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

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© 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

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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

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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.

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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

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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

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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 NSWa SAb WAc Victoriad 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); bPIRSA (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.

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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 self-imposed 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.

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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.

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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 level1. 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).

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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.

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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 Australia2. 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 NSWa SAb WAc Victoriad 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); bPIRSA (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.

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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 self-regulation 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.

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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

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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).

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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 short-term 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

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• 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 sub-clover 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.

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Figure 2.1 Temperate Pasture Seed Production Regions within Australia

Source: Hassall & Associates

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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.

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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 non-traditional 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.

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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 1997/983.

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.

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Table 2.6 Estimated Industry Value, 1997/98 Species Volume (tonnes) $/kg Total Value Clover Seed1 3,352 3.01 $10,096,000 Medic Seed2 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.

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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;

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• there is uncertainty regarding the performance of the seed sown by growers, which is owned by the plant breeder holding the rights. If the seed performs below standard there is a risk that the grower will not be able to sell it, because the grower does not own the seed and the private owner may not buy it; and

• reports suggest consumers have been disappointed with the performance of many of the new varieties, which may impact on demand for seed.

The application of the associated PBR legislation also serves to contribute to other changes within the industry such as the necessity to develop economies of scale within production. The introduction of PBR legislation has also boosted industry expansion and export business because overseas products are able to enter Australia and receive royalties. Similarly, there is greater incentive for the domestic industry to develop export markets (NSW Agriculture & Fisheries, 1991). Hendy (1999) notes that seed growers are not able to benefit from an improved market, with increases in profit accruing to the plant variety owner. This represents a change in industry culture with PBR moving attention from production to merchandising issues. 2.8.2 Seed Certification “Seed certification schemes are designed to produce seed that are uniform in their makeup, are morphologically and genetically distinct from other comparators and are genetically stable for a number of successive generations. The number of generations allowable is determined by the breeder of the cultivar” (Saunders 1999). Stür (1997) states that seed certification practices are undertaken to eliminate the adverse impacts that ‘catch-croppers’ have on seed price and quality. Forty-two countries around the world participate in seed certification schemes with protocols from the OECD (WA Department of Agriculture, 1995). The objectives of the OECD Certification Program are to guarantee a genetic purity of a line of seed and encourage the use of consistently high quality seed in participating countries. This is achieved through the pre-requisite of the Program that all certified seed produced must be related directly through one or more generations to authentic Basic seed4 of the cultivar with the number of generations permitted for cross-pollinating species being strictly limited (Saunders 1999). In Australia, minimum purity (i.e. weed seeds and other contaminants), seed germination and seed borne disease levels have been set by the Australian Seeds Committee. A crop will not be certified if one or more of these parameters is exceeded during seed analysis. For example, state legislation such as the various Seed Acts, will be enacted if a crop is found to contain prohibited weeds during field inspections or seed analysis conducted in the laboratory (Saunders 1999). Certification rules and costs have changed in recent years. Certification, normally required when exporting to OECD member countries, has become more costly and specific in eligibility requirements. As full cost recovery has become government policy, costs have risen, to varying degrees, in most states. The main change in eligibility for certification in recent years has been in the specification of the timeframe within which seed must be produced.

4 Basic Seed is used for the production of certified seed, which is produced from pre basic seed, which is produced from Breeders Seed (Saunders 1999).

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The passing of Federal Mutual Recognition legislation advances the pasture seed industry towards developing a national certification scheme that meets overseas standards, in place of the state-based certification schemes that operate at present. Under the legislation, seeds produced in one state that meet the legislative requirements for that state can be sold in other states without meeting the requirements of the importing State. The main difficulty with the legislation appears to relate to prohibited weeds (pers. comm., Nigel Phillips, Seeds Coordinator, NSW Department of Agriculture, 10/11/99). However, the issue of prohibited weeds may be resolved through the seed industry’s Code of Practice. The continuing evolution of international standards, particularly the demand for certified seed from third world countries, and the establishment of plant variety rights, has ensured the need to move to a national certification procedure. 2.8.3 Increasing necessity to engage economies of scale It is becoming increasingly apparent within the industry, that only larger scale operations can endure the fluctuating prices in the market for pasture seed. Higher certification costs and the (relatively) depressed state of the markets of many complimentary activities (e.g. wool and beef), has resulted in many small, non-specialist producers leaving the industry. Depressed demand for pasture seed has resulted in less opportunistic production (pers. comm., Hugh Roberts). Individual producers with sufficient economies of scale to offset all annual operating and capital costs involved with production are more likely to remain financially viable. 2.8.4 Decreased profitability of complimentary production activities The impact of a decline in the profitability of complimentary sectors (e.g., wool and beef) is linked to the emergence of pressures to encourage economies of scale within the pasture seed industry. Factors that have impacted negatively on the pasture seed industry in recent times include:

• a decline in the returns achieved by producers in the traditional livestock industries;

• a decline in the area being sown to pastures; and

• the effects of water reform in certain states, which have encouraged shifts in use of irrigation water from pastures to higher value enterprises.

