KINGSTON ACT 2604 - GRDC

GRDC Stakeholder Report 2012-13 1 June 2012 2

Postal address Grains Research and Development Corporation

P O Box 5367

KINGSTON ACT 2604

Location

Level 1

40 Blackall Street

BARTON ACT 2600

Telephone: 02 6166 4500

Facsimile: 02 6166 4599

Grains Research and Development Corporation June 2012

This publication is copyright. Apart from any use as permitted under the

Copyright Act 1968, no part may be reproduced by any process without

permission from the Grains Research and Development Corporation.


Table of Contents

1. Executive Summary 4

2. Grower Engagement and GRDC Accountability 5

Accountability to the grains industry 5 Industry representative 5 Grains industry priorities 5

Industry levy rates 5

Consultation arrangements 5

Growers Report 6

Accountability to the Australian Government 6 Responsible minister 6 Australian Government priorities 6 Ministerial directions 6 General policies of the government 6

Obligations under the Commonwealth Authorities and Companies Act 7

3. GRDC Strategy 8

A. Focused on delivering value 8

B. Nationally coordinated 9

C. Regional delivery 9

D. Global reach 10

E. 'Your GRDC working with you' 10

Factors Expected to Influence the GRDC Business Environment 11

4. 2012-13 R&D Portfolio 13

New Investment 13

Continuing Investments 14

5. Projected 2012-13 Budget Analysis 17

Overview 17

Revenue Forecast 18

Expenditure 19 New Project Commitments 20 Continuing Commitments 20 Employee and Supplier Expenses 20 Expenditure by Themes and Panels 20 New Capital Commitments 22

Sensitivity Analysis 22 Baseline 23 Pessimistic 24 Optimistic 25

6. The Proposed Grains Levy Rate for 2012-13 26

Attachment A – GRDC Revenue Forecast Assumptions


1. Executive Summary

The GRDC Draft Stakeholder Report 2012-13 provides crucial information to

GRDC stakeholders including Grain Producers Australia (GPA) and its members.

The Report is one of a suite of formal and informal measures utilised to ensure

effective communication and accountability to Australian grain growers. In

conjunction with the GRDC Annual Report and the GRDC Growers’ Report it

provides an overview of GRDC activities, key achievements and an analysis of

revenue and expenditure estimates for 2012-13. This information is provided to

enable GPA as the currently nominated representative organisation under the

relevant legislation to make an informed decision and recommendation on the

GRDC levy rate for 2012-13.

2012-13 marks the first year of GRDC’s new Five Year Plan. The Plan will

continue to advance GRDC’s engagement processes and accountability to grower

stakeholders. GRDC has a transparent and comprehensive system of formal

planning and reporting to ensure growers have direct input into determining the

research, development and extension (RD&E) priorities of the organisation.

Investments planned in 2012-13 will be aligned with regional grower and

Australian Government priorities, the GRDC’s corporate and theme strategies.

GRDC’ corporate strategies will be: focused on delivering value,

nationally coordinated, emphasising regional delivery, globally sourced,

and working with growers to achieve maximum benefits. Theme

strategies will focus on meeting market requirements, protecting the

crop, improving crop yield, safeguarding the resource base, improving

profitable farming systems, servicing growers, and capacity building.

Projected revenue and expenses for 2012-13 are outlined in this report. GRDC’s

current revenue forecast is based on wheat production of 25.7mt and barley

production of 9.0mt for 2012-13, with revenue estimated at $172.5 million.

Operating expenditure is estimated at $180.9million. Actual revenue will depend

on the volume of crop actually sold, the grain prices achieved by growers, farm

gate costs such as freight which are relevant at time of sale, and other marketing

decisions made by growers (e.g. to go cash or pool, to store or sell etc). The

volume of crop production is very much dependent on conditions during the

growing season and pest or disease outbreaks. The volatility in grain prices,

production, farm gate costs, and growers marketing decisions mean that revenue

estimates are highly uncertain. GRDC manages this uncertainty through the

prudent utilisation of its financial reserves.

GRDC will manage its anticipated revenues and financial reserves to deliver

maximum benefits to growers in the implementation of the new Five Year Plan.

Based on the analysis of expected revenue and expenditure, the level of

accumulated reserves, and the volatility in local and international grain markets

the GRDC recommends that the current levy rates be maintained. Levies are 0.99

percent for all leviable crops excluding maize which is levied at 0.693 percent.


2. Grower Engagement and GRDC

Accountability

The GRDC is accountable to its two key stakeholder groups—Australian grain

growers and the Australian Government—for its performance in addressing their

identified priorities. The GRDC also meets its responsibilities under its governing

legislation and the broader legal framework for Commonwealth statutory

authorities.

Accountability to the grains industry

Industry representative Under the PIERD Act, the GRDC is made accountable to Australian grain growers

through the industry’s representative organisation, Grain Producers Australia

(GPA). The GRDC also consults widely with a range of other grower organisations.

The PIERD Act also requires the GRDC to prepare an annual report, provide

copies to the industry representative organisation, and make arrangements for

the representative organisation to attend a meeting of the organisation’s

executive.

Grains industry priorities In setting directions for 2010–11 (the fourth year of Prosperity through

Innovation, the Strategic R&D Plan 2007–12), the GRDC identified industry

priorities through direct consultations with GPA, as well as local research advisory

committees, grower groups, grower organisations and individual grain growers.

Industry levy rates In 2010–11, a levy rate of 0.99 percent applied to all leviable crops covered by

the GRDC, with the exception of maize, which was levied at 0.693 percent.

