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Big farms, big opportunity

An increasing investment in larger farms is providing fertile ground for the organics industry, says Matt Genever, Chief Operating Officer at Sustainability Victoria.

The number of agricultural businesses in Australia reduced by some 34 per cent between 2010 and 2019. Over the same period, the total area of agricultural holdings went up by more than 6 per cent, pointing to a trend of farm aggregation across the country.

This is in large part good planning, with opportunistic farmers leveraging equity from the rapid growth in property prices and record low interest rates to expand into adjacent areas.

It is unclear whether this aggregation will continue and for how long (other countries such as Canada  and New Zealand are experiencing similar trends, moving toward fewer, larger farms), but for the time being it appears that larger farms with fewer owners presents a significant opportunity for the use of processed organic material.

That opportunity exists on two fronts. Firstly, there is an opportunity that is purely a product of economies of scale. As the size and complexity of farms increase, so too does the need for data-driven land management, ensuring that each hectare is maximised for short- and long-term production.

This has become even more important with the increase in strategic crop rotation optimised with relay cropping, where use of multiple crops seeks to maximise the outputs from each growing season. It’s no longer a game of feet but a game of inches.

Secondly, it’s important to look at who owns our farms, both now and into the future. In 2018, a House of Representatives inquiry found that Australian super fund investment in agriculture was disproportionately low. It’s been baby steps since that report was released, however the market is showing positive signs from institutional investors.

A good example can be seen in Equilibrium’s Controlled Environments Food Fund, which aims to capitalise on bankable food and aquaculture products. After an initial raise of about $300 million in 2019, the second offering closed in July 2021 at more than $1 billion, showing keen interest exists in the market.

Large investors are typically more driven and resourced to invest in sustainability and social outcomes, keen to ensure that their clients can see both economic growth while being good corporate citizens. So that’s a long-winded way of saying we are moving into a very willing market, where demand for composts and soil conditioners, which can both improve soil quality and hold carbon, is likely to keep rising.

Of course, there is always a “but”. While larger farms backed by larger investors present fertile ground for the organics industry, it also comes with a focus on risk management and a keen want for consistent products made to specification.

Last month I ordered a few cubic metres of AS4454 compliant compost and mulch and pulled out half a bucket of visible, gross contamination. That’s not aimed at calling anyone out, it’s just the reality of what is the industry’s most enduring challenge. This is a shared responsibility, with the organics industry needing to take a leadership position on product quality, supported by upstream education and behaviour change at household level.

Like most jurisdictions in Australia, building a strong and resilient organics sector is a key priority in Victoria, backed by a target to see all households having access to a combined food and garden organics service or composting system by 2030.

At Sustainability Victoria (SV), we remain committed to investing across the organics value chain. Upstream, we’re implementing a $25 million behaviour change program to support the rollout of the state’s 4-bin system, including combined FOGO collections.

This is amplified by more than $100 million for industry development, including infrastructure and market development grants, such as the recent Recycling Victoria Organics Sector Transformation Fund, which aims to leverage the new national Food Waste for Healthy Soils Fund. In short, we’re investing to deliver the combination of engaged households, committed to putting the right things in the right bins, with an organics processing sector that is focused on product quality and innovation.

Looking forward, one of the emerging areas of innovation that SV sees as a significant opportunity for the organics sector is subsoil amelioration. This essentially involves improving the characteristics of subsoil by adding organic carbon and nutrients, which in turn facilitates root growth into the previously unutilised subsoil and increased yields. This is in contrast to the typical use of organics as a topsoil improver.

About 20 per cent of all Australian soils are sodosols (which tend to have dense subsoil structure that inhibits root growth). Field trials show that subsoil amelioration can improve crop yield by 20-40 per cent. At the recommended application rate (10-20 tonnes/ha) and targeting land that is close to a composting facility, SVs conservative estimate is that this market could be close to nine million tonnes per annum for the Australian organics industry.   

Targeting subsoil has longer-lasting impacts, however it does come with additional cost through the need for specialist agricultural equipment to apply organic material into the subsoil layer and is still at the innovation phase of its lifecycle. These are the opportunities we love at SV, with significant opportunity that can be unpacked through the R&D and demonstration stages and commercialised at scale.

I don’t need to recite the literature on the benefits of organics in supporting long-term soil health, the evidence is clear. What does need to be reinforced, now and most likely in perpetuity, is the need for a systems approach to industry longevity. Clean inputs, quality outputs, customised products…and happy, prosperous farmers.

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