Inquiry questions levy value

24 Nov, 2015 01:00 AM
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WA Liberal MP Rick Wilson.
Are we paying more than we are actually receiving - is that the situation?
WA Liberal MP Rick Wilson.

IF anyone was going to ask pointed questions about the murky connection between lagging agricultural productivity and compulsory farm levies, WA Liberal MP Rick Wilson was the man for the job.

Mr Wilson is a member of the House of Representatives Standing Committee on Agriculture and Industry which is holding an inquiry into farm sector innovation.

A public hearing of the inquiry, recently held in Canberra, grilled Department of Agriculture and Water Resources senior officials Phillip Glyde, Peter Gooday and Richard Webb on the Committee’s investigation into the role of technology in increasing agricultural productivity in Australia and any barriers to its adoption.

Immediately after Mr Glyde finished reading his brief opening statement, Mr Wilson – an inter-generational sheep and grain farmer from Katanning in WA’s Southern Wheatbelt and experienced farm advocate – asked a burning question of Mr Gooday who is a leading farm productivity analyst at the Department.

The O’Connor MP said he was a wool grower who paid a 2 per cent levy to Australian Wool Innovation every year – but growers still shear sheep the same way they did 120 years ago and still treat flies and worms.

“We have products that have been around for 30 or 40 years that were developed by chemical companies in the first place,” Mr Wilson said.

“Where do you see the value in that 2pc levy that I am paying every year, plus the matching funding from the government – and I will specify the wool industry here?”

Mr Gooday said the Department’s sheep statistics basically started in about 1977 and continued to the present day and having measured productivity growth over that entire period found it has been “flat, basically” in increasing at about 0.1pc a year.

“When you account for the outputs that are produced and then you divide that by the inputs that are used, you get about 0.1pc over that entire period,” he said.

“But of course some fairly substantial things have happened throughout that period.

“Following the collapse of the wool reserve price scheme, productivity growth in the sheep industry has increased to about 1.4pc a year, I think.

“That probably was not due to R&D alone; it was probably due to resources shifting out of sheep and into other things.”

Mr Gooday said in terms of R&D’s impact on sheep or wool, the Department had not done any specific research.

But he said they had done some broad research across the national R&D system and found about two thirds of productivity growth can be attributed to publicly-funded research, development and extension.

“About half of that looks like it is technology spill-ins from outside - international spill-ins,” he said.

“Then the split between domestic R&D and extension is roughly even.

“And of course the different RDCs undertake specific cost-benefit analyses of different bits and pieces of their programs, but we are not involved in that.

“I know it is not related to sheep, but the work we have done in cropping indicates that it really is the development of new technologies that has pushed things along there.

“And I would really only be guessing at the specific things that have happened in the sheep industry that have improved productivity since 1990.”

Mr Wilson said he assumed the 1.4pc productivity increase since the late 1980s was attributed to the wool market’s collapse, which Mr Gooday agreed.

The WA MP said he would contend that, due to the lower prices, people had to produce more to make a living.

But he asked if growers were paying a 2pc levy every year, plus another 60c in the dollar in government-matching funding, “are we actually going backwards?”

“Are we paying more than we are actually receiving - is that the situation?” he said.

Mr Gooday said overall farmers had been facing a long-term decline in their terms of trade, “so the prices for their outputs relative to the prices of their inputs”.

“Really, the only protection against that has been through increases in productivity, given that we cannot really influence the prices of the inputs or the outputs,” he said.

“So in the long term it really is through productivity growth.”

Mr Gooday said the Department’s work indicated that R&D had been very important to productivity growth, with an argument to say it would be more important to productivity growth in the future, than it has in the past.

He said that was because of occurrences in the sheep industry, where pricing and marketing reforms had led to shifts in the way people managed their farms and what they produced.

“A lot of those big gains have washed through now,” he said.

“So where is the productivity growth in the future going to come from?

“We will probably rely more on advances in technology than we have in the past, simply because we have made the major regulatory changes that are obvious.

“Obviously, there are still things to do but they are not the really big ones.”

Public versus private funding in R&D

Mr Wilson said he’d recently seen a US based multinational seed production company’s presentation, which showed the “extraordinary increase” in corn production, over and above other crops like wheat.

He said it showed an almost doubling in the per hectare production of maize in the last 40 years.

The explanation the company gave, he said, was that after breeding hybrid varieties they could capture the value of their breeding program and then reinvest in breeding.

