Building successful primary industries
Improve the farm-gate returns for agriculture, fisheries, food and fibre industries.
The department is responsible for policies and programs that assist Australia’s primary industries and producers to be more productive and profitable. We collaborate with industries and state and territory governments to address domestic and international issues, and work with statutory and industry-owned research and development corporations to promote innovation.
The department also manages export quota arrangements for commodities including dairy, honey, juice and red meat to the European Union, Japan and the United States.
More information is available at Agriculture, farming and food.
Our work under this strategic objective in 2015–16 included delivering initiatives from the Australian Government’s Agricultural Competitiveness White Paper, notably:
- implementing new rural research, development and extension (RD&E) priorities, including the allocation of $52.2 million in second round grants under the Rural Research and Development for Profit program
- working with research and development corporations and state and territory agencies to implement new RD&E priorities
- working to improve the operation of research and development corporations to deliver more efficient, targeted and transparent outcomes for rural industries
- working with the fodder industry to introduce a new research and development levy
- administering $25.8 million in funding to Queensland, New South Wales, South Australia, Victoria and Western Australia to manage and reduce the impact of pest animals and weeds in droughtaffected areas
- undertaking stakeholder consultation to streamline the approval of agricultural and veterinary chemicals.
We worked with other agencies to implement the government’s commitment to deliver clearer and more consistent country-of-origin food labels, to benefit consumers without imposing excessive cost on industry. A two-year transition to the new labelling framework commenced on 1 July 2016.
We worked with portfolio industries on regulatory matters, including the labelling of free range eggs, and continued work to reform Codex Alimentarius Commission food safety standards for food additives and olive oils to ensure market access for the wine and olive oil industries.
We helped the citrus industry amend its levies for RD&E and biosecurity preparedness in accordance with government policy and processes. We also worked on behalf of the deer industry to end the collection of the levy and export charge on deer velvet production and the export charge on live deer. This demonstrates the ability of Australia’s agricultural levies system to respond flexibly to shifting industry priorities.
We led the development of the government’s response to the Senate committee inquiry into marketing and research and development levies in the agricultural sector. In May 2016, the government announced its commitment to allow levy payer registers to be developed, review existing guidelines in the levies system and review all industry representative bodies with existing roles within five years.
The department also provided submissions to the Senate committee inquiry into the red meat processing sector and an Australian Competition and Consumer Commission market study into the cattle and beef industry.
We worked with the Fisheries Research and Development Corporation, the Grains Research and Development Corporation and the Rural Industries Research and Development Corporation as they considered options to establish offices outside of Canberra.
Annual performance statement
TABLE 1 Annual performance statement—Strategic objective 1: Building successful primary industries, 2015–16
Result against performance measure
Portfolio industries record an increase in productivity
Corporate Plan 2015–16
Over the period 1995–96 to 2015–16, the average annual productivity growth for the agriculture, fishing and forestry sector was 0.98%. This exceeds average annual market sector productivity growth of 0.36% over the same period. a
Rate of return on capital invested across portfolio industries is maintained or increased
Corporate Plan 2015–16
Over the period 1995–96 to 2015–16, the annual trend growth for rate of return on capital was 0.01% for broadacre and dairy farms.b
Rate of profit for producers and businesses is maintained or increased
Corporate Plan 2015–16
Over the period 1995–96 to 2015–16, the annual trend growth in profit was 2.69% for broadacre and dairy farms.b
Access to water, land, forest and marine resources for primary production is maintained or improved
Corporate Plan 2015–16
Land and forest resource
Improved availability of safe, efficient and effective agricultural and veterinary chemicals
Corporate Plan 2015–16
The establishment of a Collaborative Forum for determining priority chemical needs has been completed.
Investment in rural research and development corporation programs demonstrates positive returns
Corporate Plan 2015–16
Past public investments are estimated to have generated average rates of return that could be as high as 28% for research and development, and 47% for extension.e
100% of allocated funding under the Research and Development for Profit program expended in accordance with the agreed timetable
Corporate Plan 2015–16
The program is a $190.5 million competitive grants program from 2014–15 to 2021–22 to fund the rural research and development corporations for collaborative projects to improve farm-gate profitability and productivity.
