Marsden Jacob Associates. Att: Gavan Dwyer. Dear Gavan,

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1 Marsden Jacob Associates Att: Gavan Dwyer Dear Gavan, On behalf of the Grain Producers of South Australia (GPSA) we present our submission Re Grains Research and Development Corporation (GRDC): Independent Strategic Governance Review - DRAFT CONSULTATION REPORT - JUNE 2014 (ISGR). GPSA is the Peak Industry Body for the South Australian grain producer. It is unique in that it is a non-political body that represents all grain producers to government, the community and industry including, grain marketers, exporters, storage and handlers, researchers and farm input suppliers. GPSA s objectives are to improve the profitability and sustainability of South Australian grain producers through: o Representing the views of South Australian grain producers to government, industry and the community on grains issues; o Working with an effective state farming organisation and other commodity groups to represent South Australian grain producers on cross commodity issues; o Working with government and industry to develop policies around creating and maintaining an efficient, accessible and cost effective supply chain; o Working with government, industry and institutions to improve the technical and business skills of South Australian grain producers; o Working with Research, Development and Extension organisations to identify and disseminate research priorities in grain production, handling and management; o Supporting an effective national representative organisation to work with government around national initiatives to support the grains industry; o Providing a program to include and develop young farmers to be prepared to take on leadership roles within the South Australian grains industry. Our total grain production in South Australia for 2012/13 season was million tonnes, (with a farm gate value of over $2.1 billion & export value of $2.8 billion) 1, being predominantly wheat (5.006 million tonnes) and barley (2.126 million tonnes). Most of this grain is exported in bulk, with the domestic market for grain accounting for approximately 500,000 tonnes. Farming in South Australia contributes to the employment of 33,000 people directly and an additional 146,000 are employed in the food sector. 1 Minister Gago 29 th January 2014

2 Crop production is expected to increase in the future with increased yield. PIRSA have estimated an increase in grain production of $800 million from advances in soil management in the future. 2 Grain production is a significant contributor to the $16 billion food wine and fibre industry in South Australia. Our submission follows and we would welcome any questions. Yours sincerely. Darren Arney Chief Executive Officer 2 PIRSA updated stats January 2014 and New Horizons Project

3 Re Grains Research and Development Corporation (GRDC): Independent Strategic Governance Review - DRAFT CONSULTATION REPORT - JUNE 2014 (ISGR). Research, Development and Extension (RDE) have been critical to the past success of grain growing in South Australia and will be into the future. We strongly support the GRDC Vision & 2012 to 2017 strategy i and endorse the National Grains RD&E Strategy ii. We proffer that the current Grain s Industry spend on RDE should be both more efficient initially and larger immediately to yield the increase in grain growing profitability desperately needed by our constituents. The issue: - The ISGR does not identify a compelling cost to benefit result for change from Statutory Corporation (SC) to Industry Owned Corporation (IOC). It does identify a number of potential incremental benefits to changing from SC to IOC. These incremental benefits in our opinion are not defining enough in themselves to take the risk of change without further objective analysis of the past performance of 9 IOC s vs 6 SC s then modelled into the likely future of Agriculture both globally and in Australia. The ISGR does identify two key benefits to moving to a Hybrid structure and although the likely cost of this is not explored in the report it does not appear to be significant and the risk of the move low. Answers to the reports questions are below. Table 1: Key issues and questions for the next phase of consultation Key issue Accountability & focus major changes in the industry? Recent grower survey indicates increasing value to them of GRDC on the below criteria iii giving significant comfort the levy payers are comfortable with the organisations response within the evolving environment. Table 6:GRDC performance against selected key performance indicators, 2008 to 2013, by proportion of growers surveyed (percent) Key performance indicator Growers rating GRDC performance very or fairly high Growers directly benefiting from grains R&D activities generally in the past five years Growers directly benefiting from GRDC activities or initiatives Growers confident that grains R&D is addressing threats to long-term sustainability of their farm Growers feeling that new grain varieties met expectations Growers aware of regional panels

