SUBMISSION
TO:
ACIL ALLEN CONSULTING
FROM:
PISTACHIO GROWERS’ ASSOCIATION INC
TOPIC:
HAL REVIEW
DATE:
24th February 2014
EXECUTIVE SUMMARY:
The Australian Pistachio Industry represented by the Pistachio Growers’
Association Incorporated has been a member of Horticulture Australia Limited
since its inception and believes that for the pistachio industry and Australian
Horticulture in general the HAL model is the best model for achieving a return
on investment for both grower contributions and the matching Australian
Government funds.
In saying that we also believe that there are components of the HAL model
that can be improved to make the process of funding research, development,
extension and marketing activities more efficient and cost effective but any
improvements should come from within the model not through any major
amendments forced on it by the Department of Agriculture and/or the Federal
Government of the day.
The Pistachio Growers’ Association Inc strongly supports the current
Voluntary Contribution (VC) process that is offered through Horticulture
Australia Limited and using matching Australian Government funds.
INDUSTRY BACKGROUND:
The Australian Pistachio Industry began to develop in the late 1970’s and the
Pistachio Growers’ Association PGA) was Incorporated in 1983.
PGA is a national trade organisation with direct membership by the individual
growers/businesses. There are no State based grower groups.
Over the years the PGA has developed and maintained a grower list that currently
has 60 businesses interested in and/or currently involved in the growing of
pistachios. All of these on the database are communicated with at least twice a year.
The database is split into a number of categories:a)
Members ONLY
b)
Members and research fund contributors
c)
Non-members.
The Pistachio Growers’ Association (PGA) currently represents the interests of the
47 financial pistachios growers in Australia. The financial members/research
contributors are communicated with at least once a month (on occasions even more
frequently) and the research activities are communicated at the industry annual
forum held in August/September each year.
This is a small expanding industry that has a farm gate value of about $15 million per
annum. Additional new orchards are being planted and existing orchards are being
expanded.
The major production areas are along the Murray River Valley between Swan Hill in
Victoria and Waikerie in South Australia. Further plantings are in central west
Victoria and Pinnaroo, South Australia. Small plantings exist in Western Australia.
A central commercial processing facility is at Robinvale in Victoria.
The pistachio industry includes a mix of medium-sized business ventures and
smaller family-owned operations. The bulk of the crop is produced on medium-sized
orchards.
The PGA is a foundation B Class member of Horticulture Australia Limited
(HAL).
INDUSTRY FUNDING:
PGA during its establishment years decided to implement a voluntary contribution
rather than proceed down the track of a statutory R&D and/or marketing levy.
PGA established and maintains a voluntary contribution, paid by the individual
growers, to the PGA research fund. This fund is administered by the Executive
Committee of the PGA but the specific research, development and extension
allocation is managed by the Pistachio R&D Committee. The R& D Committee
is effectively the IAC. It acts like an IAC following most of the principals and
governance requirements of HAL for IACs. Its meetings are attended by HAL.
Being a voluntary contribution and managed by the PGA Executive the pistachio
industry has a flexibility that very few other industries have in that it can change the
contribution rate when required through the deliberations of the executive committee.
This gives the PGA flexibility to react to the needs of the industry within 24 hours
rather than taking twelve to eighteen months through the statutory process.
Being a small industry, the contribution rate is high, about 2% of the crop value. In
the fungal emergency of 2011, the rate rose, on a temporary basis, to almost 4% of
the usual returns or 10% of the fungal quality depressed 2011 prices. The
contributions are received from about 96% of the value of production, i.e., about the
same, or higher, percentage than collected by the LRS.
The voluntary contribution is used by PGA in a number of ways but the majority of
the funds are used for pistachio research, development and extension. The process
available through HAL in making available matching Australian Government funds
for VC projects/programs is an essential an important ‘ingredient’ of the current HAL
model.
The annual research, development and extension spend is about $350,000 per
annum including the HAL matching funds.
The investment over the past decade in Pistachio R, D & E projects is detailed
as Appendix A.
PIB MANAGEMENT OF PROJECTS
Almost all of the PGA research projects are managed by the PGA. There are a
number of reasons for this.
In the 1990’s, the PGA did all of its research work with the Victorian Department of
Primary Industries, Adelaide University and/or CSIRO.
Early in 2000 the Victorian DPI announced it would not continue with pistachios as
the industry was too small.