100% of rural research and development corporations are compliant with statutory and contractual requirements
Corporate Plan 2015–16
Under their funding agreements research and development corporations provide annual compliance audit reports and certification reports.
High level of efficiency in collecting and distributing levies to fund research and development in research and development corporations
Corporate Plan 2015–16
Cost-recovery charges in 2015–16 represented less than 1.2% of levies disbursed.
Inspections of levy agent records cover at least 30% of levy revenue.
Corporate Plan 2015–16
Less than 5% of quota allocations are rejected because of quota certification failures.
Corporate Plan 2015–16
All quotas were allocated in accordance with relevant legislation.
a Based on actual Australian Bureau of Statistics data for the years 1995–96 to 2014–15, and a forecast for 2015–16.
b Based on actual ABARES broadacre and dairy farm surveys data for the years 1995–96 and 2014–15, and a forecast for 2015–16. Rates of return on capital invested and farm business profit are not collected for businesses in the fisheries and forestry sectors.
c ABARES Land Use of Australia dataset including agriculture and forestry, excludes water and marine resources.
d Under the Environment Protection and Biodiversity Conservation Act 1999 all Australian Government managed fisheries are subject to independent environmental assessment. The assessments are conducted against the Guidelines for the Ecologically Sustainable Management of Fisheries.
e Based on ABARES research ‘Public investment in agricultural R&D and extension: an analysis of the static and dynamic effects on Australian broadacre productivity’, published in September 2011.
Analysis of performance against the strategic objective
Growing global demand will provide significant opportunities for Australia to produce and export agriculture, fisheries and forestry products over the coming decades. However, our primary producers will need to continue producing high-quality commodities at a competitive price to maintain or increase their share of global markets. This includes adopting innovative technology and techniques to reduce costs and increase profitability and productivity.
Care needs to be taken when interpreting trends in productivity and profitability in the agriculture, fisheries and forestry sector as they are subject to significant factors outside the department’s control, particularly global economic performance and the effects of climate variability.
More productive and profitable primary producers
Rates of productivity growth across the Australian economy have slowed in the past decade or two compared with earlier decades. This is not an isolated occurrence and similar trends have been observed in other developed economies. Potential causes of this slowdown include a falling pace of innovation, sectoral shifts to lower productivity sectors, and the fading impact of past economic reforms and information and communication technologies.
Despite this economy-wide trend, productivity growth in the agriculture, forestry and fishing sector has exceeded average annual productivity growth in Australia’s market sector. The market sector comprises 16 industries under the Australian and New Zealand Standard Industrial Classification, and includes mining, manufacturing, construction, wholesale and retail trade, and information, media and telecommunications. Decomposition of the growth in productivity in the agriculture, forestry and fishing sector indicates productivity growth since the mid-1990s has been driven largely by growth in outputs exceeding growth in inputs.
As shown in Figure 4, over the past 20 years the average annual productivity growth for the agriculture, fishing and forestry sector was 0.98 per cent. This exceeded average annual market sector productivity growth of 0.36 per cent over the same period.
Based on actual Australian Bureau of Statistics data for the years 1995–96 to 2014–15, and a forecast for 2015–16.
Rates of return on capital in the agriculture sector are volatile, reflecting years of good and poor seasonal conditions beyond the control of producers. Despite this volatility, farm businesses in the broadacre and dairy industry have, on average, generated positive returns on capital investment over the past 20 years.
As a measure of longer-term profitability, annual trend growth in the rate of return on capital (excluding capital appreciation) for broadacre and dairy farms was 0.01 per cent over the 20 years to 2015–16 (Figure 5).
When capital appreciation, particularly in the form of growth in land values, is taken into consideration, broadacre and dairy farm businesses have generated returns comparable with other forms of capital investment, once differences in risks have been accounted for.
Based on actual ABARES broadacre and dairy farm surveys data for the years 1995–96 and 2014–15, and a forecast for 2015–16. Rates of return on capital invested are not collected for businesses in the fisheries and forestry sectors.
