Includes
postal,
warehousing
Note 1: includes stat. discrepancy (0.15%)
Rental, Hiring & Real
Estate
2.9%
Importance of Industries States & Territories Shares of GSP by Industry Division, F2013
4.5 6.1 7.1 6.4 8.5 9.9 6.8 6.2 5.82.9
3.44.5 4.6
5.17.0
5.4 4.6 6.74.0
4.36.0 6.5
7.06.7
7.6 7.3 4.5
2.8
9.25.7 5.2
5.96.3
4.1 4.9
29.0
5.4
3.45.1 6.8
5.8 3.38.6 7.5
9.8
6.7
9.68.1 8.3
7.8 7.7 8.3 9.3
7.9
3.1
2.7 5.68.1 6.8 6.5
9.9 11.9
3.9
2.2 2.3
4.0
4.8
4.45.8
4.8 4.3 6.2
4.54.7
3.5
3.1
4.74.5 4.8
6.15.6
4.3
2.8
5.14.1 4.1
4.54.3
12.9
17.7
9.37.7 6.6 5.5
6.0 5.1
9.7
4.6 4.6
5.0
4.26.5 6.7 7.7 6.9
7.6 7.3
29.4
14.38.8 8.1 3.3
5.4 7.6
4.6 2.72.5
2.6 2.8
2.5
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1 2 3 4 5 6 7 8 9
Agriculture
Mining
Manufacturing
Utilities
Construction
Wholesale trade
Retail trade
Transport & Postal
Media & Telecom
Finance &insurance
Rental & Real Est
Dwell O'Ship
Prof & Tech
Adm. & Support
Govt admin
Ind taxes et al
Education
Accom, cafes &rest
Health &community
Cult &recreation
Other Services
IBISWorld 09/03/14
WA NT Qld Aust SA Tas Vic NSW ACT
239 19 284 1473 92 24 329 455 32
GSP $ billion
Source: IBISWorld, ABS and mapsnworld.com 19.02.13
Australia’s Three Geographic Zones (population in equal land masses)
Top ⅓4.4%
of population
Middle ⅓ 17.9%
of population
Bottom ⅓ 77.7%
of population
1.0 millionpeople
4.1 millionpeople
17.9 millionpeople
5.4% of state
1.3% of state
93.3% of state
82.9% of state
86.3% of state
12.5% of state
17.1% of state
0.3% of state
99.7% of state
Importance of Industries By Zones Shares of GSP by Industry Division, current prices
5.9 6.2 5.7 3.3
4.3 4.7 3.7
2.1
6.6 7.25.7
3.1
4.8 5.04.6
3.2
2.42.7
1.9
7.77.9
7.8
5.1
2.22.3
2.2
6.67.4
5.1
2.9
9.811.6
5.7
2.9
4.7
4.9
5.0
4.5
4.6
4.6
2.5
4.3
4.4
4.9
7.2
7.2
7.7
5.9
7.1
7.7
6.4
3.6
9.73.2
18.4
51.2
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$1.48 trillion $1.09 trillion $277 billion $111 billion
AgricultureMiningManufacturingUtilitiesConstructionWholesale tradeRetail tradeTransport &storageCommunicationFinance &insuranceProp &businessDwelling O'ShipGovt adminInd taxes et alEducationHospitalityHealth &communityCult &recreationPersonal & Other
IBISWorld & ABS 21/02/13
Australia Bottom 1/3 Middle 1/3 Top 1/3
3.Our Agricultural
Industry
Agriculture’s Importance Agriculture, Fishing & Forestry Industry, share of GDP (%)
Sh
are
of
GD
P (
%)
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
10018
0018
1018
2018
3018
4018
5018
6018
7018
8018
9019
0019
1019
2019
3019
4019
5019
6019
7019
8019
9020
0020
10
Rev
enu
e ($
bil
lio
n,
F20
04 p
rice
s)
Revenue(constant 2004 prices)
Economic Importance(contribution to GDP, %)
2020
Australia’s Broad Population ShiftAustralia’s Broad Population Shift % of total% of total
1901 2001 2051(F)
32%
19% 25%
Source: ABS & IBISWorld
4% 5%
64%
7%
66%
Coastal
Capital Cities
Rural (cities >30,000 )Rural (towns & shires)
5%
12%
61%
Agriculture’s Continuing Volatility % annual change in real value added 1976 to March 2014
Source: ABS5206-16
-30
-20
-10
0
10
20
30
40
5019
76
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Collapses average 3+ years apart, serious ones average 7-8 years apart
Agricultural Output and Net Profit4-qtr.moving change to March 2014
ABS and IBISWorld 26/07/14
$ m
illio
n (
curr
ent p
rices
)
Gross Output
Net Profit
Output is volatile
Farm Income Realised Agricultural Income, 1960- March 2014, $ millions
Source: ABS5206-23
01,0002,0003,0004,0005,0006,0007,0008,0009,000
10,00011,00012,00013,00014,00015,00016,00017,00018,00019,00020,000