The levies were imposed and collected as stipulated by the following legislation:

Primary Industries (Excise) Levies Act 1999, supported by the Primary

Industries (Excise) Levies Regulations 1999, Schedules 4, 12, 20 and 25

Primary Industries Levies and Charges Collection Act 1991, supported by the

Primary Industries Levies and Charges Collection Regulations 1991, Schedules

8, 19, 29 and 34.

The GRDC paid the Australian Government Department of Agriculture, Fisheries

and Forestry $598,827.18 for the collection and management of levies in 2010–

11.

Consultation arrangements The GRDC paid GPA $24,285 plus GST for its participation in consultations with

the corporation during 2010–11. GPA used these funds to meet its costs of

preparing for and attending consultative meetings with the GRDC, to consider

grains industry strategic directions and concerns and to assess the corporation’s

performance against industry expectations.

The payments for consultation were made under the Guidelines on Funding of

Consultation Costs by Primary Industries and Energy Portfolio Statutory

Authorities, issued by the Minister for Primary Industries and Energy in July 1998.


The guidelines also require that when a representative organisation conducts a

project or consultancy on behalf of a statutory authority, details are to be

included in the authority’s annual report.

The GRDC paid GPA $4,925.73(GST inclusive) in 2010–11 towards its cost of

participating in the National Working Party on Pesticide Applications.

The GRDC also paid the travel and accommodation costs of representatives of

other grower groups, to attend formal consultation meetings with the GRDC.

The GRDC met some out-of-pocket costs for three grain growers nominated by

GPA—Andrew Weidemann (Victoria), Ray Marshall (Western Australia) and Wayne

Newton (Queensland)—to represent grain growers during development of the

National Primary Industries Research, Development and Extension Framework.

Growers Report

The GRDC Growers’ Report 2010-11 provides key performance information and is

sent to all growers. The GRDC Stakeholder Report should be read in conjunction

with the Growers’ Report, as it provides a concise summary of the achievements

and activities of the Corporation during the year. This includes:

Report from the Chair and Managing Director

GRDC financials at a glance

Reports from the GRDC regions

Investment highlights of Varieties, Practices, New Products, and

Communication and Capacity Building Output Groups

Commercialisation

The GRDC Team

The GRDC Board

The GRDC investment process.

Accountability to the Australian Government

Responsible minister Under the PIERD Act, the GRDC is accountable to the Australian Parliament

through the Minister for Agriculture, Fisheries and Forestry, who is responsible for

all rural R&D corporations, including the GRDC. During 2010–11, Senator the

Hon. Joe Ludwig was the Minister for Agriculture, Fisheries and Forestry.

Australian Government priorities The GRDC’s strategies and investments actively address the Australian

Government’s National Research Priorities and ministerial research priorities for

rural R&D. These priorities and the GRDC’s achievements in meeting them are

discussed in the 2010-11 Annual Report.

Ministerial directions The PIERD Act and the CAC Act provide that the responsible minister or the

Finance Minister may direct the GRDC with respect to the performance of its

functions and the exercise of its powers, or require it to provide information.

General policies of the government Section 28 of the CAC Act has been amended, and now provides that from 1 July

2008 the GRDC must comply with any General Policy Order made by the Finance

Minister, to the extent that it applies to the GRDC. At 30 June 2011, the Finance

Minister had not made any General Policy Orders that apply to the GRDC.


Obligations under the Commonwealth Authorities and

Companies Act A system of accountability and reporting obligations for the GRDC, reflecting its

obligations under the PIERD Act, is set out under the CAC Act. Under the CAC Act,

the GRDC is obliged to:

prepare an annual report (in the prescribed form, including a report of

operations), and to give it to the responsible minister by 15 October each year

(section 9)

ensure that any subsidiary’s financial statements are audited by the Auditor-

General (section 12(1))

prepare and provide to the responsible minister interim reports during a

financial year, if required by the Finance Minister by notice in the Gazette

(section 13)

prepare and provide budget estimates (section 14)

provide the responsible minister (in writing) with particulars of any proposal of

the GRDC to undertake any one of a number of significant events (section 15)

keep the responsible minister informed of the operations of the GRDC and its

subsidiaries and provide such reports, documents and information as that

minister or the Finance Minister requires (section 16)

invest any reserves in accordance with the manners listed in section 18 or

approved by the Finance Minister (approved under Commonwealth Authorities

and Companies Act 1997—Investment Approval 2008/01—Grains Research

and Development Corporation and Commonwealth Authorities and Companies

Act 1997—Investment Approval 2008/01—Dematerialised equivalents)

comply with any General Policy Orders of the Australian Government to the

extent that the General Policy Order applies to it (sections 28 and 48A)

ensure that the general policies of the Australian Government as notified to

the corporation before 1 July 2008 are carried out (Table A Item 71).


3. GRDC Strategy

GRDC is currently developing its Five Year Plan for the years 2013-18. The Five

Year Plan is still being finalised and is required to be approved by the Minister.

The proposed vision for the next five year plan is “a profitable and sustainable

Australian grains industry, valued by the broader community” and GRDC’s

proposed mission is to “create value by driving the discovery, development and

delivery of innovation in the Australian grains industry.”

To deliver on this vision and mission GRDC’s key strategies will be:

A. Focused on delivering value

GRDC will deliver value by investing in programs that address the key industry priorities with the greatest potential returns

The Australian grains industry is diverse and geographically dispersed and is

presented with many opportunities and challenges. By its nature RD&E is

complex, often requiring investment over extended periods before outcomes to

industry are realised.

