Agriculture in the Riverina

Transcription

1

2 Agriculture in the Riverina Value, importance and impediments to increased competitiveness by Kim Houghton, Jacki Schirmer, Amanda Kenyon, Heidi Congdon Strategic Economic Solutions University of Canberra April 2015 RIRDC Publication No 15/007 RIRDC Project No PRJ

3 2015 Rural Industries Research and Development Corporation. All rights reserved. ISBN ISSN Agriculture in the Riverina: Value, importance, and impediments to increased competitiveness Publication No. 15/007 Project No. PRJ The information contained in this publication is intended for general use to assist public knowledge and discussion and to help improve the development of sustainable regions. You must not rely on any information contained in this publication without taking specialist advice relevant to your particular circumstances. While reasonable care has been taken in preparing this publication to ensure that information is true and correct, the Commonwealth of Australia gives no assurance as to the accuracy of any information in this publication. The Commonwealth of Australia, the Rural Industries Research and Development Corporation (RIRDC), the authors or contributors expressly disclaim, to the maximum extent permitted by law, all responsibility and liability to any person, arising directly or indirectly from any act or omission, or for any consequences of any such act or omission, made in reliance on the contents of this publication, whether or not caused by any negligence on the part of the Commonwealth of Australia, RIRDC, the authors or contributors. The Commonwealth of Australia does not necessarily endorse the views in this publication. This publication is copyright. Apart from any use as permitted under the Copyright Act 1968, all other rights are reserved. However, wide dissemination is encouraged. Requests and inquiries concerning reproduction and rights should be addressed to RIRDC Communications on phone Researcher Contact Details Name: Address: Phone: Dr Kim Houghton 62 Miller Street O Connor ACT kim@economicsolutions.com.au In submitting this report, the researcher has agreed to RIRDC publishing this material in its edited form. RIRDC Contact Details Rural Industries Research and Development Corporation Level 2, 15 National Circuit BARTON ACT 2600 PO Box 4776 KINGSTON ACT 2604 Phone: Fax: rirdc@rirdc.gov.au. Web: Electronically published by RIRDC in April 2015 Print-on-demand by Union Offset Printing, Canberra at or phone ii

4 Foreword The Rural Industries Research and Development Corporation (RIRDC) has undertaken a regional study of the role and value of agriculture to the Riverina region of New South Wales. The project sought to test a theoretical framework, previously developed in an earlier study of agriculture in North West Tasmania (2014). The framework aims to assess the current value and role of agriculture, facilitators and inhibitors of agriculture s contribution, and avenues for enhancing agriculture s contribution, to regional wellbeing. This study found that farming communities in the Riverina show generally high levels of wellbeing, however communities with a greater dependence on farming especially with significant irrigation activity tend to demonstrate lower levels of wellbeing. Characteristics of farmers in the region that may inhibit future development include: high levels of farm enterprise stress experienced in recent years (particularly by irrigators); poorer than average health compared to non-farmers (again, particularly for irrigators); lower levels of self-efficacy; and a high value placed on being autonomous in farming that has potential to reduce cooperation between farmers. Factors facilitating development include: higher than average farm profitability (with the exception of irrigators); higher than average confidence in local institutions; and a strong combined business and stewardship orientation to farming. These results apply principally to irrigators, while dryland graziers do not experience many of these constraints, and dryland croppers experience fewer of them than dryland graziers. The target audience for this project is regional, state and national industry and government decisionmakers. It sets out a strategic view of agriculture in the region a view which blends the individualistic perspectives of communities within the region, and the perspectives of each of the main agricultural sectors. The study may be of value to leaders and organisations looking to frame a rationale for interventions (such as infrastructure investments or new initiatives) in the context of the impacts these should have on regional growth. This project was funded with RIRDC core funds, which are provided by the Australian Government. This report is an addition to RIRDC s diverse range of over 2000 research publications and it forms part of our National Rural Issues RD&E program, which aims to inform and improve policy debate by government and industry on national and global issues relevant to agricultural and rural policy in Australia. Most of RIRDC s publications are available for viewing, free downloading or purchasing online at Purchases can also be made by phoning Craig Burns Managing Director Rural Industries Research and Development Corporation iii

5 Abbreviations ABARES Australian Bureau of Agricultural and Resource Economics and Science ABS Australian Bureau of Statistics GVAP Gross Value of Agricultural Production LGA Local Government Area MCMA Murrumbidgee Catchment Management Authority NRM Natural Resource Management RDA Regional Development Australia REROC Riverina East Regional Organisation of Councils RWS Regional Wellbeing Survey iv

6 Contents Foreword... iii Abbreviations... iv Executive Summary... ix Introduction... 1 Objectives... 3 Methodology... 4 What is the current value of agriculture and agribusiness to the Riverina?... 9 The value of agriculture... 9 Agriculture and wellbeing Financial capital Built capital Innovation in agriculture: Facilitators and inhibitors Innovation survey Summary: Seven capitals and innovation Factors influencing innovation and future development in agriculture in the Riverina What are the issues, priorities and impediments to increasing the value of agriculture in the Riverina? Labour and skills Water Supply chains Value adding in the Riverina Changing global demand Aggregation of small farms Government policy and regulations Transport What are the key findings on Riverina agricultural competitiveness? Appendix 1: Literature review Regional overviews Methods of valuing agriculture Issues and industries Appendix 2: Capitals indicators for the Riverina Importance of agriculture Facilitators and inhibitors Appendix 3: Innovation survey References v

7 Tables Table 1 Gross value of commodity types produced in the Riverina Table 2Agricultural workers and population in Riverina LGAs Table 3 Snapshot of Riverina against Wellbeing Indicators Table 4 Community wellbeing in the Riverina, and different parts of the Riverina Table 5 Extent of exposure in the last five years to difficult times on the farm that have had a significant effect on the farm enterprise, reported by farmers in the Riverina, and different parts of the Riverina Table 6 Self-rating of general health reported by residents living in the Riverina, and in different parts of the Riverina Table 7 Overall life satisfaction reported by residents living in the Riverina, and in different parts of the Riverina Table 8 Confidence in access to skills and education reported by residents living in the Riverina, and in different parts of the Riverina Table 9 Self-efficacy score of residents living in the Riverina, and in different parts of the Riverina. 18 Table 10 Frequency of participation in civic activities by residents living in the Riverina, and in different parts of the Riverina Table 11 Frequency of participation in emergency services volunteering by residents living in the Riverina, and in different parts of the Riverina Table 12 Frequency of participation in local political activities by residents living in the Riverina, and in different parts of the Riverina Table 13 Self-reported profitability of farm enterprises in the Riverina, and in different parts of the Riverina Table 14 Proportion of households reporting experiencing three or more household financial stress events in the past year, in the Riverina, and in different parts of the Riverina Table 15 Importance placed on value of agriculture to society, in the Riverina, and in different parts of the Riverina Table 16 Participation of farmers in natural resource management activities in the Riverina, and in different parts of the Riverina Table 17 GVAP by LGA by number of workers, residents and farms Table 18 Meat processing workers in Riverina LGAs Table 19 - Innovation frameworks referenced in this project Table 20 Innovation activities Table 21 Indicators of innovation and adaptability in the Riverina Table 22 Extent of exposure in the last five years to difficult times on the farm that have had a significant effect on the farm enterprise, reported by different types of farmers Table 23 Self-rating of general health of Riverina farmers compared to farmers in NSW and Australia Table 24 Overall life satisfaction of Riverina farmers compared to farmers in NSW and Australia Table 25 Confidence in access to skills and education reported by of Riverina farmers compared to farmers in NSW and Australia Table 26 Self-efficacy score of farmers living in the Riverina, compared to farmers in NSW and Australia Table 27 Self-reported farm enterprise profitability of farmers living in the Riverina, compared to farmers in NSW and Australia Table 28 Level of household financial stress reported by farmers living in the Riverina, compared to farmers in NSW and Australia Table 29 Types of farming-related identity reported by farmers living in the Riverina, compared to farmers in NSW and Australia Table 30 Perceptions of environmental degradation on their land reported by farmers living in the Riverina, compared to farmers in NSW and Australia Table 31 Perceptions of local institutions reported by farmers living in the Riverina, compared to farmers in NSW and Australia Table 32 Main issues and key drivers in the Riverina vi

8 Table 33 Average yields of prunes and price received per tonne in each of the last five years Table 34 Community wellbeing in the Riverina, and different parts of the Riverina Table 35 Extent of exposure in the last five years to difficult times on the farm that have had a significant effect on the farm enterprise, reported by farmers in the Riverina, and different parts of the Riverina Table 36 Self-rating of general health reported by residents living in the Riverina, and in different parts of the Riverina Table 37 Overall life satisfaction reported by residents living in the Riverina, and in different parts of the Riverina Table 38 Confidence in access to skills and education reported by residents living in the Riverina, and in different parts of the Riverina Table 39 Self-efficacy score of residents living in the Riverina, and in different parts of the Riverina 82 Table 40 Frequency of participation in civic activities by residents living in the Riverina, and in different parts of the Riverina Table 41 Frequency of participation in emergency services volunteering by residents living in the Riverina, and in different parts of the Riverina Table 42 Frequency of participation in local political activities by residents living in the Riverina, and in different parts of the Riverina Table 43 Self-reported profitability of farm enterprises in the Riverina, and in different parts of the Riverina Table 44 Proportion of households reporting experiencing three or more household financial stress events in the past year, in the Riverina, and in different parts of the Riverina Table 45 Importance placed on value of agriculture to society, in the Riverina, and in different parts of the Riverina Table 46 Participation of farmers in natural resource management activities in the Riverina, and in different parts of the Riverina Table 47 Extent of exposure in the last five years to difficult times on the farm that have had a significant effect on the farm enterprise, reported by different types of farmers Table 48 Self-rating of general health of Riverina farmers compared to farmers in NSW and Australia Table 49 Overall life satisfaction of Riverina farmers compared to farmers in NSW and Australia Table 50 Confidence in access to skills and education reported by of Riverina farmers compared to farmers in NSW and Australia Table 51 Self-efficacy score of farmers living in the Riverina, compared to farmers in NSW and Australia Table 52 Self-reported farm enterprise profitability of farmers living in the Riverina, compared to farmers in NSW and Australia Table 53 Level of household financial stress reported by farmers living in the Riverina, compared to farmers in NSW and Australia Table 54 Types of farming-related identity reported by farmers living in the Riverina, compared to farmers in NSW and Australia Table 55 Perceptions of environmental degradation on their land reported by farmers living in the Riverina, compared to farmers in NSW and Australia Table 56 Perceptions of local institutions reported by farmers living in the Riverina, compared to farmers in NSW and Australia vii

9 Figures Figure 1 Map of Riverina boundaries for this study... 2 Figure 3 Reporting structure... 4 Figure 2 VAD Framework... 5 Figure 3 Reporting structure... 6 Figure 4 Riverina food processing employment Figure 5 Satisfaction with aspects of supply chain Figure 6 World price fluctuations Figure 7 China food import forecasts Figure 8 Age mix of farmers, Hay and Narrandera viii

10 Executive Summary What the report is about This study takes a strategic view of agriculture in the Riverina, considering its value, its importance (to individuals and communities), and issues facilitating and constraining its competitiveness. The study provides a foundation to enable the agricultural sector in the region to plan for the future and helps to establish a hierarchy and sequence of interventions to improve competitiveness and ensure long term viability. Who is the report targeted at? The target audience for this project is regional, state and national industry and government decision-makers. It sets out a strategic view of agriculture in the region a view which blends the individualistic perspectives of communities within the region, and the perspectives of each of the main agricultural sectors. The study may be of value to leaders and organisations looking to frame a rationale for interventions (such as infrastructure investments or new initiatives) in the context of the impacts these should have on regional growth. Background This study into the importance of agriculture to the Riverina region of New South Wales builds upon other regional studies of North West Tasmania and the Wet Tropics in Queensland commissioned by RIRDC in Specifically, this study utilises and tests the Value Assessment and Development (VAD) Framework developed by Bonney et al. (2015), from the University of Tasmania. The VAD Framework assesses the current situation of the region by analysing it against seven capitals and its innovation characteristics. The framework identifies innovation as a primary driver of productivity growth, which can increase agricultural value and is essential to a nation or region s competiveness in a dynamic natural climate and global market. The Riverina is somewhat different from the previous regions studied, as it is relatively close to the major ports of Sydney and Melbourne, on major road/rail transport routes and has a diverse agricultural base. The analysis in the Riverina has been focused around three subregions, based on the dominant types of agriculture: mixed cropping and grazing, dryland cropping, and irrigation. Aims/objectives The objectives of this study are to undertake an assessment for the Riverina in relation to two main questions of the Value Assessment and Development Framework developed for RIRDC by Bonney et al. (2015): 1. What is the current value of agriculture and agribusiness to the Riverina? 2. What are the facilitators and inhibitors that determine the value of agriculture? Methods used The study is based on a detailed review of available literature on agriculture and agribusiness in the Riverina, a series of interviews with stakeholders, participation in several regional forums, an online innovation survey, and detailed analysis of the recent 2013 Regional Wellbeing Survey. ix

11 Results/key findings Value In , the gross value of agricultural production (GVAP) in the Riverina was $2,069.7 million (ABS 2012), from a total of 4,504 agricultural businesses. The gross value of agricultural commodities produced varied by local government areas (LGA) from $42.2 million for Hay to $328.0 million for the Bland Shire Council. Based upon the gross value produced, cereals for grain are by far the most significant commodities to the overall Riverina region (Table 1) at 48 per cent of total GVAP. Wheat is the largest proportion of this, and another 24 per cent comes from meat products (lamb, beef, and poultry). In addition to farm gate value, there is also considerable value adding to farm production in the Riverina, and an estimated 20 per cent of Gross Regional Product for the Riverina comes from food manufacturing. Importance In terms of agricultural production in relation to agricultural employment and population size, agriculture is most economically important in the cropping communities of Carrathool, Bland, Murrumbidgee, and Lockhart where farm gate value is high and populations are relatively small. Farm gate value alone amounts to around $40,000 or more for each and every resident in those LGAs. In employment terms, there were 7,776 agricultural workers in the region counted in the 2011 Census, and another 367 people (5 per cent) provided services to farmers. The biggest employment flow-on come from food and beverage manufacturing, together accounting for another 3,790 workers, half as many again as the number of people employed on-farms in the region. Within these processing industries, 1,746 workers (62 per cent of those employed in all food processing activities) were employed in meat processing (beef, lamb and poultry), with their locations reflecting the factories that employed them: Wagga Wagga, Griffith Leeton, Cootamundra and Gundagai. Data from the Regional Wellbeing Survey were analysed to identify key indicators of (i) the importance of agriculture and its contributions to the Riverina region; and (ii) factors that may facilitate or inhibit future development of agriculture in the region. Key findings about importance of agriculture and its contributions to the Riverina region are: LGAs with high dependence on agriculture have lower overall community wellbeing compared to those with lower dependence on agriculture. This is likely due to the characteristics typically associated with high dependence on agriculture, such as remoteness from major towns/regional cities, and poorer access to services. It does indicate a challenge for retaining population in areas with high dependence on agriculture, with lower community wellbeing typically associated with higher rates of outmigration of population, which can then contribute to further lowering of community wellbeing. The Riverina as a whole has experienced greater levels of stress in the farming sector in the last five years (such as market difficulties, drought, or pest/disease outbreak) than is typical for agricultural regions across Australia. This did not apply to all farmers: irrigators were much more likely than others to report experiencing high levels of farm-related stress. This stress can reduce the positive contributions of agriculture to the broader community, as it constrains the capacity of farmers to contribute socially, economically, and culturally to the region. x

