There’s no doubt seasonal conditions over the past year have severely tested Australia’s agriculture industry and many farmers are doing it tough.
But the resilience of the sector is remarkable.
Despite contending with the worst drought on record compounded by catastrophic bushfires in the eastern states, the overall value of farm production is forecast to decline only around 5 per cent in the 2019-20 year, and the volume is likely to be about 25 percentage points above the worst years of the Millennium Drought in 2002–03 and 2006–07, according to Australian Bureau of Agricultural and Resource Economics and Science’s most recent commodities report.
Part of this achievement ties back to regional production diversification and varied conditions around our great, wide land – which has meant, for example, that although much of the east has been crippled by drought, a bumper 2019-20 winter crop is expected nationally as southern and western regions of the county enjoy favourable cropping conditions.
But much of it is because so many farmers have responded to the challenges better than ever before, and there’s a couple of driving forces at play.
Most significantly, valuable management lessons were learnt during the Millennium Drought.
It’s clear to me that the experiences from those harsh years – followed swiftly by the more disciplined borrowing environment sparked by the global financial crisis from 2009 – have led farmers to spend more time proactively thinking about how to better manage their operational and financial risks and be prepared to respond to evolving conditions.
They know it’s no longer enough to be good at farming and have invested more in understanding their business end-to-end – scientific research, technological developments, macro-economic factors such as trade wars, online marketing trends and evolving distribution channels – to help make better strategic management decisions.
An extra layer of governance is evident in most of the farm businesses I visit, providing robust structures to calculate potential investment risks and make decisions to ride out tough times.
And the results are evident in our own agricultural lending book.
In the past financial year, Westpac recorded the lowest level of impairments among our agricultural customers in more than a decade, while total lending has continued to grow.
I’ve also seen more collaboration across the whole industry than ever before, with people sharing practical information to help each other, forming local, regional and national networks to drive innovative solutions or provide fresh eyes on a problem, and generally looking out for their neighbours. This has extended to being far more aware of mental health risks and adopting strategies to respond to early warning signs.
While these factors have shored up the sector’s resilience over the past decade, that’s not to downplay the increasingly complex future agriculture faces as the world stares into the changing climate, shifting societal expectations of agricultural production, and growing demand for food as the population edges closer to 10 billion by 2050.
But seeing the next generations of farmers coming through bolsters my confidence.
Talking to young people in agriculture – many of whom come from multi-generational farming families, are tertiary qualified and more than half are women – what strikes me is the same passion for farming and connection with the land as previous generations, but with a whole new approach.
They bring a broad global perspective gained through study and travel, sophisticated governance skills and financial acumen, a propensity to adopt technology, and strong cross-regional, urban and city connections. Importantly, they also have a passion for sustainable farming and know we can’t continue to apply northern hemisphere farming techniques in the driest inhabited continent on Earth.
And as these new qualities have emerged over the past decade or so, bankers have likewise had to evolve to meet changing needs, building a new level of expertise and deeper understanding of their individual businesses from end-to-end.
That’s why 95 per cent of Westpac’s Agribusiness team members are from regional Australia and work within 300 kilometres of where they grew up, 80 per cent are tertiary qualified, their average age is 44, and almost 60 per cent are female – mirroring the demographic of our customers.
And while the sector’s tough conditions are likely to continue for some time, it’s a sector we are proud to continue to support.
Because every day on behalf of our nation our farmers care for 51 per cent of the Australian landscape – producing food and fibre to feed our nation and the world. On average, each Australian farmer produces enough food to feed 600 people every year. More than a quarter of a million Australians are employed directly in Australian agriculture and our farmers are the lifeblood of Australia's regional communities.
But what’s most important to Australia is an undeniable fact: we will always need safe, quality food. And despite the intense challenges, that still looks to be assured.
By Peter King
Acting Chief Executive Officer, Westpac