When the National Horticulture Research Network (NHRN) was established
pistachios were allocated to Tasmania as the lead agency. Pistachios cannot be
commercially grown in Tasmania making the decision to allocate the lead agency to
Tasmania impractical. As a result of industry objecting pistachios are now managed
by the NHRN secretariat. The industry receives from the NHRN the same interest
that it received from Tasmania, i.e., none.
Primary Industries and Regions SA (PIRSA) and NSW Department of Agriculture
also have showed little interest in doing research work for the pistachio industry
albeit in recent months NSW has indicated some interest, on a full fee for service
basis.
The CSIRO research station at Merbein was closed many years ago and any
plantings bulldozed. This is where the cultivar Sirora was developed, and where the
initial development work on which the industry was based was done.
Management and oversight of research and development at the project level must be
done and it has a cost, even if the R&D is done in house.
For small industries such as pistachios, the state departments will only provide
services on a ‘full cost recovery’ basis not ‘true cost recovery’. The full costs include
the substantial overheads that are being allocated over a decreasing range of actual
activity by the state departments. The state departments are extraordinarily
expensive.
Since early this century, Australian pistachio growers have largely engaged the PGA
to operate and manage the projects. But in saying this it is important to understand
the process. Within in any project the PGA will only utilise a small percentage of
funds to administer the project and prepare the appropriate milestone and/or final
reports. The funds allocated to PGA vary on the size of the project but is on average
only 5% of the total value of the project. On some projects the administration costs
may be 10% but this is generally on very small projects whereby the work
undertaken by PGA is abnormally high.
While PGA may administer projects, within each individual project the PGA
commissions private and/or government researchers to undertake specialist work
including disease identification and chemical registration soil or plant analysis and in
some cases field trials.
For its crop improvement program the PGA directly employs a highly qualified and
competent researcher who is based on a producing orchard resulting in the PGA
having a research capacity that would never have been supplied through a federal
and/or state agency or any University.
In summary, the state departments have no or little interest in small emerging
industries. The overhead costs of the state departments are prohibitive making it far
more cost effective and efficient for pistachio growers and HAL to pay the PGA to
manage the projects than to pay States Agencies. The PGA overheads are very
modest compared to the managers, manager of managers etc that get included in
Department offers.
In recent times, there seems to be a view coming from the Australian Department of
Agriculture (DoA) that PIBs are ‘sucking funds’ from the levies under the guise of
administration and consultation. DoA does not seem to ask the same questions of
either their own department or state departments.
The PGA no longer has a consultation project with HAL. The high fixed cost of
the absurd compliance rules imposed by DoA exceeds any benefit that
pistachio growers were gaining from such a program/project.
REDUCTION OF THE NUMBER OF HAL MEMBERS/PIB’s
It has been suggested that there be an amalgamation of the PIBs. The Australian
Nut Industry Council (ANIC) is often cited as a good example of a successful and
effective combined peak industry body. Those that make such a suggestion do not
understand how and why ANIC has been successful in the projects it has
undertaken. They certainly do not seem to appreciate the vast number of projects
that ANIC DOES NOT become involved in.
The PGA is a foundation member of ANIC and a strong supporter of it, as are all of
the Australian nut industries.
ANIC only commits to projects and activities that save each of the seven member
industries doing the same thing. Trade negotiations; government inspection of nut
exports; Nuts for Life; the biannual trade show; nut Biosecurity, and Australian
NutGrower are all examples of where the nut industries have successfully combined
to efficiently achieve a common objective.
However, most of the activities of the PGA are focused on the growing of pistachios
which are unlike any other of the major nut trees in their physiology and growth
cycles. Each of the other nut industry PIBs are similarly focused on the
requirements of its nut.
Nuts ain’t nuts. Each of the nut crops are each from a different biological genus with
quite different growing conditions and requirements. Most are deciduous but
macadamias are an evergreen. The pests and diseases are different. Many of the
markets are common but each has a different particular niche.
Almonds and macadamias are the giants of the nut industries, both many times the
size of the pecan, pistachio, chestnut and hazel nut industries. Walnuts are rapidly
expanding but still less than 10% of almonds.
As a small nut industry, pistachios have no fears from our large compatriots. Indeed
we gain from riding on the shoulders of giants. However, if there was a super-nut
PIB there would be a super-nut IAC. Quite properly, the supersized PIB and IAC
would be dominated by almonds and macadamias.
There would be an additional layer of bureaucracy for pistachio research projects to
negotiate.
FLEXIBILITY OF THE CURRENT ARRANGEMENT:
PGA through its model has a level of flexibility that is the envy of many other industry
organisations.