“By capturing a return on their R&D, they were able to reinvest,” he said.

“That almost goes against the tenet of all we have been talking about here this morning - publicly funded R&D - where we all come together and hold hands.

“I am putting a proposition to you that perhaps we need more commercialisation of R&D, more private enterprise, more return and reward for those people who come up with innovative ideas; rather than we all hold hands and put money into a tin in the middle and hope that something comes out of it.”

Mr Glyde said he agreed with Mr Wilson, adding that Monsanto had released BT cotton not because it was trying to do something great for the world but because it could make money out of selling BT cotton.

“I think that is an important point,” he said.

“Increasingly, we would observe that some of the RDCs are partnering with those large commercial entities.

“That is a fairly controversial area because - as you point out - here is this notion that once a technology is available and there is public investment in it we should be trying to make that available to as large a number of farmers as possible.

“You do not want to provide barriers to private sector investment continually.”

Mr Glyde said getting the balance right was an area RDCs were become better at doing.

Mr Gooday said there needed to be a path to market for the technologies, for people to put money into them.

“That does not mean that producers do not also benefit from the adoption of these technologies,” he said.

“You only adopt them if you think it is going to increase your bottom line.

“We have to remember that this is happening all around the world.

“We really do have to make sure that the incentives in our R&D system - like in any other supply chain - are set up right so that we get the outcomes we are looking for.

“Part of those incentives is to do with the public R&D spend and all of that, but part of it is to do with making sure there are not things impeding commercial investment in R&D.

“When you look back at the big things that have happened, a lot of them have started with public R&D but it has been commercial investment that brings that to market in a big way and that has led to widespread adoption.”

Mr Glyde earlier told the inquiry technology and innovation were recognised as major contributors to improved agricultural productivity which in turn would support stronger rural industries and communities.

“Australian farmers operate in a relatively wealthy country. We have high wage costs and high environmental and work health and safety standards,” he said.

“That makes it sometimes quite hard to compete in world markets, where other countries might not necessarily enjoy those benefits, and other countries also have governments that subsidise or protect their agricultural industries in various ways.

“This leaves us with fewer tools to compete.”

Mr Glyde said the Department mainly supported agricultural innovation through its investment in the 15 rural research and development corporations.

He said they also had departmental programs with the most recent one being the rural R&D for Profit grants program which has provided $25 million per year over eight years to encourage cooperation and collaboration between RDCs in rural R&D.

“That will hopefully lead to outcomes that are more able

FarmOnline
Colin Bettles

Colin Bettles

is the national political writer for Fairfax Agricultural Media
Date: Newest first | Oldest first

READER COMMENTS

Chick Olsson
24/11/2015 4:14:02 AM

Since the formation of AWI, approx $1.4 billion in wool levies have been collected and ' invested '. Is wool any better for this?
angry australian
24/11/2015 5:19:01 AM

At long last an MP who finally seems to get it! For far too long those with a vested interest in rent seeking have had too much to say about farm levies. The response from the Dept. was deplorable. In my opinion at any other organisation Mr. Glyde & Mr Gooday would be asked for their resignations! I keep asking, how much have farmers paid in levies over 20 odd years,$4b-7b? And yet the best outcomes seem to come from the likes of Monsanto & Bayer. Our own R&DC's and their research organisation partners are busy perpetuating myths rather than improving farmer productivity/profitability.
Rob Moore
24/11/2015 5:33:33 AM

Not much Chick! It is very hard to measure & the "what if" factor of doing nothing with no levies is an abhorrant idea to pollies & all the beneficiaries.AT LEAST in woolpoll- we get a say -every 3 yrs & while I voted for zero - I accept the majority of payers VIEW that 2% is what they are happy with. MLA/Red meat must follow this same model immediately- as Joyce,Glyde and Norton are UNABLE to tell me where half a million GRAINFED NON levy entries are coming from.IMO it is processors feeder cattle BUT Ross Keane chair of RMAC assures me that it isn't.How abt some journalists get the answer
the kid
24/11/2015 8:48:19 AM

I suspect if Rick wilson actually adopted some of the best practice sheep management developed he'd see where his money went.
Jock Munro
24/11/2015 9:55:06 AM

Like all advertising and promotion Chic ,we will never know but is it worth the risk by doing nothing? If AWI set up an Australia wide co op (Auswool?!) and could control the product there is little doubt that every cent of levy would be worth it.

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