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Inco
me
( $
mill
ion
)
Income is volatile
Agricultural Assets Agricultural Assets Total Assets and DebtTotal Assets and Debt
Source: IBISWorld 14/02/14
$ b
i ll i
on
Year, ended June
Total Assets
Debt
Source: IBISWorld 14/02/14
$ b
i ll i
on
Year, ended June
Capital gain(% of Net Assets)
Net Profit(% of Net Assets)
Agricultural Returns Agricultural Returns NPAT & Capital Gains return on equity (%)NPAT & Capital Gains return on equity (%)
Clearly Agriculture, in business terms,is a property speculation asset rather than an economic production asset
Average Net profit/equity 2.3% paAverage Capital gain/equity 3.6% paAverage Total Return/equity 5.9% pa
Source: ABS/IBISWorld 15/02/14 Year, ended June
Rea
l GD
P o
r G
SP
gro
wth
(%
pa)
Agriculture’s Productivity GrowthAgriculture’s Productivity Growth F1996-2013F1996-2013
The challenges for Agriculture and its rural The challenges for Agriculture and its rural operators is operators is not productivity not productivity - which is the best - which is the best
of all the nation’s industries - but of all the nation’s industries - but massively massively overpriced land, insulation from droughts and overpriced land, insulation from droughts and floods, competitive product selection, financial floods, competitive product selection, financial
structuring, and economies-of-scalestructuring, and economies-of-scale
Importance of States Rural Land Value, % by states: 1989 and 2013
36.9 40.9
24.929.7
2.9
2.610.9
8.011.0
9.9
13.08.6
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1 2 3 4 5
Qld
SA
WA
Tasmania
Victoria
NSW
NT
ACT
IBISWorld 15/02/14
1990 2013
Land Value $ bn. (current prices) 62.3 261.0
NT 0.3ACT 0.0
NT 0.7ACT 0.1
Importance of States Gross Output, % by states: 1990 and 2013
29.122.6
10.911.7
22.323.9
21.022.6
13.5 16.2
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1 2 3 4 5
WA
NT
Qld
Victoria
SA
ACT
Tasmania
NSW
IBISWorld 15/02/14
1990 2013
Gross Output $ bn. (current prices) 34.5 67.7
Importance of Product Groups The Changing Mix: 1990 and 2013
4.5 5.32.8
5.310.3
16.32.9
2.2
2.3
3.8
0.0
1.3
5.1
2.3
3.2
9.9
12.3
6.4
6.61.1
5.2
5.8
2.1
1.4
22.8
20.319.7
4.1
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1 2 3 4 5
Wool
Sheep, cattle
Other live animals, pets
Sugar cane
Pigs, poultry, deer
Eggs, honey
Milk
Wheat
Barley, oats, sorghum
Other grains, oilseeds
Fodder, grass
Plants. Flowers
Fruit, nuts, vegetables
Other agriculture
Other Livestock prod.
Non-agriculture
IBISWorld 15/02/14
1990 2013
Output $ bn. (current prices) 34.5 67.8
Wool
Sheep, cattle
Other animalsSugar CanePoultry, pigs etc
Milk
Wheat
Barley, oats etc
Other (oil seeds etc)Fodder, grassPlants, flowers
Fruit, Nuts, Vegetables
Other agriculture
Non-agriculture
So, just what is happeningSo, just what is happening as we head down the as we head down the
2121stst Century? Century?
What is Happening to AgricultureWhat is Happening to Agriculture in the 21 in the 21stst Century Century
1.1. It is growing in volume and dollars, but its growth is much It is growing in volume and dollars, but its growth is much slower than new age industries.slower than new age industries.
2.2. Average revenues per holding need to move from c. $460,000 Average revenues per holding need to move from c. $460,000 to well over $1 million, and ROSFs from <3% to 15%+ to match to well over $1 million, and ROSFs from <3% to 15%+ to match other SMEs in the economy.other SMEs in the economy.