As traditional domestic markets suffer downturns, export markets emerge as important alternative markets for domestic produce. The challenge for the industry is to ensure that such alternative markets (whether they are export or domestic markets) are adequately investigated and developed for future use. 2.8.5 Changes to the technology used within the production chain Increasing costs associated with the production of pasture seed has necessitated the adoption of new technology within the production chain in order to achieve cost efficiencies both in preparing and growing crops and in harvesting. There are various examples of new technology being utilised to improve the overall production system, these include:

• some producers using ‘tandem-hitch’ harvesting equipment to increase harvest speed and, therefore, increase the efficiency of harvest;

• adoption of innovative harvesting techniques, such as suction harvesting of sub-clover, medics and some tropical legumes (Loch, 1995);

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• the Centre for Legumes in Mediterranean Agriculture (CLIMA) in WA is working on developing aerially-sown legume varieties to replace sub-clover (e.g. pink serradella) (pers. comm. Mark Holland, WA Agriculture); and

• the continual development of new seed varieties that have greater disease resistance and improved nutritional qualities. For instance, in coming years, technology will facilitate the production of bloat-free legume pastures and disease-resistant white clovers (Jones, 1999).

Utilising and adopting improvements in technology is an important component of ensuring pasture seed producers are able to remain viable and competitive. The research that is presently devoted to the development of new technology appears to provide significant benefits for the industry. 2.9 Implications of Industry Changes for Industry Development The changes in the industry will not only impact upon growers, but encompass all sectors of the industry. In terms of the application of PBR, the main implication for the pasture seed industry is the trend towards larger, more specialised and dedicated producers, as opposed to small, part-time industry participants. Only those producers specialising in pasture seed production will be able to recover continually higher costs of production and achieve the more specific standards that are required under industry certification schemes. Furthermore, larger, more specialised producers will be better placed to attain and retain financial viability as measured at an individual business level. In recent years, there has been an increasing need to stabilise demand within the industry via diversification of end users. Demand from traditional domestic end users, such as the beef industry, fluctuates in response to climatic conditions and commodity price cycles. As a result, greater emphasis is being placed on the need to replace older pastures and produce short-term pasture leys and break crops. Such replanting provides an opportunity to plant better varieties, but also bring in new standards of professionalism (Loch, 1999a). Changes to the regions in which production is undertaken in Australia have also resulted. Regional concentration has occurred in SA, which is consistent with the trend to larger producers in non-marginal areas of production. Expansion of production has most notably occurred in WA, particularly in the Ord River region. Further changes to the regional make-up of the industry can be expected in the future as dominant industry producers are able to achieve greater cost recovery and take advantage of the associated benefits that accrue from such practices. This trend towards the achievement of economies of scale and specialisation in production is mirrored in the distribution and sale of pasture seed. The application of PBR has resulted in much of the seed being marketed under proprietary ownership (pers. comm., Kevin Boyce, PIRSA, 1999). As a result, public breeding institutions in Australia have not released any new publicly bred cultivars as public domain material for several years. The PBR legislation has also allowed the introduction of proprietary material from overseas, which allows companies to undertake their own breeding programs and also encourages the entrance into the market of large multinational companies (pers. comm., Kevin Boyce, PIRSA, 1999). The role of import relaxation in altering the structure of the domestic industry is important. For instance, prior to 1977, only four lucerne cultivars were available in Australia (Stewart & Phillips, 1994) as compared to the situation today.

