RESEARCH, DEVELOPMENT AND EXTENSION PLAN

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1 RESEARCH, DEVELOPMENT AND EXTENSION PLAN Grower & Industry Consultation Discussion Paper grdc.com.au

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3 The GRDC Research, Development and Extension (RD&E) Plan will describe the investment priorities and strategies the GRDC will use to deliver on its purpose: To invest in research, development and extension to create enduring profitability for Australian grain growers For the Strategic RD&E Plan, GRDC will develop a strategic framework and investments to deliver against the broad components of profitability through these five profit drivers (yield, price, costs on farm and post farm gate and risk) and three core frameworks (data management and analytics, grower communications and adoption, and capacity and skills) that underpin all investments. While the plan has a legislated requirement to extend over five years, 1 the long term nature of R&D and the time lags associated with adoption and impact on-farm necessitate a broader, long term assessment of the requirements of grain growers to remain profitable in an increasingly competitive international environment. As such, this plan will focus on outcomes delivered over the longer term of years. The strategic focus over a year timeframe requires assumptions to be made on future grower needs and RD&E priorities. Some assumptions will prove to be inaccurate or will change in response to adjustments in global grain supply and demand dynamics, global political and environmental changes and as new production opportunities and constraints are identified. Likely global and domestic trends, and the potential impact on investment opportunities are explored in the background of this document. To adapt to this continually evolving environment, GRDC is adopting a more agile approach to strategic planning and investment management. This will involve the regular review of strategic priorities as well as active management of investments targeted at specific outcomes incorporating flexible R&D discovery and adoption approaches. The aim will be to maximise impact and embrace a greater level of risk necessary to deliver transformational, high impact outcomes. Partnerships and alliances with research collaborators and the private sector will play an increasingly important role in the integration and adoption of new practices and technologies. The GRDC will bring together representatives from specialist research areas and various industry sectors, including agronomists, growers and scientists, to plan the required RD&E to build the grains industry s capacity for change. As well as involving large numbers of grain growers in developing, testing and implementing new technologies and production systems, the GRDC will encourage grain growers, researchers and the wider industry to participate throughout the research cycle. INTRODUCTION 1 Primary Industries Research and Development Act 1989 (Cwth), section INTRODUCTION GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN 1

4 HOW TO USE THIS DOCUMENT This consultation is important in identifying the key priorities and investment opportunities that will deliver enduring grower profitability. However, this will not be the only opportunity for growers, researchers and other stakeholders to contribute ideas and priorities. Under the agile investment strategy being adopted, stakeholders are encouraged to share their ideas for investment to deliver grower profit with GRDC at any time. GRDC will undertake regular reviews of strategic direction and priorities and maintain ongoing dialogue to ensure that our focus is aligned with the needs of growers and ensure maximum return on investment. The document is split into four sections: 1. Background covering an overview of the grains industry currently, global trends in supply and demand for key crops, a SWOT analysis of the Australian grains industry and interpretation of how these factors might influence priorities in the next RD&E plan. You have the opportunity in this section to comment on any aspect of the background information, SWOT or interpretation including highlighting any pertinent information that has not been included. 2. The purpose section outlines the focus on grower profitability as the key focus of GRDC and outlines how the various aspects of yield, price, cost and risk impact on profit. The section also details core frameworks around data management analytics, grower communication and adoption, and capacity and ability, and how these frameworks are essential to the delivery of GRDC s purpose. You have the opportunity in this section to comment on GRDC s purpose and the relative importance of key profit drivers and core frameworks in meeting that purpose. 3. The investments and delivery section highlights the investment opportunities under each profit driver at a high level. The intent being to develop detailed plans and active management of investments for highest priority opportunities aligned with purpose. Throughout the period of the plan, all stakeholders are encouraged to submit new investment ideas and where these are considered a priority, investment budgets will be adjusted to accommodate them. In this section feedback can range from advising on the relevant importance of the opportunities already identified through to the provision of new ideas for investment not already covered. 4. The feedback section outlines how you can provide feedback in a form that suits you. 2 GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN INTRODUCTION

5 BACKGROUND CURRENT INDUSTRY OVERVIEW Agriculture has always been a significant part of the Australian economy and grains, together with livestock (for slaughter) is a major driver of the total value of agriculture to the economy. Grains production contributed $18.1bn of Gross Value of Production (GVP) in , 28% of the total GVP of agriculture. Australian grains production remains dominated by wheat followed by barley, canola, sorghum and pulses. More recently greater demand and improved prices and price stability of pulses (mostly chickpeas and lentils) have driven greater production and gross returns from these crops (Figure 1). The growth in the value of chickpeas and lentils in particular is such that these crops are the major drivers of profitable farming systems in large parts of the northern and southern GRDC regions respectively. Table 1 provides a summary of major crop production, value, major markets market and uses over the past five years. Notably, seasonal production and regulatory constraints, such as the recent decision of the Indian government to impose a 30% tariff on pulse imports, can have short term impacts on production volumes and value. However, for strategic planning purposes, a longer-term consideration of trends is required as discussed in the next section. Figure 1. Gross value and production of key grain commodities ABARES 9,000 35,000 8,000 30,000 Gross Value Crop Production ($m) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 25,000 20,000 15,000 10,000 5,000 Production (kt) Pulses $m (LHS) Canola $m (LHS) Wheat $m (LHS) Barley $m (LHS) Pulses kt (RHS) Canola kt (RHS) Wheat kt (RHS) Barley kt (RHS) BACKGROUND GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN 3