Annual farm business profit is also volatile between years. At the sector level, this volatility can be largely attributed to variability in seasonal conditions. Despite this annual volatility, broadacre and dairy farm businesses have, on average, been able to increase their profitability by increasing revenue at a faster rate than costs have increased.
Over the past 20 years, average trend growth in profit for broadacre and dairy farm businesses was positive in real, inflation-adjusted terms (Figure 6). The precise rate of change over time depends on the period used, but ABARES survey data indicate that average annual farm business profit increased by 2.69 per cent per year between 1995–96 and 2015–16.
Based on actual ABARES broadacre and dairy farm surveys data for the years 1995–96 and 2014–15, and a forecast for 2015–16. Farm business profit data are not collected for businesses in the fisheries and forestry sectors.
Access to primary production resources
Agriculture remains Australia’s dominant land use, covering around 446 million hectares or 58 per cent of the continent as at 2010–11. The most common agricultural land use by area is grazing on native vegetation.
According to the Land use of Australia dataset, the total area reported as agriculture and forestry land use declined marginally by 1.5 per cent between 2005–06 and 2010–11. The most important change was grazing on native vegetation, which declined by 1.4 per cent to 340 million hectares, or around 45 per cent of Australia, mostly in the arid and semi-arid regions. Grazing of modified pasture declined by only 0.1 per cent while dryland cropping increased marginally by 0.3 per cent over the same period.
This reflects a longer-term decline in grazing (predominantly native grazing) that is driving the reduction in the total area of agricultural use (Figure 7). There has not been a significant decline in the other major agricultural land use categories. Cropping has increased significantly while horticulture has been relatively stable. There are a range of reasons for these changes, with market and climate factors likely to be significant. Over the same period of time, the area of land under nature conservation has increased.
While the national picture suggests relatively modest changes in area for key land uses, the longer-term effects of increased climate variability and population pressure may strongly affect the location of agricultural and non‐agricultural activities. ABARES land use mapping will continue to monitor these trends over time.
a From 1992–93 to 2000–01, the area of horticulture was less than 0.5 million hectares. Because of rounding, horticulture use during this period is depicted as zero.
Historically, Australia’s forest industries have predominantly relied upon access to multiple-use native forest resources. Plantations established on cleared agricultural land are becoming increasingly important for wood production, and in 2013–14 produced 83 per cent of the total wood supplied. The most recent native forest figures are in Australia’s State of the Forests Report 2013, which reports on forest “available and suitable for harvesting”, a measure of access to the forest resource. This reported a decline of 2.7 per cent, from 37.6 million ha in 2006 to 36.6 million hectares in 2011.
With significant reductions in the area available for timber production, the area of multiple-use native forests has declined in favour of other forest land uses such as nature conservation.
Australia’s State of the Forests Report 2013 reported the net harvestable area of public native forest declined by 4.6 million hectares, or 46 per cent, from 1995–96 to 2010–11. This included decisions made by governments as a result of Regional Forest Agreements. The net harvestable area of public native forest in 2010–11 (5.5 million hectares) was 14 per cent of the area of public native forests.
Australia’s total plantation estate was around 1 999 700 hectares in 2013–14, a net decrease of 12 800 hectares (0.6 per cent) from 2012–13. This is the first time since 2007–08 that the plantation area has been below 2 million hectares. The area of industrial plantations managed for wood production increased from 1.818 million hectares in 2005–06 to 2.017 million hectares in 2010–11, with almost all the increase achieved by planting on cleared agricultural land.
In fisheries, the total area of the marine environment available for production remained the same in 2015–16. Some areas for specific fisheries were opened or closed to achieve management outcomes.
In 2015–16, all fisheries managed solely by the Commonwealth were operating with approval under Part 13A of the Environment Protection and Biodiversity Conservation Act 1999. Under the Act, all Australian Government managed fisheries are subject to independent environmental assessment. The assessments are conducted against the Guidelines for the Ecologically Sustainable Management of Fisheries.