It is critical to the future of the grains industry that the national RD&E effort be

focused on the priorities that are most likely to give the greatest return. GRDC

will build its reputation to the point where growers know that the investment

analysis and management that GRDC undertakes on their behalf when investing

the levy into RD&E is as robust and rigorous as asking a financial advisor to

invest their money for short, medium and long term security. Paying the GRDC

levy needs to be the best investment a grower makes. Better than putting

the money in the bank, better than buying shares, better than investing in property, better than reinvesting in the farm.

Equally critical is that priority research targets are established with industry

involvement from the outset. Emphasis on this aspect will ensure that the local

and regional needs are analysed for the key aspects that RD&E need to address

to make the biggest difference for growers and the wider community. It also

ensures that the RD&E that we invest in on behalf of growers is needed by

growers.

GRDC, together with industry, needs to prioritise research targets and develop a

comprehensive investment strategy to deliver results and outcomes to industry.

A key component of implementing this strategy will be establishing “themes” that

cover the full breadth of the GRDC portfolio and focus our investments on the

opportunities and addressing the constraints that will make the biggest difference and return the greatest value to growers.


B. Nationally coordinated

Programs are nationally coordinated and the Australian grain industry has access to the infrastructure and capability it needs for the future.

This will be achieved by fully implementing the National Grains Industry RD&E

Strategy. During 2005 the Primary Industries Ministerial Council (PIMC) endorsed

a concept of national research with regional development and local extension.

This recognises that some research can be provided from a distance, but regional

adaptive development and local extension are critical to ensure cost-effective

adoption of innovation across the industry.

Subsequently PIMC and the RDCs have signed a statement of intent containing a

set of principles for further cooperation between agencies. Implementation of

these principles which emphasise collaboration, information sharing, continuity of

funding, access to capability, and shared reporting will improve the efficiency and

effectiveness of our national RD&E capability.

To achieve a highly efficient national grains RD&E sector the GRDC will work with

its partners to:

Build on existing national collaborations

Develop effective relationship models for private–public coexistence

Develop and implement a national RD&E framework for the grains industry

Build national capability for grains RD&E

Align RD&E with stakeholder priorities

C. Regional delivery

GRDC will deliver the outputs of research in innovative products and services relevant to growers and their advisers in each region.

Increasingly growers need access to the best possible information and research

findings to maximise the performance of their businesses. Growers utilise

numerous channels to obtain this information. Especially noticeable is the growing

use of advice from agribusiness and private consultants and GRDC recognises the need to work more closely together with this sector.

The GRDC has been investing in grains related RD&E for over 20 years. During

this period the GRDC, with its partners, has generated a mass of information from

research outputs and findings, much of which remains relevant today. This

information needs to be packaged in easy to use products and services that are tailored to growers in their local region.

Typically, research results have been communicated to industry through GRDC

Grower Updates, GRDC Advisor Updates, Ground Cover, fact sheets, media

releases, communication campaigns and the GRDC website. While these remain

important communication channels, new information technologies provide an

opportunity to communicate the results of GRDC funded research more effectively.


Growers should feel that the levy is worth it, just for the products and services

they receive from GRDC right now. Additional value comes from knowing GRDC is

investing towards the medium and longer term future of the industry.

A critical element to implementing this strategy will be the establishment of

networks like the GRDC's Regional Cropping Solution Networks to listen to the

local needs of growers and their advisors and deliver customised products and services.

D. Global reach

GRDC will proactively source new technologies and innovation from around the

world for the Australians grains industry.

Essential to implementing this strategy will be strengthening international

research linkages and being able to forge robust public private partnerships. The

marketing of Australian grains is increasingly played on an international stage and this is also true with respect to grains R&D.

The Australian grains RD&E community is highly regarded internationally.

However, the R&D effort in Australia is small and represents only about 2% of worldwide effort.

The role of the private sector in RD&E is becoming increasingly important. Most

notably the private sector is now playing a substantial role in the development of

new technologies including new varieties (both GM and conventional), new

chemistries and advanced engineering.

In the public sector, through organisations like CIMMYT and ICARDA, international

syndicates are forming to solve difficult but important challenges like lifting yield potential and increasing water use efficiency.

A key element in this new strategic direction for GRDC is the engagement of the

Australian Grains RD&E community with their international colleagues both in the

public and private sectors. This is important because it is the best way of

ensuring that Australian grain growers get early access to new technologies, traits and information.

E. 'Your GRDC working with you'

This involves actively listening and engaging with growers and the broader grains

industry.

A long-recognised strength of the GRDC has been the three GRDC Regional

Panels. These Panels, made up of growers, advisers and researchers, consult with industry and advise GRDC on RD&E needs and priorities.

It is critical that GRDC further strengthens the links between its Regional Panels

and industry to increase the opportunity for growers, at the local level, to

influence the RD&E agenda.


Strengthening these links will ensure GRDC has two-way communication with

stakeholders about GRDC investments and activities and help target the delivery

of GRDC products and services.

In addition, the GRDC will work on making its investment processes simpler,

more responsive and more transparent.

Crucial to implementing this strategy will be ensuring that GRDC's three Regional

Panels function effectively and complement the more localised activities of the

Regional Cropping Solutions Networks. These Networks will also provide the

opportunity for growers and advisors to not only have greater input into GRDC

issue analysis but also to be actively involved in the delivery of R&D outcomes.