6 Table 1. Major crop information summary Figure 2. Long run trend in real wheat prices (from LMC 2017) CROP PRODUCTION (MT p.a.) VALUE ($M) MAJOR MARKETS MAJOR USES 600 WHEAT ,400 Indonesia, Vietnam, China, Japan, S Korea, Philippines, Malaysia, Middle East BARLEY 9.6 2,300 China, Japan, Taiwan, Saudi Arabia Noodles, bread, steamed bun, pasta, cakes Stock feed, beer, distilled spirit, malt extract SORGHUM Domestic, China Stockfeed, Baijiu (spirit) CANOLA 3.4 1,680 EU, Japan, China, UAE BioFuel, food grade oil, stock feed CHICKPEA India, Pakistan, Bangladesh Human consumption hummus, soups, curries, besan (flour), dhal LENTIL India, Pakistan, Bangladesh Human consumption soups, curries, dhal GLOBAL TRENDS SUPPLY AND DEMAND GRDC has previously undertaken a number of global grain supply and demand studies to inform strategy and investment decisions. 2,3,4 For almost a decade extending from 2005 to 2015 there was a strong relationship between cereal prices (predominately wheat) and the demand for ethanol for fuel. While the demand for ethanol was largely met by maize production, the diversion of maize for ethanol production had the effect of increasing demand for wheat to fill the production gap previously filled by maize. More recently, the demand for maize for ethanol has slowed. In response, wheat demand has contracted, and prices have declined. Overall wheat prices have largely been declining since 1960 and the recovery driven by ethanol during the mid-2000s seems to have ended (Figure 2) US$ per tonne The other main driver of grain demand and price is food consumption. The recent trend of higher incomes, particularly in developing countries, driving greater consumer demand for meat remains strong. The impact of this is unsurprisingly an increasing demand for feed grains. However, while the initial growth in demand for meat was primarily for red meat, more recent demand has focussed more on chicken, pork and fish. Chicken, pork and fish have very different nutritional requirements, feed conversion ratios and, most notably, a greater requirement for protein vs carbohydrate in their diets. The implications of this is reduced demand for high carbohydrate grains such as wheat and greater demand for high protein grains or meals such as pulses and oilseeds. In addition, further decline in demand for wheat will mirror an ongoing continual decline in ethanol demand. This may seem to portray a gloomy outlook for wheat, Australia s most important crop. However, there are a number of positive trends with regard to wheat demand and prices. Firstly, in regions with rapid income growth there is ongoing opportunity for consumers to switch from traditional sources of carbohydrate such as rice to more differentiated products such as noodles and bread. In doing so we expect to see increasing demand for wheat. 2 Global agriculture and the role of Australia Guiding the allocation of GRDC s research budget. March Update on the drivers of global agriculture and the role of Australia. December While care has been taken to try an ensure accuracy, the trends and estimates described are forward looking and therefore may be subject to change. 4 GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN BACKGROUND

7 Notable among these is the likely continuing growth in demand for wheat from both India and SE Asia where income growth is expected to drive further shifts away from rice to wheat products such as wheat based noodles and bread. India and SE Asia are markets that Australia has historically supplied and in which Australian grain has a good reputation for cleanliness and functionality as well as enjoying a freight advantage. Maintaining and growing these markets in the face of competition from emerging exporters will require ongoing efforts to ensure these specific customer demands are met. In addition, it is anticipated that growing beer consumption in a number of developing countries will continue to drive increasing demand for malt barley. The increased demand for malt barley is expected to be relatively small and to be comfortably met by current growth in yield from the same area of production. In contrast to cereals, the demand for oilseeds is expected to continue to rise. Soybean will continue to be the preferred oilseed supporting both vegetable oil consumption as well as providing high protein animal feed. Growing demand for both protein meal and vegetable oil will also support increasing demand for canola. Restrictions in the potential for expansion of canola production in North America means supplies cannot grow as rapidly presenting a potential opportunity for supply of canola from Australia. However, ongoing demand for canola, particularly in Europe, will also require greater demonstration of production sustainability and providence that is likely to feature heavily in customer demand in the future. The increasing trend in demand from India for cool season pulses (chickpea, lentil and field pea) appears unlikely to diminish in the near term. The population in India and much of the sub-continent consists of a large proportion of vegetarians. While for many other countries the greater demand for protein will be met by meat, in nations with a high proportion of vegetarians, the increasing demand for protein will be largely met by pulses. Another trend likely to impact on the demand for pulses is the increasing health concerns associated with red meat consumption particularly in developed countries. A counter to this trend is the fact that the preparation of most pulse dishes is relatively time-consuming and this could limit the desirability of pulses in both developed and emerging countries. Further development of easy to prepare pulse dishes and snack foods will be a significant factor in determining future demand for pulses. Further demand for niche products arising from pulse processing (e.g. protein fractionation) is likely to result in increasing demand for pulses. Refer to questions 1 and 2 on page 16 to provide feedback on the sections in pages 4 and 5. BACKGROUND GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN 5

