A Study of the Costs of Production of Lucerne, Medic and Clover Seeds in Australia

A Study of the Costs of Production of Lucerne, Medic and Clover Seeds in Australia A report for the Rural Industries Research and Development Corporation by Hassall & Associates Pty Ltd March 2001 RIRDC Publication No 01/22 RIRDC Project No HAS-5A

2001 Rural Industries Research and Development Corporation. All rights reserved. ISBN 0 642 58244 0 ISSN 1440-6845 A Study of the Costs of Production of Lucerne, Medic and Clover Seeds In Australia Publication No. 01/22 Project No. HAS-5A The views expressed and the conclusions reached in this publication are those of the author and not necessarily those of persons consulted. RIRDC shall not be responsible in any way whatsoever to any person who relies in whole or in part on the contents of this report. This publication is copyright. However, RIRDC encourages wide dissemination of its research, providing the Corporation is clearly acknowledged. For any other enquiries concerning reproduction, contact the Publications Manager on phone 02 6272 3186. Researcher Contact Details Hassall & Associates Pty Ltd GPO Box 4625 Sydney NSW 1044 Phone: 02 9241 5655 Fax: 02 9241 5684 Email: hassyd@ozemail.com.au RIRDC Contact Details Rural Industries Research and Development Corporation Level 1, AMA House 42 Macquarie Street BARTON ACT 2600 PO Box 4776 KINGSTON ACT 2604 Phone: 02 6272 4539 Fax: 02 6272 5877 Email: rirdc@rirdc.gov.au. Website: http://www.rirdc.gov.au Published in March 2001 Printed on environmentally friendly paper by Canprint ii

Foreword This report provides an overview of the Australian pasture seed industry. In particular, the study focuses upon lucerne, medic, clover and sub-clover seed production. An extensive comparative analysis of the costs of production is undertaken, the role of environmental regulation is discussed and future research priorities for the industry are identified. This study was based on a detailed literature review as well as a survey of forty pasture seed producers across New South Wales, Victoria, South Australia and Western Australia. This project was funded from industry revenue which is matched by funds provided by the Federal Government. This report, an addition to RIRDC s diverse range of almost 700 research publications, forms part of our Pasture Seeds R&D program, which aims to facilitate the growth of a profitable and sustainable pasture seed industry based on a reputation for the reliable supply, domestically and internationally, of a range of pasture species. Most of our publications are available for viewing, downloading or purchasing online through our website: downloads at www.rirdc.gov.au/reports/index.htm purchases at www.rirdc.gov.au/eshop Peter Core Managing Director Rural Industries Research and Development Corporation iii

Acknowledgments The development of this report was greatly aided by the co-operation received from those producers and industry representatives who completed surveys and provided information regarding industry regulations. iv

Contents FOREWORD...III ACKNOWLEDGMENTS... IV EXECUTIVE SUMMARY... VII 1. INTRODUCTION... 1 1.1 STUDY BACKGROUND... 1 1.2 METHODOLOGY... 1 1.3 SAMPLE SELECTION AND PROFILE... 2 2. THE AUSTRALIAN PASTURE SEED INDUSTRY... 4 2.1 INTRODUCTION... 4 2.2 PASTURE SPECIES... 5 2.2.1 Temperate Pastures... 6 2.2.2 Sub-Tropical and Tropical Pastures... 6 2.3 STUDY SPECIES... 6 2.3.1 Clover... 6 2.3.2 Medic... 7 2.3.3 Lucerne... 7 2.3.4 Sub-Clover... 8 2.4 LOCATION OF PRODUCTION... 9 2.5 VOLUME OF PASTURE SEED PRODUCTION... 11 2.5.1 Clover... 11 2.5.2 Medic... 11 2.5.3 Lucerne... 12 2.5.4 Sub-clover... 12 2.5.5 General Conclusions... 13 2.6 VALUE OF PASTURE SEED PRODUCTION... 13 2.7 PASTURE SEED DISTRIBUTION... 14 2.8 RECENT INDUSTRY CHANGES... 14 2.8.1 Plant Breeder s Rights... 15 2.8.2 Seed Certification... 16 2.8.3 Increasing necessity to engage economies of scale... 17 2.8.4 Decreased profitability of complimentary production activities... 17 2.8.5 Changes to the technology used within the production chain... 17 2.9 IMPLICATIONS OF INDUSTRY CHANGES FOR INDUSTRY DEVELOPMENT... 18 2.10 PASTURE SEED EXPORTS AND IMPORTS... 19 2.10.1 Pasture Seed Exports... 19 2.10.2 Pasture Seed Imports... 21 3. COST OF TEMPERATE LEGUME PASTURE SEED PRODUCTION... 23 3.1 PASTURE SEED PRODUCTION AND DISTRIBUTION SYSTEM... 23 3.2 TOTAL COST OF PRODUCTION... 24 3.2.1 Establishment Costs... 24 3.2.2 Annual Production Costs... 26 3.2.3 Labour Costs (Management)... 27 3.2.4 Fixed Costs... 28 3.2.5 Land Cost... 28 3.2.6 Capital Value... 29 3.2.7 Total Costs of Production... 30 3.3 COMPARATIVE ANALYSIS OF COSTS OF PRODUCTION... 30 3.3.1 Introduction... 30 3.3.2 Geographic Analysis... 30 3.3.3 Conclusions on Geographical Analysis... 33 v

