Industry structures and systems governing the imposition of and disbursement of marketing and research and development
(R&D) levies in the agricultural sector
Submission 85
Introduction
The Victorian Farmers Federation is Australia’s largest state farmer organisation, and the only
recognised, consistent voice on issues affecting rural Victoria.
The VFF consists of an elected Board of Directors, a member representative Policy Council to set
policy and eight commodity groups representing dairy, grains, livestock, horticulture, chicken meat,
pigs, flowers and egg industries. Farmers are elected by their peers to direct each of the commodity
groups and are supported by Melbourne-based staff.
Each VFF member is represented locally by one of the 230 VFF branches across the state and
through their commodity representatives at local, district, state and national levels. The VFF also
represents farmers’ views at many industry and government forums.
Peter Tuohey
President
Victorian Farmers Federation
Industry structures and systems governing the imposition of and disbursement of marketing and research and development
(R&D) levies in the agricultural sector
Submission 85
The VFF appreciates the opportunity to comment on the Senate Inquiry into The industry structures
and systems governing the imposition of and disbursement of marketing and research and
development (R&D) levies in the agricultural sector.
The VFF believes that the current R.D&E model that is funded by producer levies and matched
government contributions has produced excellent results in driving agricultural productivity,
environmental outcomes and community benefits.
The VFF supports the continuation of the current levy collection system, albeit with some
streamlining and improvements.
In addressing the specific terms of reference of the inquiry, the VFF makes the following comments:
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An audit of reports, inquiries and reviews relevant to this inquiry
The VFF believe it is important for the previous Productivity Commission inquiry into Rural Research
and Development Corporations be considered and reviewed as part of this current inquiry.
the opportunities levy payers have to influence the investment of the levies/ the opportunities
levy payers have to approve and reapprove the imposition of levies;
The VFF believes that the relatively strong performance in global terms, of the Australian Rural
R&D sector is in large part due to strong producer engagement in research and development
activities.
Peak industry bodies provide stable and effective practical direction into identifying RD&E priorities.
The allocation of RDC funding along the supply chain, must be support by farmers and drive greater
farmgate returns. The VFF is concerned that farmers are not excluded from these supply-chain gains.
Many food and fibre supply chains are dominated by many suppliers delivering to few buyers
(oligopsonistic). This means increases the risk of these powerful market players capturing the profits
generated from RDC work.
Given the nature of some of these market structures it would be inequitable to invest farmers levies
in supply-chain R&D that is not passed back to the farm gate.
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industry governance arrangements, consultation and reporting frameworks
Each industry has unique components - geographic spread, industry culture and intensity of
production - that influence the precise governance structure of their
RDC. In general the governance structures have evolved though industry
adaptation or in some cases through changes to statutory authorities.
The VFF believes that each industry is best suited to determine its own RDC governance
structures, provided fundamental principles are followed.
These principles include:
 Skills-based board appointments.
 A strong focus on transparency.
 Accountability to levy payers.
 Comprehensive and thorough reporting on expenditure, including valuing a return to
stakeholders.
Industry structures and systems governing the imposition of and disbursement of marketing and research and development
(R&D) levies in the agricultural sector
Submission 85
The focus on coordination activities between Rural R&D bodies through the council of chairs is a
simple and effective means of minimising duplication and subsequent waste across R&D bodies.
The council of chairs should report to the levy payers each year as to activities and the outcomes
of efforts to prevent duplication and coordinate research efforts.
VFF Commodity Group Responses
VFF Livestock Group
The VFF Livestock group is a strong supporter of the two RDC’s that cover the livestock sector due to
the excellent service and return on investment that they provide to levy payers. We do, however,
acknowledge that there is room for improvement in any such organisation.
The VFF Livestock Group makes the following comments in relation to the collection of livestock
levies:
1. The current collection of a levy for the purpose of industry good, namely: marketing,
biosecurity and animal health, residue testing (and market access), and research &
development is supported by the VFF Livestock Group.
2. That Meat and Livestock Australia (MLA), Australian Wool Innovation (AWI), Animal Health
Australia (AHA), and the National Residue Survey (NRS) should continue to carry out their
responsibilities and be continued to be funded by producer levies.
3. As part of the Senate Inquiry into Grass Fed Beef Levies, the VFF Livestock Group proposed
that an investigation be undertaken of the cost benefit to the beef industry of altering the
flat fee of $5 to a more dynamic fee structure. This structure may be based on a percentage
of animal value, such as the current sheep and lamb levy structure. Within this investigation
we believe it is important to investigate:
a. The benefit to producers financial sustainability by levies reflecting animal value
b. The importance of maintaining funding sustainability for current and future levy
funded activities
4. We believe it is vital that a system that heavily affects all Australian livestock producers
should have sufficient rigour around any change process. It is anticipated that such a level of
rigour would mean any changes would have to be a strong and unified direction from the
whole of industry, not just a certain part of the industry.
In relation to governance issues the VFF Livestock Group make the following comment:
 All RDC’s need to have a board that is made up of individuals with an appropriate and
balanced set of skills.