8 SWOT ANALYSIS AUSTRALIAN GRAINS INDUSTRY The following Australian grains industry SWOT analysis (Figure 3) has been developed taking into account likely global supply and demand trends presented above and current knowledge of Australian grain production and transport logistics. Figure 3. SWOT analysis Australian Grains Industry Mostly well-informed growers that accept and welcome the need for change and recognise the need to innovate. International reputation for producing high quality, safe grain. Geographic proximity to major export markets. Broad production base: geographical, agro-ecological and crop type. Well established R&D system that is envied by the world. International reputation of researchers. Robust agricultural chemical and gene technology regulatory systems based on effectively managing risk. Well established and novel value capture mechanisms (PBR) that effectively support private plant breeding. Well established and highly skilled private consultancy network (on-farm agronomy and financial advice). Relatively small number of larger farms. provide economies of scale. STRENGTHS OPPORTUNI TI ES Increasing affluence in key markets will continue to support demand. Product differentiation tailored to current customer needs and novel products for broader consumer demand. Increasing demand for quality assured products. Size of farms provides opportunities to link consumer to producer at scale (e.g. direct sales to processors). Use R&D base to leverage international technology better. Technology to connect growers to each other and consumers. R&D and regulatory base suits development of Australia as a R&D test hub for international technologies. SWOT Demanding environment limits yield and, potentially, continuity of supply. Relative high cost of production. High labour and transport costs. High environmental production risk. Relatively small technology market on a global scale technology not targeted to Australia. Declining field-based applied R&D capacity (e.g. pathology, research agronomy) Variable status of approval across states regarding the commercial cultivation of crops incorporating genetically modified technologies. Frequent disconnect between consumers and producers. Declining public sector investment in grains R&D. Poor regional telecommunications connectivity. WEAKNESSES THREAT S Expansion of production and improvements in quality in emerging countries (Black Sea etc.). Ongoing international adoption of hazard-based regulation on technologies (chemistry, genetics, robotics etc.) will limit discovery and availability of new technologies. Changing weather/climate increases variability and production risk. Biosecurity, GM or residue breaches negatively affecting the Australian reputation for clean quality product. Ongoing demand for greater food integrity will increase costs but not necessarily price. Declining public sector contributions to R&D. Decline in rural population and impact on government policy and local service provision. Refer to question 3 on page 16 to provide feedback on this section. 6 GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN BACKGROUND

9 WHAT MIGHT THIS MEAN FOR AUSTRALIAN GRAIN GROWERS AND FOR THE GRDC RD&E PLAN? Wheat Barley Canola Impact on Australian grain growers Wheat demand from South and South East Asia will continue to be strong but Australia will need to capitalise on its reputation for functionality, cleanliness, ability to meet customer demands and relative freight advantage. Demand for malting barley will grow with greater beer consumption in emerging economies. The requirement to demonstrate providence and cleanliness for malting barley will increase. Increased feed demand, however, will not encourage greater barley production. Canola stands to gain from rising demand for vegetable oils and protein meal. Potential R&D Opportunities RD&E that maintains alignment between market needs and the functionality of Australian grain. RD&E that continues to assist end users of Australian grain to maximise opportunities from differentiation on the basis of functionality. RD&E in crop protection to maintain cleanliness of Australian grains while continuing to meet our reputation for safety. RD&E to support transport and logistics related policy. RD&E that improves grower ability to meet malting segregation requirements. RD&E in malting processes that expand the range of barley that can be malted for food purposes. RD&E in crop protection to maintain cleanliness of Australian grains while continuing to meet our reputation for safety. RD&E to support potential expansion of canola production. RD&E to underpin requirements to demonstrate sustainable production. RD&E to manage the impact of crop diseases on canola production and the requirements of export markets. Refer to questions 4 and 5 on page 16 to provide feedback on this section. Pulses Sorghum Other crops Impact on Australian grain growers Demand for pulses is likely to remain strong in the short run, but Australia will need to focus on customer demands for taste and ease of preparation to maintain demand. Strong demand for feed grains is likely to support ongoing demand for sorghum but the type and specifications will need to continue to evolve to match the requirements of the rapidly expanding chicken meat, pork and aquaculture industries in particular. The use of sorghum in distilling (making baijiu) is also presenting itself as an interesting opportunity. Smaller grain crop (durum, oats, and sunflowers) opportunities for expansion and niche product development are likely to arise and will need to be assessed on a case-by-case basis. Potential R&D Opportunities RD&E to enable the growth of pulse production. RD&E to improve efficiency of pulse processing and match functionality with customer demand. RD&E to improve the functionality of grain types to meet growing feed requirements, such as omega 3 canola for aquaculture. RD&E to support improvement in the delivery of superior sorghum varieties. Development of individual crop plans for minor crops that maximise profit potential. The relatively high cost of production and the modest yields of most Australian grain production will result in ever-increasing pressure from ongoing declining terms of trade especially as emerging grain suppliers continue to mature. Grain growers take ever increasing financial risk to support production and in turn, this threatens ongoing grower profitability. To maintain and/or increase grain grower profitability will require a shift in the balance of the RD&E investment portfolio towards higher-impact RD&E and outcomes that are more transformational (impact of more than 10% in the first year of deployment) noting that by their nature these often require a greater appetite for risk. An important aspect of this consultation process is to identify transformational investment that meets the needs of the majority of growers. BACKGROUND GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN 7

