Summary
Australia’s fodder industry has a GVP of approximately $2 billion annually, with an export sector valued at $295 million in 2013, but with a significant potential for growth.
Key export markets include China, Japan, Korea and Taiwan with increasing demand from the Middle East. From 2008- 2012, exports of Australian hay averaged around 700 000 tonnes annually; however, in both 2013 and 2014, over 800 000 tonnes were exported.
Industry participants agree that research and development underpins the success of Australia’s hay exports, through the development of oaten varieties, consistent quality and residue testing regimes, and market research. In support of RD&E, Australian hay exporters –through the Australian Fodder Industry Association (AFIA) –make voluntary contributions to support the Fodder Crops Research Program managed by the Rural Industries Research and Development Corporation (RIRDC).
However, the funding mechanism for fodder RD&E is insecure as voluntary industry contributions do not provide for long-term planning or certainty in light of RIRDC core funding not being assured beyond 2017.
In order to position the Australian industry to maximise future export opportunities, AFIA is seeking the introduction of an Australian Export Hay Research and Development Levy, commencing 1 April 2016. Hay exporters have agreed to pay a statutory levy to support industry development in order to maximise participation in current export opportunities.
This levy will be charged at a rate of $0.50c per tonne on all export hay and straw to be collected at the point of issuance of the export permitand which will be paid by the exporter. Exporters have advised that this does not create an unreasonable compliance burden.
To support this proposal, a research investment plan has been developed by hay exporters. The plan has the support of the AFIA Hay Exporters Committee, which comprises 19 export hay export companies. The members of this group process and export over 95 per cent of the hay that leaves Australia.
The initial investment plan will deliver against industry priorities including:
· Oaten Hay Breeding Program;
· Researching New and Developing Markets
· Hay Agronomy;
· Fodder Safe;
· Fodder Analysis; and
· Animal Nutrition Research
All hay exporters have been given an opportunity to comment on the proposed Australian Export Hay R&D Levy proposal. To date, only one export hay participant has been identified as opposed to the proposed levy. This exporter’s production is estimated to be less than 4 per cent of total exports and therefore represents only a small proportion of Australian exports.
All potential levy payers can be identified by AFIA either directly or through the Australian Government Department of Agriculture. This levy proposal ensures transparency and accountability, in both the collection of the levy and research expenditure. All potential levy payers will have the opportunity to comment on annual progress in delivering against the research plan, and will be invited to participate in the review of the levy collection mechanism every three years. Levy payers will review the initial research investment plan after three years, and review subsequent research investment plans every five years.
This proposal for an Australian Export Hay R&D Levy has been developed by, and has the support of, the fodder industry.
Background
Most AFIA members will be well aware of the ongoing challenge of how to fund the Research and Development needs of the hay and silage industry. Previous attempts at a whole of industry levy (i.e. the twine levy) have not been successful; however the need for continued industry R&D work is a strong as ever.
With no Fodder R&D Levy in place, the fodder industry has relied on funding from the Rural Industries Research Development Corporation (RIRDC) and voluntary contributions from industry participants. To date the majority of these voluntary contributions have been from the export hay sector.
RIRDC have undertaken fodder research for a number of years delivering a range of projects including the oat breeding program, developing rapid testing for ARGT, and the work demonstrating how hay can be safely secured for transport. However lack of a security of funding, both from industry and government have made it difficult for this work to continue in its current format.
This has led the AFIA Exporters committee to take a fresh approach on the levy idea and developing a new proposal for a levy to cover just the export hay sector. To progress this AFIA has developed a submission that will propose the establishment of an Export Hay Research and Development Levy, paid by exporters, to support the growth of this sector.
Research and Development will play an important part in preparing our industry to take advantage of these global opportunities. Developing markets, breeding superior varieties and supporting new growers to participate in the export market will underpin our long-term success.
Requiring all hay exporters to contribute a levy to research and development will provide the funding certainty and stability needed to maximise the export fodder industry’s response to increasing export and industry development opportunities.
Implications for the rest of the fodder industry?
One of the first questions that springs to mind is “what about funding for the rest of the hay and silage industry?” The simple response is at this stage we don’t have an answer, but finding an appropriate funding mechanism for the rest of the Australian Fodder industry will remain a focus for AFIA. Securing a sustainable funding model for the export sector will not only assist its continued growth, but also have flow on benefits to the rest of the fodder industry and demonstrate to other funding bodies the return on investing in fodder.
AFIA believes here is still a strong case for investment in research and development to support Australia’s domestic hay and silage sectors and we will continue to work on finding the right model.
The proposed Export Hay R&D Levy
Members of the AFIA Exporters Committee have endorsed the introduction of a mandated $0.5 /tonne levy on both export hay and straw to support research and development. It is proposed that the levy be applied at the point of issuance of the export permit, to be paid by the exporter. The levy applied will be calculated from the tonnage on the export permit. The exporter via a self-assessment process managed by the Department of Agriculture – Levies will pay the levy quarterly. The Department of Agriculture – Levies will conduct an appropriate audit process to ensure there is no leakage of levy.
The proposed investment plan for the initial three year period of the Australian export fodder fund is as follows.