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The pasture seed industry is also becoming more internationalised as local seed firms establish formal links with overseas companies to aid in product development and marketing. This includes the establishment of contracts to grow overseas cultivars for re-export. Australia is well placed to be involved in this role due to our abundant land resources, as compared to some countries which are constrained by land resources (Loch, 1999a). The proprietary marketing group of the SIAA will become an increasingly important group in the seed industry in the future. Increasingly, growers, except those producing older, public domain cultivars, are no longer free agents. Instead, most growers are now contractors to proprietary owners. As public cultivars move almost completely out of the market place in the next 3-5 years, this trend will strengthen (pers. comm., Kevin Boyce, PIRSA, 1999). 2.10 Pasture Seed Exports and Imports Despite being only a minor player in the international pasture seed industry, trade in pasture seed is an important component of the Australian industry. Australia has been a member of the International Seed Trade Federation through the SIAA since 1967. Being climatically out of sequence with the rest of the world, Australian producers and exporters are able to derive some supply advantages in the world market (NSW Agriculture & Fisheries, 1991). 2.10.1 Pasture Seed Exports Stewart and Phillips (1994) state that exports of pasture seed act essentially as a ‘sponge’ to the domestic market in periods of overproduction (especially when opportunistic production has led to oversupply). Furthermore, export prices fluctuate substantially, often being lower than domestic prices. This price variability would be caused, to some extent, by Australian overproduction being placed on the world market. Factors that influence Australian exports of pasture seed include the value of the Australian dollar, overseas supply of pasture seed and the importing country’s access to finance in order to fund import purchases from Australia (Stewart & Phillips, 1994). Over the last decade, exports of Australian pasture seed have expanded from $11 million to over $25 million. This expansion has resulted in pasture seed being shipped to over 70 countries in 1997/98. These include to markets within Europe, North and South America, South-East Asia and the Middle East (Loch, 1999a). Specific countries that are important trade partners include Japan, which imports seeds as a result of a shortage of land that ensures food crops rather than pasture seed crops are grown domestically, and Argentina, as some seeds are unable to be grown there satisfactorily (Jones, 1999). Temperate legumes are the major seed exported from Australia. Table 2.7 outlines the quantities of temperate legume seed exported from Australia in recent years.

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Table 2.7 Volume of Temperate Legume Seed Exports (tonnes), 1989/90 to 1997/98 Species 1989-

90 1990-1 1991-2 1992-3 1993-4 1994-5 1995-6 1996-7 1997-8

Lucerne 2,679 3,120 2,841 2,356 2,744 3,418 4,043 3,196 3,990 Barrel Medic

331 354 313 287 241 209 133 130 96

Other Annual medics

132 47 157 228 614 838 885 547 257

Sub Clover 730 774 824 841 842 644 531 447 538 Strawberry Clover

33 34 154 11 305 48 20 37 149

Other clovers

396 344 825 1,441 2,038 395 358 545 1,167

Other temperate legumes

83 303 50 13 55 17 38 270 1,485

TOTAL 4,384 4,976 5,164 5,176 6,839 5,569 6,008 5,171 7,682 Source: Loch (1995) for 1989/90 to 1992/93; Seed Industry Association of Australia (1999) for 1993/94 to 1997/98. As can be seen in Table 2.7, lucerne is the highest volume temperate legume pasture seed export for Australia. It is also the highest volume export of all pasture seeds. Other important exports (in terms of volume) include sub-clovers, other annual medics (apart from barrel medic) and other clovers (apart from strawberry clover). The price and demand for specific cultivars primarily drive the export market. Presently, opportunities to dramatically increase exports are constrained by increased production costs imposed under new PBR cultivars (Stewart & Phillips, 1994). Despite this, long-term export prospects for white clover are buoyant, given Australia’s advantages of irrigation and clean country uncontaminated by older varieties (Loch, 1999a). The value of Australian temperate legume pasture seed exports is outlined in Table 2.8. Statistics are provided by pasture seed type for both total value and unit value over the period 1993/94 through to 1997/98.

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Table 2.8 Value of Temperate Legume Seed Exports ($), 1993/94 to 1997/98