10 PURPOSE FOCUS ON PROFIT The Strategic RD&E plan is part of a longer-term (10-20 year) strategy to deliver on GRDC s purpose, which is: To invest in research, development and extension to create enduring profitability for Australian grain growers. Drivers of grain grower profitability are described below in terms of yield, price, on-farm and post farm costs as well as risk. That is: Profit (π) = [Yield (Y) x Price (P) Costs (on farm + post farm)] x Risk (R) It is important to note that the importance of different drivers to profit will vary across grain growing businesses and environments. This will have significant impact not only on the potential shape and scope of GRDC s RD&E investment portfolio at the national level, but also on the activities and approaches required to support adoption of RD&E outputs at the regional and local level. For the Strategic RD&E Plan, GRDC will develop a strategic framework and investments to deliver against the broad components of profitability through these profit drivers (yield, price, costs on farm and post farm gate and risk) and three core frameworks (data management and analytics, grower communications and adoption, and capacity and skills) that underpin all investments. Profit Drivers IMPROVEMENTS IN YIELD Closing the yield gap Analysis of the current gap between actual yield and potential (modelled) yield across Australia (based on wheat yields) highlights the considerable scope that currently exists for improvement in yield. Table 2 shows the regional gaps in yield compared with 80% of maximum water limited yield, accounting for production risk (i.e. growers do not target 100% of possible yield, even in a good season). Yield gaps range from 0.7t/ha in the Southern region to 0.9t/ha in the Northern region and full exploitation of the yield gap has the potential to deliver more than $3.8b of increased value annually to Australian grain production. Table 2. Relative difference in actual and potential yield of wheat across GRDC regions Western Region Southern Region Northern Region Average Yield (t/ha) - A Yield Potential (t/ha) B (modelled) Targeting 80% of Water Limited Yield to account for production risk - C Exploitable Yield (t/ha) = C-A Value Gap APW1 = 220 $/t) yr Average Crop Area ( 000 ha) 8,221 6,829 6,696 Annual Value Lost ( 000 $) 1,446 1,052 1,326 Derived from Yield Gap Australia. wordpress/ 8 GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN PURPOSE

