Global demand for Australian food, beverage and other agricultural produce is soaring, but it’s high time for governments and investors to get behind emerging, innovative opportunities. SIMON SHEPHERDSON investigates.
As much as Australia may once have been built on the sheep’s back, today the agricultural sector accounts for just 1.9 per cent of GDP and 2.5 per cent of national employment.
It is also a resource intensive industry, with agricultural production accounting for 55 per cent of the nation’s land use and 24 per cent of water extraction.
The Australian Bureau of Agricultural and Resource Economics and Sciences’ (ABARES) Snapshot of Australian Agriculture 2022 report indicates overall production of meat and live animals, animal products, grains and oilseeds, and fruit and vegetables has increased over the past 20 years, as has the value of domestic and export sales.
Added to that, growth is forecast to continue with very clear indications that the world needs more food, that more sustainable food production is mandatory and that Australia is in a prime position to become a global powerhouse for production and export of sustainable food and fibre.
According to Rhys Williamson, co-director of food and beverage authentication and customer insights platform Orijin Plus, the COVID-19 pandemic has amplified global consumers’ concerns about what they eat and drink.
“If anything, COVID has led to people focusing far more on their health and what they are putting into their bodies,” Rhys said.
“It doesn’t mean everyone is turning to organic and plant-based diets, but it does mean they want to understand where the food and drink they are consuming originates from, how it is handled through each step of the supply chain and whether it legitimately is what it claims to be.”
Rhys says that provides a great opportunity for Australian producers to take control of export opportunities, given the nation’s availability of resources and global reputation for clean, green produce.
“In many ways, the pandemic has created a great reset point for Australian exporters of quality food and beverage products,” he said.
It stands to reason that the agricultural and food sectors should present a golden opportunity for investors, particularly if the country develops its downstream manufacturing capabilities to add value to raw materials.
Yet by and large, Australian governments and financial markets tend to shy away from emerging agri-food opportunities.
Someone who knows that well is Phil McFarlane, co-founder and director of Australian Plant Proteins.
Having worked across multiple businesses in the agri-food space over many years, Phil says it is difficult to secure investment and financial support for anything outside traditional agriculture or food manufacturing.
“When it comes to agribusiness investment, financial institutions still see the safe havens as assets like acreage so they can quit if things don’t go well,” Phil said.
“No one is prepared to take any level of downstream risk even though the rest of the world is far more advanced with new and innovative food and beverage opportunities, and the demand for things like alternative proteins is booming.
“There’s growing interest from funds and mums and dads in on-trend ESG investments but they still want to see proof of success before they’ll commit.
“Until that success has hit people in the face, they will stick with commodity markets rather than back the emerging value-add opportunities and industries.”
Phil says investor interest only started to mount after Australian Plant Proteins had turned to private equity and a government-backed lending provider, then built its commercial manufacturing facility, started to generate solid revenue, secured an international food partner and announced plans for further expansion.
“Everyone wants to invest now but they weren’t interested in 2018 when we were chasing them, even though the proposition was the same then as it is now,” he said.
“Australian investors are still very conservative. They want people to prove the story before they will back it but once the story has been proven, there’s less need for investment and less of an inclination to sell equity and dilute ownership in a company.”
But there’s a considerable silver lining to the clouds that Australian Plant Proteins had to work through.
The company led a consortium that recently secured $178 million in federal and state government grants to establish a major plant-based protein hub in South Australia. Once built, the hub will be a global leader in the production of plant-based protein isolates and plant-based consumer products.
Phil hopes the concerted push into the plant protein space is just the tip of the iceberg when it comes to Australia taking a lead by embracing and capitalising on new opportunities in agriculture and food production.
And hopefully investors and financial markets will get on board.