3.3.4 Production Method Analysis... 33 3.3.5 Conclusions on Production Method Analysis... 34 3.4 KEY COST COMPONENTS... 34 3.5 MOVEMENTS IN KEY COST COMPONENTS OVER TIME... 35 3.5.1 Survey Response Data... 36 3.5.2 ABARE Data... 38 3.6 ENVIRONMENTAL ISSUES... 39 3.6.1 Environmental Priorities... 40 3.6.2 Environmental Regulation... 41 4. FUTURE RESEARCH REQUIREMENTS... 43 5. CONCLUSIONS... 45 6. ABBREVIATIONS USED IN THIS REPORT... 46 7. PERSONS CONTACTED AS PART OF THE STUDY... 47 8. REFERENCES... 48 APPENDICES... 50 APPENDIX ONE DIRECTORY OF SEED INDUSTRY COMMERCIAL STAKEHOLDERS... 50 APPENDIX TWO BACKGROUND INFORMATION ON SURVEY RESPONDENTS... 52 Clover Producers... 52 Medic Producers... 52 Lucerne Producers... 53 Sub-Clover Producers... 53 APPENDIX THREE INDEX OF PRICES PAID; 1978-79 TO 1997-98... 54 APPENDIX FOUR SURVEY FORM... 56 vi

Executive Summary This study involved providing an overview of the pasture seed industry, analysing the costs of production, identifying the role of environmental regulation and identifying future research priorities for the industry. The report was developed particularly drawing upon available literature and the results of a survey of forty pasture seed producers across Australia. 1) Overview of the industry A profile of the temperate legume pasture seed producers indicates that: There are approximately 639 certified producers of temperate legume pasture seeds in NSW, WA, SA and Victoria combined. South Australia has the largest number of growers followed by New South Wales as shown in the following table; Legume NSW a SA b WA c Victoria d Total Clovers 6 60* 6 30 102 Lucerne 60 298 0 8 366 Medic 6 36* 4 11 57 Sub-clover 46 38 22 8 114 Total 118 432 32 57 639 Source: a NSW Agriculture (1998/99); b PIRSA (1998/99); c Agwest Plant Laboratories (1999/2000); d Agrifood Technologies, AWB & Paramount (1999/2000); * PIRSA estimate. The main temperate legumes grown are sub-clover, annual medics, lucerne and white clover. The volume of production for each species, for 1997/98, is shown below; Pasture seed Tonnes produced Clover 3,350 Medic 550 Lucerne 2,500 Sub-Clover 2,300 Most of the production occurs within South Australia, followed by Victoria, New South Wales (NSW) and Western Australia; The annual value of production for temperate legume pasture seeds is estimated to be $28 million dollars; Exports of temperate legume pasture seeds accounted for approximately $25 million in 1997/98. The main export is lucerne seed; and Imports accounted for approximately $2 million dollars in 1997/98. The main import is clover seed. The pasture seed industry within Australia has been subject to significant changes in recent years. There has been a downward trend in total production and industry restructuring has resulted in many small operators exiting the industry. Key issues that have affected the industry include: the impact of Plant Breeder s Rights (PBR) Legislation; the influence of certification requirements within the production and distribution chain; increasing economies of scale; decreasing profitability of complementary production (i.e. the livestock industries); changes in technology used in the marketing chain; and annual production variability. vii

2) Analysis of costs of production An analysis of the results of the survey revealed: there are differences in the variable costs associated with the production of pasture seed crops within Australia, with lucerne crops being the most expensive and medic crops the least expensive; the costs associated with the production of pasture seed crops vary between regions within Australia, with Western Australia appearing to have a distinct cost advantage over South Australia; annualised establishment costs are generally less for dryland operators, reflecting in part, longer average lifestands than for irrigated pastures. Growing costs are generally substantially greater for irrigated enterprises, reflecting the additional costs associated with irrigation; growing and harvesting costs were the key cost components within the production chain that were identified by producers. Establishment, preparation, labour, marketing, depreciation and fixed costs were all of a lower magnitude; and the variable cost items that growers perceived as the most important in terms of increases in prices in recent years are certification, seed cleaning/testing and production inputs. 3) Role of environmental regulation Discussions with stakeholders in SA, WA, Victoria and NSW revealed that there is no environmental legislation that pertains specifically to pasture seed producers. There are however, environmental priorities within the industry. The key environmental issues identified by producers were the use of pesticides for all species, and harvest technology for sub-clover and medics. Producers favour either industry-imposed or selfimposed environmental regulation, rather than government intervention, in order to ensure environmentally sustainable production methods are employed. Approximately half of the producers surveyed indicated that some form of intervention was required. 4) Priorities for future research The priorities for future research, as identified by growers in the survey, include: increasing the efficiency and effectiveness of chemicals; improving harvesting technology so as to increase harvest efficiency; decreasing the costs associated with seed testing and certification; and researching and establishing new marketing opportunities for products. viii