11 A significant proportion of the current yield gap could be filled through adoption of outcomes from previous grains R&D investments and/or conduct of additional proof of concept R&D. In most production systems, the adoption of many innovations is complex and affected by a range of business constraints and grower motivations. Gaining a better understanding of key influences on successful grower adoption of technical innovations will assist greatly in the design of strategies to improve rates of adoption of new innovation. Despite these complexities, even a 10% improvement toward achieving potential yield is likely to return more than $300m per annum to growers. Increasing yield potential A goal to close the gap between actual and potential yield is clearly a worthwhile objective. However, delivering enduring profitability to grain growers will not only require investments aimed at closing the yield gap but investments in further extending the yield potential of all Australian grain crops. Extending yield potential could be achieved by increasing yield per se as well as limiting the impact of constraints (e.g. frost, hostile soils, and heat). These types of investment will need to be managed in the context being higher risk and having longer-term (10-20 years) timeframes to delivery. IMPROVEMENTS IN PRICE Supporting and enhancing current products Most Australian grain is exported as a bulk commodity and therefore prices are volatile and strongly impacted by many interacting supply and demand variables in global trade. Maintaining current market positions will be dependent on maintaining the premium quality of Australian grain. Important functions driving maintenance of premium quality include Australia s grain classification systems as well as effective and prompt management of trade and market access issues as they arise. Enhancing the value of Australia s current grain products will require efforts to further differentiate bulk commodities with a particular emphasis on functionality. The aim being to capture a greater proportion of premium paying global markets by identifying, segregating and delivering specific functionalities that in turn address specific end user needs. Traceability and demonstrated food safety are also likely to remain key customer requirements and are expected to increase in importance in the short to medium term. Australia appears to be well placed to capture greater value from being able to create identity preserved supply chains with assured food safety. Exploring new products While export of bulk commodities will remain a significant part of future Australian grain trading, underpinning future demand and price will require a greater emphasis on opportunities to change the functionality and or composition of traditional commodities. Opportunities to attract premium prices from novel functionality have in the past been exploited, including Ultra Low Gluten barley and High Amylose Wheat developed jointly by GRDC and CSIRO. A global population that is more health and environmentally conscious and has a greater proportion of expendable income creates the opportunity to capture value from novel functionalities particularly as they relate to health and wellbeing. Such opportunities are invariably transformational in nature and therefore require careful consideration of the path to market across the supply chain and potential return on investment to growers. REDUCTION IN PRODUCTION COSTS International comparison of average input costs (Table 3) confirms that Australian growers have relatively high costs of production on a per tonne basis. 5 A wide range of opportunities exist that can lead to incremental and transformational reductions in input costs while optimising productivity. The challenge is to identify and prioritise these incremental opportunities to match costs with production at a regional scale while also identifying transformational opportunities on a national scale. The relatively small size of the input market in Australia (compared with global markets) presents challenges for external investment in new crop protection products and innovations in farm machinery. GRDC will need to collaborate more with international R&D collaborators to ensure Australian grains industry needs are identified and addressed. 5 Herbert, A. (2017) An International Benchmarking Comparison of Australian Crop Production and Profitability. GRDC Updates. PURPOSE GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN 9

12 Table 3. Average and median production costs per tonne of wheat production for the period Cost per tonne of production (USD) Region/Farm Seed Fertiliser Pesticides Labour Machinery Total AU4000WB $11 $41 $33 $32 $60 $179 AU4500SC $8 $45 $20 $15 $52 $144 AU3000NSW $14 $43 $34 $38 $74 $206 AU1550QLD $5 $40 $19 $31 $62 $163 AU2800SA $7 $25 $26 $18 $47 $124 AU3500VIC $10 $31 $34 $35 $41 $154 AU5500WA $18 $74 $36 $25 $61 $215 AUSTRALIA $10 $43 $29 $28 $57 $169 East Europe $11 $26 $10 $17 $56 $120 EU $13 $36 $22 $33 $53 $160 North America $16 $46 $21 $13 $49 $154 Argentina $13 $41 $17 $4 $34 $109 Uruguay $28 $46 $24 $4 $62 $165 All farms $14 $38 $22 $25 $52 $155 REDUCTION IN POST FARM GATE COSTS Australia has benefited from a significant shipping freight advantage due to its geographic proximity to important Asian markets. The recent decline in international shipping costs as well as the relatively high cost of domestic freight and supply chain logistics however exposes Australian growers to greater competition in these important major Asian markets. A recent comparison between Australian and Canadian supply chain costs shows that while total Australian costs per tonne remain significantly less than Canada ($87/t compared with $107/t), rail freight charges in Australia are almost five times higher. 6 Changes to Australian domestic freight and supply chain logistics are complex and beyond the purview of GRDC. However, GRDC will continue to support R&D into understanding variables that drive supply chain costs in order to inform policy on these issues. In addition, GRDC will consider transformational investments with capacity to disrupt current freight dynamics as well as developing extension packages that assist growers in minimising post farm gate costs. Table 4. Export grain supply chain costs in 2015/16 Ukraine, Australian and Canada 7 Cost (AUD/t) Ukraine Australia Canada (2015 est.) % supply chain cost Cost (AUD/t) % supply chain cost Cost (AUD/t) % supply chain cost Cartage to bin Storage Upcountry handling Transport to port Handling at port Shipping Levies Supply chain cost Production cost (wheat) Total cost (AUD/t) Source: Ukraine Industry Sources, USDA PSD, Australia GRDC, Planfarm/Bankwest Benchmarks, ABARES, Canada AEGIC Based on the AUD:UAH exchange rates as at 23/10/ White, P. et al. (2015) The puck stops here: Canada challenges Australia s grain supply chains. AEGIC report. 7 Kingwell, R. et al. (2016) Ukraine: An emerging challenge for Australian Wheat Exports. AEGIC report. 10 GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN PURPOSE