12 People living in irrigation-dependent regions of the Riverina report, on average, poorer health than those in other regions, as do people living in regions with high dependence on agriculture. This again suggests some factors associated with agriculture that may reduce its contribution to the community. While the level of participation in civic activities is similar in the Riverina to other regions, farmers contribute disproportionately to these activities, suggesting that the presence of agriculture makes a large contribution to social capital in the region. Similarly, farmers contribute disproportionately to volunteering in emergency services groups such as fire brigades. Importantly, participation in civic activities and emergency services volunteering was lower as a whole in irrigation dependent areas of the Riverina compared to other parts of the region. Farmers also contribute disproportionately to participation in political activities such as local government discussions, with the Riverina overall having lower than average participation in these activities. This means agriculture is again an important contributor to institutional capital in the region. Despite experiencing high levels of farm stress, Riverina farmers were more likely than those in other parts of Australia to report that their farm enterprise was profitable in However, this did not apply to irrigators, who were less likely to report profitability than other types of farmers. Riverina farmers are slightly less likely to participate in natural resource management activities than farmers in other regions. This largely reflects lower than average participation in natural resource management (NRM) by irrigators; dryland farmers were much more likely to participate in NRM. In summary, farmers in the region may be inhibited in future development by: high levels of farm enterprise stress experienced in recent years (particularly irrigators); poorer than average health compared to non-farmers (again, particularly for irrigators); lower levels of self-efficacy; and, a high value placed on being autonomous in farming that has potential to reduce cooperation between farmers. Factors facilitating development include: higher than average farm profitability (with the exception of irrigators); higher than average confidence in local institutions; and, a strong combined business and stewardship orientation to farming. These results apply principally to irrigators, while dryland graziers do not experience many of these constraints. Dryland croppers also experience fewer of these constraints than dryland graziers. Constraints Nine important constraints on growth in agriculture in the Riverina were identified: 1. Labour and skills Overall, most sectors of the agricultural industry in the Riverina are experiencing some issues relating to labour and skills. Particularly, there is a perceived lack of reliable, good quality employees, and a widely acknowledged shortage of trained professionals, such as agronomists. The region has a good reputation as a place for seasonal work. 2. Water Water is the most commonly mentioned constraint to increasing the value of agricultural production in the Riverina. Throughout the region, agricultural producers consistently listed rainfall, climate and availability of water as the most significant constraints to growth. Water is an increasingly important issue, as the region is expected to become hotter and drier, with more summer rainfall but less autumn, winter and spring rainfall, by 2050 (NSW Department of the Environment 2014a). The local responses to the millennial drought have xi

13 emphasised the resilience of local communities and in many cases led to more water-efficient processes or investment in value-adding or diversification of industry. 3. Innovation An online innovation survey of farmers and related businesses in the region gathered only 21 responses, despite being distributed widely through the region, so the results are indicative rather than representative. All respondents were innovation active ; this is not representative of the broader agribusiness community, as the ABS national work survey finds only 35 per cent of agricultural businesses are innovation active. Nevertheless, survey respondents covered a range of activities, business ages and business sizes. Respondents were quite focused on cutting costs, reflecting their current business pressures. Most innovation was equipment and training to reduce costs and respondents reported relatively little innovation directed towards product development, marketing, increasing sales base and revenue. These issues were also reflected to some degree in the assessments of their supply chains, and the concerns raised about those supply chains. This reinforced the focus on innovation for cost reduction rather than customer-driven new products or services. 4. Communication with supply chain In some sectors of the agricultural industry, a lack of trust between suppliers and buyers appears to be limiting the exchange of information, and therefore the ability of growers to best meet buyer demand. For example, a history of mistrust between growers and buyers is an issue in the wine industry. There is no longer independent data produced by government, and growers can be sceptical about market predictions produced by another part of the industry. Growers and businesses further along the supply chain tend to form trade relationships based on personal connections, but the opportunity to form partnerships is not always taken. 5. Changing global demand Many of the Riverina s agricultural products are affected by wide variations in seasonal demand and prices. But running through these seasonal variations are long term trends involving consumer tastes and demands in global markets. A key influence on the prospects for Riverina agriculture is the extent to which the region is positioned to win or lose from these changes in anticipated demand. As per capita incomes rise, so does kilojoule intake, and with that comes changes in the protein sources; demand shifts from grains and cereals towards meat, dairy, fruit and vegetables. Constraints in many agricultural export countries (including land productivity, competing demands for water, and loss of agricultural land for urban development) mean that Australia will be in a good position to capitalise on these demand shifts. Riverina agricultural production is strong in wheat, livestock (beef) and fruit, so the region is well positioned to service these growth markets if supply constraints can be overcome. 6. Government policy and regulation Some aspects of government policy and regulatory frameworks are seen as impediments to Riverina agriculture by stakeholders. The nature of these impediments fall into four groups: 1. Fair go for Australian producers including truth in labelling to give due recognition to Australian production, and a fair go in international trade agreements. 2. Water and other environmental regulations are seen by many farmers as constraining natural resource use, though there is also some recognition of the end goal of the regulation that seeks to improve the overall quality and productivity of soils and water. But the compliance processes themselves are seen as constraints in their own right, a constraint that could be addressed by improving the processes involved. xii

14 3. Deregulation of the grain industry is cited as a problem by many grain growers, as it has led to many companies being involved with little regulatory oversight. Deregulation has had impacts on quality control and sampling, on sourcing for flour blending, and on transport. 4. Prices paid to farmers has been a public concern for some years as retailers and wholesalers have sought to drive prices of many agricultural products down. Many organisations and individuals interviewed in the Riverina echoed these concerns, and were seeking a fair local price for producers. 7. Aggregation of farms Increasing productivity is seen as going hand in hand with the aggregation of farms and loss of jobs in the agricultural sector. This is evident in sectors such as the wine industry, where seasonal pickers are no longer necessary with mechanised picking. Cotton, wheat and other sectors have been affected in a similar manner. As a result, surrounding towns do not have a wide range of agricultural employment, and many communities are seeing a decline in population as people leave to seek employment elsewhere. This can have flow on effects across communities. 8. Value Adding in the Riverina Food sector development in Australia is a complex, multi layered process. Many regions make the mistake of endeavouring to implement high end activities before sufficient ground work is undertaken to ensure the success of such activities. While there may be scope to increase the extent of value adding in the Riverina, there are a number of pre-requisite steps to realising full benefit from this approach. A strategic approach to strengthening value adding in the Riverina would accelerate collaboration and co-operation between growers and producers, strengthen and broaden supply chain links, and encourage innovation, product development and value adding. These soft underpinnings need to be progressed, in order to strengthen and diversify production throughout the region. 9. Transport Freight and logistics are a critical part of the Riverina s economy. Important transport constraints on agricultural competitiveness in the Riverina have been identified as: Bridges not assessed for higher mass limits Low underpasses Road width and inefficient routes Neglected rail infrastructure. A significant amount of research has been undertaken investigating transport issues and constraints in the Riverina, and more is required. Part of the solution is the development of an integrated regional freight strategy. A focus on integration would provide the region the most effective freight solutions in terms of efficiency and effectiveness. Implications for relevant stakeholders Farming communities in the Riverina show generally high levels of wellbeing, however communities with a greater dependence on farming especially with significant irrigation activity tend to demonstrate lower levels of wellbeing. Amongst the farming types, it is the dryland cropping communities in the Riverina that show the highest levels of participation in volunteering, local leadership and local institutions, while participation is lowest in the irrigation districts. Characteristics of farmers in the region that may inhibit future development include: the high levels of farm enterprise stress experienced in recent years (particularly by irrigators); poorer than average health compared to non-farmers (again, particularly for irrigators); lower levels of self- xiii

15 efficacy; and a high value placed on being autonomous in farming that has potential to reduce cooperation between farmers. Factors facilitating development include: higher than average farm profitability (with the exception of irrigators); higher than average confidence in local institutions; and a strong combined business and stewardship orientation to farming. These results apply principally to irrigators, while dryland graziers do not experience many of these constraints, and dryland croppers experience fewer of them than dryland graziers. The Regional Wellbeing survey found that farmers are open to innovation and adaptation, but still show a strong preference to doing it themselves. This may well lead to gradual innovation on individual farms, without the cohesion of a regional collaborative approach. Cost pressures are top of mind at present: the combination of higher input costs (water, labour, fuel and electricity) and downward pressure on prices received. Clearly, the region needs to remain cost competitive. However in the longer term, there should be regional capacity to deliver the value added products increasingly required by growth markets in Asia. There are serious concerns with inefficiencies in the wheat supply chain, partly as a result of market deregulation, and a thorough review of the wheat supply chain would be timely. Freight transport issues more broadly also require further attention, and an integrated freight strategy, building on the recent Riverina Eastern Regional Organisation of Councils (REROC) review, would be timely and beneficial. There is considerable scope for the Riverina to tap into growth in Asian consumer markets and use this growth as a spur for investment in further value adding activities. However, to meet the opportunities these growth scenarios present, the region will need to address the current constraints on volume, quality, freighting and traceability. xiv

16 Introduction This study examines the current situation for agriculture in the Riverina region of New South Wales. It aims to understand strengths and weaknesses of agriculture in the region, and the likely factors that influence the competitiveness of agriculture in the region. The study builds on two other trial regional studies commissioned by RIRDC. The University of Tasmania undertook a study on the North West Tasmania region, and the James Cook University led a study on the Wet Tropics region in Queensland, both commissioned by RIRDC in These studies sought to develop and test frameworks that would enable agriculture at the regional scale. The studies should help feed into regional development processes, as well as identifying opportunities and inhibitors to the competitiveness of agriculture in the region, particularly where these opportunities and inhibitors are occurring in other regions around Australia. The studies may thus give insights into national themes that may require further effort to improve competitiveness of Australian agriculture. This study specifically aims to apply the framework developed by the University of Tasmania, which assesses the region against seven capitals natural, cultural, human, social, political, financial and built. The framework also aimed to analyse innovation characteristics of agricultural industries in the target region. Innovation is considered a primary driver of productivity growth, can increase agricultural value and appears essential to a nation or region s competiveness in a dynamic natural climate and global market (OECD 2013a). Both the Queensland and Tasmanian regional studies have emphasised the importance of taking a broad and integrated approach to assessing the value of agriculture in a region. The authors of the studies note that economic data alone is insufficient to show the value and potential of agriculture, and thus draw upon frameworks of capitals to identify different types of strengths in the region. Taking a regional approach allows for the examination of interventions in the region that may have benefits to agriculture generally, rather than being restricted to supporting current sectors of the industry. There is also potential to understand how different industries interact, and therefore identify unintended consequences of different policies or other changes. This study is focused on the Riverina region of New South Wales. The Riverina is quite distinct from the previous regions studied. For example, it is relatively close to the major ports of Sydney and Melbourne, is situated on major road/rail transport routes, and has a diverse agricultural base. The Riverina is known for its agricultural industry and is often described as one of Australia s foodbowls. The region is one of the most diverse agricultural regions in Australia (NSW Trade and Investment, 2014), and in 2011 produced almost 18 per cent of NSW agricultural output, and 4.5 per cent of Australia s total agricultural output, much of which was exported. The Riverina region referred to in this study follows the Riverina Regional Development Australia boundaries. The RDA defines the Riverina as consisting of 14 local government areas: Bland Carrathool Coolamon Cootamundra Griffith Gundagai Hay Junee Leeton Lockhart Murrumbidgee Narrandera Temora Wagga Wagga. 1

17 Figure 1 Map of Riverina boundaries for this study Source: RDA Riverina This is a smaller area than that defined by Riverina Local Land Services. The Riverina LLS region includes 17 local government areas, and extends further east than the RDA s region (Riverina LLS, 2014) to include Harden, Young and Tumut Shires. The ABS Riverina SA4 region is different again, including Tumut and Tumbarumba but excluding Harden and Young. The analysis presented here considers the Riverina as consisting of three subregions, based on the dominant types of agriculture: mixed cropping and grazing, dryland cropping and irrigation. These choices are explained further in the methodology. 2

18 Objectives The objectives of this research are to undertake an assessment for the Riverina in relation to two main questions of the Value Assessment and Development Framework, developed for RIRDC by Bonney et al. (2015): 1. What is the current value of agriculture and agribusiness to the Riverina? 2. What are the facilitators and inhibitors that determine the value of agriculture? 3

19 Methodology This study utilises part one and two (green in Figure 2) of the Value Assessment and Development (VAD) Framework, developed by Bonney et al. (2015) in their study of the importance and value of agriculture in North West Tasmania. Part one of the VAD Framework has been used to shape initial analysis, assessing the current state of agriculture and resources available to it, through seven capitals. Part two of the Framework has been used to identify facilitators and inhibitors of innovation in agriculture. This framework encourages planning for the future of agriculture that is grounded in reality and current resources, or, as described by Bonney et al. (2015), a means rather than ends focused approach. This approach fits well with the OECD s (2013b) policy on regional development that advocates smart specialisation, based on investing in current strengths of the region to develop comparative advantage, and potentially leading to increased competiveness. The Framework guided the research and has informed the structure of this report, and findings are reported in the following chapters. The Value of agriculture, Seven capitals and Innovation findings are reported as in the figure below. Figure 2 Reporting structure To determine the current value of agriculture in the Riverina, the region s strengths in agriculture and future opportunities, both quantitative and qualitative data have been combined. Desktop literature reviews allowed synthesis of existing plans, perceptions and data on agriculture in the Riverina region. Data analysis, looking at both economic and social indicators relevant to agriculture in the region, provided a broad overview of the current situation, trends and future possibilities. Qualitative methods, including interviews and meetings, assisted in grounding the analysis in the real experiences and perceptions of members of the industry and community who will be involved in future planning and actions for agriculture in the Riverina. The study region was defined using the Riverina RDA boundaries, as this body has planning relevance, and is defined by local government areas, allowing census data for the region to be accurately compiled. As the Riverina region is diverse in climate, topography, communities and agriculture types, it has been divided into three sub-regions. These were drawn partially from the Riverina Local Land Services definitions of different socio-ecological landscapes, but due to this study s focus on agriculture, were divided based on the dominant types of agriculture: broadacre cropping (mostly dryland); irrigated agriculture (including horticulture); and a mixed cropping and grazing area. ABS data on gross value of agriculture product, and census data on the populations, assisted in characterising distinct subregions within the Riverina, in which the expected strengths, challenges and value of agriculture may be similar. 4

20 Figure 3 VAD Framework Source: Bonney et al

21 Part one of the VAD Framework has been used to shape initial analysis, assessing the current state of agriculture and resources available to it, through seven capitals. Part two of the Framework has been used to identify facilitators and inhibitors of innovation in agriculture. This framework encourages planning for the future of agriculture that is grounded in reality and current resources, or, as described by Bonney et al. (2015), a means rather than ends focused approach. This approach fits well with the OECD s (2013b) policy on regional development that advocates smart specialisation, based on investing in current strengths of the region to develop comparative advantage, and potentially leading to increased competiveness. The Framework guided the research and has informed the structure of this report, and findings are reported in the following chapters. The Value of agriculture, Seven capitals and Innovation findings are reported as in the figure below. Figure 4 Reporting structure To determine the current value of agriculture in the Riverina, the region s strengths in agriculture and future opportunities, both quantitative and qualitative data have been combined. Desktop literature reviews allowed synthesis of existing plans, perceptions and data on agriculture in the Riverina region. Data analysis, looking at both economic and social indicators relevant to agriculture in the region, provided a broad overview of the current situation, trends and future possibilities. Qualitative methods, including interviews and meetings, assisted in grounding the analysis in the real experiences and perceptions of members of the industry and community who will be involved in future planning and actions for agriculture in the Riverina. The study region was defined using the Riverina RDA boundaries, as this body has planning relevance, and is defined by local government areas, allowing census data for the region to be accurately compiled. As the Riverina region is diverse in climate, topography, communities and agriculture types, it has been divided into three sub-regions. These were drawn partially from the Riverina Local Land Services definitions of different socio-ecological landscapes, but due to this study s focus on agriculture, were divided based on the dominant types of agriculture: broadacre cropping (mostly dryland); irrigated agriculture (including horticulture); and a mixed cropping and grazing area. ABS data on gross value of agriculture product, and census data on the populations, assisted in characterising distinct subregions within the Riverina, in which the expected strengths, challenges and value of agriculture may be similar. A literature review followed the process of defining the study region. The review focused largely on government reports and plans relevant to the region, including those focused on regional development generally, in addition to agriculture and more specific issues such as employment. Meeting notes, submissions and other industry-specific perspectives were identified through online searches and recommendations from contacts in the region. Online searches of academic literature were also performed, but this was restricted to overviews of the value of agriculture, rather than specific research on agriculture in the region, for example on innovation in crop varieties (of which there may be a significant body of work). Additional resources were reviewed as recommended by contacts and research participants in later stages of the project. The review has been restricted to material published in the last three years, with the exception of one or two more theoretical studies. This reflects the focus 6