1. Introduction 1.1 Study Background Production of temperate pasture seeds in Australia, while concentrated in several areas, still takes place in a range of production conditions. In addition there are a range of methods which can be used for seed production. The introduction of Plant Breeder Rights (PBR) has also added further complexity to seed production and therefore increased the possible cost of delivering the product to final users. Detailed information is not available on the costs of production, assembly and distribution for temperate pasture seed production. It is not clear, therefore, whether the costs vary for producers within a region or between regions. This information is essential for providing some benchmarks to allow individual growers to gauge their performance. Such information is also important for guiding possible future directions for research and development (R&D). This study provides: a detailed overview of pasture seed production and distribution in Australia with particular focus on temperate pasture seed. It summarises important changes which have occurred over time and the implications of this for industry development; identification of costs of seed production, from farm to pallet, key cost components and their movements over time (5 years); an assessment of whether there are key differences in production and assembly costs for different types of pasture seed and between different geographical regions; specific consideration of the importance and impact of environmental regulations in some regions on the cost structure and discussion of how these vary between regions; and a discussion on whether these analyses highlight potential areas for future research. 1.2 Methodology An overview of the Australian pasture seed industry was prepared from relevant literature obtained from relevant stakeholders (including various government agencies, seed companies and producers), the Internet and library databases. Discussions were also held with the study s advisory panel consisting of Hugh Roberts ( Birralee, Cootamundra), Jock Kreitals (Grains Council of Australia) and Jeff Davis (General Manager, Research, RIRDC). A farm to pallet cost framework was prepared in conjunction with stakeholders. The cost framework included all cost items, volumes/units used and total expenditure incurred. Current cost data and trends in key cost components were collated. 1

In April 1999 a survey questionnaire was developed, trialed and finalised. Forty temperate pasture seed growers were surveyed, using a combination of telephone, fax and mail survey techniques, to collect growers estimates of costs of production and assembly by species and geographical location. Section 1.3 outlines the sample selection procedure. The survey aimed to gather information on the following key issues: the total cost of production associated with pasture seed production; differences in costs of production between: species; regions; and production systems (irrigated versus dryland); the key cost components associated with pasture seed production; movements in key cost components and the total cost of production over time; the attitudes of producers to environmental regulation; and identified future research priorities. The findings of the survey are reported on a pasture seed species and region basis. Cost of production drivers, attitudes to environmental regulation and priorities for further research are also reported. 1.3 Sample Selection and Profile The selection of the sample population ensured that the sample selected was representative of the temperate pasture seed industry both in terms of species and geographical location of production. Initially, the population was stratified by State and species produced using established total industry production volumes as a guide. The survey sample was selected with the assistance of the Pasture Seeds R&D Advisory Committee and numerous other persons who are involved within the pasture seed industry across Australia, either at a state level or a national level 1. The survey aimed to collect results from at least 40 growers as per the terms of reference for the study. To allow for surveys that would not be returned, 70 growers were contacted and requested to participate in the survey. The composition of the 40 survey respondents is provided in Table 1.1 (listed by pasture seed produced, method of production and by state). Table 1.2 shows some background information on the survey respondents. Other information on the survey respondents is provided in Appendix Two. 1 Persons who aided in the selection of the sample population for the survey included: Angela Avery (Agriculture Victoria); Bill Sharp (Paramount Seeds, WA); Irwin Hunter (Irwin Hunter & Co, WA); Graham West (Auswest Seeds, NSW); Penny Hendy (producer, Vic); Hugh Roberts (producer, NSW); David Pengelly (producer, SA); Mark Holland (Agriculture WA); Neil Ballard (Ballard Seeds, WA); Jeff Davis (RIRDC); and Peter March (producer, SA). 2

Table 1.1 Overview of Survey Respondents SA WA VIC NSW TOTAL Number Surveyed 22 7 5 6 40 Clover 4 1 3 1 9 Medics 5 2 1 2 10 Lucerne 8 - - 2 10 Sub-Clover 5 4 1 1 11 Number of Dryland Producers 9 7 3 3 22 Number of Irrigated Producers 13 0 2 3 18 Table 1.2 Background Information of Survey Respondents by Species Clover Medics Lucerne Sub-Clover Average Number of Years Involved in Industry 17 27 28 23 Average Number of Years Grown Pasture Seed in Last 10 Years 8 9 10 9 Average Farm Size (ha) 1,954 1,808 1,620 1,475 Average Pasture Seed Area (ha) 177 131 164 550 Average Stand Life (years) 4 3 8 6 The sample selected for the purposes of this study reflects the dominance of SA in the make-up (in terms of the volume and value of production) of the Australian pasture seed industry. There is a relatively even split between dryland and irrigated producers who participated in the survey, although obviously, the split of production on these terms is dependent upon the species being examined (e.g., medic production is predominantly dryland within Australia). On average, the survey respondents have been involved with the pasture seed industry for a number of decades. This extensive involvement has been reflected over the last ten years, with all four pasture seed species being grown, on average, nine years out of ten. The average size of pasture seed area grown is largest for sub-clover, reflecting to a large extent, the large areas planted to sub-clover in WA. Disregarding these producers, the average area of sub-clover seed production across the survey sample is closer to 100 hectares. Average stand life varies slightly amongst the four different pasture species. In general, average stand life is greater for dryland pastures than for irrigated pastures. 3