13 MANAGING RISK Variable input costs, dominated by production inputs (fertiliser and pesticides mostly) and machinery (Figure 4) 8 have risen sharply over that last 20 years. While farm income has also risen over the same period, it is clear that the profit margins remain very tight in most years. Importantly, the increase in input costs significantly increases the financial risk to which farm businesses are exposed. This trend is consistent across regions. Risk is an important part of the profit equation. Risk management that is too conservative can limit profit in above average production years while approaches that are too aggressive can expose the grower to equity issues that adversely impact profit and future operations. In addition, grower attitude to risk is a key determinant of the speed and scale of uptake of new technology. A key aspect of this Strategic RD&E Plan is to better understand grower decision making and attitude to risk. This will be fundamental not only to the development of programs to assist in the management of production and business risk but also in tailoring RD&E to develop and maximise the adoption of new technologies that will underpin profitability. Figure 4. Farm income and costs Wimmera ,200,000 1,000, , , , , / / / / / / / / / / / / / / / / / / / / / / / / /12 Core Frameworks DATA MANAGEMENT AND ANALYTICS Data-driven agriculture is set to drive transformational change across the grains industry. Growers, researchers, governments and industry are increasingly looking to capture and exploit data relevant to the grains industry including: farm performance data (within paddock, whole paddock and whole farm scale); regional, national and global production data (including yields and inputs); data from R&D experimentation; environment characterisation data (e.g. soil maps, high resolution imagery, water availability, etc); economic data (e.g. market supply and demand data). Combining these rapidly expanding data resources with state-of-the art analytics and the power of artificial intelligence will enable a step change for the grains industry in ensuring its enduring profitability. For instance, precision agriculture technology and analytics will enable growers to understand the yield, cost and risk components of their grain production operations at a resolution and scale not previously possible. Real-time data availability through connected technologies, remote sensing and market analytics will allow grain growers to make timely decisions throughout the year to maximise their enterprise profitability. GRDC will build its digital agriculture portfolio with a view to facilitating the development of data resources, enabling technologies and analytics. The Corporation is uniquely positioned to invest in the science that is necessary to underpin and maximise the value of digital agriculture for Australian grain growers. Finance Costs Labour Costs Machinery Costs Input Costs Overheads Farm Income Refer to question 6 on page 16 to provide feedback on the sections in pages ORM (2013) PURPOSE GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN 11

14 GROWER COMMUNICATION AND ADOPTION The desired outcome of every R, D & E project that GRDC invests in, regardless of whether it is local, national, short or long term, should be grower adoption of innovative approaches to maintaining and increasing profitability. Communications (raising awareness) and extension (influencing behaviour change) are essential to effect that adoption. Growers remain at the centre of all GRDC s R,D &E, and communication and adoption targets are closely aligned with grower priorities. Across GRDC, communications and extension staff are embedded in cross-functional teams developing plans to complement all R&D projects. By using its MAKAT model (interrogating grower Motivation, Attitude, Knowledge, Ability and Technology); GRDC will support its R&D investments with the most appropriate tools for communication and extension as part of overall planning rather than a stand-alone activity following completion of R&D. Because extension is delivered at the local level, GRDC staff with skills in communication and extension are being placed in offices in all three GRDC regions of north, south and west. Having communication and extension side by side with GRDC research staff and key collaborators ensures the most appropriate path to adoption is being considered as a critical component of every R&D investment project as it is being designed and delivered. To ensure the greatest impact in its communication and extension activities, GRDC will continue to strive to understand as much as possible about growers learning preferences, attitudes to information channels, decision drivers and barriers to adoption. These understandings will be central in tailoring development and extension packages to meet the needs of different grower segments. With around 80% of growers using adviser services to inform their decision making on farm, GRDC will work closely with key influencers including grower groups, farm advisers and agribusiness stakeholders to ensure all available communication channels are being leveraged to get the right information to growers in a timely way and in the best format to help increase adoption and profitability. While many growers still prefer to receive information in hard copy, GRDC will continue to transition to existing and emerging digital platforms, including web, mobile apps and social media, in recognition that different growers receive information in different ways, and that as technology and bandwidth improves, more and more growers and their influencers will be accessing information via digital channels. CAPACITY AND ABILITY To deliver on purpose the Australian grains industry requires grain grower leaders who can contribute innovative ideas, facilitate industry discussion on the RD&E portfolio, and be role models for the adoption of innovation into profitable farming systems and business models. GRDC will continue to contribute to enhancing the leadership competencies of Australian grain growers in these critical areas. Grower health, mental and physical, will remain a priority across all agricultural industries and GRDC will continue to contribute to cross-industry initiatives that target healthy and safe grain grower communities. GRDC must also collaborate with RD&E providers to ensure that ongoing provision of appropriate experience and ability to deliver key outputs and understanding of often-complex issues. GRDC will continue to contribute to broad RD&E capacities and abilities but will focus on the generation of research teams and support staff. While profitable grain growers are a fundamental building block of a healthy grains industry, grain growers need to operate within a functional, effective and innovative grains industry value chain. GRDC is well placed to facilitate collaboration and cooperation across the grains industry as well as assist in leveraging positive pre-competitive outcomes to this value chain. To that end, GRDC will participate in industry good functions, including post-farm gate, where these functions align with GRDC s purpose. 12 GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN PURPOSE