3.3. The industry is integrating into anThe industry is integrating into an agribusiness agribusiness input-output input-output chain with greater discipline.chain with greater discipline.
4.4. The industry is moving into a more professional and The industry is moving into a more professional and businesslike status.businesslike status.
5.5. Many Gen X offspring and most Gen Y offspring don’t want to Many Gen X offspring and most Gen Y offspring don’t want to inherit or follow their father inherit or follow their father (or parents) (or parents) into the businessinto the business
5.5. World best practice and technology transfer is a condition of World best practice and technology transfer is a condition of survival.survival.
6.6. The industry is changing its The industry is changing its marketsmarkets, its , its productsproducts, its , its locationslocations, , its its systems & technologysystems & technology and its and its ownership.ownership.
The Big Changes in AgricultureThe Big Changes in Agriculture New markets:New markets: Shift from Europe and North America to the Asia Pacific. Shift from Europe and North America to the Asia Pacific.
New products:New products: Shift from livestock products Shift from livestock products (esp.wool and dairy)(esp.wool and dairy) into beef, horticulture, cotton, oil into beef, horticulture, cotton, oil seeds, grain legumes, aquaculture, crustaceans & molluscs, floriculture and outsourced seeds, grain legumes, aquaculture, crustaceans & molluscs, floriculture and outsourced services.services.
New systems & technologies:New systems & technologies: Water Water husbandry, dry land farming, hydroponics, fish farming, dominance of man made forests husbandry, dry land farming, hydroponics, fish farming, dominance of man made forests (over native)(over native), laser levelling, varietal development, biotechnology( genetic engineering, , laser levelling, varietal development, biotechnology( genetic engineering, tissue culturing, hybridisation etc)tissue culturing, hybridisation etc)..
New locations:New locations: Shift Shift northward with Western Australia, Queensland, Northern Territory emerging as the key northward with Western Australia, Queensland, Northern Territory emerging as the key growth areas.growth areas.
New ownership and corporate structure:New ownership and corporate structure: Shift Shift from land ownership to leasing/rental from land ownership to leasing/rental (from(from specialised property trusts)specialised property trusts); sub-contracting of ; sub-contracting of agricultural services; contract supply of agricultural produce to local and overseas agricultural services; contract supply of agricultural produce to local and overseas manufacturers; development of franchisingmanufacturers; development of franchising. . Growing foreign investment and ownership Growing foreign investment and ownership (esp. China) due to food security concern.(esp. China) due to food security concern.
Merchandise Exports $A 67 million
New MarketsNew Markets
Source: IBISWorld
Other EU 18.7%
3.4%
U
SA
UK53.5%
Other Nations
8.4 %
Asia Pacific69.5%
1901
2010
OtherCountries
12.8%
Other EU 4.3 %
Merchandise Exports $A 201 billion
Indian S-C 0.8% Asia
Pacific
10.7% UK 3.6%NAFTA 5.7 %
Indian S-C 8.4%
Revenue $A 0.24 billion (c. 20% of national revenue)
New ProductsNew Products
Source: IBISWorld
Crops & Horticulture 33.4%
Livestock Products 40.3%
Wool, Hides Milk, Eggs Honey
Fishing, Hunting, Forestry
Livestock22.3%
Forestry 7.7 %
Livestock Products
9.6%
Crops & Horticulture 45.3%
Livestock 23.7%
Revenue $A 56 billion (1.5% of national revenue)
1910 2010
4.0%
Services 9.4%Fishing 4.3 %
New Systems & TechnologiesNew Systems & Technologies
Land laser levelling/watering systems/cultivation methods.Land laser levelling/watering systems/cultivation methods.
Hydroponics/aquaculture Hydroponics/aquaculture (horticulture/fishing).(horticulture/fishing).
Satellite technology Satellite technology (ground preparation, forecasting, harvesting) (ground preparation, forecasting, harvesting)
Biotechnology Biotechnology (genetic engineering, hortmones, hybridisation, (genetic engineering, hortmones, hybridisation,
tissuetissue culturing, hormones, varietal selectionculturing, hormones, varietal selection
Large scale technology.Large scale technology.
Intensive agriculture Intensive agriculture (poultry, pigs etc).(poultry, pigs etc).
Outsourcing Outsourcing (services), such as ploughing, seeding, harvesting etc.)(services), such as ploughing, seeding, harvesting etc.)
