CEO of WAFarmers Trevor Whittington discusses the Federal Governments choices and investments across the agricultural sector
We all know that Governments love to pull policy levers to help their agricultural sectors, but globally governments have a bad track record when it comes to picking and investing in winners, and Australia is no exception.
Think about the White Elephant that was Ord Stage 1, which has become Ord stage II at the cost of another half billion dollars that has gone into a now Chinese controlled farm and is still yet to deliver the promised returns to the state.
So, what has driven good outcomes for agriculture? The one consistent driver of productivity and profitability has been innovation, turning science into solutions.
It is claimed that Australia was developed off the sheep’s back. I would argue that Australia was developed with the help of the scientists and innovators that worked out better ways to get the wool off
the sheep’s back and the wheat out of the ground.
Australia has a long history of innovation in agriculture as reflected in Wolseley’s handpiece, McKay’s Harvester and Farrer – the Wheat Breeder who developed the first selective breeds of wheat for Australia and was featured on the old $2 note.
Australia backed up these innovators with a comprehensive system of agricultural technical colleges like Muresk in Western Australia and Roseworthy in South Australia, plus the university level agricultural science degrees.
Add to that every State had a well-funded Department of Agriculture and a University Faculty of agriculture producing graduates that had a clear career path that often started at the state ag department.
At its peak in the 1970s the Western Australian Department of Agriculture employed over 2000 staff, running seven research stations employing 20 graduates a year almost all coming from the University of Western Australia (UWA).
But by the year 2000 this had fallen to 1500 and by 2017 they were down to 900 with a collapse of graduate opportunities happening at the same time the number of universities offering some form of ag degree was exploding.
Those students can’t all go into the Department of Agriculture as there is not much of a department left.
They could go into one of the 14 National Research Development Corporations like the Grain Research and Development Corporation (GRDC) and Meat & Livestock Australia that have emerged largely replacing the state departments of agriculture as the drivers of change.
But their funding is limited. The federal government caps its contribution to the growth of farm gate production of 0.5 per cent or around $400 million, so there are no new rivers of gold coming from the feds.
In fact, public funding for agricultural research has fallen by over a third in real terms since the early 1990s, and with it the number of government-funded researchers employed in agriculture declined by 28 per cent between 2004 and 2014 and has not increased much in the last decade.
I believe the future of agriculture for the next generation won’t be through the old ag departments, through the RDCs, neither will it be in the global ag chemical corporates, the big end of town or the public square – but in the small end in struggle street start up.
In the 2022–23 financial year, the federal government will invest an estimated $9 billion in direct support for research and development.
Around a half billion goes to agriculture via the RDCs and CSIRO and $3.2 billion through the Research and Development Tax Incentive, with another $1 billion coming through in other programs and activities related to science, research and innovation.
This is a pool of money that has largely been overlooked by agriculture – an amount double the entire spend on agricultural research and development.
So, there is gold in them there hills yet to be found.
Currently Australia has just 1 per cent ($100m) of the world’s total ag tech venture capital funding which last year hit US$10 billion.
But that pile of money is growing rapidly and it would not take a lot of tweaking of the government’s R and D funding bucket to put Australian Ag Tech on the map.
The model to follow is that of Silicon Valley – but not being a part of a military industrial complex with deep links to the universities, a patron is needed to underwrite the risk capital for at least a decade to kick start what we have and take it global.
We need to replace the funding that went into training farmers at our regional ag colleges and the funds that went into the various state department of agriculture into ag tech innovation.
And we do this by linking our universities to collaborative innovation hubs and with government funding. We avoid another white elephant by spreading the dollars widely. Not half a billion into the Ord but half a billion into a thousand blooming flowers.
The State Government has started to join the dots and has established the $16.7 million New Industries Fund, which supports new and emerging businesses to diversify the WA economy and create new jobs.
The federal government kicks in a 20 per cent tax offset plus a 10-year exemption on capital gains tax, and they could certainly do better.
But taken in aggregate, the federal government has been the most active single financer of Australian AgTech companies.
Between 2005 and the first quarter of 2018, more than 65 per cent of Australian AgTech investments have been financed by government grants and research initiatives, incubators and accelerators, with that amount rising to 88 per cent in 2017.
Venture Capital would be a game changer, and the VC sector in Australia has achieved significant growth over the past six years.
AgTech-specific accelerators only emerged in Australia in 2017, with SproutX being the first in this space.
In 2017 more than A$1 billion was raised, double the amount raised in 2016, and funds raised by those firms in the 2015 and 2016 financial years are larger than the combined amount raised over the six preceding years.
What we need for the next generation of scientists, innovators and entrepreneurs is not to hope for more government funding for ag science, but for funding to be better allocated, to invest in supporting the budding Agtech sector.