15 INVESTMENTS & DELIVERY AGILITY FLEXIBILITY AND ADJUSTMENT Growers strategically plan crop rotations over an extended period (5-7 years) but adjust to evolving constraints or opportunities to deliver profitability and sustainability. Similarly, growers also adjust practices within a season to counter emerging risks and match practices and inputs with potential profit. Simply put, growers continually adjust both long-term and short-term activities to achieve the ultimate objective of maximising profit and sustainability. GRDC must administer the RD&E portfolio in the same manner, maintaining a focus on delivering on purpose while adopting flexibility in the scope and management of investments to meet unforeseen challenges that are inherent in all RD&E programs. Modern management practices have been developed across a range of industries to deliver outcomes efficiently in the context of uncertainty. While tailored to individual industries and processes, all approaches adopt the principles of: elimination of activities that do not add value, the prioritisation of flexibility and responding to change over rigid planning, the prioritisation of individuals and interactions over process, and the promotion of collaboration. GRDC will implement programs and individual investments that embrace these principles through: 1. Collaboration with growers as key beneficiaries and other stakeholders to identify key priorities and investment opportunities that best deliver on purpose. 2. Deployment of cross-functional teams including the use of external experts where appropriate for each priority and opportunity to undertake gap analysis and identify the desired outcome aligned with purpose. 3. A focus on clear outcomes defined for each priority based on SMART (specific, measurable, actionable, realistic and time bound) principles over rigid planning of activities. 4. Establishment of close working relationships with our partners to facilitate a flexible approach to delivering activities required to achieve a desired outcome. 5. Active management of investments that promotes responsiveness to change. 6. Continual improvement of investment planning and management as GRDC and our partners identify areas of relative strength and weakness. This consultation process focuses on the first of these practices, that is the identification of priorities and opportunities associated with key profit drivers and core frameworks aligned with purpose. The table below lists a range of broadly defined priorities and opportunities for potential investment identified from workshops and surveys with GRDC s advisory panels and board, representative organisations and their affiliates as well as research partners. Clearly, not all opportunities can be pursued and priorities will differ across regions and farming systems. GRDC is seeking feedback from growers and industry on the relevance and importance of the priorities and opportunities identified to assist in tailoring the future investment program Following this initial consultation, detailed individual plans for identified opportunities will be developed. As part of agile investment management, these plans will be continually monitored and adjusted to ensure that they deliver the outcomes desired aligned with purpose. Growers and other members of industry are encouraged to interact with GRDC on an ongoing basis throughout the plan to identify new priorities and opportunities as they arise. Where new opportunities provide a compelling case for action, the investment portfolio will be adjusted to accommodate the required RD&E programs. INVESTMENTS & DELIVERY GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN 13

16 KEY INVESTMENT PRIORITIES GRDC OBJECTIVE To invest in R,D&E to create enduring profitability for Australian grain growers Priority Investment opportunities Refer to page 16 to provide feedback on this section. OUTCOME IMPROVEMENTS IN YIELD Improving Yield Potential Minimising the impact of extreme temperature: Minimising impact of high temperature at flowering and grain fill. Minimising the impact of spring radiation frost. Changes to plant architecture and/or biochemistry to maximise water limited yield potential of wheat, barley, canola and sorghum Improving water use efficiency: Improving the capture and storage of rainfall in soil. Increasing plant access to stored moisture. Optimising the utilisation of water. Reducing the impact of soil constraints on yield and yield stability including programs to address; salinity & sodicity, extremes of ph, waterlogging, non-wetting sands and compaction. Closing the Yield Gap Addressing the gap between actual and potential yield through more informed and timely agronomic decisions including; planting time, crop/variety choice, weed, pest and disease control, and crop nutrition. OUTCOME MAINTAINING AND IMPROVING PRICE Supporting current products Maintaining and improving the differentiation of Australian grain through meeting market specifications for; demonstration of functionality, improving food safety and traceability, demonstrating sustainability of production, demonstrating lower environmental impacts, optimising storage, reducing down-grading. Exploring new markets Developing novel products targeted at; human health, nutrition and allergenicity high value feeds new industrial uses biofuels. Determining expansion opportunities for individual higher value crops including pulses, oats (for grain), linseed, maize and soybean for human consumption. Value adding crop biomass e.g. new fodder and hay opportunities. Exploring alternative uses of by-products e.g. starch. Exploring opportunities for value adding through on shore processing. Developing improvements in processing efficiency to under pin demand. 14 GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN INVESTMENTS & DELIVERY