Corporate/franchised operating systems.Corporate/franchised operating systems.
Shares of Factor Incomes
New LocationsNew Locations
Source: IBISWorld 25/07/11
Qld. 13%
NSW47%
WA
Victoria25%
SA 12.2%
NSW/ACT
14.7%
Qld.25.0%
Victoria24.5%
1910 2010
4%
WA 17.8%
SA 10%
Tas Tas
NT 1.2%
4.7%
2%
Poultry Poultry (Inghams, Steggles)(Inghams, Steggles)Grapes/Wine Grapes/Wine (Treasury etc)(Treasury etc)
Cotton Cotton (Kahlbetzer)(Kahlbetzer)
OlivesOlivesAquaculture Aquaculture (Tassal)(Tassal)
Some Vegetables Some Vegetables (incl. hydroponics)(incl. hydroponics)Some Beef Cattle & Feedlots/AbattoirsSome Beef Cattle & Feedlots/AbattoirsSome Pig FarmingSome Pig FarmingSome Grain/oilseedsSome Grain/oilseeds
New OwnershipNew Ownership(Sectors going Corporate/Agribusiness)(Sectors going Corporate/Agribusiness)
4.Agribusiness
(input-output flows & power shifts)
The Agribusiness Input-Output ChainThe Agribusiness Input-Output Chain Revenue F2014 Revenue F2014 (E)(E)
$56.5 billion $58 billion2$100 billion1 $138 billion3
$59 billion
Food Agriculture
& Fishing
Food Wholesaling
Hospitality & Institutional
Consumer Food Retail
Input-Output Chain
Revenue $460 billion(10.5% of nation)
Value of final goods $191 bn (!2.3% of GDP)
Food Manufacturing
Packaging, Utilities,Transport/ Other Costs
Imports*$11 billion
Exports*$37billion
$154 billion
Power Points In The Agribusiness ChainPower Points In The Agribusiness Chain
Agriculture Consumer
Imports
W’salingRetailing
&Final
Resellers
Exports
Manufactg.Crude
ModerateElaborate
FinalHospitality
Markets
Industrial Age (1865-1964)
Most Power
Least PowerMost Power
Least Power New Infotronics Age (1965-2040s)
Vertical Integration/alliances Vertical Integration/alliances
In the Industrial Age, each link in the chain usually owned and operated independently
Most Power
IBISWorld 20/01/12
Agriculture, Fishing, Forestry & Services Shares of industry revenue F2014(F)
Food Agriculture 73.6%
Services to Agriculture
Revenue $A 73.5 billion
5.8%12.9%
Forestry & Logging
4.5% Fishing &Aquaculture
3.2%
IndustryIndustry Firms Revenue Firms Revenue Agg. Growth Ave. Rev. Agg. Growth Ave. Rev. (‘000) ($ billion) 5 yrs, % per firm ($m)
Vegetable Growing (outdoor) 3.27 3.20 0.3 0.978Vegetable Growing (indoor)` 0.94 0.80 0.8 0.851Grape Growing 7.98 1.14 4.5 0.143Apple, Pear, Stonefruit 2.06 1.06 3.6 0.515Other Fruit Growing 4.34 2.26 7.8 0.520Grain Growing 11.96 12.80 9.5 1.070Sugar Cane 2.55 1.03 6.9 0.402Rice Growing 0.30 0.69 5.4 2.281Sheep 12.81 3.33 4.8 0.260Beef 30.02 5.54 4.0 0.185Beef Feedlots 0.52 2.79 7.3 5.363Sheep-Beef 6.93 2.13 5.2 0.306Grain + Livestock 20.92 9.84 2.1 0.470Poultry (meat) 1.10 0.46 7.4 0.418Poultry (eggs) 0.15 0.58 5.2 3.867Other Livestock 3.60 0.81 0.5 0.225Pig Farming 1.16 1.01 9.3 0.871Dairy Cattle 6.69 3.97 5.6 0.593Hay & Other Crops 2.49 1.27 6.9 0.510
Food Based 119.79 54.71 ( pa) 0.457
Agriculture, Forestry & Fishing IndustryAgriculture, Forestry & Fishing IndustryF2014 F2014 (F)(F)
IBISWorld: 23/06/14
Ocean Fishing Ocean Fishing 5.525.52 1.331.33 5.3 5.3 0.241 0.241 Seafood FarmingSeafood Farming 1.441.44 1.16 1.16 3.03.0 0.805 0.805 SeafoodSeafood 6.966.96 2.492.49 0.358 0.358
Total Total (all food)(all food) 126.75 57.20 126.75 57.20 0.451 0.451
IndustryIndustry Firms Revenue Firms Revenue Agg. Growth Ave. Rev. Agg. Growth Ave. Rev. (ANZSIC Class) (‘000) $ Billion 5 years (real) ($’milln.) ($’milln.)