2. THE AUSTRALIAN PASTURE SEED INDUSTRY 2.1 Introduction Prior to the introduction of Plant Variety Rights (PVR) legislation, the Australian pasture seed industry was traditionally composed of a small number of specialist producers and a large number of opportunistic producers. This combination would often lead to overproduction and lower returns to producers. However, the introduction of PVR legislation has encouraged the establishment of a dedicated and more specialised industry (Stewart & Phillips, 1994). There are approximately 4,000 farmers involved in seed production in Australia. This encompasses both dryland and irrigated production, of both tropical and temperate pastures. National industry representation for these producers is derived from the Seed Committee of the Grains Council of Australia. Producer membership is facilitated through the respective state affiliates of the Grains Council of Australia 2. Table 2.1 provides a summary of the estimated number of growers of temperate legume pasture seeds in Australia for the 1999/2000 season. South Australia has the largest number of growers followed by New South Wales. Table 2.1 Number of Certified Temperate Legume Pasture Seed Producers by State for 1999/2000. Legume NSW a SA b WA c Victoria d Total Clovers 6 60* 6 30 102 Lucerne 60 298 0 8 366 Medic 6 36* 4 11 57 Sub-clover 46 38 22 8 114 Total 118 432 32 57 639 Source: a NSW Agriculture (1998/99); b PIRSA (1998/99); c Agwest Plant Laboratories (1999/2000); d Agrifood Technologies, AWB & Paramount (1999/2000); * PIRSA estimate. In the early 1990s, Australian specialist seed producers sowed and harvested approximately 120,000 hectares of pasture seed annually. The harvest of this area yielded 28,000 tonnes, with an associated value of over $60 million (NSW Agriculture & Fisheries, 1991). Within Australia the value of pasture based agricultural production at the beginning of the decade amounted to $12 billion annually (NSW Agriculture & Fisheries, 1991). Given the diversity of climate and growing conditions within Australia, a wide range of pasture seed can be produced. This covers a range of species from temperate to sub-tropical and tropical (RIRDC 1997). Pasture seed production occurs in all States and Territories. The majority of production is of temperate pasture seed, which takes place in southern Australia, in particular South Australia (SA). The production of pasture seed (particularly tropical pastures) is generally regarded as high-risk. Marketing is reliant upon the success of animal industries, traditionally wool in the south of the country and beef in the north, and demand from those industries fluctuates depending upon economic and weather conditions (Loch, 1995). At present (1999), the pasture seed industry is in a state of decline, due to the poor relative profitability of sheep and cattle grazing enterprises and price pressure from seed merchants seeking to maintain their marketing margins. Despite demand from the dairy industry and 2 The affiliates are NSW Farmers Association, Agprice in Queensland, South Australian Farmers Federation, Victorian Farmers Federation, Western Australian Farmers Federation. The Tasmanian Farmers and Graziers Association is an associate member. 4

export demand in the early 1990s, it was more profitable to run merino wethers than to grow sub-clover seed within some NSW regions (e.g., Cootamundra) (pers. comm., Hugh Roberts, Pasture R & D Advisory Committee, 1/3/99). The Australian pasture seed industry is a small contributor within the world pasture seed industry, however the export market is very important to the Australian industry. Pasture seed exports have risen significantly since 1970, following Australia s membership of the Organisation for Economic Cooperation and Development (OECD) scheme for varietal certification (NSW Agriculture & Fisheries, 1991). Over the period 1987/88 to 1997/98, the ten-year average volume of exports was in excess of 5,000 tonnes annually, with an average value of over $10.5 million (Australian Farm Journal, 1999). Government involvement in the production of pasture seed is limited to the supply of relatively small amounts of early generation seed to support commercial production. Government also provides the legislative framework within which commercial activities are regulated, as well as a large part of the seed testing infrastructure (Loch, 1995). However, the seed industry is currently moving towards selfregulation with the establishment of an Interim Board of a new body, the Australian Seed Authority, and a National Code of Practice for seed labelling, marketing and setting of minimum standards. The Code of Practice was developed in response to Federal Mutual Recognition legislation, to which all states are signatories. Under Mutual Recognition legislation, as the name implies, seed which satisfies the legislative requirements of its production state, must be recognised as meeting legislative requirements of the importing state (pers. comm., Hugh Roberts, Pasture R & D Advisory Committee, 8/11/99). The following sections provide an overview of the Australian pasture seed industry. This includes an overview of pasture seed production in Australia, a description of the major pasture species, an analysis of the regional breakdown of production, an analysis of the volume and value of production, a description of recent industry developments, discussion of seed certification and comments regarding the importance of trade to the Australian industry. 2.2 Pasture Species Australia grows a more diverse range of pasture plants than any other country. Species are classified as perennial or annual, and grasses or legumes. Perennial grasses are grown for seed in all States, with most being grown in Victoria. Four grass seeds now dominate the domestic market: ryegrass, fescue, phalaris and cocksfoot (Loch, 1999). Perennial grass seed production is not currently levied for R&D. Levies are collected on most annual temperate legume pasture seeds and perennial legumes, with the majority of levies being collected on lucerne and clover seed crops (RIRDC, 1999). Australia has a comprehensive system of certifying pasture seed. Current Australian production of certified pasture seed, inclusive of grass seed, is approximately 20,000 tonnes per annum, of which, approximately 14,000 tonnes is grown in South Australia (pers. comm., Max Jongebloed, Seedco, April 1999). Species are also classified into temperate, sub-tropical and tropical based on the location of areas of production and the species ability to produce under different climatic conditions. Temperate species, derived from Europe and North America, dominate Australian production. The major characteristics of temperate and sub-tropical and tropical pasture species are briefly examined below. 5