To manage the pistachio R, D & E the PGA established a Pistachio R&D committee
which undertakes numerous roles including
 Preparation of the annual investment strategy.
 Allocating funding to appropriate R, D & E projects.
 Maintaining and reviewing projects to achieve a ‘return on investment’.
 Implementing the necessary and required Industry, HAL and Government
corporate governance.
The current Pistachio R&D Committee has ten (10) members and includes: An independent Chair (Independent of the PGA Executive), and
 Three members that bring specialist expertise and who are in no way involved
in growing of pistachios, and
 Three pistachio growers who bring specialist knowledge and skills, and
 Three pistachio growers who are also members of the PGA Executive
Committee.
The Pistachio R&D Committee is supported by a HAL Industry Services Manager
and the secretariat is undertaken by the PGA Executive Officer, an independent
contractor.
In any other structure including a ‘super nut’ structure the focus and involvement that
now exists with the Pistachio R&D Committee (equivalent to a normal IAC) would be
absent.
As highlighted above, over 50% of the R&D Committee are totally external,
independent experts and PGA believes that these experts would almost certainly be
lost in a super-nut IAC.
There would be a loss of the flexibility that currently exists that allows the pistachio
industry to quickly respond to an emergency such as the fungal epidemic that could
have wiped out the industry in 2011.
In the 2011 fungal epidemic, the PGA was able to define the project; prepare a brief
with the direct assistance of HAL specialists; increase the pistachio contribution rate;
have the project approved by HAL and commission the researchers within 6 weeks
of the extent of the problem being appreciated. If this had had to proceed through
the normal Government required governance process (as demanded through the
current HAL model) and/or a super industry IAC necessarily dominated by the larger
nut industries, the opportunity to complete the research before the next spring would
have been impossible.
Lumping small industries in with others that may appear to someone in
Canberra to be “much the same” but will doom small emerging and expanding
industries to even more bureaucracy and inefficiency.
A COMMON LEVY STRUCTURE:
There are indeed many different levies and collection rates in horticulture. To
someone not involved in the particular industry based in Canberra, and, newly
appointed consultants, they may appear confusing. To the particular industry they
represent the most efficient method available and the appropriate amount allowed
under the 13 step levy process.
There is a good reason for the different levy methods and contribution rates.
Horticulture is a single word but covers a multitude of different crops; farming
practices; and, marketing channels. The current different levies represent the
appropriate rates for each different industry.
For an emerging and expanding industry such as pistachios a contribution
rate and a flexible collection method appropriate to the industry is critical. A
structure that would be appropriate to the turf industry will not be appropriate
to the pistachio industry. A single ad valorum percentage may be suitable for a
large, long established industry – it would be totally inadequate for a small
emerging industry.
The inefficiency and lack of transparency of the costs of the LRS are indeed a matter
of concern to many horticulture industries. Fortunately, being an industry that can
sustain its research requirements with the near universal voluntary support of its
growers, the PGA does not have the misfortune to deal with the LRS.
SPECIFIC QUESTIONS FOR CONSULTATION ASKED BY ACIL ALLEN:
Qu 1:
What do you see as the primary purpose of HAL?
To facilitate research and development and marketing in the
horticulture industries.
Qu 2:
What do you think about the existing governance arrangements?
Largely excessive and heavy handed.
Qu 3:
What changes, if any, would you like to see to the way HAL consults with levy
payers?
HAL does not have a direct function to communicate with Levy Payers.
The industry specific PIBs are much better equipped to communicate
with growers, who are the principle levy payers. Well meaning staff in
Elizabeth Street (or Canberra) are unlikely to know what messages will
be understood by a pistachio grower, or a turf grower or a banana
grower.
Qu 4:
What is your view about the number of peak industry bodies (currently 43)
that make up HAL’s membership?
About correct.
Qu 5:
What is your opinion of how well HAL communicates with levy payers,
industry bodies and other stakeholders?
HAL has little need to communicate itself with levy payers. The PIBs
are much better structured to reach the growers in their particular
industry. HAL communicates reasonably well with its members, not
perfectly, but well. We are unable to comment on “other stake
holders”.
Qu 6:
What does HAL do well? How efficient is it? What changes to HAL and the
HAL model could be made to assist it to perform better in the future to meet
its challenges?
HAL can be more than a bank! HAL can provide cross industry advice
to industries. Whilst each horticulture industry is different, there are
some occasions when there is mutual interest, e.g., a common pest.
HAL is reasonably efficient for an organisation dealing with the inherent
complexities of horticulture.