.
IBISWorld: 23/06/14
Non-foodNon-food
Plant NurseriesPlant Nurseries 1.061.06 0.760.76 0.7170.717Cut Flowers Cut Flowers 0.940.94 0.330.33 0.3510.351
Horse breeding Horse breeding 3.60 0.81 3.60 0.81 0.225 0.225Cotton GrowingCotton Growing 0.700.70 2.112.11 3.0003.000
Sub-totalSub-total 6.576.57 4.244.24 0.6450.645
ForestryForestryLoggingLogging 1.341.34 1.401.40 1.045 1.045 ForestryForestry 0.530.53 1.491.49 3.4893.489
Sub-total Sub-total 1.87 2.89 1.545 1.87 2.89 1.545
ServicesServices Shearing Shearing (+ other outsourcing) (+ other outsourcing) 10.16 5.68 10.16 5.68 0.559 0.559
Services to Forestry Services to Forestry 1.39 0.65 1.39 0.65 0.468 0.468
Sub-total Sub-total 11.58 9.76 11.58 9.76 0.843 0.843
IndustryIndustry Firms Revenue Firms Revenue Agg. Growth Ave. Rev. Agg. Growth Ave. Rev.(ANZSIC Class) (‘000) $ billion 5 years (real) ($’milln.) ($’milln.)
Turf Growing 0.27 0.23 0.873
Cotton Ginning 0.03 3.43 114.333
5.The Water Industry
Water Supply ANZSIC D2811 Australia F2014(E)
Revenue $ 9.5 billion
Growth, F2013-F2018 (real) 5.4% p.a (nearly double GDP)
Value Added $ 4.76 billion (0.3% of GDP)
Enterprises 263
Employment c. 15,900
Wages $ 1.4 billion
Key Players (F2013 est.) Watercorp (WA) 11.9%Sydney Water 11.5%SA Water 9.4% Melbourne Water 6.0% Qld Urban Facilities 5.2%Yarra Valley 3.8% SE Water 3.5%
GMW 1.8%
The Water Market Share of total basis c. 2013 estimate
IBISWorld: 16/02/14
Water supply,drainage, sewerage
Agriculture37%
Products Markets
22%
Households
Water gathering & Supply
26%
Distribution74%
Other Industries
12.5%
Utilities 2.5%
Manuf 4.0%
$9.5 billion(F2014 forecast)
21%
Mining 1%
The Water Market Locations of operation, % of total basis
Source: BEA/IBISWorld 8/6/13
SA
38.1% NSW7.7%
17.7%
Victoria
Queensland 22.2%
WA 10.3%
NT 1.3%Tasmania
2.8%
Percent
Distribution of Water Consumption vs Population
Source: IBISWorld 28/07/14
PopulationWater Consumption
EnterpriseEnterprise Assets Revenue ROSFAssets Revenue ROSF1 1 Staffing Staffing ($ bn) ($ billion) (5 yr ave) (empl/$bn. Asset) (empl/$bn. Asset)
Melbourne Water 14.48 1.286 4.0 60
Sydney Water 14.45 2.521 6.2 188
SA Water 13.83 1.436 2.8 111
Water Corp (WA) 9.48 2.184 5.7 313
Qld. Urban Utilities 5.20 0.951 4.7 213
Goulburn Murray Water 4.33 0.257 -1.6 159
Yarra Valley 4.01 0.763 6.5 144
SE Water Corp 3.30 0.706 4.6 166
ACTEW 2.81 0.323 7.9 142
Hunter Water 2.68 0.318 2.2 178
City West Water 1.95 0.477 0.8 228
Total/Average 76.52 11.222 4.0 152
Water Industry Water Industry Major Players F2013Major Players F2013
Note: 1 Return on Shareholder Funds after tax, net profit (after tax) on net assets
GMW ProfitabilityGMW Profitability
GMW has virtually the same number of employees per GMW has virtually the same number of employees per $ billion assets under management $ billion assets under management (159) (159) as the industry as the industry
average average (152)(152), so is clearly as efficient., so is clearly as efficient. However, being a NFP However, being a NFP enterprise, it is not intended to match industry profitability.enterprise, it is not intended to match industry profitability.