4 Table 6:GRDC performance against selected key performance indicators, 2008 to 2013, by proportion of growers surveyed (percent) Key performance indicator Growers having direct contact with regional panel members Growers rating the value of regional panels as very or fairly high (amongst growers having direct contact) a a. Question first asked in The Grain s Industry Total Factor Productivity (TFP) has slowed in recent years from 1.9% pre 0708, a concern as an indication the industry may not be handling change as well more recently. iv Are statutory corporation (SC) operating requirements materially impeding RDE? Of the 15 RDC s there is subjectively no obvious better RDE outcomes between the 9 that are IOC s and 6 that are SC s. An empirical analysis of this could have and probably should have or should be done as part of this review. Of the 15 RDC s there is no obvious significantly better engagement with RDE providers between the 9 that are IOC s and 6 that are SC s. An empirical analysis of this could of and probably should have, or should be done as part of this review. E.g. look to analysis number of arrangements with private org s by SC vs IOC, see annual reports. Not so far. Under the new PGPA act - July 14, it would appear the accountability to government is increasing at the expense of accountability to producers (levy payers). It can be argued this is potentially negative to the operations of an RDC however it can also be argued these additional governances e.g. The new PGPA Act will (amongst others) require GRDC to: v - extend duty of care provisions across the workforce. This requirement previously only applied to the Board and the Senior Executive. This change brings the GRDC into alignment with other government departments and agencies; - Not to improperly use position or information; and

5 - To disclose material personal interests. are valid requirements of an organisation in control of collecting and spending public and levy payer s funds. It is not clear from the ISGR as to why a shift to more accountability to levy payers would improve the RDE outcomes. We have assumed the rationale is that the levy payers are better or more involved in the outcomes of the RDE therefore they would achieve better RDE outcomes however there is no data in this report to support that assumption. No. How, or why not? -paying growers? The voting regime and Board make up are the keys here and in both structures it needs to be a skills based selection. It s unlikely the skill profile will be materially different under either option. Our brief desktop review of the current RDC s identified very little difference if any in the noted skill requirements of directors or methods of levy holders experiencing higher levels of accountability to them was yet to be settled. Institutional durability Do you think politicisation (undue influence being exerted by groups of growers) of or by levy payers or other stakeholders is a major concern for either the SC or the IOC model? It s a concern in both cases but perhaps more so under the IOC option as there is less recourse to the Minister able to ultimately adjudicate. Often but not always. E.g. other IOC structured RDC s Board selection processes. E.g. HAL, Dairy Australia, appear to be managing this in the main through an extensive and comprehensive Board selection process. Yes. Yes. -led RDE strategy necessary? If so, how might it be established? -led vision necessary for an industry RDE strategy? It is already in place National Research, Development & Extension Strategy. This is a comprehensive document and should be used rather than criticised. By definition a Strategy is out of date as soon as it is completed and implementation has begun so in time a review and update is appropriate. Both. -based board a necessary requirement in either an SC or an IOC model? -based board incorporate grower representation appropriately? Utilise the experience and learnings from the 9 RDC s already operating under the IOC structure.

6 Balancing the benefits and costs Are there important benefits and costs for the SC or IOC models that are not identified in this report? There needs to be additional objective research carried out on the pro s and cons of each structure, initially review the historic performance of the 9 IOC structured RDC s vs the 6 SC structured RDC s. This then needs to be extrapolated out for the next 20 years overlayed with the likely evolution of both the broader Australian political environment and the grains industry specifically. outweigh the costs? Not without further analysis as per the immediately above comment. Hybrid model Should a hybrid model be pursued under an SC as a matter of course? Yes, because there are two clear areas (Clarity of Role & Purpose and Accountability) defined in Draft Consultation Report June 14, Table 10 where there are clearly strengths to the SC structure, fostering improved RD&E outcomes. There was no costing for this change identified in the report but it seems reasonable to assume these costs to implement a hybrid structure would not be significant. The report is not comprehensive and does not give enough empirical analysis to allow that question to be answered with any degree of confidence. Are there others? Possibly, however the options presented are practical and likely. i ii iii iv v Marsden Jacobs Associates Draft Consultation Report June 14