2.2.1 Temperate Pastures Temperate pasture seed production is concentrated in areas with reliable winter rainfall and dry summers (Lovett & Scott 1997). Within Australia, temperate pastures are planted in an arc from south-central New South Wales (NSW), through northeast and central Victoria to the south east border district of SA. Northern Tasmania and the southwest tip of WA are also important production areas (Boyce, 1999). The main temperate legumes grown are sub-clover, annual medics, lucerne and white clover (Schroder, 1997). Temperate pastures are either short-term or long-term. Short-term pastures play an important part in rotations used in the main cropping regions of Southern Australia. Soil type impacts on which species is planted and generally where soils are acidic, pastures are based on sub-clover and where soils are alkaline, pastures are based on annual medics. In areas where grazing is the dominant enterprise rather than cropping, more longer-term pastures are grown. Long-term pastures usually consist of a perennial grass and either an annual or perennial legume. Sub-clover is the main legume grown, unless annual rainfall exceeds 800mm and then white clover becomes dominant. Lucerne will generally grow successfully across a wide range of rainfalls as long as the soil does not become waterlogged for extended periods in the winter and a strict grazing management regime is followed (Schroder, 1997). 2.2.2 Sub-Tropical and Tropical Pastures Twenty-two million hectares in northern Australia is suitable for sown pastures. Tropical pasture production from Northern Australia (Queensland, Northern Territory and Northern Western Australia) accounts for 30% of total Australian pastoral production (Hacker & Jones, 1997). The main sub-tropical grasses in northeast NSW, Queensland and the Northern Territory are Rhodes grass, Setaria, Panicum, carpet grass and paspalum species (RIRDC, 1997). The major tropical grasses are buffel, Rhodes, Bambatsi panic and Silk sorghum, which account for approximately 60% of production. The major legumes are lablab and cowpea, which account for approximately 70% of legume seed production (Loch 1999b). Currently, there are no industry levies on sub-tropical or tropical species (RIRDC, 1997). The seed yield for tropical species is generally lower than that of temperate species, due in part to uneven seed production and ripening (Lovett & Scott, 1997). 2.3 Study Species Given the diversity of climate and growing conditions within Australia, a wide range of pasture seed can be produced. The pasture seed industry is dominated by temperate seed production, and the four main species are clover, medic, lucerne and sub-clover. It is however, worth noting that other temperate perennial grass species such as, phalaris, cocksfoot, tall fescue and rye grass are also important, particularly for export markets. This study examines the four major temperate legume pasture seed species in detail. 2.3.1 Clover Red and white clovers are important pastures for both grazing and irrigation regions. They require dry summers, as the presence of summer rainfall will cause the seed to germinate in the head (NSW Agriculture & Fisheries, 1991). Seed production occurs under irrigation in many operations, particularly in south east SA, allowing greater control over growing conditions. Cregan & McDonald (1984) note that perennial white clover pasture seed is grown in regions with greater than 700 mm of rainfall, or alternatively under irrigation. Within inland areas, white clover is persistent only at altitudes of greater than 700 metres. The main growing period for white clover is 6

spring, summer and autumn. Red clover pastures are generally short-lived, summer growing and suited to the tablelands districts, with altitudes of greater than 650m, and central and south coast areas of NSW (Cregan & McDonald, 1984). A partnership between Agriculture Victoria at Hamilton and Agri Seeds Ltd, New Zealand, has been established to improve white clover varieties within Australia (National Farmer s Federation, 1997). 2.3.2 Medic Annual medics are winter growing legumes regenerating each year from seed (Cregan & McDonald, 1984). Within Australia, barrel medics are the most important. Other varieties grown to a lesser extent include snail, gama and disc medics (NSW Agriculture & Fisheries, 1991). Naturally occurring medics, such as burr, black and cutleaf medics, despite their potential for producing excellent herbage, are considered contaminants in seed crop situations and seed of these localised varieties is generally not produced commercially (Stewart & Phillips, 1994). Within the low-to-medium rainfall area of southern Australia, medics are the key legume pasture where there are alkaline to slightly acidic soils (Teague, 1999). Heavy clay soils are not suitable as they cause losses of seed pods in soil cracks. Medics are well suited to regenerating after cropping for many years and regenerate more successfully than sub-clovers, especially where hard soil deters sub-clover seed burial. Furthermore, medics have high seed production (produce more hard seed), are more drought tolerant, have a deeper root system than sub-clover and set seed quickly in dry springs (Teague, 1999). Medic production in WA, SA, Victoria and New South Wales is predominantly a dryland operation. As a result, medic production varies depending on seasonal conditions (Stewart & Phillips, 1994). Additionally, annual medic seed is harvested by catch croppers resulting in seed that is neither consistent nor reliable (NSW Department of Agriculture and Fisheries, 1991). Within NSW, production has declined in recent years following the introduction of lucerne aphids and the development of improved early maturing sub-clover cultivars. A National Medic Improvement Program, centered in SA, aims to increase cultivar resistance to aphids and disease (Stewart & Phillips, 1994). 2.3.3 Lucerne Lucerne pastures are drought-resistant perennials that produce green feed in all seasons. They are suited to a wide range of soils, however grow best in deep, well-drained soils of medium to light texture with a good supply of calcium. Lucerne does not do well on heavy clays or cracking soils. Lucerne pastures will grow where they receive as little as 250mm rainfall, although it is possible to achieve yields in excess of 20t/ha where irrigation is available (Teague, 1999). Lucerne seed production is highly specialised and grown mostly under irrigation in SA or on flood plains with high watertables. Specialised production involves expensive inputs and valuable land (NSW Agriculture & Fisheries, 1991). For good persistency, lucerne pastures need to be either rotationally grazed or cut (Teague, 1999). Lucerne stands may live for up to 20 years, although the average stand life is closer to 5 years (McDonald & Waterhouse, 1989). The life of a lucerne stand will be determined by a variety of factors, including how well it survives pests and diseases, climatic impacts and timing of harvest (RIRDC, 1997). Environmental factors and management will also influence stand life (NSW Agriculture, 1988). 7

