Introduction
5.1
Northern Australia, with its relatively secure water supplies and proximity to growing Asian markets, has the potential to significantly expand its agricultural production over the coming decade. It is also a region where freight costs can be a challenge and so taking advantage of economies of scale and possibilities for integrating food production and processing are likely to be beneficial. This chapter will consider the opportunities available for expansion of agricultural production in northern Australia.
5.2
The combination of new technologies, expanding markets, and changing consumer preferences provides opportunities for new or emerging industries to prosper. This chapter will also consider some of the smaller agricultural industries with the opportunity to experience rapid growth in the coming decade.
Review of the Evidence
Opportunities for Agricultural Expansion in Northern Australia
5.3
The Cooperative Research Centre for Developing Northern Australia (CRC DNA) outlined the scale of the opportunity that expanding agriculture in northern Australia presents, stating:
There are about 17 million hectares of arable soil that we have available to us. Sixty per cent of the nation’s rainfall falls in northern Australia. Obviously, these are ideal conditions for agriculture, not only cattle, which is obviously the predominant business at the moment, but all sorts of new and developing industries can work in northern Australia.
5.4
CRC DNA stated that research it had jointly undertaken had identified five key products for the north to focus on, these being beef, avocado, macadamia, aquaculture, and soybeans. In addition, CRC DNA stated that there were growth opportunities for Indigenous Agriculture, in particular through the commercialisation of medicinal plants.
5.5
The Western Australian (WA) Government reported that over the last decade a number of strategic northern Australian pastoral leases had been purchased by global investors. These leases remain under-developed and the WA Government suggested that ‘the challenge for government, both State and Commonwealth, is to provide the signals that will facilitate and unlock investment and encourage partnership investments in key infrastructure.’
5.6
The WA Government added that infrastructure, particularly road networks, and the current regulatory approval system remained impediments to development. The WA Government suggested that ‘partnership and leveraging opportunities, through the Northern Australian Infrastructure Facility (NAIF) and other programs … will assist in unlocking the northern regions potential.’
5.7
ORDCO, a cooperative based in the Ord River Irrigation Area of northwest Western Australia, stated that ‘people, isolation, and scale’ were the main challenges holding back further development in the Ord River region.
5.8
Similarly, the University of Queensland (UQ) stated that to be viable development in Northern Australia had to be undertaken at scale. Especially, those developments being undertaken on greenfield sites.
UQ added that this would require ‘very large integrated agricultural enterprises’ and as provided an example of the type of business needed, stating it would be:
A large corporate enterprise that’s growing sugarcane, feeding molasses to cattle with some cassava that you’re growing on the side and probably producing some high-value starch and feeding the animals with it as a by‑product. It will be of such scale that it would probably have its own abattoir there on site.
5.9
CRC DNA suggested issues with planning, coordination, and governance arrangements were impeding development in the north. CRC DNA added that there was a need for greater collaboration and coordination between the Commonwealth and the State and Territory Governments to develop clear and consistent rules around development. In particular, CRC DNA highlighted infrastructure planning as an area where there was a need for improved coordination and a focus on infrastructure as a means of enabling supply chains to develop.
Cotton
5.10
The Cotton Research and Development Corporation (CRDC) stated that recent research it had undertaken in partnership with CSIRO had ‘demonstrated the feasibility of growing cotton across northern Australia.’ CRDC reported rainfed cotton production is being developed in northern Queensland and the Northern Territory, while irrigated production is being developed in northwest Western Australia.
5.11
CRDC explained, however, that northern cotton growers are hindered by a lack of processing facilities which result in costly freighting of cotton to southern production facilities. CRDC added that there was an opportunity for partnerships between government and industry to develop the infrastructure to support the development in the north.
5.12
The Northern Territory Farmers Association (NT Farmers) also emphasised the potential importance of cotton to northern agriculture, stating that over the next ten years it could become a $300 million industry. NT Farmers added that plans were in place to develop a cotton gin near Katherine, and that the gin already had an investor, an in‑principle NAIF loan, and had applied to the Northern Territory Local Jobs Fund but seed funding was still required. NT Farmers added that the gin infrastructure could also be used in hemp processing.
5.13
A number of northern Australian participants nominated cotton as a key crop for the region. Cotton was described as a ‘base crop’ or ‘pillar crop’ for the region both because it could offer the scale needed to drive development and because of its interactions with other industries. This interaction was due to cotton seed being a high protein feed source for cattle which could lead to intensification of beef cattle production. This intensification could enable the development of a meat works which could provide an alternative revenue source to live exports.