· Oaten hay breeding program (estimated 47% of funding per year)
The Australian Oaten hay breeding program is the only oat breeding program in the world with a dedicated focus on developing varieties for hay production. This gives Australian exporters an edge on other international export nations, and will ensure that varieties of oats are developed that both suit the different agronomic zones of Australia and deliver high quality export grade hay. As the varieties produced from this program are available to all Australian farmers, and therefore exporters, the benefits of this project are shared amongst the levy contributors and the domestic fodder industry.
· New Market development (estimated 13% of funding per year)
Australian fodder exporters currently enjoy long-term relationships in a number of our established markets (e.g. Japan, Korea). However in the new and developing markets such as China, Vietnam, India and the Middle East where relationships are not well developed there are opportunities for Australian exporters to invest collectively in building these new markets. There are a range of activities that can be delivered to develop markets including conducting educational campaigns on the benefits of using Australian Fodder in different animal systems and research to ensure market access is maintained.
· Hay Agronomy (estimated 13% of funding per year)
To continue to grow hay production in Australia there is a need to ensure that its production is both profitable to growers and compatible to farming systems. Currently cereal hay provides a number of benefits to cropping rotations including weed control, risk management, and crop disease management. However little research and accompanying extension work has been carried out on these techniques. Projects could include;
1. Chemical manipulation techniques to improve weed management and quality control (including pre and post-harvest applications)
2. Management of fungal diseases in cereal crops for hay
3. Nutrition for Export hay with a focus on fertiliser application management to safely maximise yield and quality
4. Use of plant growth regulators.
· Fodder Safe (estimated 7% of funding per year)
Ensuring that export hay meets and continues to meet importing country requirements, with regard to chemical residue, is important for the maintenance of Australian export markets. Funding this project would give all exporters access to a maintained database that provides scrutiny over chemical applications.
· Fodder analysis (estimated 7% of funding per year)
Australian exporters rely on feed analysis for marketing hay to their customers. Investment will be made in the AFIA ring test program to ensure consistency between analysis providers and to contribute towards development of additional analysis techniques that are relevant to the export sector, as well as the domestic fodder industry.
· Animal Nutrition research (estimated 13% of funding per year)
Animal nutrition research is required, to demonstrate the beneficial attributes of Australian cereal hay in dairy cow diets where other fodder types (i.e. lucerne hay) currently make up the majority of the ration. This would include looking at animal performance indicators such as rumen pH, dry Matter Intake, milk yield, milk quality, postpartum time interval and frequency of metabolic disorders post calving.
This investment plan responds to the Australian Government’s Rural RD&E Priorities:
Productivity and Adding Value
· By improving the productivity of the Australian Fodder industry by increasing the skills and capacity of farmers to grow and conserve fodder, either for use on farm or to trade
· By investing in the Oaten Hay breeding program, dedicated to developing varieties for high quality hay production.
· By supporting grain farmers to diversify into fodder production as a diversification tool and hedge against grain prices
· By investing in hay agronomy to support growers in fodder production
· By investing in animal nutrition research that will improve animal performance in the dairy industry
· RD&E will be demand driven, meeting industry productivity needs.
Supply Chain and Markets
· By investing in research that positions Australian fodder in new and emerging livestock markets in Asia and the Middle East.
· By investing in education programs that highlight the benefits of Australian fodder in different animal systems
· By investing in a consistent fodder analysis needed for marketing hay to customers
· By investing in Fodder Safe, to ensure that export hay meets and continues to meet importing country residue limits.
· By assisting farmers to move in to the export hay supply chain through expanded extension activities
Natural Resource Management
· By ensuring fodder production and conservation impacts positively on the environment by limiting over grazing in stressed landscapes
· By up-skilling more farmers to manage their annual feed programs effectively to the benefit of the environment.
Climate Variability and Climate Change
· By growing the capacity of farmers to mitigate against climate variability in livestock production by understanding how to better grow and conserve fodder
· By underwriting Australian agriculture by ensuring flexibility of feed supply when climate events impact the capacity to produce fodder on farm.
Innovation Skills
· By improving the skills of farmers to participate in fodder production and the export hay sector
· By improving the transfer of information and extension to enable farmers to apply research findings
Biosecurity
- Hay production provides a valuable weed control tool in cropping rotations.
Who is supporting the Levy?
The following Australian Hay Exporters support the introduction of the proposed mandated export hay levy.
- JT Johnson & Sons Pty Ltd
- Balco Australia Pty Ltd
- Johnson Asahi Pty Ltd
- Narrakine Hay
- JC Tanloden Pty Ltd
- Gilmac Pty Ltd
- Pyrenees Hay Processors Co-operative Ltd
- Glenvar Hay Pty Ltd
- Bodiam Pty Ltd
- Pentarch Farms
- Hay Australia Pty Ltd
- G & RJ Ballard
- Lithgow Enterprises Pty Ltd
- Standard Commodities
- Hill River Hay
- United World Enterprises
- Feed Central
- TMR Feed Solutions
- MultiCube Stockfeed
Next steps
AFIA is currently developing an R&D Levy proposal for the Australian government’s consideration.
The final proposal will be available for review and will need to be supported by hay exporters and the Australian government to be successful.
We welcome feedback from hay exporters or any producers preparing to export, to assist in the development of objectives and identification of research needs. Updates on progress are available on our website.
For more information, please contact John McKew at [email protected] or 03 9670 0523