22 on the current situation of agriculture, rather than trying to capture overall trends and long term research outcomes. Quantitative aspects of the value of agriculture, including the quantitative aspects of the seven capitals in Bonney et al. s (2015) framework, have been assessed using a variety of data sources including recent previous analyses and reports, as well as the original sources of much useful data including the Census, farm census and data and analysis from agencies including Bureau of Transport & Regional Economics and ABARES. Values of agricultural outputs have been mapped across the region (by geography and product type) and linked to farm numbers, related business numbers, farm worker numbers and overall resident numbers, to give a variety of benchmarks of the direct financial value of agriculture. This method enabled capture of the importance of agriculture across the region, as well as just the value of agriculture. This study extended analysis of the importance of agriculture through detailed consideration of the rating of Riverina communities in the national Regional Wellbeing Survey, and its coverage of indicators the seven capitals. The Regional Wellbeing Survey is an annual survey of residents of rural and regional city (defined as those living outside the capital and major cities). Launched in 2013, the survey had 9,135 participants in its first year. This included 1,394 who lived in the Riverina RDA, including 305 farmers living in the Riverina. The survey methods are described in detail in Schirmer and Berry (2014). In this report, the survey data are drawn on to compare residents living in the Riverina to those in other regions. In some cases, survey questions were not asked of all participants; the number of people who responded to each question is reported as part of the presentation of data to assist in understanding the robustness of the results. Wherever possible, data from the survey have been weighted so they are representative of the distribution of the population in terms of gender, age, geographic residential location, and whether they are a farmer or non-farmer. In preparing a regional overview, it is important to gather perspectives grounded in the region that may explain the qualitative data, add legitimacy, and provide a localised viewpoint. Interviews were held with a wide range of people across the region, and several field trips were conducted to participate in discussions, and site visits. People interviewed included representatives of key agencies and organisations, such as Riverina RDA, CSIRO, Riverina Local Land Services, NSW DPI, irrigation councils and local government, in the region. These interviews and conversations also helped identify representatives of different agricultural supply chains, and different stages of supply chains. This included growers, grower organisations, industry advisors and researchers, and owners of manufacturing and logistics businesses in the region. While manufacturing businesses were often selected as the only example in the region, most other interviewees were selected based on their knowledge of their industry, their willingness to speak on behalf of their industry, or their perceived high level of innovation. Interviewees were asked about impediments to growth and current issues, innovation and opportunities for agriculture in their sector across the supply chain. In order to enable some analysis of patterns relating to innovation in agriculture in the Riverina, an online innovation survey was prepared, using a similar format to the ABS national scale work on innovation in Australian business. Businesses from across the agricultural supply chain were also invited to comment on innovations. A series of case studies were prepared to illustrate the backgrounds and prospects for some innovative agribusinesses in the region. A further case study was prepared focusing on a specific supply chain, to illustrate how the broader issues play out in a more specific context. This case study represents a relatively small chain, highlighting some of the wider issues which could be captured within the limited research period. This allows illustration of a level of detail which would otherwise have been outside the scope this study. 7

23 The final stage of the study drew together the findings from all data collection methods described above to identify the scope, nature and prospects for agricultural development in the Riverina. The analysis blends the external and top down information gathered from existing data sources on the region with information on regional, national and international trends. It also lays the foundation for the bottom up perspective of farmers, residents and businesses on how agricultural competitiveness should be accelerated. From this analysis, a series of priority themes and areas for attention were prepared. 8

24 What is the current value of agriculture and agribusiness to the Riverina? This chapter presents a summary of the assessment of the current situation and value of agriculture to the Riverina, including: Value, in terms of quantitative measures of production and supply chain employment; Importance, in quantitative terms through the relative scale of agricultural production and employment in each Riverina LGA; qualitative perspectives through the relationships between agriculture and wellbeing; and the innovation characteristics of agriculture in the Riverina. The value of agriculture Agriculture is of great significance to the Riverina region, and the LGAs within it. This is demonstrated in this section by a variety of quantitative measures, drawing on the most recently available data from the ABS, including the proportion of employed people working within the industry and the gross value of agricultural product produced by the region. For this study, the following local government areas (LGAs) are included in the Riverina region: Bland, Carrathool, Coolamon, Cootamundra, Gundagai, Hay, Junee, Leeton, Lockhart, Narrandera, Murrumbidgee, Temora, Griffith, Wagga Wagga Amongst these 14 LGAs, there are three distinct agricultural sub-regions: Cropping: Bland, Temora, Junee, Coolamon, Lockhart, Narrandera, Murrumbidgee, Carrathool (these areas include some irrigation, but cropping is the main production by value) Irrigation: Griffith, Leeton Mixed cropping and grazing: Wagga Wagga, Gundagai, Hay, Cootamundra On the basis of the employment measures, agriculture would appear to be most important in Carrathool, Murrumbidgee, Bland, Coolamon and Hay Shires, where the proportion of the population employed in agriculture is around 10 per cent or more. In terms of the importance of agriculture to a shire, the ratio of GVAP to residents incorporates both the scale and intensity of agricultural production, and the overall size of the shire s economy. On this ratio: Agriculture is clearly most important in Carrathool well above the other LGAs; There is another group of LGAs with a similar ratio ($40,000 to $60,000 per resident) comprising Bland, Murrumbidgee and Lockhart (extensive agriculture, small population) and for each of these, agriculture is clearly important; 9

25 Temora, Narrandera, Hay and Coolamon (mostly broadacre cropping) have this ratio in the $20,000 to $30,000 GVAP per resident range, where agriculture is still important, though not so much as in the shires above; and In the remaining shires, while agricultural activity is still significant, it is being complemented by a range of other economic activities and is somewhat less of a foundation to the communities. On these measures, agriculture is most economically important in the cropping communities of Carrathool, Bland, Murrumbidgee, and Lockhart. In these LGAs, farm gate value is high and populations are relatively small, so farm gate value alone amounts to around $40,000 or more for each and every resident in those LGAs. Considerable value is generated through processing and value adding to agricultural products in the Riverina. Amongst these processing industries: 1,746 workers (62 per cent of those employed in all food processing activities) were employed in meat processing (beef, lamb and poultry), with their locations reflecting the factories that employed them: Wagga Wagga, Griffith, Leeton, Cootamundra and Gundagai (see Table 18); and The next largest processing employers were: o beverage manufacturers (819 workers in Griffith and 74 in Leeton); o grain milling (278 workers in Leeton and 8 in Narrandera); o bakeries (especially Griffith and Wagga); and o fruit/vegetable processing (77 in Griffith, 68 in Wagga Wagga, and 36 in Leeton). Gross value of agricultural product The total gross value of agricultural commodities produced by all of the LGAs within the Riverina in was approximately $2,069.7 million, from a total of 4,504 agricultural businesses (ABS 2012). Riverina agricultural production accounted for some 17.7 per cent of NSW total gross value of agricultural production (GVAP), and 4.5 per cent of Australia s total GVAP in The gross value of agricultural commodities produced varied by LGAs, from $42.2 million for Hay to $328.0 million for the Bland Shire Council. This is the farm gate value, to which the value of the agricultural product transport and processing should also be added. Based upon the gross value produced, cereals for grain are by far the most significant commodities to the overall Riverina region (Table 1) at 48 per cent of total GVAP. Wheat is the largest proportion of this (Binks et al 2013). Table 1 Gross value of commodity types produced in the Riverina Commodity Type Approx. Gross Value of Commodity Produced ($mil) Commodity share of regional GVAP Broadacre crops for hay % Cereal for grain % Legumes for grain % Oilseeds % Other broadacre crops % Horticulture - not fruit (e.g. vegetables) % Horticulture Fruit (inc. wine grapes) % Livestock slaughtered % Livestock products (e.g. milk, eggs) % 2, % Source: ABS 2012 Value of Australian Agricultural Production (Cat ) 10

26 The cereals comprised: wheat (68 per cent of cereals by value), barley (14 per cent), rice (11 per cent), oats (3 per cent) and maize (2 per cent). It is important to note that this data was obtained by the ABS for a single year ( ), which was the most recent agricultural census year. Later data is available at the regional level, but not at the LGA level. As a single year measure, each LGA would be affected differently by seasonal conditions. The GVAP does not indicate the actual amount of profit each type of product brings to the region, and therefore does not provide a complete picture of its actual value to the Riverina. Further to these gross values of agricultural commodities produced, downstream and value-adding industries are important to the Riverina region, and an estimated 20 per cent of gross regional product for the Riverina comes from food manufacturing (NSW Trade and Investment Regional Profile 2014 for Riverina). Additional flow-on impacts stem from agricultural product-driven activity in other industries like transport, wholesaling, retail and tourism. The total value of agricultural production for each of the LGAs is shown in Table 17. Employment in agriculture The agricultural industry 1 is the highest employer in the region, followed by manufacturing, much of which is food manufacturing. Employment figures for 2013, based on a larger definition of the Riverina, suggest that agriculture, forestry and fisheries are the largest employing industries, employing 7,919 people (Binks et al 2013). Of these, 92 per cent were employed in agriculture, 3 per cent in forestry industries and 5 per cent in support industries to agriculture, forestry and fisheries. For this broader Riverina region, 2,840 people were employed in food manufacturing industries. Some employment in other industries is also dependent on agricultural production. For example, some activities in the transport and wholesaling industries will include the movement of agricultural products. Agriculture s contribution to employment varies significantly by agricultural region, as demonstrated by the Census Data from 2011 in Table 2. The growing regional city of Wagga Wagga has the lowest proportion of its population employed in agriculture, forestry and fisheries, at just 1.9 per cent of the total population 2. Generally, the larger the LGA population, the smaller the per centage of the population employed in agriculture, as a large local economy tends to diversify away from a reliance on primary production. Griffith, the LGA with the next biggest population and growth rate ( ), has 5.4 per cent of its population employed in the agricultural industry, and the slightly smaller towns of Leeton and Cootamundra have 4.5 and 4.3 per cent respectively. Local government areas with a population of less than 6,000 had 6-15 per cent of people employed in agriculture, with the exception of Carrathool. In the Carrathool LGA, agriculture employs 23.4 per cent of the population. Although size of the LGA gives some indication of the per centage of the population employed in agriculture, there are many other influencing factors. This is clearly demonstrated by the Bland and Junee LGAs, which have a very similar population size, but differ significantly in the proportion of people employed in agriculture, at 13 per cent and 6.3 per cent respectively. 1 This includes forestry and fisheries in the Australian Bureau of Statistics census data. 2 It is important to note that the population includes people outside of working age, such as children and retirees. 11

27 Table 2Agricultural workers and population in Riverina LGAs Local government area Population (2011) Agricultural industry workers Agricultural industry workers as share of population number of farms workers/ farm Bland 5, % Carrathool 2, % Coolamon 4, % Junee 5, % Lockhart 2, % Murrumbidgee 2, % Narrandera 5, % Temora 5, % Griffith 24,364 1, % Leeton 11, % Cootamundra 7, % Gundagai 3, % Hay 2, % Wagga Wagga 59,458 1, % Riverina 144,177 7, % Source: ABS Census 2011, Place of usual residence data and ABS Water use on Australian farms (Cat ) On the basis of the employment measures, agriculture would appear to be most important in the Carrathool, Murrumbidgee, Bland, Coolamon and Hay shires, where the proportion of the population employed in agriculture is around 10 per cent or more. Natural capital The Riverina has a diverse agricultural base in a dry semi-arid climate, with mean annual rainfall of mm (NSW Office of Environment and Heritage, 2014). Rainfall, soils and climate vary significantly across the Riverina, and irrigation is a very important part of the region s agricultural activities. There are three dominant agricultural types: mixed cropping and grazing, dryland cropping, and irrigation. The Riverina s significance to Australia s agricultural industry is well-accepted, although this has been affected by recent scarcity of water due to both climatic conditions and changes to the allocation of irrigation water (RDA Riverina, 2012). A key strength of the region s natural capital from a socio-economic perspective lies in the scale and productivity of its agricultural lands. ABARES refers to ABS data (2012) to estimate that 4.4 million hectares of land are held by farm businesses in the Riverina, with 2.5 million hectares used mainly for grazing, 1.6 million hectares used for cropping, and much smaller areas for forestry or conservation. From a biophysical perspective, the key strength is the variety of protected areas and ecosystems across the region. On the other side, there are weaknesses and vulnerabilities in the Riverina s natural capital. Some important challenges facing the stock of natural capital in the Riverina are the predicted changes to climate, pest management, water quality and impacts of salinity and erosion (The Murrumbidgee Catchment Management Authority 2013). A recent Integrated Regional Vulnerability Assessment by the NSW Department of Environment summarises the expected impacts of climate change on the Riverina Murray region. It acknowledges 12

28 uncertainty about the impacts, and that the impacts will vary across the region. Temperatures rises of 1.5 C-3 C in all seasons, decreases in rainfall particularly in winter and spring, with some increase in summer rains, higher evapotranspiration, and increased risk of bushfires and floods will impact on agriculture, as well as infrastructure and health that support agricultural communities. Possible impacts on agriculture include: Declines in average yields as a result of reduced rainfall; Lack of soil moisture at the end of winter to finish winter cereals; Lower water quality due to sedimentation and increased algal blooms; Less water for stock and irrigation; Potentially lower yields and fruit quality of some fruit trees, particularly stonefruits and apples, due to warmer winters resulting from temperature rises; Decreased stocking rates for pastured livestock; Potential impacts on canola yields (though NSW DPI data suggests wheat yields will be relatively unaffected in the short-medium term, as the higher availability of carbon may minimise the impact of changing rainfall patterns); Reduced on-farm investment due to uncertainty; Increases in natural disasters, which could damage infrastructure both on and off-farm, such as storage and transport, thus preventing growers from getting their product to market on time; and More disease vectors and new or increased pests and weeds, which could threaten livestock and crop production. Agriculture and wellbeing This section focuses on four capitals (human, social, cultural and political), as well as providing additional insight into aspects of natural capital (such as relationships between farmers and natural resource management processes), and financial capital (such as the extent of farm profitability and incidence of financial stress). A useful framework for understanding the nature of economic and social outcomes is the concept of wellbeing, which is widely used as an indicator of satisfaction with life, or quality of life. The popularity and usefulness of wellbeing as a concept stems from its broad scope. In its broadest sense, it combines objective measures (for example, standard of living and other material aspects of wellbeing) with subjective measures (such as a person s own rating of their satisfaction with different aspects of their life) (Cummins 2000). This allows assessment of both economic and social measures within the one concept, and by doing so, acknowledges their interconnectedness. 13

29 Well accepted drivers of the wellbeing of an individual include physical and mental health, social capital, human capital (for example, access to skills, resources and ability to achieve desired goals), financial wellbeing (standard of living), safety and security, cultural connections/identity, and placebased attachment (Schirmer et al. 2013). These drivers of wellbeing are similar to common conceptualisations of factors driving adaptive capacity and resilience. Recent work focused on understanding these commonly draws on the capitals frameworks (for example, Nelson et al. 2010b, Brown et al. 2012). These argue that a person s access to social capital, human capital, institutional capital, economic (financial) capital, natural and physical capital (and sometimes other capitals such as cultural capital) determines their capacity to adapt successfully to change. This is a rapidly developing field. While in this study we do not label these concepts as capitals in all cases, the determinants of wellbeing include the factors believed to influence adaptive capacity and resilience. Agriculture contributes value to the Riverina region in many ways. The following indicators reflect the Seven Capitals framework recommended in VAD Framework by Bonney et al. (2015). The indicators measure how agriculture contributes to different capitals in the Riverina, drawing on data from the Regional Wellbeing Survey. This survey, described in detail in Schirmer and Berry (2014), collected data in the region between July and October 2013, and included a large sample of farmers (dryland and irrigators) and non-farming residents of the region. A number of indicators were constructed based on the survey data. These include indicators that measure the value of agriculture to the region, and indicators identifying factors that facilitate or inhibit future development of agriculture in the region. In this section, indicators of the importance of agriculture are shown. These are analysed by comparing key characteristics of the Riverina, and of different types of farming communities within the Riverina (those dependent on cropping, on mixed cropping and grazing, and on irrigation), with comparison regions, in particular with the average for (i) the Riverina as a whole (RDA boundaries), (ii) NSW, and (iii) rural and regional Australia. Indicators assessing the importance of agriculture are: 1. Community wellbeing 2. Agricultural sector stress 3. Health and wellbeing (human capital) 4. Confidence in access to skills and education (human capital) 5. Self-efficacy (human capital) 6. Civic participation (social capital) 7. Volunteering in emergency services groups (social capital) 8. Social and institutional capital 9. Financial contributions of agriculture to the community (financial capital) 10. Financial wellbeing of farm households (financial capital) 11. Cultural value of agriculture to the community (cultural capital) 12. Contribution of agriculture to environmental conditions (natural capital) A snapshot of the assessment of the Riverina against each of the above indicators is presented in Table 3. A summary of key observations for each indicator for the Riverina is presented below. Appendix 2 provides more information on each of the indicators. The table summarises findings in relation to whether wellbeing indicators score higher or lower in the Riverina when compared with rural communities in NSW, and Australia as a whole. The table also highlights which farming communities in the Riverina exhibit the highest and lowest levels of each indicator, to illustrate how different the farming communities can be. 14