Fully implementing these five strategies will take GRDC to a new level of

performance. It will ensure an efficient and effective RD&E community with

excellent international linkages, focused on returning value to growers, that listens and delivers to grower's needs.

Factors Expected to Influence the GRDC Business

Environment

To ensure that its strategies remain relevant, the GRDC continually monitors and

reviews changes in its business environment. Table 1 lists the main factors

expected to influence the business environment and explains some of the

implications for GRDC and its budget.

Table 1: Factors Expected to Influence the Business Environment

Factors expected to

influence the business

environment

Implications for GRDC

Pressure on productivity

growth rates

Unless productivity growth rates continue to climb,

growers’ confidence in rural R&D achieving desired

outcomes will decline. Implementation of the National

Grains RD&E Strategy and GRDC’s new five year plan

will look to address the efficiency of input use to

achieve output.

Implementation of the

National Grains RD&E

Strategy

GRDC is a leading player in the implementation of the

National Grains RD&E Strategy. The impact of the

Strategy on GRDC is likely to be a need for increased

resources for coordination (e.g. support of the

Executive Officer), a commitment of staff to

participate in working groups and the Implementation

Committee and budgetary implications where GRDC

invests to secure future RD&E capacity.

The outcomes of the

Productivity Commission

review of the RDCs

While the Minister for Agriculture, Fisheries and

Forestry has rejected the Productivity Commission’s

(PC) recommendation for the government matching

contribution to be reduced, there are several

recommendations which may still impact on the GRDC

business environment. Funding could be conditional

on the following issues, leading to potential budgetary

impacts:

an appropriate balance of long term, short term,


Factors expected to

influence the business

environment

Implications for GRDC

high and low risk, strategic and adaptive research

needs possibly requiring a rebalancing of the

GRDC portfolio.

a greater emphasis on the timely adoption of

research results

ongoing improvements in administrative efficiency

resulting in resource adjustments

undertaking of rigorous and regular ex ante and

ex post project evaluation

participation in regular and transparent

independent performance reviews

High levels of volatility in

grain prices and input

costs

Price volatility and continual change in the

characteristics of grain markets will impact on

growers’ profitability. Therefore GRDC needs to

continue to educate growers in effective business and

risk management strategies.

The higher volatility in grain prices leads to fluctuating

future revenue streams and makes planning for RD&E

investment more challenging. This volatility

emphasises the need to have a sufficient buffer of

financial reserves to mitigate the impact of any

downturn.

Changes to grain-

marketing and data

collection arrangements.

GRDC may be requested to supply information for

wheat stocks by State (see Final Report from the

Productivity Commission on Export Wheat Marketing

Arrangements). If this eventuates, there will be a

financial cost likely to be in the range of $0.5M-

$1.5M.

National Strategic Rural

R,D & E Investment Plan

The plan proposed that government investment in

rural RD&E be allocated in the following proportions:

Transformation RD&E 40%

Industry development 30%

Capacity in people 20%

International linkages 10%

If GRDC is requested to implement this plan it may

require a re-allocation of resources possibly towards

high risk/high return longer term projects which may

be different to investment priorities of growers.


4. 2012-13 R&D Portfolio

GRDC’s proposed investments in 2012-13 will be aligned with the Corporation’s

Strategic R&D Plan 2012-17. Investment priorities have been developed through

extensive consultation with growers through regional panels and researchers

through regional advisory committees, linkage groups and site visits. Drafting of

the priorities presented in the Investment Plan 2012-13 began in 2011 and took

into account new investments being made in 2011-12, progress reports on

existing investments, project reviews and other sources such as outputs from

technical workshops. Panel members and GRDC management identified new

opportunities for incorporation into priority development.

New Investment

The following are examples of new investments for 2012-13:

Sorghum pre-breeding program (Improving Crop Yield): This

investment will enable growers to have access to better sorghum hybrids with

higher yields and increased disease and pest resistance. Sorghum germplasm

produced by this program is made available to private seed companies under

non-exclusive licensing arrangements. This allows the material to be used

directly as parents of commercial hybrids or to be used by the individual

companies’ plant breeders as parents of new crosses in their respective

breeding programs. The objective is to ensure that germplasm released from

the program with enhancements for particular traits is well adapted to

Australian growing conditions. The hybrids are developed by the private

sector using the germplasm and methods developed in this sorghum pre-

breeding program. The material produced is widely used commercially and

there is continuing strong and increasing demand, with 100% of sorghum

germplasm having some genetic contribution from the program and 75% of

hybrid seed sold in the past four years having at least one parent from the

sorghum pre-breeding program.

Dry Seeding into Crop Residues (Profitable Farming Systems): Dry

seeding is an increasingly common occurrence under a no tillage seeding

system and a drying climate. It can produce significant productivity gains

through water use efficiency. However, it comes with risks associated with

fatal germinations, poor crop establishment and sub optimal sowing dates

that can also lead to frost risks and lack of control of weeds. This project will

address issues of risk management and maximising productivity with respect

to dry seeding and its interaction with permanent residues.

Sustainable Farming Systems for WA’s northern Ag Region (Profitable

Farming Systems): Extensive farm consolidation is occurring in WA's

Northern Ag Region and crop production is becoming the dominant enterprise

due to increasing cost-price pressures. Growers are looking for more flexibility

in the farming system to reduce risk associated with increased climate

variability. The aim of this investment is to work with growers to increase

their adoption of specific practices that reduce the climate risks associated

with the Northern Ag Region.