Snapshot: Australian international leadership on plant genetics
The International Treaty on Plant Genetic Resources for Food and Agriculture provides a binding legal framework for the conservation, sustainable use and exchange of plant genetic resources for food and agriculture.
Our counsellor in Rome, Matthew Worrell, chaired the treaty’s governing body during its sixthbiennium (2013–15) and has achieved much during his tenure.
Under Mr Worrell’s leadership, the governing body launched a global information system on plant genetic resources. The system will make it easier for plant breeders and researchers to identify germ plasm with desired traits and characteristics from seed banks around the world, so they can develop new crop varieties with higher yields that are better adapted to local conditions.
The treaty has also allocated more than USD$10 million to projects ranging from exchanging and developing biodiverse potato varieties in Peru, Nepal and Bhutan, to using modern biotechnologies to sustain food security in Pacific island countries.
More than 95 per cent of Australian agriculture is based on plant genetic resources from other countries. A secure global supply of plant genetics helps underpin Australia’s agriculture and food future.
Australia also continues to consolidate key domestic collections of plant genetic resources into a national genetic resources centre, to help streamline access for domestic and international users.
More information about the treaty is available at planttreaty.org.
Photo: Matthew Worrell (second left) chairing the Sixth Session of the Governing Body of the International Treaty on Plant Genetic Resources.
Photo by IISD/ENB at iisd.ca/biodiv/itpgrfa/gb6/5oct.html
Improving access to agricultural and veterinary chemicals
The department and the Australian Pesticides and Veterinary Medicines Authority (APVMA) work together to improve the availability of safe and effective agricultural and veterinary chemicals. We are collaborating on an $8 million initiative over four years, which includes:
- developing a collaborative forum to allow producers to more effectively share their agricultural and
veterinary chemical needs with each other and with chemical companies
- establishing an official Australian crop grouping list to give producers greater access to more uses
of agricultural and veterinary chemicals
- moving some chemical uses from temporary permits to permanent product labels.
During the year, we provided 49 industry assistance grants worth $1.6 million. The grants will help farmers generate the data they need to apply to APVMA to gain, maintain or broaden access to agricultural and veterinary chemical uses identified as priorities by the collaborative forum.
We made a number of regulatory improvements in 2015–16 to reduce the administrative and compliance burden on industry. These included simplifying the registration of related products and streamlining the process to notify the APVMA about a substitution of certain ingredients in a product’s formulation. We also introduced five-year product registrations and developed a consistent approach to regulating certain animal feeds.
Rural research and development
We continued to invest in the success of rural research, development and extension, working with the research and development corporations to help them meet the government’s requirements, and addressing broader issues. This included helping Horticulture Innovation Limited to finalise its transition to a grower-owned company and the development of its first strategic plan.
We also implemented the government’s decision to make payments to Forest and Wood Products Australia, to allow for matching funding of eligible voluntary contributions for forestry RD&E.
During 2015–16, Australian Wool Innovation, Australian Meat Processor Corporation and Meat and Livestock Australia submitted independent performance reviews, and Australian Egg Corporation Limited agreed to terms of reference and commenced a review of its performance. We began negotiations on new funding agreements with four industry bodies, including provisions to strengthen communications with stakeholders, corporate governance and evaluation.
Research has shown that there can be significant lags between investment in RD&E and resulting productivity improvements. Notwithstanding, we have made efforts to evaluate the returns on investment on research and development.
In 2011, ABARES investigated the relationship between public investments in RD&E and broadacre total factor productivity growth in Australia over more than five decades from 1952–53 to 2006–07. The analysis demonstrated that public investment in RD&E has had a significant and positive effect on broadacre total factor productivity. Past public investments were estimated to have generated average rates of return that could be as high as 28 per cent for research and development and 47 per cent for extension.
The analysis of the dynamic relationship indicates public RD&E strategies that invest over the long term result in higher returns than shorter-term strategies.
Given this long-term relationship, we will not report against this performance measure every year. We
expect to report on this measure again in 2019–20.