30 Table 3 Snapshot of Riverina against Wellbeing Indicators Indicator Community wellbeing Agricultural sector stress Health and wellbeing Confidence in access to skills/education Self-efficacy Civic participation Volunteering in emergency services groups Social and institutional capital Financial contributions of agriculture Financial wellbeing of farm households Cultural value of agriculture Contribution of agriculture to environmental conditions Riverina indicator level compared NSW Similar Higher Similar Farming community with highest level Cropping Irrigation Irrigation Medium dependence on agriculture Farming community lowest with level High dependence on agriculture Mixed cropping Low dependence on agriculture Mixed cropping High dependence on agriculture Similar All similar All similar Similar Similar Lower overall but farmers generally higher than other regions Lower overall but farmers higher Higher levels of profitability Similar overall but farm households experiencing more financial stress Similar Lower participation in natural resource management High dependence on agriculture Cropping Medium dependence on agriculture Cropping Cropping Cropping Most stress in areas with high dependence on agriculture Areas with high dependence on agriculture Mixed farm participation above average Irrigation Irrigation Irrigation Irrigation Irrigation Least stress in areas with low dependence on agriculture Areas with low dependence on agriculture Irrigation participation well below average Indicator 1: Community wellbeing (measures outcomes for the community of having access to multiple types of capital) Overall community wellbeing in the Riverina region is similar to that for NSW and rural and regional Australia (Table 4). However, there are slightly fewer people reporting low levels of community wellbeing compared to NSW and Australia. This suggests that there are many residents reporting average or just above average levels of wellbeing, rather than large amounts of disparity in wellbeing experienced by residents in the same community. When Riverina LGAs with dependence on different types of agriculture are compared, there is no difference in average community wellbeing, but in areas with high dependence on cropping, there are greater disparities between residents in these regions. In irrigation-dependent LGAs, most report average levels with less difference between residents in their wellbeing than in cropping LGAs. The principle difference evident is between LGAs with high dependence on agriculture versus others. LGAs with high dependence on agriculture report lower than average community wellbeing, with a lower proportion reporting they feel their community provides a high quality of life, and a higher proportion reporting they feel their community provides a lower quality of life. This suggests that regions where agriculture is the principle employer do have some quality of life challenges, which may also be a consequence of the typical characteristics associated with these communities; this can include being located some distance from major towns and cities, and having access to fewer services. 15

31 Table 4 Community wellbeing in the Riverina, and different parts of the Riverina % with high community wellbeing rating (6-7) % with low community wellbeing rating (1-4) N Mean score (1- Community wellbeing 7) Rural and regional Australia % 11.0% 8560 NSW % 9.0% 3826 Riverina region % 7.8% 1392 Riverina Cropping LGAs % 9.5% 327 Riverina - Irrigation LGAs % 6.6% 357 Riverina - Mixed cropping and grazing LGAs Riverina LGAs with high economic dependence on agriculture Riverina LGAs with medium economic dependence on agriculture Riverina LGAs with low economic dependence on agriculture % 7.4% % 12.5% % 6.4% % 8.1% 602 Indicator 2: Agricultural sector stress (measures outcomes of effects of stress on capitals) Farmers in the Riverina were more likely than those in Australia or NSW to report that they had experienced multiple types of difficult times on their farm in the last five years, which had an effect on their farm enterprise (Table 5). This was particularly the case for farmers living in irrigationdependent LGAs, while those in mixed cropping and grazing LGAs reported similar levels of farm stress to the Australian average. Farmers living in LGAs with low dependence on agriculture reported less farm stress than those living in LGAs with medium dependence (in which most irrigation areas are located). Overall, these findings suggest that there is a higher than average level of farm stress in the Riverina, and that this is specifically the case for farmers dependent on irrigation. Those in dryland areas experience more typical levels of farm stress (though still relatively high across the country). Farm stress can have negative flow-on effects for communities, suggesting that in irrigation areas, stress in farming is likely to be contributing negatively to overall community wellbeing. Table 5 Extent of exposure in the last five years to difficult times on the farm that have had a significant effect on the farm enterprise, reported by farmers in the Riverina, and different parts of the Riverina % with high score (of over Difficult times on farm Mean score (0-84) 55) N Rural and regional Australia % 2287 NSW % 937 Riverina region % 283 Riverina - Cropping LGAs % 108 Riverina - Irrigation LGAs % 82 Riverina - Mixed cropping and grazing LGAs % 110 Riverina LGAs with high economic dependence 38.6 on agriculture 38.4% 62 Riverina LGAs with medium economic 43.5 dependence on agriculture 61.7% 171 Riverina LGAs with low economic dependence 33.8 on agriculture 27.7% 67 16

32 Indicator 3: Health and wellbeing (human capital) While people living in the Riverina report similar levels of health and life satisfaction to those in NSW and rural and regional Australia, there are some differences between areas with different types of dependence on agriculture (Table 6 and Table 7). Those living in irrigation-dependent agricultural areas (and those living in areas with medium dependence on agriculture, many of which rely on irrigated agriculture) report higher than average general health and life satisfaction, while those living in areas with high dependence on agriculture report lower than average health and life satisfaction. This suggests that high dependence on agriculture is associated with poorer general health, something which is supported by the further finding (discussed in subsequent indicators) that overall, farmers report lower levels of general health compared to non-farmers. Table 6 Self-rating of general health reported by residents living in the Riverina, and in different parts of the Riverina % reporting excellent or very good health % reporting fair or poor health n Rural and regional Australia 55.5% 13.8% 7231 NSW 55.7% 14.1% 3436 Riverina region 54.9% 13.1% 1275 Riverina - Cropping LGAs 56.9% 15.9% 294 Riverina - Irrigation LGAs 60.2% 7.9% 318 Riverina - Mixed cropping and grazing LGAs 51.7% 14.8% 724 Riverina LGAs with high economic dependence on agriculture 45.1% 25.8% 156 Riverina LGAs with medium economic dependence on agriculture 60.8% 10.1% 691 Riverina LGAs with low economic dependence on agriculture 51.9% 13.9% 566 Table 7 Overall life satisfaction reported by residents living in the Riverina, and in different parts of the Riverina Satisfaction with life overall (average score out of 100) n Rural and regional Australia NSW Riverina region Riverina - Cropping LGAs Riverina - Irrigation LGAs Riverina - Mixed cropping and grazing LGAs Riverina LGAs with high economic dependence on agriculture Riverina LGAs with medium economic dependence on agriculture Riverina LGAs with low economic dependence on agriculture Indicator 4: Confidence in access to skills and education (human capital) There is little difference in the level of confidence of the population in access to skills and education, when comparing the Riverina to NSW and national averages, or to different regions within the Riverina (Table 8). The majority of residents have high confidence that they have access to the skills and education they need. 17

33 Table 8 Confidence in access to skills and education reported by residents living in the Riverina, and in different parts of the Riverina % respondents who disagree Mean score (1-7) with statement n Rural and regional Australia % 8350 NSW % 3883 Riverina region % 1394 Riverina - Cropping LGAs % 328 Riverina - Irrigation LGAs % 357 Riverina - Mixed cropping and grazing LGAs % 780 Riverina LGAs with high economic dependence on agriculture % 171 Riverina LGAs with medium economic dependence on agriculture % 781 Riverina LGAs with low economic dependence on agriculture % 602 Indicator 5: Self-efficacy (human capital) Residents living in the Riverina overall report similar levels of self-efficacy to those in NSW and rural and regional Australia (Table 9), although with a slightly higher than average proportion reporting low levels of self-efficacy. Self-efficacy was higher in regions with high dependence on agriculture, and lower in regions with low dependence on agriculture, and those with high dependence on irrigation. Table 9 Self-efficacy score of residents living in the Riverina, and in different parts of the Riverina Mean selfefficacy score (1-7) % with high selfefficacy % with low selfefficacy n Rural and regional Australia % 11.8% 7250 NSW % 11.6% 3457 Riverina region % 13.2% 1285 Riverina - Cropping LGAs % 12.1% 298 Riverina - Irrigation LGAs % 13.7% 321 Riverina - Mixed cropping and grazing LGAs % 13.6% 728 Riverina LGAs with high economic dependence on agriculture Riverina LGAs with medium economic dependence on agriculture Riverina LGAs with low economic dependence on agriculture % 10.1% 21.6% 12.2% 22.7% 14.2% Indicator 6: Civic participation (social capital) Civic participation levels are similar in the Riverina compared to the national and NSW average (Table 10). However, farmers contribute disproportionately highly to civic activities in cropping areas, and less in irrigation dependent LGAs. This suggests that agriculture contributes most to social capital of this type in areas with high dependence on dryland cropping, and to a lesser extent, areas dependent on dryland mixed cropping and grazing, but not as much in areas dependent on irrigation. 18

34 Table 10 Frequency of participation in civic activities by residents living in the Riverina, and in different parts of the Riverina Mean score whole population (1-7) Mean score - farmers (1-7) Mean score nonfarmers (1-7) n Rural and regional Australia NSW Riverina region Riverina - Cropping LGAs Riverina - Irrigation LGAs Riverina - Mixed cropping and grazing LGAs Riverina LGAs with high economic dependence on agriculture Riverina LGAs with medium economic dependence on agriculture Riverina LGAs with low economic dependence on agriculture Indicator 7: Volunteering in emergency services groups (social capital) Participation in emergency services volunteering was slightly lower than average in the Riverina, compared to NSW and rural and regional Australia (Table 11). However, farmers in the Riverina were more likely than farmers in other regions to be emergency service volunteers. This was particularly the case in dryland farming areas. This suggests that agriculture makes a substantial contribution to provision of emergency services volunteering in the Riverina, which is greater than is typical for other parts of rural and regional Australia. Table 11 Frequency of participation in emergency services volunteering by residents living in the Riverina, and in different parts of the Riverina Mean score whole population (1-7) Mean score farmers (1-7) Mean score non-farmers (1-7) n Rural and regional Australia NSW Riverina region Riverina - Cropping LGAs Riverina - Irrigation LGAs Riverina - Mixed cropping and grazing LGAs Riverina LGAs with high economic dependence on agriculture Riverina LGAs with medium economic dependence on agriculture Riverina LGAs with low economic dependence on agriculture Indicator 8: Social and institutional capital contributing to local decision making processes There is lower political participation in the Riverina compared to the NSW and national average (Table 12). However, the reverse is true for farmers; farmers in the Riverina participate more frequently in political activities than farmers in other regions, and more than non-farmers. This suggests that farmers contribute disproportionately to local decision making. Political participation was substantially lower than average in irrigation LGAs, for both the general population, and farmers. 19

35 Table 12 Frequency of participation in local political activities by residents living in the Riverina, and in different parts of the Riverina Mean score whole population (1-7) Mean score farmers (1-7) Mean score non-farmers (1-7) n Rural and regional Australia NSW Riverina region Riverina - Cropping LGAs Riverina - Irrigation LGAs Riverina - Mixed cropping and grazing LGAs Riverina LGAs with high economic dependence on agriculture Riverina LGAs with medium economic dependence on agriculture Riverina LGAs with low economic dependence on agriculture Indicator 9: Financial contributions of agriculture to the community (financial capital) Farmers in the Riverina were more likely to report their farm enterprise was profitable in 2013 than those living in NSW or rural and regional Australia (Table 13). However, there were large differences in this between different types of farmers: those in dryland cropping, or dryland mixed cropping and grazing areas, were more likely to report their farm was profitable, whereas those living in irrigation areas were much less likely to report being profitable and much more likely to report making a loss. Table 13 Self-reported profitability of farm enterprises in the Riverina, and in different parts of the Riverina Mean score (measured from 1 = large loss to 7 = large profit) % making loss % making profit n Rural and regional Australia % 46.3% 2287 NSW % 46.6% 937 Riverina region % 53.3% 283 Riverina - Cropping LGAs % 58.9% 108 Riverina - Irrigation LGAs % 36.4% 82 Riverina - Mixed cropping and grazing LGAs % 59.4% 110 Riverina LGAs with high economic dependence on agriculture Riverina LGAs with medium economic dependence on agriculture Riverina LGAs with low economic dependence on agriculture % 58.2% % 49.3% % 56.7% 67 Indicator 10: Financial wellbeing of farm households (financial capital) Across the Riverina as a whole, there is relatively little difference in the proportion of households experiencing financial stress compared to the NSW and national averages (Table 14). However, LGAs with high economic dependence on agriculture report higher levels of financial stress at the household level compared to those with less dependence on agriculture. 20

36 Table 14 Proportion of households reporting experiencing three or more household financial stress events in the past year, in the Riverina, and in different parts of the Riverina Whole population: % experiencing 3 or more household financial stress events Farmers: % experiencing 3 or more stress events Non-farmers: % experiencing 3 or more stress events Rural and regional Australia 7.1% 3.9% 8.3% 9134 NSW 6.4% 3.7% 7.2% 3883 Riverina region 6.8% 2.7% 7.7% 1394 Riverina - Cropping LGAs 5.7% 3.8% 6.5% 328 Riverina - Irrigation LGAs 5.4% 3.4% 5.9% 357 Riverina - Mixed cropping and grazing LGAs 8.8% 3.0% 9.8% 780 Riverina LGAs with high economic dependence on agriculture Riverina LGAs with medium economic dependence on agriculture Riverina LGAs with low economic dependence on agriculture 8.1% 6.4% 9.0% % 3.1% 7.2% % 1.6% 8.9% 602 n Indicator 11: Cultural value of agriculture to the community (cultural capital) People living in the Riverina report slightly higher agrarianism scores compared to those living in NSW, and rural and regional Australia (Table 15), suggesting agriculture is more commonly viewed as having high importance to society than in other regions, albeit only to a small extent. This was particularly the case for LGAs with high and medium dependence on agriculture, whereas those with low dependence reported agrarianism values similar to the national average. Table 15 Importance placed on value of agriculture to society, in the Riverina, and in different parts of the Riverina Whole population - mean score (1-7) Farmers - mean score (1-7) Nonfarmers - mean score (1-7) n Rural and regional Australia NSW Riverina region Riverina - Cropping LGAs Riverina - Irrigation LGAs Riverina - Mixed cropping and grazing LGAs Riverina LGAs with high economic dependence on agriculture Riverina LGAs with medium economic dependence on agriculture Riverina LGAs with low economic dependence on agriculture Indicator 12: Contribution of agriculture to environmental conditions (natural capital) Farmers in the Riverina were slightly less likely to participate in natural resource management (NRM) activities than those in NSW and rural and regional Australia (Table 16). This was principally due to low participation in NRM by farmers in irrigation-dependent LGAs; in cropping LGAs of the Riverina, participation was around average, while in mixed cropping and grazing areas, participation in NRM was substantially higher than average. 21