Reverse Genetics For The Development Of Wheat Cultivars With

Improved Resistance To Necrotrophic Pathogens (Protecting Your

Crop): Necrotrophic fungal pathogens cause many economically important

diseases of both wheat and barley in Australia. The highest priority pathogens


include Yellow spot, Septoria nodorum, Crown rot and Rhizoctonia which

together cause in excess of $450M in annual loss in wheat (Murray and

Brennan 2009). Generating significant levels of resistance in commercial

cultivars for most of these pathogens has historically been difficult and

effective resistance sources are limited, therefore new approaches are

needed. This project will convert knowledge obtained in model plant systems

into useful breeding tools to generate improved varieties of wheat. In contrast

to wheat, much is known about host resistance and susceptibility mechanisms

for necrotrophic fungal pathogens in model plants like Arabidopsis. In these

systems strong resistance to necrotrophs has been obtained by mutation of

genes that repress plant defences as well as mutation of plant susceptibility

genes that are harnessed by the pathogen to induce disease. This new project

will test whether deletion of the wheat examples of these model plant defence

genes will similarly increase resistance of wheat to Yellow spot, Septoria

nodorum, Crown rot and Rhizoctonia.

Northern Pulse Agronomy Initiative (Profitable Farming Systems):

Pulses are the preferred broadleaf rotation crop in the predominantly cereal

farming systems of the northern grains region. The major pulses are

chickpeas, faba beans, field peas, mung beans and soybeans. The aim of this

investment is to improve the production and reliability of targeted pulse crops

in the north through the development of agronomic and integrated disease,

weed and pest management packages.

Grains Research Updates (Grower Services): New contract commitments

will be made in the provision of cutting edge RD&E information through the

Grain Research Updates program. In addition to providing a dynamic and

engaging learning environment for both growers and advisers this investment

will allow networking opportunities between the GRDC, its research partners

and update participants to improve information flows.

Ground Cover Publication (Grower Services): Ground Cover Newspaper

is the GRDC’s primary communication vehicle with its content being drawn

from projects across the corporation’s investment portfolio. New

commitments in this area will deliver current technical information written in

plain English to grain growers, advisers and researchers. In 2012-13 there

will be six editions of the GRDC flagship publication each of approximately 40

pages.

Continuing Investments Examples of GRDC continuing investments with a particular emphasis on grain

grower priorities are outlined in Table 2.


Table 2: Examples of GRDC continuing investments

Priorities Examples of relevant GRDC investments and activities

Farm management

Integrated farming practices and technologies

Integrated management of weeds, diseases and pests

Herbicide resistance management

Work to establish an Australian national blackleg resistance rating system for canola breeding material and commercial varieties.

Work to develop a blackleg disease resistance management initiative for canola, with strategies to reduce yield loss based on cultivars with a greater durability of resistance against the blackleg fungus.

Support for a large number of integrated pest management, disease management and weed management (including herbicide resistance management) projects.

Work on identifying diseases through molecular diagnostics.

The registration of minor-use chemistries for the grains industry.

Work to better manage rust by using fungicide strategically and understanding adult plant resistance.

Variety development

Biotechnology for improving genetic gain

Superior new varieties

Germplasm enhancement projects to:

improve genetic resistance to wheat streak mosaic virus, crown rot and yellow spot in wheat

improve frost tolerance in wheat and barley

develop high salinity tolerance in winter cereals

identify the genetic and phenological basis of head loss in malting barley.

Specific breeding projects to:

develop wheat varieties that have substantially higher yields and are better adapted to Australia’s harsh environments than existing commercial varieties

develop and commercialise high-amylose wheat suitable for growing in Australia and the United States

increase the yield and improve the reliability of durum grain production

develop pulses with better adaptation to water-limited environments

develop herbicide-tolerant pulses.

Environmental

Responses to climate change

Improved water-use efficiency

The identification of genes that enable crops to tolerate heat, frost and drought, and breeding to increase the rate of adaptation of crops to climate change.

The extension of the Managing Climate Variability program, to improve multiweek forecasting, seasonal forecasting and tools for forecasting, and to establish the Climate Champions program.

The adoption of a climate change communication strategy to ensure that knowledge, information and technology generated through research is provided to growers in preparation for the likely impacts of climate change.


Priorities Examples of relevant GRDC investments and activities

Crop breeding for improved water-use efficiency.

Sustainability and resource management

Soil health and biology

Work to improve

soil quality, through greater use of pulses and pastures in the farming system

water infiltration, through better understanding of non-wetting soils

nitrogen use efficiency, through better understanding of ammonia loss from surface-applied nitrogen fertiliser.

Work to establish a national quality assurance system to improve industry confidence in microbial products, such as soil inoculants, and thereby promote their use in agriculture.

New and innovative product development

Feasibility studies looking into new ways to produce fertiliser that are cheaper and more energy efficient and environmentally sustainable than current fertiliser products.

Work to develop a probe for rapid on-farm soil testing, to enable the cost-effective, real-time collection of moisture and nutrient data.

A project exploring a range of new technologies, for on-farm and commercial use, for their potential to control or eradicate insect pests of stored grain.

Capacity building

Improving skills, training and education in agriculture

Farm business management

Work to facilitate the exchange of knowledge between grower groups.

Workshops on particular topics such as precision agriculture, irrigation in grains and wide row spacing/stubble management.

Vavilov–Frankel Fellowships to support researchers from developing countries to conserve and use plant genetic resources.

Sponsorships of events such as the National Youth Science Forum and grower representative organisation conferences.

Examination of the potential to expand training opportunities to engage a wider selection of Indigenous people in the Australian grains industry.

