Have finished the England, France and Brussels leg of the trip. Been very interesting and has exposed me to a set of production, marketing and environmental systems that are quite foreign to me operating in Australia. Firstly, the farmers here have very little if any scale. This will have a massive impact on their costs of production. Secondly, they have a great climate – I can see why they can grow such high yielding crops and grow grass (and hence face virtually no production risk). Thirdly, they face enormous environmental pressures that are increasing, such as hedge establishment and maintenance, tree lines and data recording that makes Australia look very attractive. They also face a marketplace that is becoming more discriminatory in regards to food quality, safety and “image” (ie the story or history behind the product).

However, with this large domestic market (or in the case of Europe right on their doorstep), they also have a tremendous oportunity to market their products to a customer who has significant purchasing power and is begining to look at food more than jsut “food”, rather they are looking for an experience and story behind food. This, to me, seems to be positioning Europe as a high cost food provider and they will move to more of a domestic focus with some small imports of high cost/high margin foodstuffs (think champagne, rocquefort, iberian ham etc) to western nations with high disposable incomes. Any commodity foodstuffs I feel will be imported because the farmers here won’t be able to compete on price with the likes of Australia, New Zealand and South America. There would probably be an opportunity for Macquarie in high end, niche foodstuffs if that is one of the business models that you want to pursue, however the ability to replicate may be a bit limited.

The agricultural system in Europe was quite fascinating to me and also places the Common Agricultural Policy (CAP) in a greater context. It appears that whilst the CAP is being reformed and there will be no direct payments for production being made in the future, there will however be a greater emphasis on environmental stewardship payments so that environmental outcomes can be achieved. Whilst there is pressure being placed to reform the CAP, it won’t be removed any time soon and it seems that whilst the payments are being welcomed by the farmers, a lot of the paperwork and auditing that comes with it is not. The environmental demands of the people will not be reduced and these will be met through the CAP.

I also feel that the CAP will be one of the centrepieces of the push into climate change and executing climate change policy changes. We have heard a great deal about climate change and food security and it appears to be a big issue over here. Whilst I can’t see Europe running out of food any time soon, I do feel that with the issues mentioned in the first and second paragraphs, the days of Europe exporting significant quantities of food will be limited, as their farmers are earning a poorer return on investment than Australia. We saw 3 farms on a tour to Bedford, the first had invested in a 20,000 acre operation at Cundedin in WA as well as the farm at Bedford, the second was in pigs (and has got out of them) and has now diversified into a farm shop (butchery and some bread and vegetables) and the third farmer was turning a lot of their farm sheds into commercial real estate and leasing them out to town businesses (basically creating a low cost business park) as well as establishing a livery. It was quite interesting to see that operating returns must have been quite poor to push them into these decisions (or that they maybe wanted to further diversify their income streams?).

France was a beautiful country, but again plagued by the issues identified above. However, if they could get their act together, they have some of the best soil, rainfall (900mm south of Lille) and climate to grow grain that I have seen. However, there is a piece of legislation that is about to or has been passed that will reduce the registered pesticides to be used in Europe by 50% by 2020 and organics must increase to 20% of total farm production in the same timeframe.

We also managed to spend some time around Fromelles and Menin Gate where we saw some of the WWI battles and memorials. It was very moving and quite humbling to see men younger than myself go off to war and never return home. Kind of drives home that despite the current financial turmoil, we have a lot to be thankful for.

Brussels was very interesting and also drove home to be what a disparate and complicated beast the EU is and how they ever reach a decision is beyond me. To my impression, the EU bureacracy runs a real risk of growing into a massive thing that loses touch with the common people but I imagine that it has got to the stage now that it can’t be done away with. Brussels itself was a great town. From my perspective having never been to Europe it is all so old (not in a bad way) and yet very stately with the cobblestone streets, cathedrals and palaces/squares that celebrate various monarchs or wars over the centuries. On a seperate note we also heard that there is no chance of the Doha round of trade negotiations getting up, which was quite interesting compared to other press I have read.

We are off to Brazil today. I am really looking forward to it. One of the presenters we heard in Brussels had some interesting comments regarding the sustainability of the Brazilian Beef Industry and it will be interesting to compare their thoughts with some of the farmers on the ground in Brazil.