37 Table 16 Participation of farmers in natural resource management activities in the Riverina, and in different parts of the Riverina Never undertaken NRM on farm Have undertaken NRM in past but not currently Currently participating in NRM n Rural and regional Australia 3.0% 26.1% 71.0% 2077 NSW 2.0% 22.7% 75.3% 850 Riverina region 1.0% 31.0% 68.0% 260 Riverina - Cropping LGAs 0.8% 28.8% 70.3% 98 Riverina - Irrigation LGAs 0.9% 49.2% 49.8% 72 Riverina - Mixed cropping and grazing LGAs 1.0% 17.1% 81.9% 107 Riverina LGAs with high economic dependence on agriculture 0.0% 31.5% 68.5% 56 Riverina LGAs with medium economic dependence on agriculture 2.1% 31.0% 66.9% 161 Riverina LGAs with low economic dependence on agriculture 2.0% 25.8% 72.2% 61 Agricultural wellbeing: key conclusions for the Riverina Assessment of the importance of agriculture in the Riverina against seven capitals shows that with many indicators, communities more dependent on farming particularly those with significant irrigation activity score themselves lower than other farming types, or than similar communities in other parts of NSW. In some cases, this may be because communities highly dependent on agriculture are usually located some distance from major towns and cities, and have access to fewer services. In the Riverina, the cropping districts show higher participation in volunteering, local leadership and local institutions, while participation is lowest in the irrigation districts. This may be due in part to several signs of financial stress in irrigation districts, coupled with other indicators suggesting a lack of feeling of efficacy or control in farm circumstances in these irrigation communities. While agriculture is clearly a very important part of many Riverina communities, it does not always guarantee high scores in terms of the capitals indicators. 22

38 Financial capital Value of agricultural production The employment ratios discussed earlier give one measure of the importance of agriculture to an LGA. Another measure is the gross value of agricultural production (GVAP), and how this compares with other types of economic activity. This section looks at two different indicators of the importance of agriculture, in terms of employment and production value: 1. Value of agricultural production per agricultural worker (a measure of the financial productivity of farms and the farming mix); and 2. Value of agricultural production per resident (a measure of the economic reliance on agriculture). Value of agricultural production per agricultural worker Table 17 shows that the Bland Shire had the highest GVAP, at $328 million in mostly due to wheat production. Griffith and Carrathool had the next highest levels of GVAP, which included some irrigated farming. The LGAs where agriculture is dominated by dryland broadacre cropping had the highest GVAP per agricultural worker. For example, the GVAPs in Narrandera and Bland were $362,931 per worker and $431,579 per worker respectively, reflecting the broadacre structure and low employment intensity of farming in these areas. The lowest GVAP per person employed in the agricultural industry was in the mixed farming Gundagai LGA ($112,533 per worker). On a GVAP per farm measure, the irrigation areas of Griffith and Carrathool, and the higher density activity around Wagga Wagga, show the highest ratios. Table 17 GVAP by LGA by number of workers, residents and farms Local government area Gross Value ($ mil) Agricultural Production GVAP per ag worker ($ per person) GVAP per resident ($ per person) GVAP/farm ($ per farm) Bland ,579 55, ,511 Carrathool , ,610 1,098,805 Coolamon ,881 30, ,393 Junee ,989 16, ,068 Lockhart ,545 39, ,351 Murrumbidgee ,195 43, ,116 Narrandera ,931 28, ,868 Temora ,778 25, ,765 Griffith ,613 11,554 1,023,636 Leeton ,034 8, ,629 Cootamundra ,994 8, ,086 Gundagai ,533 11, ,817 Hay ,638 28, ,933 Wagga Wagga ,657 2, ,387 Riverina 144, ,165 14, ,525 Source: ABS Agricultural Census 2011 (Cat ) and ABS Water use on Australian farms (Cat ) The GVAP per agricultural worker ratio measures the labour intensity of different farm types, showing that broadacre farming generates strong value from a small workforce. On a per farm basis, the 23

39 rankings of the LGAs are different, and this ratio does not include assessment of the number of workers, just the total production value. The mixed farming subregion shows a consistent GVAP/farm of between $260,000 and $280,000, except for Wagga Wagga. Financial capital varies considerably amongst farms across the Riverina, however average farm financial productivity masks these regional variations. The most economically productive farming areas are the broadacre areas of Bland and Carrathool. The mixed farming areas of Gundagai and Wagga Wagga are more labour intensive, and have lower levels of production value per worker. Value of agricultural production per resident A wider aspect of financial capital is the economic importance of agriculture to a shire. Here, the ratio of GVAP to residents is used, as it incorporates both the scale and intensity of agricultural production, and the overall size of the shire s economy. Using this ratio, agriculture is clearly most important in Carrathool well above the other LGAs. There is another group of LGAs with a similar ratio ($40,000 to $60,000 per resident), comprising Bland, Murrumbidgee and Lockhart (extensive agriculture, small populations) and for each of these, agriculture is clearly important. Another four LGAs have this ratio in the $20,000 to $30,000 GVAP per resident range: Temora, Narrandera, Hay and Coolamon (mostly broadacre cropping) where agriculture is still important, though is not as much a foundation industry as in the shires above. For the other LGAs, while agricultural activity still significant, it is clearly being complemented by a range of other economic activities, and is somewhat less of a foundation to the communities. Based on these measures, agriculture is most economically important (and farm-driven financial capital is highest) in the cropping communities of Carrathool, Bland, Murrumbidgee, and Lockhart, where farm gate value is high and populations are relatively small. Farm gate value alone amounts to around $40,000 or more for each and every resident in those LGAs. A related measure of financial capital is farm profitability, and the GVAP per farm measures correlate quite well with farm profit levels. Recent estimates of farm cash incomes show that: On average, farm cash income (receipts minus costs) of broadacre farms in New South Wales was projected to average $73,000 per farm in , around 30 per cent above the average farm cash income recorded for the 10 years to Farm cash income for New South Wales grains industry farms was projected to average $139,000 a farm in , around 75 per cent above the industry average for the previous 10 years (during which were very poor growing conditions). Average farm cash income for sheep industry farms was projected to decline to $44,000 per farm, around 3 per cent below the industry average of $46,000 per farm for the previous 10 years. Average farm cash income for New South Wales beef industry farms was expected to be $21,000 per farm in , around 35 per cent below the average of $33,000 for the previous 10 years. Farm cash income for New South Wales dairy farms was projected to decline to an average of $109,000 per farm, close to the average for the previous 10 years. 24

40 Value adding to agriculture in the Riverina In addition to farm gate value, there is also considerable value adding to farm production in the Riverina, which contributes significantly to the financial capital driven by agricultural activity. In employment terms, people providing services to farmers numbered some 367 (5 per cent) out of the 7,776 agricultural workers in the region counted in the 2011 Census. The biggest employment flowons were in food and beverage manufacturing, together accounting for another 3,790 workers (Figure 5), half as many again as the number of people employed on-farms in the region. Figure 5 Riverina food processing employment Meat and Meat Products Beverages Grain Mill and Cereal Products Bakery Products 1,746 Fruit and Vegetables Other Food Products Dairy Products Undefined Food Products Oil and Fats Sugar and Confectionery Cigarettes and Tobacco All food and beverage manufacturing workers: 3,790 Source: ABS Census 2011, customised table Within these processing industries, 1,746 workers (62 per cent of those employed in all food processing activities) were employed in meat processing (beef, lamb and poultry), with their locations reflecting the factories that employed them: Wagga Wagga, Griffith Leeton, Cootamundra and Gundagai (Table 18). 25

41 Table 18 Meat processing workers in Riverina LGAs Local government area Meat processing workers Bland 0 Carrathool 12 Coolamon 24 Junee 94 Lockhart 3 Murrumbidgee 61 Narrandera 73 Temora 21 Griffith 502 Leeton 195 Cootamundra 144 Gundagai 105 Hay 45 Wagga Wagga 508 Riverina total 1,746 Source: ABS Census 2011, customised table After the meat processing workers, the next largest processing employers were beverage manufacturers (819 workers in Griffith and 74 in Leeton), grain milling (278 workers in Leeton and 8 in Narrandera), bakeries (especially Griffith and Wagga) and fruit/vegetable processing (77 in Griffith, 68 in Wagga Wagga, and 36 in Leeton). As noted above some 20 per cent of gross regional product for the Riverina comes from food manufacturing (Riverina NSW Trade and investment Region Profile 2011). The total gross regional product for the Riverina was estimated at $4 billion by the National Institute for Economic and Industry Research (NIEIR 2013). A final aspect of financial capital relating to agriculture was identified in the Regional Wellbeing Survey findings, which showed that farmers in the Riverina were more likely to report their farm enterprise was profitable in 2013 than those living in NSW or rural and regional Australia. In addition, there is little difference in the proportion of farming households experiencing financial stress in the Riverina when compared to the NSW and national averages. The implications of these farm stress indicators for future adaptation and growth are discussed in a subsequent chapter. 26

42 Built capital Built capital is a very broad component of the capitals framework, and this section focuses on the aspects of built capital which have a direct link to opportunities and constraints facing agriculture in the Riverina. The built capital strengths of the Riverina (as highlighted in the NSW Trade and Investment Regional profile (2014) include: Significant water infrastructure and irrigation capacity; Natural gas and electricity widely available; Good transport networks, with most major highway and rail corridors crossing the region; An international reputation for food manufacturing; and Well-developed telecommunications networks. Transport infrastructure in particular is important in the Riverina, as several transport corridors run through the region including the main Sydney-Melbourne road corridor, the Hume Highway, the main Southern Rail Line, as well as the main Melbourne-Brisbane road corridors; the Newell Highway and the Olympic Highway. While the road network is generally adequate, there are some issues: Bridges and small rural roads that have not been assessed for higher mass limits; Low underpasses; Road width; Road surfaces; Lack of bypasses; and Geometry of roads. Similarly for rail, while the basic infrastructure is adequate, impediments to greater use are: Lack of national uniformity; Legislative requirements; Cost (prohibitive for non-bulk quantitative); and Reliability. 27

43 Innovation in agriculture: Facilitators and inhibitors This section considers innovation of agriculture in the Riverina through responses to an online survey on the topic, and through the findings from the Regional Wellbeing Survey on the characteristics of farmers in the Riverina that might facilitate or inhibit innovation. Innovation survey A 21-question online innovation survey (Appendix 3) was developed to obtain an insight into the innovation activity amongst Riverina businesses, with a focus on agribusiness. The survey explored: Characteristics of the participating businesses; Types of innovation activities undertaken o o o o Good or services Operational processes Organisational/managerial processes Marketing methods; Barriers to innovation activity; Concerns about business prospects; and Supply chains. The survey was designed to be consistent with the ABS Innovation in Australian Business survey (ABS, 2014). The ABS has run this survey in various forms from 2003 and in a consistent format since 2010, and the questions were included with the permission of the ABS to benchmark respondents innovation activities against those recorded by the ABS for Australia as a whole. The ABS approach covers four broad types of innovation (goods or services, operational processes, organisational/ managerial processes, and marketing methods) across three innovation statuses (introduced, still in development, and abandoned). These are combined to group businesses into two categories of innovation: innovating businesses (includes businesses that introduced at least one type of innovation during the inquiry period) and innovation-active businesses (includes businesses that undertook any innovative activity irrespective of whether the innovation was introduced, still in development or abandoned). The four broad types of innovation are quite similar to the divisions used in the VAD Framework for innovation work: product, process, marketing, supply chain, governance. The difference lies in the treatment of what Bonney et al. (2015) term Governance, but which in practical terms is not about business governance but, rather, about business strategy. In the ABS framework, this aspect of innovation is covered in the two process themes, and the ABS framework has the added benefit of better definition of innovation in services rather than products, and enabling comparison to national averages and innovation trends over time (Table 19). 28

44 Table 19 - Innovation frameworks referenced in this project ABS innovation framework Goods or services Operational processes Marketing methods Supply chain Organisational/managerial processes Bonney et al. (2015) innovation framework Product Process Marketing Supply chain Governance Invitations to participate were circulated through a range of networks: RDA; Riverina Local Land Services; Department of Primary Industry; Winegrowers; and Rice Growers Association. A total of 21 responses were completed, with a further 11 partial responses (mostly from smaller businesses). The survey took an average of 19 minutes and was completed using the questionpro platform. With such a small number of respondents it is particularly important to note their characteristics, and use the survey results as indicative rather than representative. Just over half the respondents (59 per cent) were growers, with another 13 per cent in agricultural supply chains and 29 per cent in other industries. Of the growers, 50 per cent were irrigators, and the others were a mix of cropping, sheep/beef, mixed farming horticulture, citrus and viticulture. Several respondents were involved in a combination of farming activities. While most respondents were small businesses (85 per cent employing less than 10 people), there were three large business respondents (with 58, 160 and 650 full-time workers). Most of the respondents businesses had been established for many years; 76 per cent had been established for over 20 years. Just two (seven per cent) had been established for less than five years. Income Consistent with the small employment numbers, 50 per cent of respondents reported turnover/farm operating surplus of under $500,000 in But there were also more high-turnover businesses than the employment numbers might suggest: 17 per cent from $ to $1 million, 23 per cent from $1 million to $5 million and 10 per cent over $5m. The larger the businesses, the more they were involved in innovation activities. Turnover had been stable over the previous three years for 40 per cent of respondents, variable for 10 per cent, decreasing for 28 per cent and increasing for 21 per cent. Overall, two-thirds of farmer respondents earned income from off-farm activities, and for 80 per cent of these, the off-farm income was deemed very important, we wouldn t survive without it. 29

45 Markets The market mix was quite polarised, with 75 per cent selling 90 per cent or more of their products or services locally. Only three businesses exported outside the region or overseas. The respondent pool is highly dependent on local markets, so their innovation activities will predominantly have their local buyers in mind, and outside-region buyers as only secondary targets for innovation. Given the long business history and relatively small employment numbers for most businesses, it is likely that their approaches will be well-entrenched, and any innovations more likely to focus on equipment or processes that reduce costs. This is typical of a standard commodity-seller approach to doing business, where the perception is that buyers purchase primarily based on price, and that differentiation is not important. Contrary to this approach, the blood orange farm of Red Belly Citrus is an example of a Riverina grower that redirected their business based on their assessment of where market opportunities were strongest, and where they could capture the highest value for a differentiated product. 30

46 Case study: Red Belly Citrus Red Belly Citrus Growing and marketing a differentiated product Red Belly Citrus has its roots in Italy, when owner Vito Mancini s grandparents bought with them from Sicily their long history of farming practices handed down from generation to generation. In the Riverina, they looked for land that would help give the same characteristics as what is known to be the best growing area for blood oranges Catania in Sicily. With the aid of family knowledge and NSW Department of Primary Industries mapping of Australia s climate to the famous region in Italy, they have developed the ability to produce the deepest colour in their blood oranges. In starting Red Belly Citrus, Vito looked for a niche product and investigated figs, nuts and pomegranates before deciding on blood oranges. Today, Vito grows 50 percent of Australia s blood oranges, approximately 2,000 tonnes production. Italy is the largest producer of blood oranges and grows 600,000 tonnes, and they are also grown in Morocco, Spain, and Turkey. Like many other growers and producers, Vito faces impediments such as market access issues, the capacity to access finance, the cost of water and electricity, and a shortage of skilled labour. Vito and his family have a passion for creating new and interesting recipes and uses for blood oranges. Len Mancini, Vito s dad remembers When we originally decided to plant our orchards, we looked at some of the choices out there but none of them offered the excitement we craved. Nothing really allowed our passion for farming and creating specialised products for our customers. They focus on quality, which doesn t come cheap. Approximately half the fruit doesn t make the grade, half of the seconds are made into juice, and the other half is waste. They value add by making juice, marmalade and cordial, and while they would like to do more, they need volume and critical mass. Red Belly Citrus also recognise the need to build return custom, and to do so, the best quality is required. In trying to create a new product, they have found that the major supermarkets are very reluctant to stock their product. To date, they have had great feedback about the closeness they have reached to the real Italian blood orange but realise they can t be complacent. Red Belly Citrus is still aiming to achieve higher and higher, not only surpassing the quality of the Italian blood orange but also to provide inspiration to all who use the product. Innovation activities The survey included a series of questions on innovation activities, which paralleled questions asked in the ABS Australian Business Survey. As noted earlier, a range of options were provided on innovation activities in relation to: Good or services; Operational processes; Organisational/managerial processes; and Marketing methods. Overall, every respondent was involved in some form of innovation activity, and is therefore classed as innovation active, and all were in the process of innovating. The ABS national benchmarks are 42 per cent innovation active and 36 per cent currently innovating. More details on the nature of the innovation activities of all respondents compared with the ABS national benchmarks are shown in Table