If that exemption ceased, GMW might need to raise prices for If that exemption ceased, GMW might need to raise prices for its services by $204 milion its services by $204 milion (79%) (79%) to earn the industry’s low to earn the industry’s low
average ROSF of 4.0%. Whether it could do that with the average ROSF of 4.0%. Whether it could do that with the already-low profitability of farmers is another matter.already-low profitability of farmers is another matter.
The GMW 5-year Financial Plan shows a reduction in the The GMW 5-year Financial Plan shows a reduction in the losses but does mean customers will have been subsidized by losses but does mean customers will have been subsidized by
some $400 million over a 10-year period from 2009? A state some $400 million over a 10-year period from 2009? A state government, one day, might change the rules; suggesting a government, one day, might change the rules; suggesting a contingency plan in a drawer somewhere could be handy.contingency plan in a drawer somewhere could be handy.
6.Success In Rural
Businesses
Success in any Success in any businessbusiness
Percent
Australian Profitability By Major Industries
Return on Shareholder Funds (after tax), Top 555 businesses 5 years to F2013
Source: IBISWorld 13/11/12
Includes private and government enterprises
Wholesale Tradeincludes multinational importers/marketers
8.8
ROSF Percent
Australian Profitability By Major Industries
Return on Shareholder Funds (after tax), Best 100 5 years to F2013
Source: IBISWorld 20/11/13
40.7
Includes GBE & private enterprises
40.7
2 company 2 companies
19 companies
21 companies
16 companies
100 companies
9 companies
5 companies
8 companies
7 companies
5 company
1 company
2 companies
1 company
1 company
1 comp.
Includes multinational importers/marketers
By Focus Focused (mainly single industry class) 97 1 49.3% Theme Conglomerates 3 51.0% Classic Conglomerates 0 -
100 49.4%
By Ownership Local Owned 44 43.5% Foreign Owned 56 54.0%
100 49.4%By Ownership Public Company 38 46.5% Proprietary Company 59 51.3% Government Body 3 48.7%
100 49.4%
The 100 Best Companies ROSF after tax (%), 5-Year Average to F2013
Source: IBISWorld 20/11/13
Number of ROSF companies (%)
Note: 1 This is highlighted to show that the majority of companies are in onebusiness only, even if slightly lower in ROSF
20 Best Performing Australian Enterprises5 years average ROSF, after tax, (%) to 2013
Enterprise ROSF (%)
Industry Ownership(Local/Foreign)
Revenue ($mill)
1. Rondo 152 Manufacturing L 1552. Bechtel 148 Prof. & Tech. Services F 42773. Phillips Electronics 139 Wholesaling F 3644. Hatch Associates 119 Prof. & Tech. Services F 6915. John Deere 117 Wholesaling F 9326. Phillip Morris 114 Manufacturing F 9847. Federal Express 94 Transport F 2098. Shindlers Lifts 89 Manufacturing F 3319. Tcorp 87 Finance & Insurance L 819710. British Tobacco 80 Manufacturing F 196111. Revlon Australia 72 Wholesaling F 9512. WorkPac 72 Admin. & Support Serv L 43213. Reed Elsevier 69 Info. Media & Comm. F 20914. Mars 68 Manufacturing F 131515. Pandora 66 Retailing F 13416. Schroder Investment 64 Finance & Insurance F 10117. Jardine Lolyd 63 Finance & Insurance F 19418. Novo Nordisk Pharm 59 Wholesaling F 18819. Wotif.com 58 Admin. & Support Serv L 14720. Cliffs Natural Res. 58 Mining F 1411
Source: IBISWorld 29/01/14
What the Best Enterprises Are DoingWhat the Best Enterprises Are Doing
1.1. They They stick to one business at a timestick to one business at a time and do not diversify and do not diversify
2.2. They They aim to dominateaim to dominate some segment (s) of their market some segment (s) of their market
3.3. TheyThey are are forever innovativeforever innovative,, valuing the business’ IPvaluing the business’ IP..
4.4. They They outsourceoutsource non-core activitiesnon-core activities to enable growth. to enable growth.
5. 5. They They don’t own “hard” assetsdon’t own “hard” assets..
