Cutting subsidies is good news for growers but won’t ensure market share

Tuesday 22 December, 2015

The Australian Export Grain Innovation Centre (AEGIC) has welcomed The World Trade Organization’s (WTO) agreement to abolish all agriculture export subsidies.

AEGIC Chair, Terry Enright, said the removal of the subsidies should make Australia more competitive against most other grain exporters.

“Australia has very low levels of subsidies compared to many of its major competitors which means our growers have not been competing on a level playing field.

“Australian grain producers have been feeling the cost-price squeeze for some time now and having to compete with subsidized countries has been compounding this in terms of profitability and long-term viability.”

The Organisation for Economic Co-operation and Development (OECD) stated producer support estimates, or subsidies, as a percentage of gross farm receipts were 7.1 per cent for the US, 13.5% for Russia, 14.3% for Canada and 19% for the European Union.

In contrast, producer support estimates in Australia sit at only 2.7%.

Mr Enright cautioned while the agreement is positive it will have less impact for Australian growers in cases where competitors had similar or lower levels of producer support to Australia, an example being Ukraine.

“Australia is facing increasing competition from emerging low cost grain producers, such as Ukraine which has about half the level of subsidies when compared to Australia, so the WTO agreement will not improve Australia’s competitiveness against Ukraine.”

“Australia also faces an increasingly challenging production environment. There is an ongoing need for research, supported by industry and government, to cost-effectively boost Australian production and assist its grain industries to adapt and adjust to climate change.”

AEGIC is currently analysing the competitiveness of the Australian export grains industry compared with its major competitors.

These analyses are showing the productivity of Australia’s grain production is growing slower than what it needs to be in order to maintain market share.

A report comparing Australia with Canada ‘The puck stops here! Canada challenges Australia’s grain supply chains’ released earlier this year found Australian supply chains lack the rail efficiency of the Canadian supply chains and identified key areas where Australia can improve its competitiveness.

“Grain exports have totalled about $9 billion annually over the past four years making it Australia’s most valuable agricultural export and it is vital the sector examines the competitive pressures coming from other grain-producing nations,” Mr Enright said.

“The ultimate aim is to enhance the international competitiveness and value of Australia’s export grain and to return pre-farm gate value to grain growers.”

Media contact
Danielle Whitfield
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