Food processing industry looking good

Amongst all the doom and gloom in rural Australia the food processing industry shines brightly.

As detailed in the State of the Country series in the Herald Sun this week, rural Australia, more specifically small, inland communities based on broad-acre agriculture are falling behind the rest of the country in almost every economic and social indicator.  Although this is not a new trend, the pace of the decline has arguable accelerated in recent years and for many rural communities the decline has been going on for so long it almost time to turn out the lights.

Couple this with increasing utterances of the big r-word here and aboard, the men and women on the land have a right to be a bit depressed.  After all, recessions usually hit commodity prices extra-ordinarily hard.  Moreover, commodity prices and farmers generally benefited little for the boom economy of recent years.

Trends in the food processing industry should, however, cheer them up.

Food processing is Australia's largest manufacturing sector with turnover of $47 billion and employing 165,000 people nation-wide and over 45,000 in Victoria.  It has also been one of the country's perennial under performers with low levels of productivity and poor export performance.  The industry has gone through radical changes over the last ten years including reductions in tariffs and other forms of government support, increased foreign ownership, rationalisation of plant and increased focus on exports.  It has also been effected by increased competition from abroad and globalisation of brands and sourcing of product.

The process of change while painful for some has been very promising to date.

Since 1991 turnover in the processed food industry has increased by just over 35 per cent;  exports have grown by over 70 per cent;  and employment has expanded by 15 per cent.  Victoria -- which has the largest concentration of food processing operations -- has been the main beneficiary amongst the states from the industry's reconstruction.

Importantly the rural and regional Australia has benefited more than metro areas.

Between the 1986 and 1996 census the number of people employed in food manufacturing increased by 51 per cent in non-metro, inland regions and by 4 per cent in remote regions.  In some regions such as the Murray River, growth in food processing has maintained the absolute number of people employed despite declining employment in farm and transport services.  Food processing industries have also helped rural areas by creating larger markets and sometimes new markets and higher prices for farm products.

Wine has been the stellar performer with a 28 per cent increase in the number of wineries and a doubling of exports in the three years between 1996 and 1999.  Milk, ice cream, biscuits, soft drinks, poultry and seafood processing have also shown double digit growth.

The food manufacturing industry, however, has plenty of work left to do.  Many areas of the industry still lag behind the international competition in terms of labour productivity and scale of production.  And unless these issues are addressed the industry could go into retreat with the exist of some global producers.

Nonetheless, the record of the industry to date offers a way forward for hard pressed rural folk.

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