5.14
To emphasise the importance of this cottonseed market, ORDCO suggested that it may provide more value to the regional economy than the cotton fibre as ‘it will be fed to cattle, weaning percentages will improve dramatically and it will make these cattle operations extremely profitable and efficient.’
5.15
Additionally, with a successful base crop, ORDCO suggested it became easier to add in niche crops and highlighted the range of other crops grown include chia, plantago, quinoa, poppies, and peanuts.
5.16
ORDCO reported that Kimberley Agricultural Investments will be the developer of the Ord Stage 2 scheme and that they have developed over 7000 hectares with a proposed further 5000 hectares on Knox Plain. ORDCO stated that the Knox Plain was crucial to creating large enough scale to warrant the development of a cotton gin in the Ord region.
Rice
5.17
The Ricegrowers Association of Australia suggested that there is ongoing research in support of the development of a northern Australian rice sector but also highlighted some of the challenges that growing rice in tropical Australia may encounter. The RAA stated that :
The varieties we grow in the south are temperate varieties similar to South America and California. When you take them up there, they shorten the growing season by up to 30 or 40 days, which straight away reduces yield potential and sometimes your grain quality. So they need to be specific varieties for those climatic conditions.
5.18
In addition, unlike the Riverina region, the rice blast disease is known to exist in Queensland and the Ord River region which presents a further difficulty to rice cropping in these regions.
Emerging Industries with Significant Growth Potential
Protected Cropping
5.19
Protected cropping is the process of growing horticultural crops under, or within, structures that provide protection from pests and adverse weather. Simple versions of protected cropping include the use of netting and polytunnels, while more complex operations can involve glasshouses with automated venting, fans, heaters, and shading. Crops are often grown in artificial media, watered with hydroponic irrigation, and sowing and picking may also be automated.
5.20
In 2017, protected cropping had a farm-gate value of $1.5 billion and had been experiencing 60 per cent annual growth over the last five years, making it the fastest growing agricultural sector in Australia. Crops commonly grown in protected cropping include: nursery stock and flowers; leafy greens; herbs; berries; vegetables such as tomato, cucumber, eggplant, and capsicum; and medicinal cannabis. Protected Cropping Australia suggested that protected cropping was likely to continue growing due to ‘increasing climate and weather risks’ such as cyclones and floods. In addition, growing to match increasingly tight supermarket specifications is easier in the controlled environment possible in protected cropping.
5.21
The South Australian Government highlighted the example of the Netherlands, which is the world’s second largest exporter of food (by value) despite having a land area 185 times smaller than Australia. The Netherlands achieves this though highly innovate agriculture that is often intensive and involving significant protected cropping.
Ecosystem Services and Carbon Farming
5.22
Charles Sturt University (CSU) stated that carbon credits and ecosystem services provide farmers with the opportunity to generate income from less productive parts of their land. CSU added that ‘both these markets have been functioning overseas for some years and have the potential to diversify farm offerings with drought proof income.’
5.23
AFI stated that ‘considered management of farmlands can improve natural capital via the provision of multiple ecosystem services.’ Currently, due to a lack of market mechanisms these capital improvements were being performed ‘voluntarily at the personal expense of farmers or enabled via government subsidies.’ AFI suggested that developing a market for ecosystem services could:
... not only incentivise and accelerate regeneration of natural capital to future-proof production, but also contribute financial capital to Australian agriculture gross value of production by adding an income stream to primary production.
5.24
The Western Australian (WA) Government described soil carbon storage as an opportunity for northern Australia but noted, however, that the challenges to realising this opportunity included the land tenure system, impacts on the mining sector, the need for more research, and the cost of carbon measurement. Nevertheless, the WA Government estimated that the carbon farming in the Southern Rangelands region could have a value of $5.2 billion over 25 years.
5.25
RMAC stated that ‘more needs to be done to incentivise carbon projects that deliver environmental, economic, and social co-benefits such as improvements in biodiversity, soil health, water quality, and employment.’ RMAC added that consideration should be given to supplementary policies that support carbon projects such as ‘tax deductions for livestock producers who purchase greenhouse gas avoidance technology such as livestock supplements that reduce enteric methane emissions.’