Pasture Seed Type 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 Lucerne 6,627,561 8,611,348 10,545,321 13,984,882 11,189,813 16,977,340 Unit Value ($/kg) 2.81 3.14 3.09 3.46 3.50 4.25 Barrel medic 407,900 299,457 432,653 345,763 312,667 291,012 Unit Value ($/kg) 1.42 1.24 2.07 2.60 2.41 3.03 Other annual medics 479,900 1,826,614 2,534,245 2,968,055 859,482 861,173 Unit Value ($/kg) 2.11 2.97 3.02 3.35 1.57 3.35 Subterranean clover 1,796,648 1,546,529 1,509,751 1,709,431 1,330,856 1,384,563 Unit Value ($/kg) 2.14 1.84 2.34 3.22 2.98 2.57 Strawberry clover 48,100 712,929 207,124 109,923 237,098 631,087 Unit Value ($/kg) 4.26 2.34 4.32 5.50 6.41 4.24 Other clovers 1,631,700 1,913,124 1,004,578 1,171,066 1,783,370 3,333,087 Unit Value ($/kg) 1.13 0.94 2.54 3.27 3.27 2.86 Other temperate legumes 219,800 445,267 481,549 131,745 393,368 1,678,001 Unit Value ($/kg) 17.31 8.10 28.33 3.47 1.46 1.13 Total Value 11,211,609 15,355,268 16,715,220 20,420,863 16,106,654 25,156,262 Source: RIRDC (1997) for 1992/93; Seed Industry Association of Australia (1999) for 1993/94 to 1997/98. The total value of temperate legume pasture seed exports has increased rapidly over recent years from approximately $11 million in 1992/93 to just over $25 million in 1997/98. In terms of value, lucerne is the most important pasture seed export for Australia. The Australian Farm Journal (1999) listed the average volume and value of seeds exported from Australia over the period 1987/88 to 1997/98. These ten-year averages provide a ‘smoothed’ overview of exports of pasture seed, eliminating year to year variations in volume and value. The average volume of production was estimated at 5,388 tonnes and the average value was estimated in excess of $10.5 million (using a ten-year weighted exchange rate value of 0.7453 ($US/$AUD) to convert from $US (ABARE, 1998)). 2.10.2 Pasture Seed Imports There is less information and data available on imports of temperate legume pasture seed into Australia. Table 2.9 details the quantities of temperate legume pasture seed imported into Australia over the period 1989/90 to 1997/98. Table 2.9 Quantity of Seed Imported into Australia (tonnes) Temperate Legumes

1989/90

1990/91

1991/ 92

1992/93

1993/94

1994/95

1995/ 96

1996/97

1997/ 98

Annual Average

White Clover 192 205 218 208 193 240 224 141 196 202 Red Clover 102 205 132 158 85 168 115 147 135 139 Other Clovers 46 32 28 24 27 24 18 57 129 43 Medics (incl. lucerne)

0 0 0 0.1 6 14 27 45 25 13

TOTAL 341 441 378 390 311 446 383 389 486 396 Source: Loch (1995) for 1989/90 to 1993/94; Seed Industry Association of Australia (1999) for 1994/95 to 1997/98.

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As demonstrated Table 2.9, clover seed was by far the dominant pasture seed species imported into Australia in the 1990s. The total volume of imports in 1997/98 is greater than the volume in 1989/90, however volumes have varied from year to year, as have export volumes, over the same period. Table 2.10 details the value of temperate legume pasture seed imports into Australia over the corresponding period. Initial values are reported in terms of $US. Conversions of the aggregate value of imports into Australian dollars was carried out using actual $AUD equivalents for each corresponding year. Exchange rate data was sourced from ABARE (1998). Table 2.10 Value of Seed Imported into Australia (US$’000) Temperate Legumes

1989-90

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

Annual Average

White Clover

410 526 498 505 487 727 869 543 660 581

Red Clover 179 256 277 357 229 443 315 406 411 319 Other Clovers

297 128 70 48 65 63 52 266 259 139

Medics (incl. lucerne)

0 0 7 0.2 18 136 179 651 482 164

Total Value ($US’000)

886 909 852 910 798 1,369 1,415 1,866 1,811 1,054

$AUD/$US 1.266 1.284 1.288 1.366 1.479 1.374 1.355 1.283 1.348 1.338 Total Value ($AUD’000)

1,122 1,167 1,098 1,243 1,180 1,880 1,917 2,393 2,441 1,405

Source: Loch (1995), ABARE (1998) for 1989/90 to 1993/94; Seed Industry Association of Australia (1999) for 1994/95 to 1997/98. The value of temperate legume pasture seed imports into Australia in the period 1989/90 to 1993/94 was relatively constant at just in excess of $1.1 million. By 1997/98, the value of imports totalled $2.4 million. Based on data from the Australian Farm Journal (1999), over the ten year period 1987/88 to 1997/98, the value of pasture seed imports into Australia averaged in excess of $AUD2.1 million. Clover imports (red, white and other) accounted for 64% of this total value. Lucerne and hop medic clover imports are of high quality and are generally new cultivars which explains the high value associated with imports of these seeds.