Lucerne flowers and sets seed in early summer. As a result, most seed is produced in low summer rainfall areas. Summer dominant rainfall interferes with pollination, seed set and may also adversely impact upon harvest (NSW Agriculture & Fisheries, 1991). Winter active cultivars are suitable for shortterm dryland pastures (up to 5 years), whilst winter dormant cultivars have a longer life. Pastures can be long lived perennial legumes producing a nutritious and palatable fodder for direct grazing or cutting for forage or hay. Following the entry of lucerne aphids into Australia in 1977, import restrictions were relaxed to allow aphid resistant varieties to enter. This increased the number of cultivars available within Australia (NSW Agriculture & Fisheries, 1991). Some new varieties also have resistance to root diseases (Teague, 1999). 2.3.4 Sub-Clover In the early part of this decade, sub-clover was the dominant pasture species in Australia, accounting for almost a third of national production of pasture. In the early 1990s, SA and WA accounted for approximately 75% of the total Australian crop (NSW Agriculture & Fisheries, 1991). Sub-clovers are self-generating annuals for dryland and some irrigated pastures. They are suited to higher rainfall areas with acid to neutral soils. Some varieties will, however, perform satisfactorily on slightly alkaline soils. Sub-clover tolerates close grazing, has large seeds (aiding establishment), provides early Autumn production and is weed suppressive (Teague, 1999). Sub-clover is suitable for growing on a wide variety of soils and in a wide range of climates, where it tolerates cold conditions and frosts. Its benefits include that it acts as an important element in transferring nitrogen from the atmosphere into a form that can be used by plants in the ground, it provides a high amount of protein and many valuable nutrients and varieties that bury their seed into the ground will ensure these seeds survive long dry periods and germinate with Autumn rain. Once sub-clover becomes established, it is hardy and its dense cover will inhibit the growth of other grasses and weeds. It also acts as an insect deterrent as it provides an undesirable habitat to many varieties of insects. Sub-clover is the basic component of pastures within NSW (Cregan & McDonald, 1984). Seed production is suited to SA due to the dry summer conditions being ideal for summer production, as it minimises seed deterioration, rotting and premature germination (NSW Agriculture & Fisheries, 1991). Stewart and Phillips (1994) note that sub-clover is grown within the 400 700 mm rainfall zone, although NSW Agriculture & Fisheries (1991) state that a minimum rainfall requirement of 480mm is needed and Teague (1999) indicates a minimum of 250 mm. The seed crop can be quite variable depending upon the season. Seed supply and price will also fluctuate in response to opportunistic dryland growing of the pasture seed (Loch, 1995). Irrigation and other management techniques maintain productivity of sub-clover pasture. Within SA, 75% of production is supplemented with irrigation and in Victoria 50% of production is irrigated. In WA and NSW, production is predominantly carried out on a dryland basis (Stewart & Phillips, 1994). Different growing conditions will support different varieties of sub-clover (Teague, 1999): early to mid season varieties will need a growing season of 4-6 months and a minimum of 275mm rainfall. These conditions will support varieties such as Nungarin and Dalkeith; mid season varieties will need a growing season of 5.5 7.5 months and a minimum of 400mm rainfall. These conditions will support varieties such as Seaton Park, Rosedale, Trikkala, Gosse, Junee, Clare and Woogenellup; and 8

late season varieties will need a growing season of 8-9.5 months and a minimum rainfall of 550mm. These conditions will support varieties such as Nuba, Karridale, Goulburn, Denmark, Larisa and Leura. A National Subterranean Clover Improvement Program works to develop new cultivars of sub-clover. Characteristics of new cultivars include increased disease resistance, low oestrogen levels and a high level of hardseedness to ensure survival (NSW Agriculture & Fisheries, 1991). Characteristics of subclover include oestrogen content, persistence and productivity, flowering and seed maturity, hardseedness, special adaptive features and resistance to insects and diseases (Cregan & Wolfe, 1988). 2.4 Location of Production SA is the leading state in temperate pasture seed production, producing more than half the national output. The dry summers in this region aid seed retrieval, thus facilitating extensive production, which is concentrated in the south-east of the state particularly around Naracoorte and Keith. Approximately sixty percent of production in SA is grown under irrigation (Loch, 1999a). Clover seed production within Australia generally takes place in the south-east part of SA, north-east along the Murray River within Victoria and from Howlong to Corowa and up to Forbes within NSW. Recent expansions in Victorian production have resulted in this state becoming the predominant supplier of clover seed. Production of clover in WA is mainly opportunistic (pers. comm., Mark Holland, 1999). The majority of medic production within Australia takes place in SA, (within 120km of Adelaide, incorporating the regions around Balaclava, Owen and Maitland), and Victoria. Opportunistic production occurs in NSW and WA. Lucerne production within SA is centred on Keith, Bordertown and Jamestown. Within NSW, lucerne production takes place from Howlong through to Corowa with dryland enterprises found at Cootamundra and irrigation enterprises at Forbes (written comm., Hugh Roberts, 1999). Traditionally, there has been no lucerne production in WA, however the recent benefits derived from lucerne production in higher rainfall areas has also led to increased lucerne plantings in WA in recent years. Production of sub-clover in SA is centred on Naracoorte and Bordertown. In WA most production occurs around Esperance. NSW and Victorian production regions (both irrigated and dryland) include Rutherglen to Corowa, Wagga Wagga, Griffith and Young (pers. comm., Hugh Roberts, 1999). Production of sub-clover also occurs around Numurkah, Dookie and Yarrawonga in Victoria (Hendy, 1999). Figure 2.1 indicates the most important regions for temperate pasture seed production in Australia. 9

