Government policy: Australian agriculture’s new risk?

Think about the biggest risks to your future returns if you’re invested in Australian farmland now.

What comes to mind? Probably foremost are the changing climatic conditions with all signs pointing to a hot and dry period ahead following several years of strong rainfall.

Perhaps you are more concerned about the potential for interest rates to keep rising, or at least stay higher for longer, which could see a slowdown in land value growth become cemented.

Or maybe you’re looking at the even bigger picture, nervously eyeing geopolitical events in Eastern Europe, the Middle East or the South China Sea as having the potential to disrupt global trade and commodity markets in profoundly unpredictable ways.

At the National Farmers’ Federation 2023 National Conference in Canberra last week, Australia’s largest agricultural lobby group suggested there is an even larger threat than any of these things: the Australian federal government.

The NFF launched its new campaign, ‘Keep Farmers Farming’, with a fiery speech by newly elected incoming president David Jochinke, who said the sector was confronted by “an avalanche of bad ideas” including plans to restart voluntary water buybacks in the Murray-Darling Basin, ban live sheep exports to the Middle East, and a lack of progress on a dedicated visa pathway for agricultural workers.

Agriculture minister Murray Watt was clearly a little taken aback by the launch of the campaign, addressing the conference before Jochinke to argue that agriculture is a “central priority” for the incumbent Labor government.

The NFF is a member organization and not one that really purports to represent the views of the largest corporate farmers or institutional investors involved in the space. Rather, it is on the side of small farmers. There is, of course, nothing wrong with that.

It has clearly launched this campaign to reflect the views of many of its members, with beef cattle producer Gillian Fennell giving an illustration of this during one panel discussion at the conference: “The biggest threat to Australian agriculture at the moment… is poor policy decisions made on the back of populist politicians wanting be re-elected and pandering to activist groups and inner-city people whose lives don’t rely directly on making a living from the land.”

You can debate the rights and wrongs of that line of argument – and whether you agree with Fennell may depend on your point of view on certain hot-button issues, such as whether you think water buybacks in the Murray-Darling Basin are too blunt a policy tool, or whether you disagree with the live export of sheep on ESG grounds.

While the NFF’s campaign against a sitting government is unprecedented in its history, we are still some way off the farmer protests that have been seen in other countries, such as the Netherlands and India, as governments try to balance climate and ESG concerns with more traditional farming lobbies.

These tensions aren’t going to go away and will continue to ebb and flow – and it’s probably fair to say that calls for change or action will always grow louder during times of economic volatility.

As such this can affect investors, even if the NFF is not really a representative body for the readership of Agri Investor. It will be interesting to watch how effective the NFF’s campaign proves to be over the coming months.