5.26
NQ Dry Tropics reported that there were currently effective methodologies to increase soil carbon but the cost of measuring the changes was reducing the potential economic gains for farmers. NQ Dry Tropics explained:
The problem is scale. You’re talking about fractions of a per cent change in terms of soil carbon. You need to be able to scale that up to make it worthwhile and you need to have methodologies that aren’t crippled by the cost of measurement. That’s one of the big challenges with soil carbon at the moment: the methodology is probably viable, but the costs of being able to measure it, validate it and demonstrate it, in terms of carbon credits, are crippling.
5.27
In its Delivering Ag2030 plan the Australian Government announced that it is investing in technologies that will reduce the time taken to develop new methodologies for carbon reduction under the Emissions Reduction Fund and reduce the cost of measuring soil carbon.
5.28
The FIAC raised concerns about the ability of the forest industry to participate in the Australian Government Emission Reduction Fund. The FIAC explained that ‘industry would benefit from the introduction of a pricing mechanism that recognises the contribution that forestry makes to avoided emissions.’ The FIAC also quoted a 2019 report by the CSIRO and the National Australia Bank, that stated:
Carbon sequestered in forests could be produced profitably on over 30 million hectares, equivalent to half of the more marginal agricultural land in Australia’s intensive use zone... support by the higher price assumptions, planting on this scale means that the returns to landowners could more than double to as much as $114 billion per annum.
Medicinal Cannabis and Industrial Hemp
Medicinal Cannabis
5.29
Austrade reported that a medicinal cannabis facility is being developed in Toowoomba with the potential to provide significant economic benefits. Austrade stated that the project involves an investment of over $400 million and that:
... over the life of this project it will produce over 1000 jobs [and] also attract to Australia world-leading innovation in agribusiness and the health sector as well as in the form of glasshouse cultivation, artificial intelligence and robotics. So this is the creation of a new industry which we expect to create exports worth over a billion dollars.
5.30
Toowoomba and Surat Basin Enterprise stated that this would be the world’s largest medicinal cannabis project, but noted that one of the challenges facing the region would be finding enough staff for the project.
Industrial Hemp
5.31
Industrial hemp is defined as cannabis where the psychoactive compound THC is found at levels below 1 per cent. The plant can be grown for food, fibre, stock feed, and a nutraceutical called cannabidiol (CBD).
5.32
The Hemp Association of Tasmania (HATas) reported that currently Australian farmers can harvest the grain for food but cannot use the whole plant, whereas in other countries the fibre is used for insulation and in car doors. Additionally, CBD is currently considered a schedule 4 narcotic and so cannot be made in Australia. HATas stated that CBD is not a psychoactive drug and suggested Tasmanian growers could make $50,000 gross margin per hectare by producing CBD.
5.33
HATas highlighted the positive impact the legalisation and commercialisation of Hemp has brought to the economies of the USA, Canada and Europe. HATas stated that in Canada, the global leader in hemp farming, the industrial hemp industry was worth approximately $1 billion. By contrast, in 2018-19, the Australian industry was worth approximately $10.5 million.
5.34
The hemp associations are calling for ‘delisting of Cannabis Sativa with THC of less than 1 per cent from the Narcotics and Poison Acts to allow for the commercial sale of all industrial hemp products from the entire plant.’ The NSW Industrial Hemp Association stated the CBD was valuable in treating a range of conditions including epilepsy and chronic pain and added that the World Health Organization ‘recommended that CBD be removed from the drug register.’ Canna Hemp Care also pointed out that ‘currently the market is flooded with this (illegal) product anyway but the benefits of the sales go overseas.’
5.35
Austrade stated that there is a lot of interest in hemp farming amongst producers but that there was a need to scale up production in Australia, stating it had been receiving:
... inquiries from farmers and producers that are looking at what the opportunities are for hemp overseas ... at the moment, unfortunately, there is very small scale production in Australia and we need to build the economics of scale to be able to meet that export demand overseas.
5.36
NT Farmers stated that it was investigating the opportunities for hemp production in the Northern Territory. NT Farmers explained that government support would be valuable at this early stage, stating:
When we're starting a brand-new industry we think it's reasonable that government has some input into those initial risks and mitigating the risks for producers. At the moment we're putting together a research proposal across north Australia looking at different varietals of hemp. We're looking only at the seed at this current juncture of time, because we don't have processing facilities for the fibre.