47 Table 20 Innovation activities Innovation in Survey ABS (%) (%) Goods Services Operational processes Organisational processes Marketing methods Abandoned 18 6 Still in progress Source: Survey and ABS Innovation in Australian Business (Cat ) It is clear from the comparison with the ABS survey that survey respondents were more interested and involved in innovation than the overall business community. This is not unexpected, as the survey was an opt in survey where businesses self-selected their participation, and clearly those businesses more interested in innovation took part. The mix of innovation activities in Table 20 shows the respondents are focusing much more on processes and backroom operations than developing new goods/services or marketing. This pattern was the same for growers and for other respondents. This reflects the hierarchy of innovation drivers reported by respondents: 1. Profit (nominated as a driver by 80 per cent, compared with 72 per cent from the ABS national survey); and 2. Increased responsiveness to customer needs (nominated by 50 per cent, with 51 per cent from ABS survey). An example of a Riverina business with a strong focus on customer needs, and on expanding the range of products and services to respond to those needs, is the Junee Liquorice and Chocolate Factory. Case study: Junee Liquorice and Chocolate Factory Junee Liquorice and Chocolate Factory: Innovating products and processes by responding to customer needs The Junee Liquorice and Chocolate Factory produces a rapidly growing range of innovative, certified organic confectionaries increasingly being found in shops around Australia and overseas. The Factory is operated by Green Grove Organics, a family operated farm-based enterprise that has been practicing organic farming since Green Grove holds Level A Organic Certification through the BFA (Biological Farmers Association of Australia, P225). Owner Neil Druce saw an opportunity to capitalise on what the region grows, and a niche to produce a product that no one else was making. He purchased the then derelict Junee Flour Mill and restored the building, located some old liquorice making machinery, and transformed it into the Junee Liquorice and Chocolate Factory, a historically rich landmark in the area. He located a confectioner and liquorice maker and applied himself to learning all he could about making liquorice. The business has since grown in production and makes a range of liquorice and chocolate items. The Factory has become a well-known tourist destination in the region incorporating the liquorice factory with tours, a restaurant and gift shop. Grain grown on the family owned Green Grove farm is milled in the modern day stone mill, which was installed to convert grain into product for inclusion in liquorice, flour and bread mixes. The Green Grove organic farm is an 1100 hectare property situated near Ardlethan. In 1962, Alan became concerned about pollution in the food chain. He set about taking steps toward pure food production by eliminating harmful sprays, artificial fertilisers and other modern day farming practices designed to enhance farm production, and in the process became one of the pioneers of organic farming in Australia. As recognition that Green Grove Organics are heading in the right direction the company was the proud winner of the 2002 Riverina Gold Plate Award for innovative product. 32

48 In keeping with the large number of smaller businesses that responded, the amounts invested in innovation were often small (58 per cent spending under $50,000 in the previous year), while the large business expenditure was significant (32 per cent spending between $100,000 and $1 million in the previous year. The spending categories were broad, with the hierarchy the same as reported by the ABS nationally: Equipment (nominated by 61 per cent of survey respondents compared with 34 per cent of ABS survey) Training (39 per cent of survey respondents compared with 28 per cent of ABS survey) Marketing (33 per cent of survey respondents compared with 28 per cent of ABS survey) None (39 per cent of survey respondents, same as ABS survey). In terms of benefits, respondents reflected a cost reduction focus rather than customer service/revenue focus (although most grower respondents reported that it was too early to identify clear benefits): Reduction in costs (nominated by 33 per cent of survey respondents compared with 19 per cent of ABS survey) Improved customer service (33 per cent of survey respondents compared with 43 per cent of ABS survey) Increased revenue (28 per cent of survey respondents compared with 40 per cent of ABS survey) Gained competitive edge (22 per cent of survey respondents compared with 28 per cent of ABS survey) Too early to observe benefits (50 per cent of survey respondents compared with 29 per cent of ABS survey). Barriers to innovation While most respondents reported no barriers to innovation (44 per cent; close to the ABS national average of 42 per cent) this is not surprising as all survey respondents were engaged in some innovation activities already. Barriers nominated by all respondents were very similar in proportion and ranking to those observed by the ABS, and there was little difference in the responses from growers when compared to other business types. Barriers included: Lack of access to additional funds (nominated by 33 per cent of survey respondents compared with 29 per cent of ABS survey); Uncertain demand (33 per cent of survey respondents, compared with 18 per cent of ABS survey); Cost of development or introduction 5 22 per cent(23 per cent of survey respondents, very close to 22 per cent for ABS survey); and Lack of skilled people or government regulations (each per cent from survey and 15 per cent-20 per cent from ABS). Concerns about business prospects Survey respondents were also asked about their perceptions of their general business prospects and the main concerns highlighted the emphasis that respondents were placing on controlling costs and remaining price competitive. Concerns included: 33

49 Lower profit margins to remain competitive (50 per cent); Cost of inputs (44 per cent); Lack of access to additional funds (28 per cent); Outstanding accounts receivable limiting cash flow (22 per cent); Government regulations and compliance (22 per cent); and None (28 per cent). Supply chain Respondents were asked to rate their satisfaction with a range of different aspects about their supply chains (Figure 6). Respondents were most satisfied with supply chain quality, efficiency and reliability, and least satisfied with preparedness for market changes. This fits with other aspects of the survey that suggest that respondents (and others in their supply chain) are focusing less on innovation to meet changing customer and market needs, and more on reducing costs. Figure 6 Satisfaction with aspects of supply chain All attributes Quality Efficiency Reliability Ability to market our goods and services Preparedness for market changes Source: Innovation survey, ranking from 1 (low satisfaction) to 5 (high satisfaction) Respondents were also invited to nominate particular supply chain bottlenecks and constraints. The responses showed particular concern about costs and strategic innovations: Trust Introduction of new products, systems or processes Ability to innovate Communication of cost, quality, market issues Balance between collaboration and competition Ability to differentiate our goods and services Management of risks Timeliness Management of peaks and troughs Cost An overall lack of international competitiveness in the food process business sector inhibiting the potential within the region to generate sustainable profitability on an on-going basis. Higher levels of business competence would enable more strategic planning, management and effective decision making by business owners/operators. Key raw material supply / timing / seasonality 34

50 We are very aware of freight costs to regional areas. This has to be monitored very astutely. Process capacity and changeover time Problems with the wine industry. Lack of trust between growers and wineries. Prices received for grapes are often below the cost of production. Freight costs and poor roads Weather conditions and natural disasters. Agricultural innovation in the Riverina: Conclusion The survey gathered only a small number of responses, despite being distributed widely through the region, so the results are indicative rather than representative. As an online survey, it was up to respondents to opt in, and the answers supplied showed that respondents were all innovation active. This is not representative of the broader agribusiness community as the ABS national survey finds only 35 per cent of agricultural businesses are innovation active. Nevertheless, survey respondents covered a range of activities, business ages and business sizes. Respondents were quite focused on cutting costs, reflecting their current business pressures. This suggests respondents are at risk of being caught in the commodity trap being squeezed on prices that can be achieved and fighting to stay price competitive. Respondents reported relatively little innovation directed towards product development, marketing, increasing sales base and revenue. These issues were also reflected to some degree in the assessments of their supply chains, and the concerns raised about those supply chains which reinforced some focus on innovation for cost reduction rather than customer-driven new products or services (see case study on SunRice for customer response examples). These findings fit well with the outcomes of the interviews and literature review. Government-funded and other research is important, as growers often do not have the capacity to invest in long-term or radical innovation, although they have been good at embracing it once cost-effective (particularly in rice). While capital availability is a constraint on innovation, there are signs that this is a question of scale, with many large scale processors investing heavily, and smaller producers investing what they can in new equipment and processes. The region shows considerable resourcefulness and the ability to collaborate across supply chains. A good example of this is CopRice as an outlet for waste/seconds from SunRice as well as waste from the Narrandera Flour Mill, sending products to feedlot and other animal industries in the region. Overall, there is perhaps a need to inspire and promote innovation in agriculture a conclusion flagged in the RDA s Innovation in Agriculture Think Tank in 2012: There are some outstanding innovations at both farm and industry scale in the Riverina, and the quality of leadership and examples of innovations in place mean that the Riverina is wellplaced to drive this inspiration process using its own experiences and resources. 35

51 Summary: Seven capitals and innovation This table summarises the main findings against each of the seven capitals described in the VAD Framework, as they relate to opportunities and constraints for agriculture. The second key element of the VAD Framework (innovation) is also summarised. Seven capitals Summary Natural Air, soils, water (quality and quantity), climate landscape, biodiversity, environmental evidence The diversity of the region is seen as a strength from broadacre cropping to mixed farming and irrigation. Dryland graziers are the farm types most likely to note environmental problems, with irrigators the least likely to do so. There are slightly lower levels of participation in NRM activities in the Riverina compared with other regions, especially amongst irrigators. Cultural Demographics, history, mindsets about change, education and agriculture Most of the region identifies as farming-based, and areas in the Riverina with higher dependence on agriculture place higher value on agriculture. Farmers are slightly more business-oriented than counterparts in other regions, and irrigators in particular tend to display a business orientation to their farming practice. Human Agricultural expertise, numeracy and literacy, managerial skills, leadership, ability to source knowledge, breadth of agricultural labour, land ownership knowledge Riverina farmers are as confident in their skills and level of education as counterparts in other regions. Their assessment of self-efficacy (ability to influence their lives) is highest for dryland graziers and lowest for irrigators, reflecting the influence on irrigators of external policies and regulations. Overall health and wellbeing indicators are similar for the Riverina in comparison to other regions, and are highest for irrigation farmers and lowest for mixed cropping farms. Social Benchmarking groups, social connections, relationships, social license for farming Much of the Riverina has close ties to farming with deep and longstanding family and community relationships. In most areas more than half the farmers are over 50 years old while in a few areas, like Hay and Carrathool, there have been new, younger farmers arriving and 40% or less are over 50. Several social capital indicators place the Riverina slightly lower than other regions, though farmers themselves score more highly on indicators like civic participation and volunteering. Farmers contribute to civic activities particularly in cropping areas, but less in irrigation dependent LGAs. Overall, agriculture makes a more substantial contribution to provision of emergency services volunteering in the Riverina than is typical for other parts of rural and regional Australia. 36

52 Seven capitals Summary Political Environment, industry associations, voting powers of farmers, local government, access to state/fed government, green lobby Riverina residents are slightly more positive about their political and institutional capital than people in other regions, though there is a lower level of political participation in the Riverina compared to the NSW and national average. However, the reverse is true for farmers; farmers in the Riverina participate more frequently in political activities than farmers in other regions, and more than non-farmers Non-irrigation farmers in the Riverina farmers in particular have confidence in their local decisionmakers. Financial Business access to finance, investment culture, financial institutions, support from institutions, grants for innovation Financial stress has been common across Riverina farming households, and more prevalent than in other regions. Profitability of Riverina farms is generally rated quite highly by farmers, but there have been periods of significant financial stress across most farming types in recent years, especially for irrigators and in irrigation communities. Built Physical assets and infrastructure, transport infrastructure, water supply, waste management, processing equipment, telecommunications Health, education and social infrastructure is generally perceived by Riverina residents as being quite good. The main areas of dissatisfaction with built capital assets are in water infrastructure and water allocations, and in transport. Deficiencies with road and bridge infrastructure are seen as constraining agricultural activities in the region. Innovation The online survey provided some indicative findings in relation to approaches to innovation in the Riverina amongst growers, and other business types. Survey respondents were highly innovation active, developing and introducing innovations in goods and services, processes, operations and management, and marketing. The main focus for the majority of survey respondents was on cutting costs, and there was little innovation activity directed towards product development, marketing, and increasing sales base and revenue. An implication of this is the risk of being caught in the commodity trap being squeezed on prices, fighting to stay price competitive. Government-funded and other research is important, as growers often do not have the capacity to invest in long-term or radical innovation, but often embrace new approaches once cost-effective. This is particularly evident in the rice industry. While capital availability is a constraint on innovation, there are signs that this is a question of scale, with many large scale processors investing heavily, and smaller producers investing what they can in new equipment and processes. 37

53 The region shows considerable resourcefulness and the ability to collaborate across supply chains. A good example of this is CopRice, an outlet for waste/seconds from SunRice as well as waste from the Narrandera Flour Mill, sending products to feedlots and other animal industries in the region. Factors influencing innovation and future development in agriculture in the Riverina Indicators monitoring factors likely to facilitate or inhibit innovation and future development in agriculture are different to those discussed earlier, which measure the contribution of agriculture to wellbeing in a region. While the indicators in this section often use the same data as those that measured value, that data is examined from a different perspective. Indicators measuring value to the community identify whether agriculturally-dependent communities have different characteristics to other communities, with an objective of identifying whether the presence of agriculture is overall having a positive or negative effect on different aspects of community wellbeing. Indicators of factors influencing the future of agriculture, meanwhile, focus on characteristics of farmers and farm enterprises, and whether they are showing change that may facilitate or inhibit the successful further development of agriculture in the region. To do this, the following indicators compare the characteristics of different types of farmers in the region (namely, irrigators of all types, dryland croppers, dryland mixed cropping and graziers, and dryland graziers) to (i) non-farmers, and (ii) to these types of farmers in other regions. By doing this, it is possible to identify whether particular types of farmers in different locations have characteristics indicative of being able to innovate, and able to adapt successfully to change. The results presented show how Riverina farmers are similar to, and different from, their counterparts (same farming types) across NSW and across Australia (Table 21). In the table, results from Riverina farming communities on nine indicators are compared with the results from other farming communities in NSW and Australia as a whole, to see if the indicator scores in the Riverina are higher or lower than in these comparator areas. Nine indicators are discussed in this section: 1. Farm enterprise stress (financial capital available to farmers) 2. Health and wellbeing of farmers (human capital) 3. Confidence in own skills and education (human capital) 4. Self-efficacy (human capital) 5. Financial performance of farm enterprises 6. Financial wellbeing of farm households 7. Farming cultures 8. Natural capital as a barrier to innovation 9. Institutional capital as a barrier/facilitator for agricultural development 38

54 Table 21 Indicators of innovation and adaptability in the Riverina Indicator Riverina higher or lower compared to other regions Riverina farming type with highest level Riverina farming type with score closest to State average Farm enterprise stress Higher Irrigation Mixed cropping Health and wellbeing of farmers Similar Dryland graziers Irrigation and mixed cropping Confidence in skills/education Similar All similar All similar Self-efficacy Slightly lower Dryland graziers Irrigators Financial performance of farm enterprises Farm households financial stress Farming cultures business orientation Higher Dryland cropping Irrigators Slightly lower Irrigators Mixed farming Slightly higher Irrigators Dryland graziers Natural capital as a barrier to innovation environmental problems on land Slightly lower Dryland graziers most likely to note problems Irrigators least likely Institutional capital as a barrier perceptions of local institutions Slightly more positive views Little difference Little difference Indicator 1: Farm enterprise stress (financial capital available to farmers) Overall, farmers in the Riverina have experienced greater on-farm stress than those in NSW or rural and regional Australia in the past five years (Table 22). However, this is the case for only some types of farmers. Irrigators in the Riverina reported much higher levels of stress than irrigators in other regions, while dryland farmers reported either similar, or slightly lower, levels of stress events, compared to the NSW and Australian average. The experience of multiple types of stressful events on the farm can reduce adaptive capacity, and is likely to be doing so for irrigators. 39