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3. COST OF TEMPERATE LEGUME PASTURE SEED PRODUCTION This chapter reports the costs obtained from a survey of the pasture seed production and distribution system.

3.1 Pasture Seed Production and Distribution System There are several key steps within the pasture seed production and distribution system. Each step is briefly described using information provided by Hendy (1999). The discussion also includes some of the important issues related to each step, such as producing PBR varieties. The various steps involved in the pasture seed production and distribution systems are:

1. Buying Seed: This includes determining whether to use private or public cultivars, weighing the costs associated with each, and entering into agreements with companies if producers decide to use private cultivars;

2. Limitations of Use: Growers who grow private cultivars may be limited in the amount they can sow and the price received for seed may be determined in advance;

3. Preparing Soil: Soil tests must be carried out, with additional inputs, such as fertiliser, added as necessary. Intensive efforts must be made to ensure the ground to be sown is cleared of all previous varieties. This procedure may take several years;

4. Sowing Seed: The timing of sowing seed depends upon moisture requirements;

5. Crop Care: Insect and weed control are activities that are at the discretion of individual growers. In addition, some field inspections are carried out by staff of certifying authorities;

6. Harvesting Seed: Harvesting depends upon the individual crop and requires good weather. Samples of crops are used for certification testing (tests for purity, cleanliness and germination);

7. Cleaning Seed: There are stringent requirements that govern keeping different seeds separate. Furthermore, certification standards require careful cleaning;

8. Packaging & Storing Seed: Seed is usually packed in 25kg bags, with a variety of information included with the seed, including results of all certification analysis. A Statement of Analysis is prepared for clients. Seed storage occurs in a dry place, away from chemicals;

9. Marketing, Selling and Payment for Seed: Private cultivar growers are generally allowed to retain some seed for sowing the following season. Aside from this, private cultivar seed is the property of the owner of the seed. Payment for seed is in accordance with the agreement reached between the PBR owner and the grower prior to sowing. The owner of the PBR will do the marketing of any private cultivar seed. Growers of public varieties are at liberty to arrange their own marketing and selling of seed;

10. Transporting Seed: For private cultivars, the seed company (owner of the PBR) organises the transport of the seed;

11. Documentation for Seed: Administration of seed production includes ensuring payment of all inspection and certification fees and all levies, including research levies; and

12. Preparation for Next Crop: Depending on the contract agreed upon, some private cultivars might have to be grown the following season. If a different cultivar is to be grown, the paddock must be cleared of the previous cultivar. This can be difficult as explained in item 3.

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3.2 Total Cost of Production The total cost of pasture seed production is calculated by accounting for all variable and fixed cost components associated with the production and distribution of pasture seed. The variable cost components include establishment and annual production costs. Other cost items include:

• labour costs (management);

• fixed charges;

• land costs; and

• an allowance for the depreciated value of capital equipment.

Each of these components were examined in turn in order to provide an estimate of the variable and fixed costs associated with pasture seed production. The costs were examined on a per hectare basis and a per tonne basis. Per hectare calculations were based on the average enterprise size for each species, while per tonne calculations were based on average yields nominated by the survey respondents. The average hectares and tonnes per species by State are presented in Tables 3.1 and 3.2. Table 3.1 Average Hectares per Enterprise per Species by State State Clover Medics Lucerne Sub Clover SA 253 58 192 86 WA 440 793 na 1,344 VIC 53 40 na 150 NSW 60 28 68 100 Average 201 230 130 420 Table 3.2 Average Tonnes per Enterprise per Species by State State Clover Medics Lucerne Sub Clover SA 108 25 100 78 WA 53 111 na 537 VIC 21 12 na na NSW 26 17 31 45 Average 52 42 66 220 The yield results are based on a slightly smaller sample size due to six respondents not nominating their yields. 3.2.1 Establishment Costs Establishment costs are those associated with the establishment phase of a pasture seed crop. They include preparation costs and growing costs in the first year in which a pasture seed crop is sown. Preparation costs include costs involved with preparing ground for the establishment of the crop, pre-irrigation costs, cultivation costs (ploughing, scarifying), seed costs, inoculation costs, sowing costs and certified crop establishment costs (cultivar fees, call-out fees and inspection fees). Growing costs include herbicide, pesticide, fertiliser, irrigation, pollination, rouging weeds, paddock inspection, mowing, raking and baling, preventative maintenance costs and costs associated with implement repairs for machinery.

