Economic Factors (BEESTOP)

Question 1

General economic value/factor for dairying

Also list the points for economic factors!

Answer 1

In 2017/18 the dairy industry accounted for 7% ($4.4 billion) of the gross value of agricultural production (ABS 2019)
AND
Globally, around 1 billion (IDF) people gain their livelihood from dairying (directly/indirectly)

competitive advantage, consumer demand, mobility of labour and capital

Question 2

Competitive advantage - explain (nature)

Answer 2

1. Australia & New Zealand - ideal biophysical environment, i.e. mild climate and can produce milk all year round, reliable precipitation reducing need for irrigation

2. European countries advantage through 
high subsidy (government handout given to industry in order for costs to be reduced - helps to keep their prices down to be more competitive

3. The USA has experienced 13% milk dairy product price inflation, significantly higher than in Australia. USA farmers are disadvantaged because they’re selling products at a higher price = less sold.

Question 3

Competitive advantage - Australia & New Zealand statistic

Answer 3

In an average year, approximately 60%–65% of cattle feed requirements in south-eastern Australia comes from grazing. This results in cost efficient, high-quality milk production.

Question 4

Competitive advantage - future directions (3)

Answer 4

1. Larger herds to achieve economies of scale - farm consolidation (mergers or acquisitions) –> more milk production (profit maximisers)
   In 1980 there were 22,000 dairy farms in Australia with an average herd size of 85. While in 2020 the average herd size is 276 and there are 5,213 farms.
2. New technology - Above average profits for the past three years has led to increased investment in new capital equipment and technology as the key spending area for Australian dairy farmers. This will lead to growth in the medium to long term.
3. Brexit & UK trade deals - UK won’t have taxes on Australian imports –> access to more (wealthy and larger population) UK market
   Used to be taxes between £8-160 per kilo of Australian dairy products, now £0

Question 5

Consumer demand (nature) - explain
2 main regions each with 3 points

Answer 5

1. Australia & western countries -
   a. Health conscious consumers (focus on niche products, e.g. A2)
   b. Uprise of Veganism and plant based drinks, e.g. almond/soy milk - forcing farmers and manufacturers to become stakeholders of plant-based brands e.g LPC has a hold in Freedom Foods OR risk more competition
   c. Consumers who are concerned about animal welfare and the transparency/legitimacy of brands
2. China & Asia
   a. Driven by food scares (e.g. melamine baby formula incident 2008) and people are concerned and are looking towards countries who are ‘green’ e.g. Australia, New Zealand, who operate in a clean environment and with strict guidelines in food production
   b. Ongoing urbanisation across Asia boosting the proportion of middle income earners from 29% in 2010 to 65% in 2030 - more disposable income
   c. Increasing westernisation of Asian countries due to globalisation - people are exposed to more westernised diets

Question 6

Consumer demand (future directions) - 3

Answer 6

1. Focus on Alternative Products and niche markets such as A2
2. Export-focused infant formula capacity - Good future potential and growth for Australian dairies (for export to China) because Australia is a trustworthy/transparent/reliable source
3. Contribution toward cultural integration - where people e.g ‘Daigou’ travel to Australia to buy and resell
   milk overseas.

Question 7

What does ‘mobility of labour and capital’ mean?

Answer 7

Mobility of labour - ability to attract sustainable/adequate employment
Mobility of capital - ability to attract new investment which is vital to increase efficiency, productive capital and drive new employment

Question 8

Outline impacts of mobility labour.

Answer 8

• Greater access to resources and employment opportunities

- Ability for workers to improve their financial situation

Question 9

Outline issues with the mobility of labour and capital on dairy farms

Answer 9

1. Lack of profitability, promotion opportunities and career development (as dairies are labour-intensive)
2. Lack of safety regarding heavy machinery and dealing with larger animals in rural areas
3. Negative connotations of rural living

Question 10

Explain mobility of labour/capital (nature)

Answer 10

• While dairy farms are still largely family owned with 38,000 people directly employed in
  farming/manufacturing in Australia, there is a lack of capital mobility with decreased ability to attract investment in the dairy industry (which is vital to increase productive capacity and drive employment)
• Overriding industry trend has been one of mechanisation and rationalisation, meaning that there are now fewer farms and fewer manufacturers - remaining manufacturers and farms are larger
• Rural depopulation has meant that in Australia finding farm workers is difficult. Basically labour mobility is limited and capital (investment) is also not readily available- though the 2022 outlook for capital investment looks more positive.

Question 11

Mobility of labour (future directions)

Answer 11

• Decreased mobility of labour and capital trend projected to continue
• Decrease in profitability for farmers due to:
  (a) lack of sustainable employment
  (b) lack of sufficient investment for expansion
  (c) increased presence of agribusinesses/economies of scale (competition)

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