Executive Director (Export Development) NSW Department of Agriculture Sydney, NSW.
There are a number of misconceptions concerning the role and function of Statutory Marketing Authorities which I suggest need clarification.
To many they are seen as a panacea for all the production and marketing problems associated with an agriculture industry. To others they are anathema and an absolute restriction upon the freedom of an individual to pursue a path to whatever goal or objective he perceives to be in his own best interest. Usually his best interest by chance just happens to be coincidental to the benefit of the others participating in the industry. At least that is what we would be led to believe.
Quite obviously neither option as expressed is correct and the truth probably lies somewhere in the middle. The suggestion is made that there is a need to separate the term ‘statutory’ for the purposes of this discussion.
In most debates concerning international marketing of agriculture products there is usually general agreement of the need for marketing organisations. The fact that there are as many opinions as to the type or form of organisation as there are participants is irrelevant.
We should all recognise and accept that there are a number of factors which are common to the international market place irrespective of product or market.
The first is that for any product in any market there is a prescribed distribution channel through which the product flows to the consumer. Such distribution channels have been in existence for some time and are likely to remain.
Furthermore there are organisations and individuals within those distribution systems which exercise significant influence over choice and preference as to the type of product and the terms of trade. Therefore, the support and cooperation of such organisations is vital and essential to both growth and profitability.
For example, in most western economies in the retail trade 80% of the food business is conducted by 20% (or less) of the stores. A relatively few companies dominate the trade. Unless there is a strong relationship between those companies and our products there is little likelihood of successfully reaching the majority of consumers.
Unfortunately, in many instances it is not possible to have direct associations with those organisations. Sales to them must be made through wholesalers, distributors, etc. Accordingly, we must direct our trade through those who do service the major outlets.
The second point is that for’ all agriculture products, the distribution channels are totally transparent and knowledge and information is freely available to all. There is little if any commercial confidentiality remaining in any agriculture trade anywhere in the world.
Sales negotiated, offers made and shipments undertaken, are common knowledge to those participating in the trade. Furthermore, the information is instantly available and known.
It is difficult to comprehend that producers in Australia continue to believe that their products are able to be negotiated separately on terms and conditions that provide a significant advantage to them, over and above that of their neighbours and fellow producers.
Unfortunately, in an undisciplined and laissez-faire environment, Australian product competes with itself and the foreign competitor is left unscathed.
Perhaps the best illustration is the apple and pear industry where 64 exporters from Australia compete amongst each other in the ‘open market’. The nett result is that Australian product has lost market share to New Zealand, Chile, South Africa and the Argentine, all of whom enjoy considerable premiums over Australian product.
Competitive advantage is not related to price, but, more importantly, to consistency of quality, quantity, presentation and terms of trade over time.
For these reasons there is need for organisation and management of the product. How that is undertaken is of prime importance. How the business is managed is more important than why the business is managed.
This may come as a major surprise to those economists who will argue the theory of ‘competition’ as being to best advantage without understanding of either ‘products or markets. Perhaps one might suggest that the majority of economists might explore the theory that explains satisfactorily why it is that the industries which survive profitably over time in the international agriculture trades are those which are best organised.
Each product area must be looked at separately. There is not one form of organisation that is necessarily appropriate to the successful management of all products.
The objective is to maximise the market over time to the benefit of the investor, i.e. the producer. Inherent in this objective is that the producer and the consumer/buyer have a close and strong interrelationship. There is little point in promoting yesterday’s products for tomorrow’s markets.
It is essential, therefore, that the product must be controlled. The best position to be in is to have the demand for the product exceeding the supply. The worst position is to have product competing with itself in the market place. If we are honest then we must admit to far too much of the latter in our marketing of agriculture products. The product is more important than the company.
I am not advocating that single seller organisations are essential. Nor am I advocating that open competition is a viable alternative.
What I am suggesting is that an organisation for each industry has responsibility for ensuring that market planning, product development, and, most important, establishing creditability with the international trade is essential. Such organisations must have functional responsibility for aspects of the international trade according to need.
The statutory element merely conveys appropriate powers and responsibilities. It does not of itself imply either efficiency or success.
If we return to our apple and pear example there is in place a statutory authority. The existence of this statutory authority has not promoted the growth and expansion of apple and pear exports from Australia.
The New Zealand and South African apple and pear industries also have statutory authorities. These two have successfully managed their industries’ growth and profitability. One could therefore argue that it is not a matter of whether the authority exists; it is a matter of the effective management of that authority. In this regard, it is my view that statutory authorities are no different to commercial organisations. Both depend on efficient and effective leadership and management.
The statutory element is essential in that it requires a mandatory commitment. Many would argue in favour of voluntary arrangements. The reality of life is that voluntary agreements do not work. The self-interest of the individual all too often takes precedence over the good of the industry.
Those who propose open ‘free enterprise’ should be reminded that ‘free enterprise organisations are themselves formed according to a multiplicity of statutes and are subject to strict rules and regulations concerning formation and codes of practice. Is there then any difference between the so-called ‘free enterprise’ company and the statutory agriculture organisation? Both have an element of ‘compulsion’ and adherence to rules and regulations.
In conclusion I am bound to favour the formation of statutory organisations to assist the planning and development of agriculture industries. The proviso is that such organisations are effectively and efficiently managed.
Nor should such organisations necessarily conform to the traditional concept of the statutory authority, i.e. they are single desk selling units or, alternatively, regulatory mechanisms for applying discipline to industries.
Rather they should be constructed according to need; they should be flexible and perhaps above all, they should facilitate growth and development and not impede, as many have done in the past.