Why GM crops won't fly in South Australia.

Advocates have failed in their bid to stop the State Government’s suspension on the introduction of GM crop technology in South Australia.  Not because of what they have said, but because of what they haven’t said.  Or rather, the key questions they haven’t answered.

That is, how will the introduction of genetically modified grain to South Australia’s much differentiated food system add value to customers and consumers of our products here and abroad?

Rightly so, the State Government has adopted an integrated perspective of South Australia’s food industry.  For example, understanding the relationship between food and tourism is why an integrated perspective is important for South Australia.  Hence, we have Tourism Ministers making announcements about South Australia's food system.  A smart marketing move.

Whilst individual debates such as GM technology will always circulate, the ground-swell of opinion across South Australia’s broader food industry is that we needed to dare-to-be-different and use this to build a sense-of-place about South Australian food that can be marketed to the rest of the world.

Whether or not GMs are safe is not the issue here.  The South Australian food industry has a mantra to provide premium food produced at the highest standard and to give people an authentic food experience.  It is the current view of consumers that GM foods are not premium quality and are not authentic - safe or otherwise.

Consequently, the State Government has developed, prioritised and committed itself to a range of new programs and market-centric strategies that are propelling South Australia’s food industry around the globe and is capturing a niche in consumer sentiment.

For the moment that means some individual farm-gate requests have not been met in order to achieve the greater good for South Australia’s food industry.

It is vital that the local grain production community soundly demonstrates how their future wishes at the farm-gate can be integrated into the greater vision for South Australia already under way.

Farmer choice at the expense of consumer choice is not how things are done.  Clearly, this is not the request of South Australia’s grain producers.

But what has not been explained is how the grains sector intends to work-in with the rest of South Australia’s food industry vision on the issue of GM crops.  It is important that primary producers of all types view themselves as part of the broader food value-chain community in South Australia, or risk being isolated from the decision making process.

Without that buy-in, it will be 2019 and beyond for no GM.

Food for thought.

So what do Australian consumers think about all this?

It's interesting that a lot of the debate about GM gravitates around whether or not they are safe for consumers. 

For the average punter in the supermarket, whether or not GM is safe scores quite low. Why? 

Because in Australia we have generally kept consumers in the dark about GM. What is influencing their decision against GM the most, is that consumers actually see no real value in having GM foods. They see no benefit in altering food that way. 

Consumers are not scared of the advancement of powerful new sciences, because they know it does great things such as cure disease.

But why food?  Would Australian consumers buy into the need for food security, as this is often presented as the case for GM crops?  

The average consumer would not be aware the world already produces enough food to feed 12 billion people.  But most families understand food waste and the need to reduce it.  

So if food security is the problem statement, then consumers would change their attitudes about food waste much sooner than they would change their attitudes about lifting productivity via GM, simply because they see value in one and not in the other.  

This demonstrates the power of consumer decisions to lift the efficiency of the entire food chain, not just one group involved in supply.  These are the type of local market shifts Australia should be aiming for, to improve the profitability of our entire food industry.

With the information consumers do have available when making decisions about foods to buy, what scores highly then are things like origin, quality and authenticity. They use these to work out points-of-difference and points-of-parity. 

The SA moratorium is not about whether or not GM is safe. It's about deliberately targeting what we know consumers do currently value, in order to extract a premium from them. 

As it stands today, consumers do not view GM as authentic, premium or provenant - safe or otherwise. 

If you want to grow GM you need to convince consumers THE VALUE of eating them.

The (un)natural attrition of Australian farmers will continue at pace.

I’ve noticed a resurgence of articles in the rural press, centred on the old adage that farmers make no money and are not rewarded for the work they do.

A nice sentiment but I’ve yet to see a pricing method based on effort.  Nor do markets pay for effort, let alone pay a premium for it.  If only.

A common complaint I read is that farmers need to be price makers, not price takers.


Once again, a nice sentiment, but I’m not aware that Australian farmers are producing anything for which there is no substitute.

Let’s forget the price taker / price maker thing.  If you are a primary producer then you are a price taker.

What a farmer needs to be is a margin maker.

Why is this important?  Well, the business model of farming is already skewed.  Inputs are purchased at retail prices and outputs are sold at the bottom rung of wholesale.  If retail prices are rising faster than wholesale prices, there is only one way for everyone involved to survive this business model = equity.  You are ‘margin called’ by the industry.

Farmers have been carefully groomed as consumers of inputs, equipment, finance and services.  This is driven by the other common complaint I read about farmers needing to get more productive.

Of course the more you produce, the more you consume – putting equity at risk.

There is still too much emphasis on productivity and scale, and not enough on profitability.  Can you believe that in the National Food Plan released by the Australian Government, productivity is mentioned 100 times and profitability is referred to 9 times.

 

The industry obsession with productivity has led many farmers to over-capitalising on expensive farming systems.  For example, in the grains industry some farmers have financed enough production equipment to farm a small country.

Productivity – be careful what you wish for.

Sure, ‘get big or get out’ but unless you have a solid understanding of cost behaviour and how specific costs respond to increased business activity, you could be headed down the path of low profit or no profit - especially if the business is simply producing more of the same.  And you are now working 100 hours a week feeling very unloved.

As some farmers have described to me “I’ve done everything I was advised to do, and I’ve gone backwards – and I’m exhausted.”

 

There once was a time of less interference, when farmers knew their business.

