Chain of events: a blog of Food Chain Intelligence

The Productivity Commission PC delivered a draft report yesterday that didn’t make any friends among farmers and researchers. There is an excellent summary of the findings here.

The reasons of unhappiness are many, including the opinion of the PC in that agri-businesses should be investing in funding their own research.
The PC does not question itself the proportion of agribusinesses that would be able to invest in R&D. For example, about 51% of horticultural farms earn less than $50,000. They leave the faith of these small businesses to the market forces. The question is: what incentives do they offer to the shrinking rural industry to stay put? Innovation is the lifeblood of any small business. This is where public funding has a role in many countries. But in Australia, small innovative businesses will need to survive alone.

Further, the PC states that when processors leave to other countries (such as New Zealand, which has much more interest in keeping their agri-food R&D alive and kicking), it is because it is cheaper to do so. Tough luck for Australian farmers again. Does the PC question whether R&D in NZ is one of the reasons why NZ is more competitive/attractive for McCain and Simplot? Nope.

The report states that ”In short, both the contention that Australia should necessarily be seeking to undertake more food-related value-adding activity, and the consequential perception that this justifies public funding for R&D, are highly questionable”. Yet, no analysis of the value of value addition to the Australian economy is made. No analysis of the value chain effect of R&D is made. The report is heavy in opinion and light in facts. Almost no statistics are presented to back this and other points of view. This is established in page 4: “rather than add to the plethora of empirical work already in the public domain, the Commission has used judgement and qualitative assessment to supplement the available quantitative evidence”. This, to me, is the problem of this report. Assessment of how much funding RDCs should receive, what mechanisms should be used, whether farmers are able to fund their own R&D (and what types of farmers) are issues that require solid, hard evidence and sound analysis. If someone bothers in presenting a good case, with figures showing the how’s and why’s, there is always the disclaimer that “judgement” and qualitative assessment” will be used.

I could go on forever.But the intentions are to eventually decrease (not maintain) R&D funding, make no mistake. The overview of the report indicates: “At the end of the 10-year phase down of the matching contribution cap for the industry-specific RDCs, the Government’s total contribution to the RDC program would be around $60 million a year lower”.

Dr Lee  is the director of CSIRO’s Food Futures National Research Flagship program. He was presented with the award – which recognises outstanding contribution in leadership of Australasia’s food, beverage and agribusiness industries – at the annual Rabobank Leadership Dinner in Sydney last night.

Rabobank chief executive officer Thos Gieskes presented the award and stated that “Work undertaken by CSIRO, under Bruce’s leadership, has already resulted in significant realisable impact in Australia and is poised to make enormous future contributions to the food, beverage and agribusiness sectors of Australia and New Zealand. At maturity, this work is estimated to have a potential worth of up to $9 billion for Australia’s food and agricultural industries.”

Food Futures has as a main goal to transform the international competitiveness of the Australian agrifood sector, adding A$3 billion annually, by applying frontier technologies to high potential industries.

There three main areas of research in the Food Futures Flagship are:

Future grains, grain based foods and feed. This program is researching new techniques in advanced genetics with the aim of delivering premium value in food and feeds.

Engineering better Australian seafood and beef. Technologies investigated include breed engineering, ste-cell research for improving beef production, molecular genetics and breeding programmes for seafood and aquaculture.

Quality biosensors. This includes biosensor research, particulalry for wine.

This is an update to my note yesterday about the leaked information on the SA budget.  The final budget will indeed have consequences for the wine & food industry support, as previously reported. The most significant cost cutting measures going ahead are:

• Agricultural support programs — rationalisation. It includes the cessation of government support to the Advisory Board of Agriculture.
• Biosecurity animal health — efficiencies and cost recovery. This initiative will increase revenue  through the implementation of an e-business model and  improved cost recovery from livestock owners who benefit from the existing animal health surveillance programs.
• Biosecurity aquatic pest management — efficiencies.
• Departmental costs — reduce.
• Executive employees — This initiative represents a 10% reduction in executive positions.
• Industry development programs — A reduction in grants and programs relating to the agriculture, food and wine sectors delivered and supported by the government. Government assistance to food industry organisations and associations would be reduced.
• Marine safety — efficiencies.
• Rural Solutions SA — By 2013-14 Rural Solutions SA will be fully cost recovering its activities, such that it receives no subsidy from the government. To achieve this, state government support will be withdrawn for all lower value activities and Rural Solutions SA will begin to charge full cost recovery prices for the services it provides. As the activities of Rural Solutions SA are downsized, there will be a consequential loss of external revenue to the Department of Primary Industries and Resources for services previously provided. The new operating model will result in workforce adjustments and requires a significant decrease in support costs. Rural Solutions SA will also need to compete successfully in private markets to earn replacement revenues.
• South Australian Research and Development Institute (SARDI) — By 2013-14, the level of government support to SARDI will reduce by $3.5 million per annum. As a consequence, SARDI will increase cost recovery and reduce costs resulting in a reduction in R&D activity and service delivery across the broader spectrum of primary industries research. These changes are consistent with the strategy of streamlining state research in line with the National Research, Development and Extension Strategy with the Primary Industries Standing Committee. The savings will be achieved through cessation of some R&D activities and workforce changes.
• Strategic policy and analytical capacity — rationalise.
• Aquaculture industry and Commercial fishing industry— increase cost recovery by raising the fees charged to the industry.

