R&D a top investment for agriculture
Productivity growth has made agriculture the best performing industry in all sectors of the Australian economy despite the drought, according to NSW Department of Primary Industries principal research scientist, Dr John Mullen.
"Productivity growth in agriculture has been around three times that in the economy as a whole," Dr Mullen said.
However, Dr Mullen also notes that while productivity growth has remained high, public investment in research and development (R&D) in Australian agriculture has been static for two decades and research intensity has declined.
He prepared analyses in his role as president of the Australian Agricultural and Resources Economics Society that show productivity growth in Australian broadacre agriculture has been strong over several decades.
Dr Mullen said Australian broadacre productivity has grown at a rate of 2.5 per cent per annum since 1953.
"About 70 per cent of the real value of agricultural output in recent years can be attributed to productivity gains," Dr Mullen said.
Continued expenditure on R&D was in good measure responsible for this positive return, although Australian agriculture also benefited from investment in public infrastructure and education, and from R&D in other countries.
"R&D is a good investment for Australian agriculture," Dr Mullen said, "but there is international concern that it is falling in developed economies".
Speaking at the recent Riverina Outlook conference hosted by the E H Graham Centre, Dr Mullen said while productivity growth amongst specialist crop farms had fallen from very high levels, productivity in the beef industry had risen.
"Hence, despite the slowdown in recent years because of poor seasons, there is little evidence yet of a long term slowdown in productivity growth.
"Until the early 90s the decline in the terms of trade was almost as fast as the rate of productivity growth but over the past 15 years the terms of trade have declined at a rate of less than one per cent.
"This would have been a real advantage to the farming sector, were it not for the droughts."
He said that in Australia, the public sector has always been the dominant provider of research services to the agricultural sector, however more research now is being undertaken by universities and the private sector, with less done by state and Australian governments.
Dr Mullen added that the Rural Development Corporations now fund almost half of the agricultural research in the public sector in Australia Recent data from the Australian Bureau of Statistics also suggested that research resources have shifted to plant industries from animal industries, which may underpin the figures on average broadacre productivity growth, given the higher rates of productivity in cropping.
Dr Mullen noted there is concern internationally that investment in agricultural R&D in developed economies is falling.
"This has implications for food security in developing countries, which rely on nations like our own to develop technologies which will increase agricultural productivity."
"From my analyses it would seem that public investment in agricultural research, from 1953 to 2003, has earned moderately high rates of return, in the order of 15 to 40pc per annum.
"These benefits are shared by farmers, processors and consumers, some of whom live outside Australia," Dr Mullen said.