6.6. They They havehave good and professional financial managementgood and professional financial management..
7.7. They They plan from the outside-inplan from the outside-in not the inside-out not the inside-out
8.8. They They anticipate any new industry lifecycle changesanticipate any new industry lifecycle changes..
9. They 9. They follow world best practicefollow world best practice for their own type of business. for their own type of business.
10.10. They They developdevelop strategic alliances.strategic alliances.
11.11. They They develop unique organisational culturesdevelop unique organisational cultures..
12.12. They They valuevalue leadership firstleadership first and management second. and management second.
Success in Success in agricultureagriculture
The Agricultural industryThe Agricultural industryhad assets of $425 billion in 2013 to had assets of $425 billion in 2013 to produce just $68 billion revenue and produce just $68 billion revenue and
earn a trading profit of 3% on net assets earn a trading profit of 3% on net assets (equity). (equity). One fifth of the national all-One fifth of the national all-
industries SME average, and well below industries SME average, and well below WBP of 20-25% ROSF!WBP of 20-25% ROSF!
Most farmers are in the property Most farmers are in the property business business (for capital gain)(for capital gain) more than more than being in an operating business being in an operating business (for (for
trading profits)trading profits)
Very Profitable FarmersVery Profitable Farmers
II. Don’t blame other countries,
play a different game.
III. Grow what the market wants, not what have always done
IV. Don’t pray for rain,
make sure you have got water.
V. Outsource everything you can get cheaper & better than DIY (ploughing, seeding, harvesting etc).
VII.Work the brain (intellectual property)
harder than the body.VIII.
Add value at the farm not factory (ie. high quality fresh is often better
than processed).
IX.Have long term contracts &
relationships, not spot markets.X.
Franchise or be a franchisee, wherever possible.
I.Become a business,
not a way of life.
VI. Do not own land,
buildings, equipment, stock or debtors.
7.A Different Industry
In The Future
Some IssuesSome Issues 1. Our agricultural industry will be expected to make a 1. Our agricultural industry will be expected to make a contribution to the food security issue in Asia in this contribution to the food security issue in Asia in this Century, even though we cannot be a major supplier.Century, even though we cannot be a major supplier.
2. Nevertheless, we could probably increase output by 2. Nevertheless, we could probably increase output by some 5-fold, as we did in the 20some 5-fold, as we did in the 20thth Century, but with Century, but with different different products, systems, localities and types of products, systems, localities and types of businesses.businesses.
3. High-density/intensive production 3. High-density/intensive production (hydroponics, under-(hydroponics, under-cover, cover, aquaculture etc)aquaculture etc) - where water costs are not an - where water costs are not an issue - is already emerging as corporate endeavours, issue - is already emerging as corporate endeavours, sometimes including franchising.sometimes including franchising.
4. Also likely to emerge are mega-buck investments 4. Also likely to emerge are mega-buck investments (a la (a la mining scale)mining scale) especially in the top end of Australia, with especially in the top end of Australia, with many being over a billion dollars. Some mining many being over a billion dollars. Some mining
companies are thinking this way alreadycompanies are thinking this way already
5. The current methods of agriculture do not earn a 5. The current methods of agriculture do not earn a proper income and return on equity, and the proper income and return on equity, and the younger younger generation are reluctant to take on “the generation are reluctant to take on “the family farm”.family farm”.
6. New financial structures will emerge to focus on 6. New financial structures will emerge to focus on passive agricultural assets passive agricultural assets (land, buildings, general (land, buildings, general infrastructure) infrastructure) with modest returns and some capital with modest returns and some capital gain to gain to match the (low) Bond returns in super and match the (low) Bond returns in super and other funds. other funds.
7. The outsourcing of many farming functions 7. The outsourcing of many farming functions (as as (as as happens in mining – eg contract mining - and other happens in mining – eg contract mining - and other industries)industries) will lead to other big agricultural service will lead to other big agricultural service organisationsorganisations
So?So?
8. What products should be grown in the GMW zone for 8. What products should be grown in the GMW zone for best growth and a profitable future?best growth and a profitable future?
9. How can GMW go about helping agricultural 9. How can GMW go about helping agricultural customers know the future, enjoy growth and customers know the future, enjoy growth and become more become more profitable? profitable?
10. Which other sectors within the GMW zone of 10. Which other sectors within the GMW zone of influence can also benefit from advise and help influence can also benefit from advise and help (tourism, other industries)(tourism, other industries)??
ruthvengmwater
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