It brings me back to my point of knowing how to make a margin - something that has been bred out of the primary industry.  Those not controlling margins are being squeezed by everyone else in Australia’s food system that does, including their neighbours.  It’s tough when buyers and suppliers know more about your margins than you do.  They go to great lengths to know your business.

So, if every Australian farmer wants to remain a primary producer, then under the current conditions of continuing to do business in this globalised industry, there are still too many farmers trying to do the same thing.  Global supply chain systems are designed to remove excess, as there are no longer enough margins for as many participants as before.

Where did the margins go?  I’ll talk about that in another blog.

‘Get big or get out’ no longer applies.  It’s too late.  What applies now is ‘change, or get driven out.’  This is why the proposition that productivity (i.e. produce more of the same for fewer buyers) will save Australian farmers will continue to put many of them in a precarious position, and we will continue to read articles about Australian farmers making no money and feeling unloved.

What needs to change?  Two things.

Change the business model of our primary industry.

Strengthen Australia’s marketing network so that it is globally competitive.

I’ll talk about the power of these changes to improve margins in future blogs.

Today I stepped on a Brown Snake and..............

For the last couple of months I've been working for a prominent agricultural exporter helping them with their quality assurance system.

A lot of in-field work is involved.  Unusually, I hadn't seen a snake the entire time - apart from the odd one making a mad dash across the road well ahead of the dual cab's new Mickey Thompson tyres.

And then I decided to step on one.  A Common Brown Snake.  Australia's second most venomous snake, known for being grumpy and aggressive.

Obviously I didn't know it was there and it clearly didn't feel the need to move on as I was walking towards it.  We were in the middle of a paddock, so it had plenty of space to get out of the way as it felt the vibrations of my steps.

The snake moved a bit as I stepped on it's tail, which caught my attention and I glanced down.

Oh crap.  THIS IS IT!!!  There's no way out of this one.

OK.  I'm behind it, not in front of it - which is good.  It can escape if it wants to.

But that leaves it room to fling around and strike if it feels threatened.

Do I jump back or slowly take my foot off and step back quietly?

If I jump back I might keep away from it's fangs if it's going to strike.  But that might startle it and seal-the-deal it will try and bite me anyway.

OK.  I'm going to slowly step away, moving further behind the snake - hoping all involved remain calm.  Sorry about your tail - no harm done.  Nothing to get angry about.

I gently removed my foot and slowly walked backwards.

The snake just lay there for a few moments looking at me and then slithered away in the opposite direction - not in any great rush.

Why it didn't strike me I'll never know - but who wants to over-analyse that one!

If you do have experience with snakes and might know the answer, I'd be interested to hear.

I think the snake felt a connection - some sort of bond.  On a trip to Vietnam I once ate the beating hearts of a water python and drank it's blood.  (see previous blog 'Be still my beating heart.......')

This is a custom to strengthen young males.  In Vietnam snakes also symbolise immortality and luck.

So perhaps the snake felt some sort of kinship.

Whatever the reason, today was my day.

That snake looked me in the eye and thought "not today sunshine, not today."

Or it was thinking "would you bloody-well hurry up and get off me."

Do you have a snake story to share?

An Australian Century is food for thought.

In My Opinion has gone global with a recent opinion piece published in International Director by The Australian Institute of Company Directors.

Here is the link:

'An Australian Century is food for thought' - International Director page 4 


A huge thanks to Suzanne Ardagh, International Division Manager at The Australian Institute of Company Directors for inviting me to write for International Director.

Why profit is like paying protection money.

Paulie Walnuts

The other day I wrote a blog about understanding the cost of time and the positive impact this can have on managing cash flow.

What are the chances someone acted on my blog and started developing a new cash management system to mitigate the cost of time on their business?! 

Anyway.

I finished my blog by stating that many small and medium enterprises in Australia were only one event away from running out of time.  In most cases a single event can totally side-swipe a business; hence my quote “everything seemed to be going so well” at the time.

Of course, it’s not ideal to keep operating a business that is only one event away from being in trouble – even if it’s an astute business totally aware of its position.

The idea is to grow out of this stage. **

Accounting profit is a numbers racket.  And like any good racket, profit is the ‘money’ you have to ‘pay’ to protect and grow your business.

Cash pays your dues.  Profit makes the business stronger.

Profit is something you never seem to actually have.  Its goes straight into the business.

Why?  It’s the cheapest source of money.  Profits are re-invested into new assets such as production capacity or IT capacity.

There will always be occasions when things are less-than-profitable for your business.  Not ideal, but this is temporarily acceptable with a well-managed cash position.  For example, Amazon made no profit for 10 years!  A bit extreme and not exactly temporary.

However, unless there is also a strong focus on how your business will return to a profitable position as quickly as possible, your business will remain in a vulnerable position and the 'racketeers' will come-a-calling.

It’s not easy.  Using up valuable resources to keep your business in a steady holding pattern, whilst at the same time also needing lots of resources to eventually break-out of the holding pattern is a tough gig.

So I hope that all helps.  In two simple blogs I’ve given you a new perspective on the cost of time to help understand the importance of cash flow.  And I’ve given a new perspective on the role profit plays on protecting and growing your business.

At all times avoid getting a visit from Paulie ‘Walnuts’ Gualtieri looking for protection money!!

**BTW- If a very mature business is only one event away from failure, then I suggest it has many other significant challenges that need to be dealt with ASAP.