Figure 2.1 Temperate Pasture Seed Production Regions within Australia Source: Hassall & Associates 10

2.5 Volume of Pasture Seed Production The following section provides an overview of the volume of certified pasture seed production in Australia in recent years. Each of the species included within this study is examined in turn. All estimates of production volume were obtained from the Department of Agriculture, Fisheries and Forestry - Australia (AFFA), Levies Management Unit. All estimates reflect quantities of certified seed as declared on levy return forms. 2.5.1 Clover Table 2.2 details estimates of the volume of production of certified clover seed within Australia from 1992/93 to 1997/98. All volumes are measured in tonnes. For the period 1992/93 to 1996/97 volumes combine both clover and sub-clover seed production due to different data collection methods. Table 2.2 Volume of Production of Certified Clover Seed (tonnes) 1992/93 1996/97 State 1992/93 1993/94 1994/95 1995/96 1996/97 South Australia 3,020 875 1,266 2,289 2,056 New South Wales 26 26 70 602 805 Victoria 1,536 1,066 920 1,476 430 Western Australia 1,031 1,021 324 406 n/a Australia 5,614 2,991 2,579 4,774 3,291 Source: AFFA Levies Management Unit (1999). Note: Volumes reflect both clover and sub-clover seed. In 1997-98, clover seed production, measured independently of sub-clover production, was estimated at 3,352 tonnes. Victoria and SA were the largest producers (AFFA Levies Management Unit, 1999). The production of certified clover seed is widespread across Australia, with SA and Victoria the dominant states (in terms of volume of production). Production is characterised by extreme variability in supply. Table 2.2 shows that total national production: almost halved between 1992/93 and 1993/1994 due to the effects of drought; increased by 62 percent between 1994 and 1995; and declined by 21% between 1995/6 and 1996/7. This variability in supply is reflected across all states. 2.5.2 Medic Table 2.3 details estimates of the volume of production of certified medic seed in Australia over recent years. 11

Table 2.3 Volume of Production of Certified Medic Seed (tonnes) 1992/93 1997/98 State 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 South Australia 718 724 334 431 417 370 New South Wales 552 552 6 18 10 21 Victoria 364 310 60 210 219 126 Western Australia 55 75 22 75 n/a 33 Australia 1,689 1,660 422 734 646 550 Source: AFFA Levies Management Unit (1999) The production of certified medic seed within Australia has declined nationally by two-thirds since 1992/93, with some fluctuations, with declines in aggregate production being exhibited across all states. The variability in supply reflects the predominantly dryland nature of medic production and opportunistic cropping. The distinct decline in production in NSW is, as noted before, due in part to the introduction of lucerne aphids and improved early maturing sub-clover varieties. 2.5.3 Lucerne Table 2.4 details estimates of the volume of production of certified lucerne seed in recent years. Table 2.4 Volume of Production of Certified Lucerne Seed (tonnes) 1992/93 1997/98 State 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 South Australia 2,540 633 4,935 4,804 2,090 2,056 New South Wales 484 484 309 444 356 438 Victoria 6 13 3 9 n/a 28 Western Australia n/a n/a n/a n/a n/a n/a Australia 3,030 1,130 5,247 5,257 2,446 2,522 Source: AFFA Levies Management Unit (1999). Production of certified lucerne seed is concentrated in SA and NSW, with an expansion into the nontraditional region of WA in 1997. In terms of volume, lucerne seed production was the second largest temperate legume seed crop within Australia in 1997/98. This is despite a decline in the total volume of lucerne production since 1995/96. National production halved in 1992 and 1993 due to the effects of drought. 2.5.4 Sub-clover Table 2.5 details the volume of sub-clover production for 1997/98 only. Due to data collection procedures where sub-clover and clover levies were aggregated for the period 1992/93 to 1996/97, a complete table of volume of production of certified sub-clover seed cannot be developed. 12

Table 2.5 Volume of Production of Certified Sub-Clover Seed (tonnes) State 1997/98 South Australia 1,400 New South Wales 17 Victoria 853 Western Australia 6 Australia 2,276 Source: AFFA Levies Management Unit (1999) SA dominates production of sub-clover seed, accounting for 62% of national production in 1997/98. Sub-clover was the largest volume temperate pasture seed crop in Australia in the earlier part of this decade, but now accounts for less than 2,300 tonnes, making it the third most important temperate seed crop in terms of volume of production. The advent of Plant Variety Rights in 1987 has encouraged the growth of different pasture species carefully managed to meet specific needs. This has contributed, along with other factors, to the decline in the total volume of sub-clover seed production. 2.5.5 General Conclusions Pasture seed production within Australia has been characterised in recent years by: a recent general downward trend in the total volume of production; a large degree of year-to-year supply variability, exhibited across all states; and a change in the relative mix of species production, with clover emerging as the dominant pasture seed crop as measured by volume. The following section provides brief comments on the value of pasture seed production within Australia. 2.6 Value of Pasture Seed Production The data available on value of production is very limited. NSW Agriculture & Fisheries (1991) estimated a value of over $60 million for the 28,000 tonnes produced nationally in the early 1990 s. Loch (1999a) notes that the value of pasture seed production in Australia is split roughly two-thirds/one-third between temperate and tropical species. This would indicate a total value of production in the order of $40 million for temperate pasture seed production, based on production and value data from the earlier part of the decade. Alternatively, a value of production can be derived using the unit value for temperate legume pasture seed exports (as supplied by the Seed Industry Association of Australia, 1999, and listed in Table 2.8). Table 2.6 shows the production volumes for 1997-98 by pasture species (as listed in Tables 2.2 2.5), the unit value for pasture seed exports and the estimated value of production. Based on these calculations, the gross value of temperate legume pasture seed production was approximately $28 million in 1997/98 3. 3 In Section 2.10.1, Stewart and Phillips (1994) note that export prices fluctuate substantially, often being lower than the domestic price (to some extent due to Australian over-production being placed on the world market). Therefore, the estimated value of production is considered a conservative estimate. 13

