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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
219720-94 150216 Food and Fibre Fact Pack.pptx 2
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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.
219720-94 150216 Food and Fibre Fact Pack.pptx 4
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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
219720-94 150216 Food and Fibre Fact Pack.pptx 5
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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
219720-94 150216 Food and Fibre Fact Pack.pptx 11
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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'
219720-94 150216 Food and Fibre Fact Pack.pptx 13
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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
Source: Victorian Department of Economic Development, Jobs, Transport and Resources unpublished data (2015)
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
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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$
• 37% increase in domestic demand
• Some industry adjustment and
transition
• Safe, clean, green, and animal
friendly food production
• 2.5% less land
• 3% less rainfall
• 29% less irrigation water
• 50 ppm more CO2 in the atmosphere
• 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$
• 45% increase in domestic demand
• Incentives lead to significant industry
adjustment and transition
• Safe, clean, green, and animal
friendly food production
• 2% less land
• 1% less rainfall
• 23% less irrigation water
• 50 ppm more CO2 in the atmosphere
• Slightly increased climate variability
with slightly more frequent
heatwaves, frosts, droughts, floods,
fires, pests and disease
• Minor seasonal impacts on chilling,
flowering, plant maturity
Source: Victorian Department of Economic Development, Jobs, Transport and Resources unpublished data (2015)
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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