The agricultural economy


Part 3

For What It's Worth

The pie chart mentioned previously in Part 2 opened my eyes. There it is sitting at the top - Agriculture, forestry, fishing $4.538bn - out of a state gross product of $94.21bn.


Leave out fishing (value $394m in 2009/2010, ABS Year Book 2012), and what remains is that about 4.4% of the state’s economy is attributed to agriculture and forestry production. 

4.4%! 

It was a great surprise to me, and I suspect it would be to most in the general community. The transition of the state economy is the ignored fact. 

I have confirmed the figures in this chart at SA Centre for Economic Studies and at ABS State and Territory Statistical indicators, 2011.

Now, as we know, agriculture exists in land that has been cleared of native vegetation. According to the latest State Of The Environment 2013 report, only 13% of the area of the state is used for agriculture (which does not include pastoral activities out in the arid regions). 

Source: “The Advertiser” supplement 
SA Business Journal December 3, 2013


76% of that 13% has been cleared since the time of European settlement, which means that only about 4% of original native vegetation remains in the agricultural areas. 

These figures are slightly at variance with those from other documents, but nevertheless the scale of the problem is just the same. We will come to that soon.

The cleared area is 10.2 million ha

Agricultural production borrows from natural capital (the natural resources).

One of the components of the economic rent to produce agricultural products is natural resources rent. Users of the land (farmers) are rent seekers. They borrow from natural resources to produce an economic output.

The problem with agriculture in our state is that natural resources condition has been declining for many years, and this is clearly enunciated in the State of the Environment 2013 report.

The "rent seekers" have been using up the natural capital. The cost is accumulating, as we will see later.

As with much of agriculture in Australia, farmers have also experienced declining terms of trade for decades. It is cyclic, so some are capable of withstanding these fluctuations in fortunes, but for others (such as the cattle producers) it is a steady decline. 

With every system there is a limit to sustainability, and the use of natural resources for agriculture is no different.


The 4.4% conundrum

As we’ve seen, land-based agriculture represents about 4.4% of gross state product, and this reveals quite a lot about the extent of importance directed to the agricultural sector - the regions - in the state. 

Consider these questions.

  • Does this 4.4% explain WHY the rural sector is almost being forgotten in policy terms? 
  • Does it explain why rural environment programs are almost non-existent, or if they do exist then they are mere breadcrumbs on the table? 
  • Does it explain why NRM Board functions are now at a level of in-effectiveness? 
  • Does that 4.4% explain the PRIORITIES and policies of Labor and Liberal today? Of a priority focus on Adelaide? It certainly seems that way.
  • Does it explain the very low emphasis on regional RE-development - i.e. a reorientation of the agricultural economy - in the 41 policy settings of the State Liberal Party?
  • Does that 4.4% explain the diminished imperatives from all sides of politics relating to  necessary responses described in recent and past environmental reports?

The real answer is that South Australia is trending the way that the whole Australian economy is, and that is to a service economy. This is what happens in a maturing economy. Mining and agriculture are relative minnows in the economic pond. 

It could also be said that the agricultural sector requires a huge resources base (10.2 million ha just for cropping/grazing) for what seems to be a very low proportion of state gross product.

I have deliberately excluded the agricultural service industry, the figures for which are not apparent in the pie-chart above. 

What I sense however, is that the rural sector is rapidly becoming the big loser. People living in the country will be the big losers, if they are not already. 

When they wake up to this, and respond in a collective way, that is when change will happen.


Let's now see Part 4 --> The Roadblocks To Landscape Change

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