Qu 7:
Are there ways in which HAL can deliver better value for money from its R&D
and marketing projects? If so, what are they?
The HAL projects in the pistachio industry have produced significant
benefits for Australian pistachio growers. There has been significant
value for money. For pistachios, the current system works.
Qu 8:
What – if anything – is needed to encourage more investment by HAL in
projects that cross over between different industries within horticulture?
The crossover investment benefit is overstated. The diversity of
horticulture limits the few true crossover projects. Even such pests as
fruit fly actually only affect a limited number of industries. There are
some legitimate cross over projects, but, most of the current ones are
the merely the latest hobby horse of the HAL Board or HAL senior
management. Fashion is often involved in the choices made. The
industries are better equipped to prioritise the projects that cover their
future.
Now that nuts are the largest Australian exporting horticulture industry,
there is the realisation by the current HAL management that perhaps
there is more to horticulture than just fruit and vegetables. The cross
industry HAL funding has supported several fruit and vegetable health
education programs – one of which overtly excluded nuts. The across
industry fund has never provided one cent towards the highly
successful nut health education campaign.
ANIC is an example of how multiple industry programs can work
effectively and efficiently for a sector of the horticultural industry. The
ANIC programs work because they were created by the participating
industries, not forced upon industries by Canberra or HAL
management.
PGA is a participant in several multiple industry projects as well as the
ANIC projects.
Qu 9:
What are your views about the present system for collecting horticulture
levies and ability for members to make voluntary contributions?
The pistachio industry is small and unified making voluntary
contributions the preferred option to levies. We fully appreciate that our
successful model would not work in many other industries. Hence the
PGA is not able to comment on levies.
The government has indicated its on-going support for matching
voluntary contributions. Obviously this is critical to on-going research
and development in the pistachio industry.
Qu 10:
Are the levy arrangements efficient? What changes could be made to
horticulture levies to improve efficiency of the arrangements?
No comment
Qu 11:
Are there too many industry bodies making too many decisions about levies?
No comment
Qu 12:
The consultation paper presents HAL model options and levy arrangement
options that range from minimal change through to substantial reform. Which
of these do you favour, and why?
Minimal change, HAL works.
Qu 13:
What changes are required to improve the performance of HAL and the
horticulture levy system?
A detailed examination of HAL is beyond the resources of a small
industry such as pistachios. Perhaps we need an expensive consultant
to recommend some minor adjustments?
APPENDIX A:
PISTACHIO R, D & E INVESTMENT
Pistachio Industry Government Matched R&D Investment Between 2002/03
and 2012/13 by Agency
Agencies
Pistachio Growers of
Australia
The University of
Adelaide
Horticulture Australia Ltd.
Australian Pioneer
Pistachio Company
The Nielsen Company
TOTALS
# Projects
Levies
VCs
% of TOTAL $
20
$0
$1,929,361
51.9%
4
3
$0
$0
$1,727,556
$17,860
46.5%
0.5%
2
1
30
$0
$0
$0
$39,577
$2,835
$3,717,189
1.1%
0.1%
100%
Pistachio Industry Government Matched R&D Investment Between 2002/03
and 2012/13 by HAL Portfolio
PORTFOLIO
PARTNERSHIP AGREEMENT
PLANT HEALTH: PATH /
VIRUS / NEMATODE
INDUSTRY DEVELOPMENT
SERVICES
CROP PRODUCTION
PLANT HEALTH: IPM /
CHEMICALS
MARKETING - DOMESTIC /
EXPORT
POST HARVEST
CONFERENCES
CONSUMER RESEARCH,
MARKET ANALYSIS
PRODUCT INTEGRITY
STUDY TOURS
TOTALS
$600
R&D
Levies
$0
VCs /
TOTAL
$110,000
% of
TOTAL $
3.0%
6
$0
$1,806,206
48.6%
4
3
$0
$0
$1,169,035
$302,277
31.4%
8.1%
3
$0
$144,009
3.9%
2
2
1
$0
$0
$0
$15,400
$20,927
$36,000
0.4%
0.6%
1.0%
1
1
1
30
$0
$0
$0
$0
$2,835
$63,000
$47,500
$3,717,189
0.1%
1.7%
1.3%
100%
Pistachio R&D Funding over the last 10 years
$500
Thousand $
#
PROJECTS
6
$400
$300
$200
$100
$0
03/04
04/05
05/06
06/07
07/08
08/09
Years
09/10
10/11
11/12
12/13