Support to assist individuals or small groups to improve their level of understanding of particular issues by attending a conference or travelling to acquire knowledge to benefit the Australian grains industry.

National Partners in Grain, which delivers training and mentoring programs to develop leadership and business skills in women and young people in the Australian grains industry.


5. Projected 2012-13 Budget Analysis

Overview The GRDC is primarily funded by a levy on the farm gate value of production on

25 leviable grains. The Australian Government will provide half of GRDC

expenditure up to the lesser of the total levies received or 0.5% of the gross

value of production (GVP). (In reality the government contribution is always

capped at 0.5% of GVP).

GRDC’s revenue is determined by price and production and therefore is subject to

events influencing international grain markets. This includes the impacts of

significant weather events such as droughts, floods, heat waves, cold snaps both

locally and in key overseas producer countries. Prices are also influenced by the

levels of international grain stocks available, prices of substitute commodities

(e.g. corn), grain infrastructure bottlenecks, government policy decisions (e.g.

the Russian export ban last year), demand for biofuels, impact of westernisation

on developing countries, hedge fund activity, and the general global economic

outlook. Production can also be affected by pest and disease outbreaks.

Growers’ marketing decisions impact on the amount and timing of the levies

received (for example receipt of levies from pools are usually delayed to the

following financial year). Farm gate costs which are deducted from gross sale

value to determine farm gate value can also vary significantly for different grain

growers.

In order to maximise the benefits of RD&E to the Australian grain grower GRDC

must manage this volatility in revenue while maintaining critical long term

capacity. GRDC does this by developing a budget which is sustainable given

anticipated revenues and the level of financial reserves. Reserves are held in

accordance with the Commonwealth Authorities and Companies Act. The use of

financial reserves is governed by the GRDC Board, within Federal Government

requirements.

The GRDC derives grain production estimates and price data from the Australian

Bureau of Agricultural and Resource Economics and Sciences (ABARES),

Australian Crop Forecasters (ACF), Profarmer and its own estimates. GRDC

consults regularly with other agricultural commodity consultants and the Levies

Revenue Service in the Australian Government Department of Agriculture,

Fisheries and Forestry in the development of its forecasts.

This budget analysis has been developed more than 9 months before the 2012-13

harvest and much can happen in grain markets in that time. Therefore expected

revenue is highly uncertain. The sensitivity analysis undertaken highlights the

effect of significant changes in key revenue drivers. However GRDC’s current

reserves put it in a strong financial position to fully implement the new 5 year

plan.


Revenue Forecast

Table 3 shows the GRDC’s financial results for the previous three years, the

revenue and expenditure forecasts for 2011-12 and 2012-13. The major price

and production assumptions used for the revenue estimates are shown at

Attachment A – GRDC Revenue Forecast Assumptions. Projected revenue in

2012-13 is based on the levy rate of 0.99 percent of farm gate value of all grains

except for maize1 and continuance of the prevailing Australian Government

contribution. At this stage, GRDC’s 2012-13 revenue is estimated at $172.5

million. Table 3: GRDC 3 Years Financial Results and Baseline Forecasts for 2011-12 and 2012-

13 ($m)2

Actual Actual Actual Forecast Forecast

2008-09 2009-10 2010-11 2011-12 2012-13

Grain Grower Levy 89.2 74.1 104.5 98.6 93.9

Australian Government 43.9 50.1 53.4 56.4 61.5

Grants 2.6 8.9 6.0 3.9 2.0

Interest, Royalty & Other 14.7 10.8 11.7 18.1 15.0

Total Revenue 150.4 143.8 175.5 176.9 172.5

Research and Development 106.3 116.8 140.7 150.0 161.2

Employees 6.1 6.5 6.9 7.1 8.3

Suppliers 5.6 5.9 6.2 7.4 7.9

Write-down and Impairment of Assets 3.3 4.2 0.4 1.5 3.5

Total Expenses g 121.3 133.4 154.1 166.0 180.9

Share of (deficit) of associates and joint

ventures -0.7 -0.6 -0.7

Surplus/Deficit 28.5 9.8 20.8 10.9 -8.4

Gross Reserves d 118.7 128.5 149.3 160.2 151.9

Less Property Plant & Equipment 7.6 7.2 6.4 6.1 6.8

Less Shares in unlisted companies 7.6 8.4 7.7 9.9 7.8

Liquid Reserves e 103.5 112.9 135.3 144.2 137.3

40% Lower Limit Reserves

72.7

a The Australian Government provides half of total expenditure up to 0.5 percent of the gross value of

grains production (three year rolling average), provided the Government contribution does not exceed grower levies for the relevant year. b ”Other” includes penalties and project refunds. c Revenue estimates for 2011-12 and 2012-13 are indicative only. Revenue is highly uncertain due to

grain price fluctuations and seasonal influences on production. d Gross reserves means net assets (i.e. total assets less total liabilities).

e Liquid reserves are net assets which are easily convertible to cash.

f Grants are contributions from other organisations for implementation of R&D programs

g R&D expenditure may be revised

1 Levy rate for maize is 0.693 percent 2 Figures are subject to rounding differences


The proportional break-up of the GRDC’s forecast revenue for 2012-13 is shown

in Figure 1.

Figure 1: Break up of GRDC’s Forecast Revenue for 2012-13 as a Percentage of Total Revenue

Expenditure Planned project and operating expenditure for 2012-13 is estimated at $180.9

million. The percentage break-up of this into new investment, continuing

commitments, employees and suppliers is shown in Figure 2. It is estimated that

$29.7 million will be invested into new projects; $106.2 million in ongoing

research commitments, $18.7 million in strategic commitments, $10.1 million in

unallocated provisions and $16.2 million for employee and supplier expenses.