55 Table 22 Extent of exposure in the last five years to difficult times on the farm that have had a significant effect on the farm enterprise, reported by different types of farmers Difficult times on farm Mean score (0-84) % with high score (of over 55) n Rural and regional Australia all farmers % 2287 NSW all farmers % 937 Riverina region all farmers % 283 Rural and regional Australia dryland cropping farmers % 183 NSW dryland cropping farmers % 69 Riverina region dryland cropping farmers % 33 Rural and regional Australia dryland graziers % 693 NSW dryland graziers % 269 Riverina region dryland graziers % 44 Rural and regional Australia dryland mixed cropping-grazing 33.8 farmers 35.4% 311 NSW dryland mixed cropping-grazing farmers % 131 Riverina region dryland mixed cropping-grazing farmers % 46 Rural and regional Australia irrigators % 842 NSW irrigators % 369 Riverina region irrigators % 144 Indicator 2: Health and wellbeing of farmers (human capital) Overall, farmers in the Riverina report similar levels of general health and life satisfaction to those in other parts of Australia (Table 23 and Table 24). However, farmers engaged in dryland cropping reported slightly lower general health than dryland croppers in other regions (although with a relatively small sample size, it cannot be said with confidence that this difference is significant). Dryland graziers, meanwhile, report substantially higher general health in the Riverina compared to other regions, and to farmers in general. Irrigators in both the Riverina and other regions are more likely to report poor general health, and less likely to report being in good health, compared to other types of farmers. This is likely to inhibit their adaptive capacities. Table 23 Self-rating of general health of Riverina farmers compared to farmers in NSW and Australia % reporting excellent or very good health % reporting fair or poor health n Rural and regional Australia all farmers 51.7% 15.0% 2086 NSW all farmers 54.2% 13.8% 858 Riverina region all farmers 54.7% 15.7% 270 Rural and regional Australia dryland cropping farmers 52.1% 11.8% 183 NSW dryland cropping farmers 53.9% 10.5% 69 Riverina region dryland cropping farmers 49.2% 14.7% 33 Rural and regional Australia dryland graziers 53.1% 14.2% 687 NSW dryland graziers 57.0% 12.2% 272 Riverina region dryland graziers 66.9% 8.0% 45 Rural and regional Australia dryland mixed cropping-grazing farmers 54.1% 15.2% 311 NSW dryland mixed cropping-grazing farmers 59.8% 12.0% 130 Riverina region dryland mixed cropping-grazing farmers 57.4% 11.8% 46 Rural and regional Australia irrigators 50.2% 16.2% 757 NSW irrigators 50.5% 17.0% 331 Riverina region irrigators 50.5% 20.7% 130 Table 24 Overall life satisfaction of Riverina farmers compared to farmers in NSW and Australia Satisfaction with life overall n 40

56 (average score out of 100) Rural and regional Australia all farmers NSW all farmers Riverina region all farmers Rural and regional Australia dryland cropping farmers NSW dryland cropping farmers Riverina region dryland cropping farmers Rural and regional Australia dryland graziers NSW dryland graziers Riverina region dryland graziers Rural and regional Australia dryland mixed cropping-grazing 73 farmers 311 NSW dryland mixed cropping-grazing farmers Riverina region dryland mixed cropping-grazing farmers Rural and regional Australia irrigators NSW irrigators Riverina region irrigators Indicator 3: Confidence in own skills and education (human capital) No substantial differences were found in confidence in skills and education of farmers in the Riverina compared to the NSW and Australian average. While a slightly smaller per centage of dryland cropping farmers and dryland graziers reported a lack of confidence in their skills and education in the Riverina compared to other regions, small sample sizes, and the small difference in per centage, mean this difference is unlikely to be significant. Table 25 Confidence in access to skills and education reported by of Riverina farmers compared to farmers in NSW and Australia % respondents Mean score (1-7) who disagree with statement n Rural and regional Australia all farmers % 2491 NSW all farmers % 994 Riverina region all farmers % 305 Rural and regional Australia dryland cropping farmers % 186 NSW dryland cropping farmers % 69 Riverina region dryland cropping farmers % 33 Rural and regional Australia dryland graziers % 704 NSW dryland graziers % 274 Riverina region dryland graziers % 45 Rural and regional Australia dryland mixed cropping-grazing 5.3 farmers 8.9% 315 NSW dryland mixed cropping-grazing farmers % 132 Riverina region dryland mixed cropping-grazing farmers % 46 Rural and regional Australia irrigators % 915 NSW irrigators % 392 Riverina region irrigators % 154 Indicator 4: Self-efficacy (human capital) With the exception of dryland graziers, Riverina farmers report lower levels of self-efficacy compared to the average for farmers in NSW and rural and regional Australia (Table 26). This suggests some barriers to future development of agriculture in the region, as having a strong sense of self-efficacy is often critical to achieving desired changes in life. Table 26 Self-efficacy score of farmers living in the Riverina, compared to farmers in NSW and Australia Mean self- % with % with n 41

57 efficacy score (1-7) high selfefficacy low selfefficacy Rural and regional Australia all farmers % 14.5% 2063 NSW all farmers % 14.3% 851 Riverina region all farmers % 15.7% 267 Rural and regional Australia dryland cropping farmers % 11.2% 178 NSW dryland cropping farmers % 10.4% 67 Riverina region dryland cropping farmers % 12.1% 33 Rural and regional Australia dryland graziers % 14.1% 682 NSW dryland graziers % 11.4% 272 Riverina region dryland graziers % 8.9% 45 Rural and regional Australia dryland mixed cropping-grazing 4.9 farmers 17.9% 16.0% 307 NSW dryland mixed cropping-grazing farmers % 15.3% 131 Riverina region dryland mixed cropping-grazing farmers % 13.0% 46 Rural and regional Australia irrigators % 15.0% 754 NSW irrigators % 17.7% 327 Riverina region irrigators % 20.2% 129 Indicator 5: Financial performance of farm enterprises Farmers in the Riverina are more likely than those in other regions to report having a profitable farm enterprise at the time of completing the survey in late 2013, and less likely to report their enterprise was making a loss (Table 27). This was the case for dryland croppers and dryland graziers, but not for dryland mixed croppers-graziers, or for irrigators (both of these groups reported similar levels of profitability versus loss-making to irrigators in NSW and Australia as a whole). Many farm types are therefore reasonably well-placed to adapt to change in future. Table 27 Self-reported farm enterprise profitability of farmers living in the Riverina, compared to farmers in NSW and Australia Mean score (1-7) % making loss % making profit n Rural and regional Australia all farmers % 46.3% 2063 NSW all farmers % 46.6% 851 Riverina region all farmers % 53.3% 267 Rural and regional Australia dryland cropping farmers % 68.1% 185 NSW dryland cropping farmers % 70.5% 69 Riverina region dryland cropping farmers % 80.6% 33 Rural and regional Australia dryland graziers % 40.6% 696 NSW dryland graziers % 40.7% 274 Riverina region dryland graziers % 58.5% 45 Rural and regional Australia dryland mixed cropping-grazing farmers % 55.3% 315 NSW dryland mixed cropping-grazing farmers % 55.7% 132 Riverina region dryland mixed cropping-grazing farmers % 54.5% 46 Rural and regional Australia irrigators % 45.7% 855 NSW irrigators % 45.2% 383 Riverina region irrigators % 44.3% 149 Indicator 6: Financial wellbeing of farm households Generally, farmers living in the Riverina reported slightly lower levels of severe financial stress compared to those living in other regions (Table 28). However, the differences were relatively small, and may not be significant. As noted earlier in this report, farmers overall were less likely to report experiencing financial distress events in their household compared to non-farmers and in general, financial stress does not appear to be a major inhibitor to change adaptation in the Riverina at present. 42

58 Table 28 Level of household financial stress reported by farmers living in the Riverina, compared to farmers in NSW and Australia % experiencing 3 or more financial stress events in last 12 months n Rural and regional Australia all farmers 3.9% 2491 NSW all farmers 3.7% 994 Riverina region all farmers 2.7% 305 Rural and regional Australia dryland cropping farmers 1.9% 186 NSW dryland cropping farmers 3.4% 69 Riverina region dryland cropping farmers 0.0% 33 Rural and regional Australia dryland graziers 2.7% 704 NSW dryland graziers 2.9% 274 Riverina region dryland graziers 2.4% 45 Rural and regional Australia dryland mixed cropping-grazing farmers 1.5% 315 NSW dryland mixed cropping-grazing farmers 0.9% 132 Riverina region dryland mixed cropping-grazing farmers 0.0% 46 Rural and regional Australia irrigators 5.5% 915 NSW irrigators 5.2% 392 Riverina region irrigators 3.7% 154 Indicator 7: Farming cultures Farmers in the Riverina are slightly more likely to have a business orientation to farming, meaning they consider their farm enterprise to be a business enterprise (Table 29). This is a characteristic which enables decisions to be made on the basis of their effects on profitability. Riverina farmers were also more likely to report that having autonomy on their farm was important to them. This indicates a high level of self-direction, but can be associated with less interest in collaborating with other farmers to achieve desired outcomes (for example, to coordinate production to access a new market). Farmers in the region reported similar levels of emphasis on stewardship and lifestyle aspects of farming to those in other regions, although graziers reported a higher level of stewardship orientation. Table 29 Types of farming-related identity reported by farmers living in the Riverina, compared to farmers in NSW and Australia Business orientation Stewardship orientation Lifestyle orientation Autonomy orientation n Rural and regional Australia all farmers NSW all farmers Riverina region all farmers Rural and regional Australia dryland cropping farmers NSW dryland cropping farmers Riverina region dryland cropping farmers Rural and regional Australia dryland graziers NSW dryland graziers Riverina region dryland graziers Rural and regional Australia dryland mixed cropping-grazing farmers NSW dryland mixed cropping-grazing farmers Riverina region dryland mixed croppinggrazing farmers Rural and regional Australia irrigators NSW irrigators Riverina region irrigators

59 Indicator 8: Natural capital as a barrier to innovation Farmers in the Riverina, with the exception of dryland graziers, are less likely than farmers in other parts of the country to believe that there are important environmental problems on their land (Table 30). Irrigators are particularly unlikely to report that there are environmental problems on their land. This suggests that perceptions of environmental degradation are unlikely to be acting as a barrier to investing in, or developing, agricultural activities. Table 30 Perceptions of environmental degradation on their land reported by farmers living in the Riverina, compared to farmers in NSW and Australia Mean score (1-7) n Rural and regional Australia all farmers NSW all farmers Riverina region all farmers Rural and regional Australia dryland cropping farmers NSW dryland cropping farmers Riverina region dryland cropping farmers Rural and regional Australia dryland graziers NSW dryland graziers Riverina region dryland graziers Rural and regional Australia dryland mixed cropping-grazing farmers NSW dryland mixed cropping-grazing farmers Riverina region dryland mixed cropping-grazing farmers Rural and regional Australia irrigators NSW irrigators Riverina region irrigators Note: higher levels indicate a higher proportion of farmers believe there are important environmental problems on their land Indicator 9: Institutional capital as a barrier/facilitator for agricultural development Farmers in the Riverina are slightly more likely to feel confident in their local institutions compared to those in NSW and rural and regional Australia (Table 31). This was the case for all types of farmers except irrigators, who had similar confidence in local institutions to the average. This suggests that confidence in local institutions is not a significant barrier to agricultural development in the region. Table 31 Perceptions of local institutions reported by farmers living in the Riverina, compared to farmers in NSW and Australia Mean score (1-7) n Rural and regional Australia all farmers NSW all farmers Riverina region all farmers Rural and regional Australia dryland cropping farmers NSW dryland cropping farmers Riverina region dryland cropping farmers Rural and regional Australia dryland graziers NSW dryland graziers Riverina region dryland graziers Rural and regional Australia dryland mixed cropping-grazing farmers NSW dryland mixed cropping-grazing farmers Riverina region dryland mixed cropping-grazing farmers Rural and regional Australia irrigators NSW irrigators Riverina region irrigators

60 Note: higher levels indicate higher trust in local decision making institutions to be competent, fair and representative. While trust in local institutions is slightly higher in the Riverina than in NSW and rural and regional Australia, the consultations showed that there are differences across the region in terms of how local government is perceived. Some local governments are seen as embracing opportunity, facilitating change and responding to challenges more openly and effectively than others. The importance of the quality of local leadership was raised in many of the consultations as an essential element in facilitating agricultural development. Conclusion This section has drawn on the 2013 Regional Wellbeing Survey to look at factors influencing innovation and the future development of agriculture in the Riverina. Looking through the lens of the seven capitals, some attributes of agriculture in the Riverina are facilitators of innovation, and the future development of agriculture. These include: Better financial performance; Less financial stress; More business oriented farmers; Natural capital seen as strong; and Institutional capital perceived positively. All these indicators provide a reasonably good foundation for ongoing innovation and adaptation amongst Riverina farmers. Other indicators were similar to levels seen in the rest of NSW, with the exception of two factors that could potentially inhibit innovation and agricultural development. These were: Higher levels of farm enterprise stress; and Lower levels of self-efficacy. 45

61 What are the issues, priorities and impediments to increasing the value of agriculture in the Riverina? This chapter discusses the range of top-priority issues and impediments to improving the competitiveness of agriculture in the Riverina. The issues and discussion have been drawn from the literature review, interviews and innovation survey. Eight issues are discussed in some detail: Labour and skills; Water; Communication with supply chain; Changing global demand; Government policy and regulations; Aggregation of farms; Value adding; and Transport. Table 32 provides a summary of the drivers influencing the constraining issues identified in the Riverina. Each is discussed in more detail throughout this chapter. The issues and drivers were identified through the literature review and consultations (meetings and interviews) conducted for this project. Table 32 Main issues and key drivers in the Riverina Issue Drivers Higher level skills in short supply Labour and skills Few young people joining industry Some shortages of labourers Vulnerability to change in rainfall patterns Water Few low cost efficiency options left Vulnerability to reduced allocations Signs of lack of trust in some chains Communication with supply chain Price pressures on growers Poor markets for seconds Poor understanding of emerging market needs and consumer tastes Changing global demand Limited ability to adapt to meet emerging needs Restrictions on activities Government policy and regulations Costly compliance burdens Inefficiencies induced in wheat transport Economies of scale pressures Aggregation of farms Loss of people and services from smaller communities Large scale processing capacity eroding Regional branding limited to select commodities Value adding Little cohesion amongst niche producers Poor links along niche supply chains Deficiencies in road infrastructure Transport Transport costly 46

62 In some cases, issues impact on different agricultural activities in different ways, and are much more pronounced for some than others. Where this is the case, the issues and impediments are discussed separately for broadacre cropping, irrigation and mixed farming. Labour and skills Overall, most sectors of the agricultural industry in the Riverina are experiencing some issues relating to labour and skills. Particularly, there is a perceived lack of reliable, good quality employees, and a widely acknowledged shortage of trained professionals, such as agronomists. A Riverina Agricultural Education Alliance workshop in 2013, attended by 28 stakeholders across government, education, training, industry and community sectors, concluded that the labour and skills issues in the region do not result from a lack of resources or education facilities, although education facilities have since been cut, and are concentrated in the eastern Riverina. Both the RDA Riverina (2014) and the Alliance suggest that better links between different parts of the education system and also with industry are required, to ensure people enter the industry and learn the required skills. The RDA Riverina claim their partnership broker programs have been successful in assisting with the transition into the agricultural industry. Poor perceptions of the opportunities within agriculture are also a problem for ensuring sufficient human capital in the industry. The RDA Riverina is just one organisation that has been working to improve this image, through videos that promote the region's agricultural industry. Both the Alliance, and people interviewed throughout the region, emphasise the ageing workforce and the seasonal nature of work as problematic for hiring reliable and skilled staff when required. In the Sturt Employment Area, which includes part of the Riverina and extends further south, in 2012, 63 per cent of people employed in agriculture were farmers or farm managers (Sainsbury 2012). This percentage is likely to fall as farms are aggregated, and as the RDA Riverina have speculated, there are likely to be increasingly specialised non-manager opportunities in agriculture as large businesses expand. Looking across all industries in the Sturt Employment Area, in 2012, one-fifth of technical trade positions and machinery operator or driver positions were unfilled, while all labouring positions were filled (Sainsbury 2012). The interviews conducted for this study echo this throughout the wider Riverina, reporting that it is difficult to find good quality employees who already possess the necessary driving, mechanical or other non-professional skills. The Riverina RDA (2014) explains that many semi-skilled workers, in both on-farm and manufacturing parts of the agricultural industry, were lost as a result of the long period of drought in the 2000s. The RDA also notes that the resulting skill shortage has been partly eased by workers recruited on 457 visas and through the regional skilled migration program. New skills, such as understanding marketing, appear to be increasingly important to the success of agricultural producers, and are essential to harnessing opportunities for value-adding. The high cost and limited availability of labour has led to technical innovation, including both increased machinery size and more automated systems. Some researchers have suggested there are opportunities to export this and other innovation overseas. Broadacre cropping Farmers in broadacre cropping regions report difficulties in acquiring good quality labour. One major strategy to cope with the limited availability and high cost of labour in the region is by increasing the size of machinery. Some farmers have also tried employing untrained, travelling workers, such as backpackers, to fill their seasonal need for labour. As most work involves operating large and expensive machinery, employing inexperienced, untrained workers creates a significant risk of injury or damage to machinery. Thus, skills such as heavy vehicle licences, welding, and knowledge of machinery maintenance, are valued in broadacre cropping, in both dryland and irrigation areas. Obtaining heavy vehicle licences is a significant expense for farm workers or their employers. 47

