MICHAEL Shipton doesn't need to be told twice about the enormous opportunity he faces as an Australian dairy farmer.
Asian demand for food, including dairy, is fuelling a food boom that will require global agricultural production to increase 60 per cent beyond levels achieved just five or six years ago as farmers try to feed an additional 2 billion people eating increasingly more protein, The Australian Financial Review reports.
However a Port Jackson Partners report commissioned by ANZ Bank released today warns Australian agricultural productivity has slowed and must be kick started through a range of measures including greater investment in research and development and $1 trillion in fresh capital to increase farm production.
For Mr Shipton, who owns 300 dairy cows near Nar Nar Goon about 60 kilometres southeast of Melbourne, the difference between the opportunity and the reality is huge.
He said banks were reluctant to lend more than 40 per cent of his asset values, which made expanding difficult. Finding good labour was also a big issue.
"It is a good, strong solid business but it takes a lot of hours and dedication to make it work," he said.
His "gut reaction" was to reject foreign investment but the farming sector needed it in order to grow.
"The reality is that we need them because there are no Australians out there or financial institutions that will back the Australian farmer," Mr Shipton said.
Port Jackson Partners' report, "Greener Pastures: The Global Soft Commodity Opportunity for Australia and New Zealand" highlights Brazil, which increased exports by more than 17 per cent per year between 2000-2009. This was largely due to increased sugar, soybean, beef and chicken production.
ANZ deputy chief executive Graham Hodges warned Australia was not alone in seeking to exploit the global soft commodity opportunity.
"Other countries like Brazil are also actively competing for the opportunity and if we are serious about wanting to develop vibrant, globally competitive agricultural industries, we will need all stakeholders to work together to deliver on the opportunity," Mr Hodges said.
Gary Helou, managing director for Australia's biggest milk processor Murray Goulburn Co-Operative, said Australian milk production had fallen 3 billion litres to 9 billion in the past decade while New Zealand production had soared by 6 billion litres to about 18 billion litres.
Mr Helou wants to reverse declining milk production to tap rising dairy demand in Asia, where he said just one third of the population had tasted cheese.
"People blame it [falling milk production] lazily on the drought but I don't buy it," he said.
New Zealand has adopted a better approach to deregulating its market by creating a dominant, strong co-operative in Fonterra, which has become the world's largest raw milk processord.
Mr Helou said improving supply chain efficiency and lowering costs would bolster the industry.
Murray Goulburn is already cutting its own costs in a bid to increase the amount it can pay dairy farmers in a bid to revive milk production.