Geraldton farm consultant 'wrong on GRDC'

Outgoing Grains Research and Development Corporation chairman Keith Perrett has responded to recent criticism of the research and development corporation by iCropAustralia head and Geraldton farm consultant Paul McKenzie.

Mr Perrett, who hands over the reins of GRDC to northern New South Wales farmer Richard Clark in early October, said Mr McKenzie’s analysis of the return on investment from the grains levy was incorrect.

iCropAustralia has established a website to survey growers on the collection, spending and value of the levy.

But Mr Perrett said many of the financial assumptions and analyses contained in reports on the website were incorrect.

He said the levy needed to be considered as another business cost, like fertiliser and other inputs.

"The report is quite incorrect," Mr Perrett said.

"The levy is around about 1.2 per cent of a grower’s cost base - and that’s the way you have to look at it, because if you were to use his formula, you’d look at fertiliser and say that’s 1000 per cent of my cost base.”

He said iCropAustralia’s claim that grains research and development spending had declined since 2004, were wrong.

"That figure is incorrect. R&D expenditure from 2004 to 2012 has increased by 4.3 per cent, and in fact since 2007, it’s increased by 12.5 per cent," Mr Perrett said.

"The levy hasn’t increased - it’s still at 0.99 per cent of the growers’ net farmgate value of their grain.

"That (percentage figure) hasn’t increased, but the total amount of levy has increased which is good, because that means that a grower’s productivity has increased and the amount they are getting for their grain has increased."

He said productivity in the grains sector would be going backwards without investment in research and development.

"There are a lot of things we do that are just about maintaining the status quo," Mr Perrett said.

"If we look at the cereal rust program, that has been effective in minimising the outbreaks of rust outbreaks across Australia.

"There has been independent economic analysis done which has shown there is a huge return for every dollar invested in that program, and there are many examples like that where what we do helps growers maintain the genetics that are there.

"Without R&D our productively would be declining dramatically and our profitability would be out the door, that’s something you just can’t argue with."

But Mr McKenzie defended his analysis saying it was important to differentiate between input costs and output costs, and the GRDC levy was clearly an output cost.

"We have draw a line between an input cost and output. Fertiliser is an input cost," he said.

"The farmer has absolute discretion about the extend to which an input is utilised, and it’s measured on a per hectare basis. Output costs happen after the production has occurred, and they are based on a per tonne basis, not a per hectare basis. These might include levies and end point royalties. They might also include receival fees and freight.

"The other salient point is that farmers have no control over whether or not to pay a levy, or how these funds are spent - it’s there by compulsion, not by choice, so there are some critical differences between the input costs and output costs.

Mr McKenzie said it was important to recognise GRDC was not a research body, but an administrative body.

"GRDC doesn’t conduct the research," he said.

"To suggest or imply that iCropAustralia is anti-research is wrong."

Mr McKenzie said the purpose of iCropAustralia was to promote transparency and to improve net returns to grain producers.

"In the last 10 years farmers have gone from paying one per cent of their crop revenue for crop productivity, to paying 2 per cent, because we now also have an additional end point royalty which exceeds one per cent of farmgate value," he said.

"Success has a thousand fathers, but farmers are paying for a lot of things twice. GRDC is claiming the benefit for breeding, and then we have the plant breeders claiming the benefit for breeding.

"We need to have a review of the structure and the cost impost it is having on farm businesses."

Mr McKenzie disputed that Australian grain productivity had increased in the last 10 years.

"Australia Farm Institute figures clearly show that that is not the case, it has flatlined, at best," he said.

"Also, this notion that the levy hasn’t increased is entirely incorrect. If we go back 20 years, a levy at 0.99 per cent was less than $1.50 a tonne. Now we are looking at $3 a tonne.

"We shouldn’t be talking percentages. We should be talking real dollars. The fact is that the dollar impost to farmers has doubled per tonne."

Mr McKenzie said iCropAustralia would be publishing the results of the online survey plus various recommendations on a path forward for the industry, in coming months.

"GRDC needs to be showing leadership in progressing change that will benefit the levy payers," he said.

"The most important thing is that the interests of the producer, who can’t pass on costs, needs to be priority number one and at the moment, the triangular structure, of having farmer, administrator, and researcher, where the administrator has monopolised the equation, might be due for a rethink."