 The selection of individual board members should occur via a process that ensures that a
board with an appropriate mix of skills is achieved and does not deter high quality applicants
from applying.
 There is a strong need for all RDC’s to have a prescribed industry consultation process. This
ensures that the consultation with industry is consistent, understood by industry and not at
the whim of the board members at any one time. The process in place for MLA, where the
prescribed consultation process includes national Peak Bodies such as the Cattle Council or
Australia (CCA) and the Sheepmeat Council of Australia (SCA) give clear direction to MLA as
to how they will maintain their consultation with industry. AWI does not have such a defined
process however would strongly benefit from such a process. Wool Producers Australia, the
wool industry equivalent of SCA and CCA is the obvious choice to fill this role.
Industry structures and systems governing the imposition of and disbursement of marketing and research and development
(R&D) levies in the agricultural sector
Submission 85
VFF Grains Group
The Victorian Farmers Federation (VFF) Grains Group would like to thank the Senate Standing Rural
and Regional Affairs and Transport References Committee for the opportunity to provide a
submission and input into the review of industry structures and systems governing the imposition
and disbursement of marketing and research and development (R&D) levies in the agricultural
sector. As a representative organisation of grain growers who have a direct investment in Rural
Research & Development Corporations (RRDC) activities through the Grains Research and
Development Corporation (GRDC) levy, the VFF Grains Group has restricted its commentary to issues
impacting the GRDC.
VFF Grains Group supports the RRDC co-funding model and the existing funding arrangements of the
GRDC, and notes that this is also widely supported by grain growers, with 77 percent of respondents
in the 2013 GRDC Grower Survey indicating that they are comfortable or extremely comfortable
paying the levy.1 There is considerable opportunity for levy payers to be involved in the GRDC’s
processes of levy investment and review, through the Regional Panels, Regional Cropping Solutions
networks, and Grains Producers Australia (the current industry Representative Organisation), as well
as the annual Grower Surveys.
Additionally, the VFF Grains Group would like to note that an independent strategic review of GRDC
was implemented in 2013-14, conducted by Marsden Jacob Associates, with findings recently
released this year. Industry and GRDC have already commenced implementation of the next phase
of this review process, including a range of measures to further increase accountability to growers.
VFF considers this structural review process should be allowed to run its course.
In support of the current structures and systems governing the imposition and disbursement of
GRDC levies, VFF Grains Group would like to make the following observations. The VFF Grains Group:
1. supports the RRDC co-funding model and the existing structure and funding arrangements of the
GRDC and other RDCs;
2. considers that government investment in Research, Development & Extension (RD&E) in
agriculture is well justified by the numerous studies into the resultant productivity gains relative
to other sectors of the Australian economy;
3. notes that while there may be theoretical debate to determine the level of public benefit versus
private benefit resulting from RD&E expenditure through Government funding versus private
levy funding, the point largely uncontested is that this expenditure does generate productivity
gains for grain producers, industry and the broader economy;
4. further believes that as the rate of productivity growth declines with declining real investment in
RD&E, the need to maintain both public funding and levy based funding is essential if we are to
1
There is significant grower support for the GRDC’s activities, with 79 percent of respondents rating the
organisation’s overall performance ‘high’ or ‘very high’. Additionally, 71 percent of respondents view the GRDC
as adding value to farm business activities, and more than 60 percent consider that the GRDC invests in
activities for the public good.
Source: Down to Earth Research, GRDC Organisational Performance Research – 2013 Grower Survey Report,
September 2013 (URL: http://www.grdc.com.au/About-Us/Corporate-Governance/GRDC-Grower-SurveyResults).
Industry structures and systems governing the imposition of and disbursement of marketing and research and development
(R&D) levies in the agricultural sector
Submission 85
achieve the productivity gains required to meet rapidly increasing Australian and world food
demand;
5. is concerned that as productivity gains from RD&E are ‘lagged’, that any temptation by
Government or some sectors to reduce expenditure on RD&E, regardless of it source, will have
far-reaching negative impacts on the economy into the future, especially as food consumption
and demand continues to increase; and
6. supports good governance, reporting, and consultation structures that provide balance of
transparency, accountability, and efficient use of both public and private levy funds. To this end
VFF Grains Group again notes that the structure of GRDC is currently undergoing an industry
review to assess appropriate industry structures and corporate governance arrangements of
GRDC, and acknowledges the changes that are already being made in response to this review to
ensure increased grower engagement and accountability.
In conclusion, VFF Grains considers that the existing arrangements for funding RRDCs in the grains
industry through the GRDC are effective and efficient. Further, the current funding model is widely
supported by growers, and it is clear that funding is required to ensure continuing productivity
benefits to both rural and regional areas and the wider community alike. The reduction of such
funding would not only have a negative impact upon the wider community today, but also on future
generations, due to the ‘lagged’ returns that inevitably result from RD&E ‘investment’ in a future
sustainable food industry.