5.37
NT Farmers also noted that hemp growing provides diversification benefits as well as the potential to develop multipurpose infrastructure:
We would like to see some investment into hemp and hemp production, and that's varieties, localities and seasonality of planting…. We're looking at how we can actually have a multipurpose gin, so the [cotton] gin and a hemp-processing facility housed in the same building...… So, instead of the normal six to 12 week ginning period, we would then be rolling into a winter or a dry season hemp crop and utilising that facility for more hours, creating more jobs.
Other Emerging Industries
5.38
CSIRO also drew attention to the potential value of ‘alternative protein’ stating that products derived from ‘seeds, pulses, nuts, bacteria or mycoprotein, microalgae, and insects are in high demand to complement traditional sources of protein in our diet.’ CSIRO added that ‘global protein demand is projected to grow by up to 20 per cent by 2025’ and suggested that due to resource constraints and concerns of consumers relating to animal production alternative proteins would be an important component of this growth.
5.39
Similarly, Austrade stated that there is a ‘huge revolution around plant-based protein’, adding that there are companies ‘looking to invest in soybeans in Australia and also those protein legume products.’
5.40
The Centre for Nanoscale BioPhotonics stated that non-animal proteins were increasing in both availability and quality and soon consumers would have access to cultured meat alternatives which:
…involve growing animal cells in a laboratory setting, removing the need to slaughter animals. This viable meat alternative will be available to consumers in the near future.
5.41
UQ highlighted the potential for agriculture to be a source of oil product alternatives. UQ explained that in addition to biofuels there is a mature technology in using sugarcane to produce plastic precursors. UQ stated that the challenge is ‘you have to get a whole mill area to decide, ‘Okay we’re going to move over to something other than sugar’.
Committee Comment
5.42
One of the most significant opportunities for Australian agriculture is through the expansion of the industry in northern Australia, a region which is sparsely developed relative to the south despite receiving 60 per cent of Australia’s rainfall. Northern Australia is an area where the scale of production is key to success. Large developments provide the economies of scale to at least partially overcome freight costs and also provide the opportunity for integrated agricultural enterprises, where waste product can be reused, and on-farm downstream processing facilities can be established.
5.43
An example of how integrated farms could provide multiple benefits is the potential use of cotton in northern Australia. Cotton production provides not only valuable fibre but also seeds that can be used as high-nutrient cattle feed. Many inquiry participants believe that cotton has the potential to become the crucial crop in the development of northern agriculture, providing the volume to support infrastructure investment and the reliability and security to allow farmers to trial smaller, niche products.
5.44
The Committee was pleased to hear about proposals for the construction of gins in both the Northern Territory and north-western Western Australia. The construction of one or both of these gins would substantially reduce freight costs for northern growers and help drive growth in the industry. Additionally, a gin could also be used to process industrial hemp, an industry that while currently small has significant growth potential.
5.45
As discussed in Chapter 2, the horticulture sector is likely to be one of the key drivers of agricultural growth in the coming decade. Increased use of protected cropping techniques could offer significant productivity gains for horticultural businesses. Some of the advantages of protected cropping include protection against extreme weather events, improved water efficiency, and the ability to use technology to gain greater control over all elements of the cropping process.
5.46
Carbon farming and payment for the provision of ecosystem services is likely to become increasingly common within Australian agricultural businesses. Carbon farming can provide producers with an additional income stream while also providing co-benefits such as improved soil health. There is still a need for further development of market mechanisms to provide incentives to farmers. Additionally, the cost of measuring carbon improvements is currently prohibitive to many businesses but it is likely that these costs will decrease over time.
Recommendations
5.47
The Committee recommends that the Australian Government supports further research and development in northern Australia. This should focus on driving investment into the development of large-scale integrated agricultural enterprises. In particular this should consider:
Opportunities for greater use of on-farm or shared processing facilities and any barriers to the development of these facilities
Regulatory barriers, including the limitations of pastoral leases, to diversification of production on properties
Options for the repurpose of low-value or waste products for use as inputs into higher-value products.
5.48
The Committee recommends that the Department of Agriculture, Water and the Environment review the regulations applying to the growing and processing of low-THC Industrial Hemp. This review should include the scheduling of Industrial Hemp products by the Therapeutic Goods Administration and consider how any barriers restricting producers from accessing the full value of the hemp plant including the food, fibre, and nutraceuticals can be overcome.