17 OUTCOME OPTIMISING INPUT COSTS Optimising crop protection inputs Integrated management to minimise cost of effectively and sustainably manage; weeds diseases vertebrate and invertebrate pests. Optimising nutrient inputs Technology to reduce fertiliser manufacture and application costs Improving nitrogen and phosphorous availability including; optimisation of legumes in rotations improvement in biological nitrogen fixation capturing greater value from mycorrhiza soil amelioration to improve nutrient availability. Improving nutrient use efficiency through improved genetics. Improved monitoring technologies Improved sensors and monitoring to support modelling and allow more timely and accurate input decision making including; biosecurity monitoring soil sensors harvester sensing weed identification and discrimination. Improving plant and equipment efficiency Engineering to improve product delivery accuracy and efficiency. Engineering to reduce capital and running costs. Automation of repetitive functions (e.g. weed control). Improving labour efficiency Engineering solutions to reduce labor costs including automation and robotics OUTCOME LOWERING POST-FARM GATE COSTS Improving the efficiency of transport, handling and storage Research to advise policy development. Research to maintain grain quality in handling and storage. Automation of transport and handling activities. Maintaining and improving market access Maintaining and expanding grain classification. Research to address technical barriers to trade e.g. snails in barley, sustainability requirements for canola. Quantifying the impact of tariffs on grower profitability. OUTCOME MANAGING RISK TO MAXIMISE PROFIT AND MINIMISE LOSSES Improving the management of production and business risk Optimising enterprise integration for risk management. Research into decision making and grower drivers for adoption of new technology. Improve the accuracy of short and medium range weather forecasting to assist grower decision making, insurance models etc. Support for grower acquisition of business management skills. Improved trade efficiency Research and extension to improve transaction efficiencies. INVESTMENTS & DELIVERY GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN 15

18 FEEDBACK Under a flexible and agile investment process, it is important to identify the broadest range of priorities and opportunities to deliver on purpose to allow rapid pivoting of investment approaches in response to changes in external markets and grower needs. Your input is sought on this consultation document that can include feedback on: Industry trends, strengths, weaknesses, opportunities and threats. What importance should be placed on yield, price, cost and risk to profit? What other priorities and opportunities exist to address yield, price, cost and risk? Specific feedback on any individual opportunity providing further detail or comment on importance. Any general feedback. Feedback can be provided through: Providing feedback to the electronic version of the discussion paper available at consultation@grdc.com.au Twitter Facebook - Further opportunities to contribute new ideas and investment targets will occur throughout the life of this plan and GRDC encourages all stakeholders to communicate regularly with our Canberra and/or regional offices or directly with relevant staff to ensure that new opportunities for investment are captured. Q1. Are there any additional trends the GRDC should be aware of when developing the Plan? (Refer to pages 4 and 5). Q2. Are there any implications for grains RD&E arising from the global trends for supply and demand for grains? Why? (Refer to pages 4 and 5). Q3. Please provide comment on the SWOT Analysis (Figure 3, page 6). Comments could include: Identification of strengths, weaknesses, opportunities and threats not included within the analysis. Where identified strengths, weaknesses, opportunity and threats that are unlikely to impact on the future of Australian grains R&D. Any strength, weakness, opportunity or threat that will have a particular impact on the future of Australian grains R&D. Q4. What do you believe is the right balance in the GRDC s portfolio between research with transformational and incremental outcomes. (Refer to page 7). Q5. What areas of research do you believe will have transformational outcomes for Australian grain growers? Why? (Refer to page 7). Q6. Rank the different profit drivers from most important to least based on the ability of RD&E outcomes for each to create to enduring profitability for Australian grain growers. (Refer to pages 8 11). Please provide comment on the Key Investment Opportunities (pages 14 and 15). Comments could include: Are the priorities sufficiently focused to maximise the ability of the GRDC to invest in RD&E to achieve outcomes in improving yield, maintaining and improving price, optimising input costs, reducing post farm gate costs or managing risk to maximise profit and minimise losses? If no are the priorities expressed too broadly or too narrowly. Do you believe the GRDC should focus on other priorities to maximise the benefit of RD&E investment to achieve outcomes in improving yield, maintaining and improving price, optimising input costs, reducing post farm gate costs or managing risk to maximise profit and minimise losses? If yes, please provide details on the alternate priorities and how it would contribute to the enduring profitability of Australian grain growers. What are the other investment opportunities available to the GRDC to achieve outcomes in improving yield, maintaining and improving price, optimising input costs, reducing post farm gate costs or managing risk to maximise profit and minimise losses? Provide detail about how the opportunities would contribute to the enduring profitability of Australian grain growers. Provide feedback on any individual investment opportunity. 16 GRDC RESEARCH, DEVELOPMENT AND EXTENSION PLAN Feedback

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