Among the very few good news, the SA Food Centre seems to have  survived and received $4.2 million over four years to further develop the South Australian food and wine industries. This is against a backdrop of a substantial decrease in operating expenditure in the Dept. of Primary Industries, from  $324.0 million in 2009-10 to $264.5 million in 2010-11.

The scandal of the leaked  report from the Sustainable Budget Commission recommending more than $1 billion of cuts in several  South Australian agencies is evolving.

The leaked document contains references to several programs supporting the agriculture, food and wine industries in SA. If these cost cutting initiatives go ahead, the capacity-building of the state’s food industry would be severely slashed.

In the Dept. of Primary Industries & Resources South Australia (PIRSA) , affected programs would include the Agriculture, Food & Wine Industry Development Programs, including SA Food Centre.

Among the initiatives recommended in the leaked document are that PIRSA ceases to implement policies and programs that assist the state’s agriculture, food and wine sectors.

Specifically,  the initiative would:

•Cease the delivery of services and programs services through the Food Centre.

•Minimise delivery of services and information to regional areas.

•Cease Government’s assistance to industry organisations and associations.

•Minimise information and communication services available to industry.

•Cease Government’s assistance for industry events (eg. Premier’s Food Awards).

It is also indicated that “PIRSA may also review its remaining industry development programs for which there is no cost recovery proposed, and consider submitting a proposal to cease these services.”

Other measures affecting PIRSA would include:

-The reduction in strategic policy and analytical capacity to support decision making and governance including corporate strategy and policy advice, forestry and biosecurity policy capacity.

-The gradual cessation of  the $100,000 annual grant to Agricultural Societies Council of South Australia.

-Cease programs that co-ordinate regional primary industries related community development, building capabilities and skills, as well as assist PIRSA and the broader community with the capacity to respond to extreme weather events including drought and other regional issues requiring state coordination and policy development. Includes the abolition of the Advisory Board of Agriculture.

-Continued implementation of Aquaculture cost recovery model to increase the proportion of funds recovered from the South Australian Aquaculture industry, to support core administrative programs required within PIRSA Aquaculture to meet legislative obligations.

-Increase cost recovery in commercial fishing fees and charges, to reflect all attributable costs.

-Implement a state-wide recreational fishing licence. To ensure the sustainability of the recreational sector and increase services for recreational fishers.

-Fruit Fly Program – Protect Riverland region only and cost recover from Riverland growers. This proposal provides for continuation of a fruit fly program to protect the horticulture industries in the Riverland, but will allow fruit fly to become endemic in metropolitan Adelaide and the Adelaide Hills, unless industry are willing to cover the program costs. Protection in the Riverland will be recovered from Riverland growers, through new fees, at a cost of $3,300 per citrus grower, $4,500 for a pome fruit grower and $1,250 for a stone fruit grower.

Other proposed cost cutting measures affecting the agriculture and food industries include:

-In the Further Education, Employment, Science & Tech Portfolio, it is proposed that the responsibilities of the Seafood Training Centre of Excellence are transferred to the Primary Industry Skills Council and that the grant to support the administrative expenses of the Seafood Training Centre of Excellence ceases. It is further proposed to stop the training grant provided to the Centre for the purchase of training. It is proposed that the seafood industry will have access to training places funded under the Jobs Strategy and Productivity Places Program.

-In the Education and Childrens portfolio, it is proposed to cease funding for the Healthy Foods Guidelines Program. This program is proposed to be ceased on the basis that policy & guidelines have already been developed and distributed to schools.

-The Tourism Portfolio would see the reduction in funding of low impact savings options including a remodelled Tasting Australia, investment in Tour Down Under future growth reduced, ceasing the World Food Exchange and halving the current Regional Events grants program. Also, a reduction in funding three programs focused on Indigenous Tourism, Food & Wine Tourism and the South Australian Tourism Industry Council (SATIC) are foreseen.

-The Environment and Conservation Portfolio would see a reduction of expenditure in the Kerbside incentive program - food waste.

As expected, Penny Wong has left the Climate Change Ministry and is now the Finance Minister. Greg Combet is the new Climate Minister and has outlined three priorities: renewable energy,  energy efficiency in industry and households, and  the introduction of a carbon price.

Tony Burke  has been given the responsibility of sustainable population, communities, environment and water. The Agriculture portfolio is now managed by Senator Joe Ludwig. I don’t really know much about Senator Ludwig and it seems that this has also been a concern for others. But quite frankly, Labor did not offer many reforms in agriculture R&D and other support to rural industries during their campaign. Further, Mr Ludwig has said that he would be “carrying forward” the work done by Mr Burke, suggesting that no major changes are to be expected from the way things operated under the previous administration.

I find it amusing that politicians can change portfolios without feeling conflicted about how much they actually know about climate change, or agriculture, or education. Take Peter Garret: from being a musician he went on to work on climate change and now he is on an education role. Stephen Smith moves from Foreign Affairs to Defence.

And silly me! I was concerned about studying a PhD in food engineering because I felt I didn’t know enough when I finished Uni. Clearly, in politics, it really doesn’t matter how much you know about the subject you have to create policies for…