Strategic commitments include provision for project reviews, impact assessment,

share write downs, project variation allowances, emerging issues, national grains

RD&E strategy, GPA project contingencies, the Council of Rural Research and

Development Corporations and other contingencies.

Figure 2: Break-up of the GRDC’s Project Operating Expenditure for 2012-13

Grain Grower Levy, $93.9m,

54%

Australian Government, $61.5m, 36%

Grants , $2.0m, 1%

Interest, Royalty & Other,

$15.1m, 9%


New Project Commitments

New project investment is budgeted at $29.7 million. This makes up about 16

percent of the total budget shown in Figure 2.

Continuing Commitments

GRDC manages over 700 ongoing projects in its portfolio. The GRDC’s total

expenditure budget for 2012-13 for ongoing commitments is $106.2 million which

represents 59 percent of total operating expenditure (shown in Figure 2).

Employee and Supplier Expenses3

Employee and supplier expenses in 2012-13 are estimated at $16.2 million. This

represents 9 percent of total expenditure which is within the target range of 8 to

11 percent.

Expenditure by Themes and Panels

3 Employee expense is employee remuneration. Suppliers’ expense is the cost of the supply of goods and services, which primarily includes panel and themes support and depreciation

New

commitments,

$29.7m, 16%

Continuing

commitments,

$106.2m, 59%

Strategic

commitments,

$18.7m, 10%

Unallocated,

$10.1m, 6%

Employees ,

$8.3m, 5%

Suppliers, $7.9m,

4%


As part of the new five year plan GRDC’s investments will be allocated to themes.

Figure 3 shows the percentage break-up of proposed 2012-13 RD&E investment

into these categories. Significant capacity building for industry and researchers

also occurs directly through each of the individual themes.

Figure 4 shows the percentage break-up of proposed 2012-13 RD&E investment

among the GRDC Panels. The Growers’ Report describes the panel system and

how it is used to ensure investments meet the interests of GRDC stakeholders.

The National Panel investments comprise the national components of the GRDC’s

RD&E investment across Australia.

Growers Meeting

Market

Requirements,

$12.7m, 9%

Improving Crop

Yields, $40.0m, 30%

Protecting your

Crop, $29.0m, 21%

Profitable Farming

Systems, $24.7m,

18%

Maintaining the

Farm Resource

Base $9.4m, 7%

Building Skills and

Capacity, $8.0m,

6%

Grower

Services

,

$10.8m,

8%

R&D Management,

$0.7m, 1%

Growers Meeting

Market

Requirements,

$12.7m, 9%

Improving Crop

Yields, $40.0m, 30%

Protecting your

Crop, $29.0m, 21%

Profitable Farming

Systems, $24.7m,

18%

Maintaining the

Farm Resource

Base $9.4m, 7%

Building Skills and

Capacity, $8.0m,

6%

Grower

Services

,

$10.8m,

8%

R&D Management,

$0.7m, 1%


Figure 3: 2012-13 Proposed R&D Project Investment by Theme4

Figure 4: 2012-13 Proposed R&D Project Investment by Panels4

New Capital Commitments

GRDC also has significant capital investment budgeted at $1.4 million. Capital

investment is shown in Figure 5.

4 Excludes $28.7 million not allocated to Themes for National Grains RD&E Strategy, emerging issues, project variations, project reviews, CRRDC, impact assessment, share write downs, GPA, contingencies and unallocated provisions.

National Panel, $82.5m, 61%

Northern Panel, $12.7m, 9%

Southern Panel, $22.8m, 17%

Western Panel, $18.2m, 13%


Figure 5: Break up of GRDC Capital Expenditure for 2012-13

Sensitivity Analysis

As GRDC’s revenue is uncertain sensitivity analysis is undertaken on key variables

to examine the possible impact of more optimistic and pessimistic scenarios on

GRDC reserves and its ability to maintain a satisfactory level of RD&E investment.

Table 4 shows the results of the sensitivity analysis and Table 5 shows the

underlying assumptions which were varied.

Table 4: Sensitivity Analysis on Forecast Revenue 2012-13 5

Forecast

Pessimistic Baseline Optimistic

2011-12 2012-13 2012-13 2012-13

Projected Revenue 176.9 123.5 172.5 223.7

Expenditure 166.0 180.9 180.9 180.9

Surplus/Deficit 10.9 -57.4 -8.4 42.8

Liquid Reserves 6 144.2 88.2 137.3 188.5

5 Figures are subject to rounding differences 6 Liquid reserves are net assets which are easily convertible to cash

Share Purchases$1.0m71%

Novozymes$0.4m29%


Table 5: Underlying Assumptions by Scenario

Pessimistic Baseline Optimistic

Wheat Production in 2012-13 (mt) 11.4 25.7 25.7

Barley Production in 2012-13 (mt) 4.7 9.0 9.0

Sorghum Production in 2012-13 (mt) 1.3 2.2 2.2

Canola Production in 2021-13 (mt) 0.8 2.9 2.9

Oats Production in 2012-13 (mt) 0.8 1.7 1.7

Wheat Price (APW) in 2012-13 ($/t) 257 257 400

Wheat Price (APH) in 2012-13 ($/t) 283 283 426

Malt Barley Price in 2012-13($/t) 242 242 390

Feed Barley Price in 2012-13($/t) 186 186 272

Sorghum Price in 2012-13($/t) 204 204 291

Canola Price in 2012-13($/t) 449 449 665

Oats Price in 2012-13($/t) 194 194 273

Baseline

The baseline scenario outlined above assumes a 0.99 percent levy rate on farm

gate value for 24 grains and a 0.693 percent levy rate on farm gate value for

maize, and operating expenditure of $180.9 million in 2012-13. The baseline scenario is depicted in Figure 6 below.