United Dairyfarmers VIctoria
The basis on which levies are imposed, collected and used;
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The legislated “dairy services levy” as collected in the dairy sector is for the purposes of
industry services (R&D, marketing and policy development) and not advocacy
The basis for collection and changes to the levy (the Levy Poll) is heavily regulated with
significant opportunity for levy payer involvement in all stages of the process
Use of funds is controlled via Board approval of the DA Strategic Plan which is reviewed by
Government. All key stakeholders have significant input into the development of the plan.
While bureaucratic in nature, the current levy system is inclusive and results in investment
well aligned with the needs of the industry.
The opportunities levy payers have to influence the investment of the levies;
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Apart from the Levy Poll itself, there are many opportunities for levy payers to provide their
views on the priorities for investment by DA including:
o Farmer participation on the DA Board and at the AGM
o DA field consultation
o The strategic planning process and industry strategic frameworks (e.g. Dairy Moving
Forward)
o Industry committees and the whole DA extension structure (through the Regional
Development Programs – 3 in Victoria )
o DA stakeholder surveys (e.g. National farmer survey)
o Consultation with Group B members (including Australian Dairy Farmers) in the
strategic planning process as defined by a MoU between the parties
Industry structures and systems governing the imposition of and disbursement of marketing and research and development
(R&D) levies in the agricultural sector
Submission 85
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The industry structure and associated agreements require regular consultation that results
in a DA Strategic Plan and Annual Operating Plan that reflects industry key priorities
The opportunities levy payers have to approve and reapprove the imposition of levies;
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The Dairy Services Levy Poll is the legislated mechanism for levy payer approval of the levy
and levy rate and this must occur at least every 5 years. Only Wool and Dairy are required to
conduct a poll
Pre-poll, an independent report on the performance of DA is made available to levy payers
Significant levels of consultation with levy payers are required pre, during and post poll
which provides the levy payers with opportunity to influence the process, as well as make
the final assessment (19 meetings across Victoria last poll)
A criticism is the levy poll itself requires significant DA overhead and cost and could be
streamlined. With the support of key stakeholders, DA has instigated an independent
review in this regard.
The transformation of R&D and marketing into increased returns at the farm gate, including the
effectiveness of extension systems;
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Total factor productivity for Australian dairy farms has increased at an average annual rate
of 1.6 per cent from 1978-79 to 2010-11. This compares favourably with all broad-acre
agriculture (1.0 per cent), broad-acre cropping (1.5 per cent) and the beef industry (0.9 per
cent). (ABARES)
 While there are other factors at play, R&D has provided the basis for much of this
productivity improvement. Independent experts have estimated the overall benefit of R&D
expenditure to the levy in the range of 3.3 – 6 to 1.
 Around a third of DA’s investment is directed towards Extension activities. DA relies upon
the RDPs, NCDEA (TAFE network), industry consultants and commercial organisations as key
elements of its Extension structure.
 Of recent years, the withdrawal of State Government in agriculture extension activities has
placed greater pressure on organisations such as DA to maintain Extension services
Collaboration on research to benefit multiple industry and research sectors;
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DA has a strong record of collaborating with other RDCs and government agencies to
address cross-sectoral challenges that impact the profitable growth and sustainability of the
Australian dairy industry. This work also ensures that the broader policy and national RD&E
objectives are achieved as efficiently as possible.
Industry governance arrangements, consultation and reporting frameworks;
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DA is one organisation of many that support the dairy sector. To be effective, DA must
interact effectively with other services and advocacy bodies.
While DA has no formal role in the governance of advocacy bodies (ADF, ADPF or ADIC), ADF
and ADPF have representatives on the DA Board Selection Committee.
There is regular communication, consultation and reporting between the parties. A MoU
between DA and ADF/ADPF formalises the interaction between the parties for the DA
strategic planning process including participation in ADF’s Policy Advisory Groups.
DA’s interaction with ADF includes regular (6 monthly) performance reporting
Industry structures and systems governing the imposition of and disbursement of marketing and research and development
(R&D) levies in the agricultural sector
Submission 85
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While the mechanisms above encourage consultation, there is always room for
improvement and DA is working iteratively with the ADF and ADPF to optimise
arrangements
VFF Horticulture Group
VFF Horticulture welcomed the ACIL Allen review into Horticulture Australia Limited (HAL). This
review was prompted by criticism by growers of the way in which levies were distributed, conflict of
interest issues and the lack of transparency. In early October, following a scathing report from ACIL
Allen, the Minister for Agriculture, Barnaby Joyce announced the formation of Horticulture
Innovation Australia Ltd (HIAL).
There are many challenges facing the horticulture industry such as pest, disease and weed
management. R&D is one way to not only maintain but increase productivity which allows
Australian horticultural growers to be globally competitive. We need to ensure that those parts of
levies that produced successful outcomes for growers are enhanced under the new system.
While it is very early days the changes the Minister has announced have been cautiously welcomed
by growers. Our member growers are flagging that small to medium levy payers need to be assured
that their voice will be heard as these growers are not in a position to individually fund any R&D.
Levy payers are looking for a fairer system where they have a say in the collection method, amount
and how the dollars are invested. Without pre-empting the Senate inquiry the growers would
welcome any move that would provide greater transparency around the levy collection and project
identification process and give some ownership back to those paying.