Snapshot: A more flexible and responsive dairy levy
In March 2016, the amended Dairy Produce Act 1986 came into effect, removing the legislative requirement for a dairy levy poll to be held every five years. This change followed months of consultation between the department and the dairy industry.
The levy poll determines the amount of levy paid by farmers to Dairy Australia. Levy payers had raised concerns about the costs of conducting a levy poll every five years. In response, Australian Dairy Farmers, the industry representative body, and Dairy Australia, the industry research and development corporation, conducted an independent review of the poll process.
The review estimated the cost of conducting a levy poll every five years was in the order of $1 million. It recommended a flexible, streamlined poll process where a dairy levy poll is held if a change in levy rate is being considered.
The streamlined poll process is consistent with the Australian Government’s commitment to create a strong business environment for the agricultural sector by reducing regulatory burden. The dairy industry now has flexibility around when to hold a dairy levy poll, freeing up funds for research and development activities to drive productivity.
Managing industry levies
The department is responsible for collecting, administering and disbursing levies from primary producers to fund marketing, research and development, animal and plant health, and residue testing programs. In 2015–16, we disbursed $741 million (including the government-matched research and development expenditure) to levy recipient bodies. Staff processed 47 296 returns for 75 commodities.
We work to make our levies services as efficient as possible, encouraging levy payers and intermediaries to submit returns using Levies Online and make payments via electronic funds transfer.
During the year, 64 per cent of all agents signed up to lodge returns online, and 79 per cent of all agents paid their levies via electronic funds transfer.
In 2015–16, we reduced our levy administration costs by 1.65 per cent (from $4.98 million to $4.89 million)
compared to 2014–15. This represents 1.01 per cent of the total levies collected and disbursed.
We support levies administration through a national compliance program, using a mix of targeted and non-targeted compliance activities. The risk-based program ensures coverage of 30 per cent of the collection each year on an average over three years.
In 2015–16, we undertook a number of new activities to improve the effectiveness and efficiency of levy compliance, including a targeted assessment program focused on collection points that have not had a records inspection or ongoing interaction with the department for an extended period of time. We also implemented a business improvement program to improve the capability and efficiency of levy administration, and increased our focus on agent education.
The department administers tariff rate quotas on behalf of Australia’s dairy, honey, juice and red meat industries for products to the European Union, Japan and the United States of America. Quotas reduce or remove the tariffs payable for Australian exporters when sending products overseas.
Where free trade agreements involve quotas, we seek to manage the quotas in order to offer exporters the maximum concessions possible on agricultural products. In 2015–16, we issued 30 081 certificates across 33 quotas, saving exporters approximately $700 million in tariffs.
After the introduction of quotas under the Japan–Australia Economic Partnership Agreement in 2015, we began a project to modernise our quota administration. Our objective is to bring our legal, IT and administrative systems up to date and build in flexibility to add quotas under any future agreements. The changes will further improve efficiencies, reduce red tape and improve our reporting capabilities. The project is due for completion by 30 June 2017.
Snapshot: Levies national compliance program
Our risk-based national compliance program encourages levy-payers to voluntarily comply with legislation, and provides assurance to government and industry stakeholders that levy collections are materially complete.
While the majority of levy-payers comply with regulations, the program has delivered good results in identifying levy leakage. In 2015–16, we collected an additional $4.4 million to be invested for the benefit of Australian producers.
The flagship of our compliance efforts, the Operational Compliance Program, conducted 519 record inspections during the year. Those selected for inspection collectively contributed 28 per cent of total levies paid in 2014–15. We succeeded in identifying 84 new agent accounts, collected an additional $2 million in levies, and refunded more than $200 000 in overpaid levies.
The ongoing identification of new agent accounts with a levy liability is a critical function, as these accounts deliver continuous returns to industry. To put this in context, 84 new agent accounts identified in 2014–15 collectively contributed more than $1.1 million in 2015–16.
Levy outcomes as a result of the compliance team's non-targeted and day-to-day activities amounted to $1.1 million.
In 2016–17, we will invest in strategic and tactical analytical support to the national compliance program, including the introduction of an automated profiling capability to target high-risk transactions.