Table 2.6 Estimated Industry Value, 1997/98 Species Volume (tonnes) $/kg Total Value Clover Seed 1 3,352 3.01 $10,096,000 Medic Seed 2 550 3.26 $1,793,000 Lucerne 2,522 4.25 $10,718,500 Sub-Clover 2,276 2.57 $5,849,320 Total $28,456,820 Source: Volumes sourced from Tables 2.2 2.5, unit values per kg from Seed Industry Association of Australia (1999) as listed in Table 2.8. 2.7 Pasture Seed Distribution The domestic distribution channel for pasture seed includes seed firms that range in size from individual operators to multinational companies. A small group of specialist seed merchants work in conjunction with seed firms as do a larger group of general rural merchandisers who sell seed as a small part of their operations. At present within Australia, there is a trend towards concentration of the seed market, with large seed firms and the large general rural merchandisers being the dominant players. Three seed firms that are leading this trend are Heritage Seeds and Wrightson Seeds (both foreign owned entities) and the South Australian Seedgrowers Cooperative (Seedco) (an Australian entity). Industry associations representing seed merchants that are important within the Australian pasture seed industry include the Seed Industry Association of Australia Ltd (SIAA), the Proprietary Marketer and Plant Breeder s Group and the National Agricultural Commodities Marketing Association (NACMA). The SIAA represents the main geographic areas of seed activity in Australia. The Proprietary Marketer and Plant Breeder s Group is an association within the SIAA which comprises thirty of the largest seed firms in Australia. NACMA represents about 270 marketing businesses who are primarily associated with grain trading and have an interest in the supply of seed within the grain industry (Boyce, 1996). Appendix One provides a listing of companies, cooperatives and traders that are involved within the pasture seed industry in Australia. This directory provides an excellent overview of the commercial stakeholders within the industry in each state. 2.8 Recent Industry Changes To evaluate the current position of the pasture seed industry within Australia, recent changes that have occurred within the industry must be examined. Important recent changes include: the introduction and application of Plant Variety Rights (PVR) Legislation; the introduction of industry certification systems and practices; the increasing necessity to engage economies of scale; the decreased profitability of complimentary production activities; and changes to the technology utilised within the production chain. Each of these changes is briefly examined below. 14

2.8.1 Plant Breeder s Rights Plant Variety Rights (PVR) were introduced into Australia in 1987 and changed in 1994 to become known as Plant Breeder s Rights (PBR). This is due to the fact that the right lies with the breeder rather than the variety (Jones, 1999). In the following discussion these two terms are interchangeable. PBR provide breeders of new plant varieties with a legal monopoly over the commercialisation of their varieties for a prescribed length of time so they can recover the cost of breeding commercially valuable new plant varieties (NSW Agriculture, 1999). To be granted a PBR a variety must be new, distinct, uniform and stable. PBR provide an incentive to individuals and companies to invest in plant breeding and to develop new varieties which will also aid the industry as a whole. New varieties have the potential to allow producers to achieve higher yields, to more successfully target variety specifications to demand and to achieve better resistance to diseases and pests. PBR operate by charging a royalty on the sale of the seed or propagating material of that variety. The sale of seed or propagating material of that variety can only be carried out with the owner s permission and an accompanying payment of the associated royalty (NSW Agriculture, 1999). International agreements relating to plant genetic resources and seed testing impact upon the Australian industry. Australia has been a member of the International Union for the Protection of New Varieties of Plants (UPOV) since 1988. Further, the Australian Plant Breeder s Rights Act is harmonised across states under the more recent 1991 Act of Convention (NSW Agriculture, 1999). Stewart and Phillips (1994) discuss the benefits and costs associated with PBR. Benefits include: rationalisation of seed production with seed companies producing to specific market requirements regardless of whether it is domestic or export demand; associated development of grower contracts which can include predetermined prices that aid in minimising risk and the avoidance of marketing problems; Australia is able to attract out of season increases in foreign cultivars for re-export back to the originating countries; public bodies are able to recover a proportion of the costs associated with breeding via royalties and license sales; and the range of cultivars available has increased. Some of the costs, or disadvantages, associated with the development of PBR include: increased costs to consumers; opportunities for individuals to obtain license rights to new public bred cultivars are limited; and there no requirement that PBR seed has to be tested under a seed certification scheme and is therefore not tested for minimum standards of seed health, germination and performance. Hendy (1999) notes additional costs or disadvantages of PBR: the duration of contracts with plant breeders are often restricted to 12 months, however perennial varieties take over 12 months to start performing well; twelve month contracts may also result in previously grown varieties contaminating available land for subsequent varieties; 15