63 The Narrandera flour mill, which processes wheat from the region, suggested that labour was easy to find. This difference between the on- and off-farm workers may be partly explained by the mill's preparedness to train their semi-skilled staff on site, the stability of their labour requirements, or the nature and location of the work. There is also a shortage of agricultural professionals with both university training and local experience, in disciplines such as agronomy. One agronomist reported that his current staff were unable to meet the demand for their services. However, the high cost of the time involved in transitioning a university graduate to a reliable staff member with local expertise prevented the agronomy business from expanding. Good agronomic advice can increase the efficiency of crop inputs such as fertilisers, herbicides and pesticides, and increase crop yield. As such the effect of this limitation to growth of private agronomic businesses, coupled with the continued cuts to government-funded professional advice, may reduce the potential competitiveness of the region. Irrigation In irrigation areas, a shortage of labourers with adequate machinery experience is also an issue. It seems that basic ongoing labourer positions may be easier to fill. Some producers noted that the reluctance of younger generations to return to their parents' farms resulted in a loss of region-specific knowledge and other general skills that are built up through generations of experience. Itinerant workers, including backpackers and grey nomads, are relied upon for picking citrus, and also for some work within the cotton industry. Griffith City and Leeton Shire Councils (2013) report that the citrus industry has had little difficulty in finding fruit pickers, as the region has an established reputation with travellers. The cotton industry has helped attract workers by offering long shifts and providing accommodation, making the seasonal work attractive financially. Conditions of working holiday visas, which allow for extension of visas if the visa holder does at least 88 days of work in rural areas, promote workers coming to the region. As with broadacre areas, there are some concerns about the experience, skills and reliability of itinerant workers who may have little knowledge of the industry. Itinerant workers such as backpackers and retirees do bring some tourism and other value to the region during their visits; further analysis may show their overall contributions to the region. While mechanisation of picking is not a technically viable option for citrus, it has been adopted for grapes, significantly reducing labour needs. Rice growing and processing has also been increasingly mechanised. Although professionals in dryland areas suggested that 'trendy industries', such as cotton in irrigation areas, may tend to attract more professionals, interviewees in irrigation areas still identified a shortage of professionals in agronomy, water management and related areas. The expertise that does exist is believed to be of high quality, and has potential for export. Mixed farming No particular issues were identified in relation to labour and skills for mixed farming enterprises. 48

64 Water Water is the most obvious constraint to increasing the gross value of agricultural production in the Riverina. Throughout the region, agricultural producers consistently listed rainfall, climate and availability of water as the most significant constraint to growth. Water is an increasingly important issue as the region is expected to become hotter and drier, with more summer rainfall, by 2050 (MCMA 2013). The long drought in the late 1990s and early 2000s illustrated the significance of water and the importance of the agricultural industry to the Riverina as the region suffered, and many people left the region to pursue employment in other areas. The local responses to drought have also emphasised the resilience of local communities (MCMA 2013) and in some cases led to more water-efficient processes or investment in value-adding or diversification of industry. The availability of water for irrigation also decreased as a result of low rainfall in the drought, and changes to water allocations under the Murray Darling Basin Plan, water buy-back schemes and other aspects of government water policy reform in the past two decades. The effects of less irrigation water will likely have impacts outside of the irrigation areas themselves, because most of the health, education, retail and other services are concentrated in larger rural centres such as Griffith and Leeton (established on the basis of irrigation industries) and Wagga Wagga (Meyer 2005). A detailed study modelling the effects of the rice industry on regional economies (Mushtaq et al. 2014) demonstrates that reduced yields of rice have significant flow-on effects due to the rice processing that occurs in the region and associated jobs. This intersects with issues of declining rural townships throughout regional Australia, and the Riverina particularly. Although not frequently mentioned by industry representatives spoken to, groundwater should also be considered in ensuring the future opportunities for agriculture in the Riverina. Broadacre cropping In the areas of the Riverina dominated by dryland cropping, changing climate may have particularly large effects. Some of these areas may be considered marginal cropping areas, so in years of insufficient rain, croppers, aided by agronomists, need to carefully consider decisions about inputs to minimise losses, rather than maximising yield. If rainfall is insufficient for crop growth, the costs associated with applying fertilisers, herbicides and other chemicals will outweigh the benefits. Narrandera Flour Mill reports that growers have been able to maintain quality during low rainfall years, although overall yields of wheat were low. The Regional Wellbeing Survey showed that dryland farmers were much less concerned about downriver water flows, and in fact tended to favour more water for the environment. Irrigation For irrigation areas, the decreasing availability of irrigation water, as a result of the reduced allocations from the Murray-Darling Basin Plan, and water buy-back schemes, is the biggest issue threatening the viability of individual enterprises and whole industries. Producers see the rising costs of water as one part of an ongoing input cost squeeze. Many costs associated with irrigation, such as charges for the maintenance of the irrigation authorities and infrastructure, are ongoing, regardless of whether there is sufficient water available for the season. When water is available and affordable, there are still challenges associated with delivery. For example, the Murrumbidgee Irrigation Authority's infrastructure is not always sufficient to deliver the quantities of water at the speed desired by growers for maximum benefit to their crops (such as rice and cotton). For citrus growers, there are different issues with delivery, as they require water outside 49

65 the summer irrigation season utilised by irrigation croppers. In winter, the Murrumbidgee Irrigation Authority does not deliver water, so it is not accessible to horticulture at all times it is required. Water availability concerns are affecting the wellbeing of farms and irrigation communities. The human and social capital work reported above showed that the irrigation communities showed lower levels of wellbeing on several indicators, as well as higher levels of farm financial stress. The irrigation industry has responded to the increasing pressures on water, and the rate and implementation of innovation is significant. For annual growers of rice and cotton, flexibility has been essential to success, as they choose to plant irrigated crops based on predictions of the availability of water and commodity prices. This flexibility may be affected by high infrastructure costs, but has also been enabled by diversity of products grown on these farms. For permanent horticultural plantings such as grapes, citrus and other fruit trees, water is required every year regardless of season. This is reflected in the higher security water entitlements, as they are given higher priority access to irrigation water than croppers with general security entitlements. Short-term water availability forecasts would help growers to make these decisions. Water efficiency in the Riverina has improved dramatically over the past two to three decades. The Australian rice industry pride themselves on using 50 per cent less than the world average amount of water per kilo of rice produced (RGA 2014). Both the rice and cotton industries have their water use heavily regulated, and penalties apply for the overuse of water. Improvements in water efficiency have been made possible through the development and enthusiastic adoption of water-saving technologies, including recycling water on-farm and new types of irrigation delivery systems. Other innovations, such as precision agriculture (including seeding, spreading and spraying aided by GPS technologies), and stubble retention to retain soil moisture, have also contributed to greater yields per megalitre of irrigation water applied. Irrigation researchers suggest there is still potential to improve water efficiency as per cent of water applied to a paddock is lost, in that it is not used directly by the crop plant. Currently, new technologies such as polymers that can be applied to reduce evaporation are being developed and trialled. Recent history demonstrates that growers are willing to implement water-saving initiatives, when the benefits have been proven and they are cost-effective. Further increases in yield per megalitre of water are likely to be limited by their economic viability. Although increasing efficiency and automation of water systems has led to significant savings in both water and labour costs, it has the undesired result of increasing energy use, increasing the pressure of rising energy prices. As some members of the irrigation industry have suggested, renewable energy such as solar may be a worthwhile investment to counter this pressure, if sufficient capital can be raised to cover the initial costs. The irrigation industry has also made significant improvements to other aspects of water management, such as reducing salinity and improving management of shallow water tables (MCMA 2013). Mixed farming Although the issue has received less publicity, agricultural producers in mixed cropping and grazing areas also have concerns about changes to water access as a result of government policy, namely the 2012 Water Sharing Plan for Murrumbidgee Unregulated and Alluvial Water Sources (MCMA 2013). Supply chains It is common for farmers to argue that they are 'price takers, not price makers'; this sentiment was echoed by many of the agricultural producers in this study. As they indicated, the terms of trade for Australian farmers are often not favourable. There are many small agricultural producers and few market options, affected by the duopoly of Coles and Woolworths, and large trading companies such as Graincorp. This vulnerability of producers is an ongoing concern. Some farmers interviewed in the 50

66 region have addressed this issue through value-adding and even selling direct to the consumer (see Case Study: Junee Liquorice and Chocolate Factory). While there are still many ways that yield may be improved, and ongoing investment into improved production is important, there is also potential to improve the profits and economic value of agriculture to the region by better ensuring the product meets the standards desired by all parts of the supply chain, and ultimately the consumer. Many of the agricultural production and processing success stories in the region demonstrate an emphasis on consumer desires. For example, selecting popular citrus varieties that are not widely grown in Australia has allowed one grower to command a higher price while there has been an oversupply and low prices of commonly grown varieties of oranges. For horticulture such as tree fruits, tree nuts and grapes, it can be difficult to respond to changing demands, because the trees and vines take years to mature. Better marketing of varieties soon to come into season, or in abundant supply, may be required. The Riverina wine industry is well developed, but suffers from the changing needs of grape growers and wine consumers, and managing the lead and lag times between grape availability and market preferences for particular varieties. Changing consumer preferences and overseas competition are ongoing challenges in the industry, with many growers seeking other forms of income from their grape products in order to reduce exposure to these risks Case study: Riverina wine industry Riverina wine industry: growers and winemakers making diverse use of an established supply chain The Riverina wine industry is centred on Griffith and Leeton in the Murrumbidgee Irrigation Area, and comprises 400 grape growing enterprises, over a dozen wineries, and a large number of supporting industries including engineering, fabrication, transport, packaging suppliers, and agriculture supply providers. Riverina wineries now produce one in every four glasses of Australia s wine, with a gross value of production in excess of $1billion. Riverina wineries employ around 1,900 full time and 500 part time paying wages of $135 million, while a further 1,000 FTEs are engaged in grape growing with a gross value in excess of $100 million. The Riverina wine industry processes up to 400,000 tonnes of wine grapes, which are processed during January to April each year. It produces the equivalent of more than 30 million cases of wine annually. Around one half of this production is exported, providing a valuable contribution to Australia s balance of payments. Currently the market is over supplied in specific types of grapes, which has driven prices down. There is little leadership from buyers in regard to types of grapes they demand; for example, Chardonnay is out of fashion and Sauvignon Blanc from New Zealand has saturated the market. Growers can t change their varieties quickly for the sake of fashion. There are 22,000Ha of wine grapes in the Riverina, comprising over 50 different varieties of wine grapes. The most common varieties grown are Chardonnay, Semillon, Shiraz and Cabernet Sauvignon, although many alternative varieties are now being grown to offer some interesting new wines such as the Italian varieties Nero D Avola, Fiano, Montepulciano and Greek variety Aglianico. Many wineries in the Riverina are trying different ways to market, and have produced other alcoholic beverages and flavoured wine pre-mixers such as green tea and ginger, while others are producing beers and ciders. With changes occurring in the sector, growers are looking at ways to diversify and innovate. Opportunities are presenting in the areas grape seed oil, red and white wine vinegars, and verjuice, although some growers are concerned about their reputation as wine growers. Waste presents another opportunity. Most waste is currently used for mulch, and some cattle feed, but there is no significant value adding. Due to the industry s rapid growth, Griffith has huge processing capacity and many smaller satellite areas are pulling out of processing. As a region, the Riverina has an international reputation as an environmentally responsible industry producing products with minimum impact on the environment. 51

67 In some sectors of the agricultural industry, a lack of trust between suppliers and buyers appears to be limiting the exchange of information, and therefore the ability of growers to best meet buyer demand. This history of mistrust between growers and buyers is an issue in the wine industry. There is no longer independent data produced by government, and growers can be sceptical about market predictions produced by other part of the industry. Growers and wine-makers tend to form trade relationships based on personal connections, but the opportunity to form partnerships may be better improved. Growers of annual crops can respond more quickly to changing demands of buyers. However, this is also dependent on trust and information flows between growers and buyers or processors. A flour mill operator interviewed reported that growers were often being reluctant to share information about the wheat they are selling to the mill, suggesting this may be influenced by the requirement to pay royalties on some varieties. Growers agree that they are hesitant to share this information with buyers, but also cite a fear of their grain quality category being downgraded based on the buyer s assumptions about how the variety usually performs. This concern prevents open communication about which varieties and growing techniques are used, therefore preventing processors from producing generalised feedback to the growers on which varieties are producing the best final products. In industries where growers have more ownership over the processing, communication appears to be much more effective. SunRice, being a grower-owned cooperative, actually controls the amount of different varieties grown each year. Southern Cotton s gin in Whitton was established in 2012 at the initiative of growers. When delivering to the gin, growers fill out detailed information, including the paddock name, cotton variety, genetic modification, watering method and harvesting method. Bales of cotton are fully traceable, and information on the final quality of the product can be matched with the growers data so they can alter their growing practices to improve quality. This issue of supporting the supply chain is important to many in the region s supply chains, with one warehouse operator saying: We always look for added value, we look after the processors, help the carriers with labelling, stacking the trucks in new ways so nothing shifts, and improve our processes around traceability. Supply chain case study: Prunes To illustrate the challenges affecting the smaller and more specialised supply chains, a series of interviews were performed with businesses involved in the prune supply chain. Prunes have been grown in Australia since the 1890s. The first sizeable crop in NSW was harvested in 1927, with a recorded production of 1,000 tonnes. It wasn't until the 1980s that considerable expansion of the industry took place. Today, it s a small but important industry sector to the Riverina. The region is the largest prune growing area in Australia, with around 70 farmers producing up to 3,000 tonnes of premium quality Australian prunes every year. Prune production is one of the very few Australian horticultural sectors that is continuing to grow, with farmers planting new trees every year. The prune sector is generally reasonably representative of other small volume niche agricultural products such as nut, figs, and pomegranates. Indeed, many farmers grow a range of products, including prunes. PLUMS READY FOR PICKING AND DRYING Generally Australian prunes are dried on the farms where they're grown. Farmers pick them in late 52

68 summer and early autumn, when the fruit has ripened and the sugar levels are just right. At that stage, the fruit is hanging like large purple grapes on the tree branch. The prunes (dried plums) are then graded into various sizes in preparation for processing and packaging. The fruit is picked very quickly by mechanical shakers and immediately dried overnight in large hot-air tunnels on the farm, so that the picking and drying process is complete within 24 hours. The prunes (dried plums) are then graded into various sizes in preparation for processing and packaging. The fruit will lose around two thirds of its moisture in the drying process, so three tonnes of freshly picked plums will make just one tonne of prunes. Once dried, the prunes can be stored for up to two years. The prunes go through a pitting process which removes the stone from the prune. The fruit then passes through a laser scanner which is used to detect pits or pit fragments that may remain following the pitting process. All Riverina fruit goes to Angas Park for packaging and sales to the world market. Angas Park is a factory formerly owned by Sunbeam and now owned by Bright Foods, a large Chinese Company. Angas Park sorts the entire crop, and juices the second grade fruit. Angas Park is a volume exporter of quality Australian tree fruit and has long-term dealings with Europe, North America, Asia and Oceania. Products are exported in 20-foot containers, with full containers consisting of approximately 20 metric tonnes of fruit. PLUMS BEING PICKED, AND DRIED INTO PRUNES Prune Grower X has a small prune growing operation over six hectares, the equivalent of 1,600 of sugar plum trees for prunes. They are in the process of removing 12 hectares of grapes in readiness to plant more plums, for a future total of 20 hectares. Sugar plum trees take approximately seven years to reach optimum production, although some hand picking can occur at three years. However, it is essential to make sure young trees don t produce too much fruit, resulting in fruit overload and tree stress. Their average yield per hectare is six tonnes of dried weight. They have also been growing wine grapes, but are discontinuing this operation as wine grape prices are low, and have been for some time. Table 33 shows the average yields of prunes and price received per tonne in each of the last five years. Table 33 Average yields of prunes and price received per tonne in each of the last five years $1,975 $1,591 $1,497 $1,135 $1, tonne dried 35 tonne dried 35 tonne dried 35 tonne dried 60 tonne dried 53