The baseline scenario shows projected revenue of $172.5 million in 2012-13.

Liquid reserves as at the end of the 2012-13 financial year are projected to be

above the target range of reserves.

Figure 6: Baseline Scenario

$0m

$20m

$40m

$60m

$80m

$100m

$120m

$140m

$160m

$180m

Levy Govt Match (0.5 % GVP) Other Income

Expenses 40% Lower Limit of Reserves 70% Upper Limit of Reserves

Closing Liquid Reserves


Pessimistic

The pessimistic scenario for 2012-13 assumes low crop production volumes.

Prices for the major crops of wheat, barley, sorghum, canola, and oats are

assumed to stay as per the baseline scenario. Such a scenario may be possible if

other major producer countries had very good harvests while Australia had a very

poor harvest.

This scenario shows projected revenue of $123.5 million in 2012-13 (refer Table

4). Liquid reserves decrease to $88.2 million. As can be seen in Figure 7, this

would lead to a significant reduction in reserves however they are still within the

target range of GRDC’s reserves policy. This indicates the forecast expenditure

level would be sustainable under such a scenario.

Figure 7: Pessimistic Scenario

$0m

$20m

$40m

$60m

$80m

$100m

$120m

$140m

$160m

$180m





Optimistic

The optimistic scenario for 2012-13 assumes crop production levels as per the

baseline scenario but prices similar to the record high prices in 2007-08. This

scenario could be possible if world grain stocks were depleted severely but

Australia manages to have a reasonably good season.

This scenario shows projected revenue of $223.7 million in 2012-13 (refer Table 4

and Figure 8). Liquid reserves increase to $188.5 million. As can be seen in

Figure 8 reserves would move well above the upper bound of the target range of

GRDC’s reserves policy.

Figure 8: Optimistic Scenario

The scenarios above highlight the potential volatility in GRDC’s revenue base.

However the GRDC investment cycle generates more potential investments than

what is normally contracted. Therefore in times of significantly higher than

expected income further investments can be made at fairly short notice.

$0m

$20m

$40m

$60m

$80m

$100m

$120m

$140m

$160m

$180m

$200m

$220m





6. The Proposed Grains Levy Rate for 2012-13

The GRDC’s levy rate is to be reviewed each year ‘by the representative

organisation’, currently GPA. At present the levy rate is 0.99 percent of farm gate

value for 24 grains and 0.693 percent of farm gate value for maize.

In recent years the volatility of grain production and more importantly grain

prices has led to fluctuating levy revenue for GRDC. Grain prices are highly

sensitive to both international and local influences. Agriculture is now impacted

by food, fuel and financial markets. Profarmer commented that “final prices can

move by as much as $100/tonne, up or down, from prices we might see early in

the year.” 7 This inherent price volatility supports the need to keep levy rates

stable.

GRDC believes the forecast expenditure level is sustainable and GRDC has

sufficient financial reserves to meet any shortfalls at the current levy rates.

Stability and a strong reserves position will enable the GRDC to lead the

implementation of the National Grains R,D&E Strategy and the development of

the new five year plan. This will create significant value for the Australian grain

grower and the community at large.

GRDC therefore recommends continuation of 0.99 percent for 24 grains and

0.693 percent for maize in 2012-13.

7 Profarmer Grain Australia; 24 August 2011; Vol 01 No.43

Attachment A - GRDC Revenue Forecast

Assumptions

GRDC’s forecast for 2011-12 and 2012-13 is based on the production and price assumptions in Table A1.

Table A1 GRDC’s Price & Production Assumptions - 2011-12 and 2012-13

Production (mt) 2011-12 2012-13

Wheat 29.5 25.7

Barley 8.6 9.0

Sorghum 2.3 2.2

Canola 2.8 2.9

Oats 1.7 1.7

Prices ($/t) 2011-12 2012-13

Wheat – Pool 268 257

Wheat – Cash 223 257

Wheat-APH – Pool 355 283

Wheat-APH – Cash 295 283

Feed Barley – Pool 251 186

Feed Barley – Cash 203 186

Malting Barley – Pool 261 242

Malting Barley – Cash 205 242

Sorghum 193 204

Canola 516 449

Oats 219 194

Sources:

Production (mt) 2011-12 2012-13

Wheat ABARES Australian Commodities March quarter

2012

ABARES Australian Commodities March

quarter 2012

Barley

Sorghum

Canola

Oats

Prices ($/t)

Wheat-APW –Pool Australian Crop Forecasters – March 2012

ABARES Australian Commodities March quarter 2012

Wheat –APW-Cash Profarmer - March 2012

Wheat-APH - Pool Australian Crop Forecasters

– March 2012

Wheat-APH - Cash Profarmer - March 2012

Feed Barley - Pool Australian Crop Forecasters – March 2012

Feed Barley - Cash Profarmer - March 2012

Malting Barley- Pool Australian Crop Forecasters – March 2012

Malting Barley- Cash Profarmer - March 2012

Sorghum

Canola

Oats

Documents

KINGSTON ACT 2604 - GRDC