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Establishment costs are divided into preparation costs, growing costs and other miscellaneous costs identified by growers. Table 3.3 details the establishment costs associated with each species expressed as a cost per hectare. Table 3.3 Costs of Pasture Seed Establishment ($/ha) Cost Item Clover Medics Lucerne Sub-Clover Preparation Costs 83 72 233 127 Growing Costs 176 78 155 170 Other Costs 14 0 0 4 Total Establishment Costs 273 150 388 301 The costs of pasture seed establishment per hectare are relatively consistent across pasture types, with the exception of medics, which has a considerably lower cost of pasture establishment. Table 3.4 expresses the costs of establishment as a cost per tonne, based on average yields per species. Table 3.4 Costs of Pasture Seed Establishment ($/t) Cost Item Clover Medics Lucerne Sub-Clover Preparation Costs 224 165 458 193 Growing Costs 473 178 305 257 Other Costs 38 0 0 6 Total Establishment Costs 735 343 763 456 The costs of establishment per tonne show a greater variation due to the higher yields achieved in lucerne and sub-clover production. To compare the establishment costs, which are a one-off cost at the start of a pasture crop, with annual production costs, it is necessary to convert to an annualised cost basis. The establishment cost is depreciated (using the straight-line method) over the stand life of the crop in order to provide an annualised cost of establishment. Table 3.5 details the annualised establishment costs per hectare and Table 3.6 details annualised establishment costs per tonne associated with each pasture species. Table 3.5 Annualised Pasture Seed Establishment Costs ($/ha) Clover Medics Lucerne Sub-Clover Establishment Cost 273 150 388 301 Stand Life 4 3 8 6 Annual Establishment Cost 68 50 49 50 Table 3.6 Annualised Pasture Seed Establishment Costs ($/t) Clover Medics Lucerne Sub-Clover Establishment Cost 735 343 763 456 Stand Life 4 3 8 6 Annual Establishment Cost 184 114 95 76 Once establishment costs are annualised to reflect stand life, there is less variation in costs between pasture species. For example, although medics have a low total establishment cost relative to the other species, the shorter average stand life for medics means that the annualised cost is closer to the other pasture species, all of which have longer average stand lives. This trend is stronger in the per hectare analysis.

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3.2.2 Annual Production Costs Annual costs of seed production reflect those costs associated with seed production each year, following the establishment of a pasture seed crop. Annual costs include:

• preparation costs (if the crop is re-established annually); • growing costs; • harvesting costs; and • selling and marketing costs.

The costs associated with preparing and growing the pasture seed crop were outlined in Section 3.2.1. Cost items associated with harvesting include desiccation, seed harvesting, on-farm storage and handling, freight, seed cleaning, grading, seed bag and bagging, storage and insurance. Selling and marketing cost items include marketing, seed testing (purity, germination and electrophoresis tests), certification fees, research and other levies and agent commissions. Table 3.7 details the annual costs of production per hectare by pasture seed type and Table 3.8 details the annual costs of production per tonne. Table 3.7 Annual Costs of Pasture Seed Production ($/ha) Cost Item Clover Medics Lucerne Sub-Clover Preparation Costs 0 31 0 56 Growing Costs 252 91 394 181 Harvesting Costs 232 229 204 301 Selling & Marketing Costs 31 35 63 35 Other Costs 0 0 0 0 Total Annual Costs* 515 386 661 573 * Not including establishment costs. Table 3.8 Annual Costs of Pasture Seed Production ($/t) Cost Item Clover Medics Lucerne Sub-Clover Preparation Costs 0 71 0 85 Growing Costs 675 209 774 275 Harvesting Costs 622 527 400 456 Selling & Marketing Costs 82 81 124 53 Other Costs 0 0 0 0 Total Annual Costs* 1379 888 1298 869 * Not including establishment costs. Based on the results of the survey, there is some difference in the annual costs associated with pasture seed production between species, as indicated by both the per hectare and the per tonne analysis. Total annual costs associated with medic production are substantially less than those costs associated with other pasture types when analysed per hectare. However on a per tonne basis, sub-clover has the lowest annual costs. This is reflective of the trends observed for costs of pasture seed establishment in Tables 3.3 and 3.4. To more accurately reflect the total annual variable costs associated with pasture seed production, annualised establishment costs must be added to the analysis. Total annual variable costs are detailed per hectare in Table 3.9 and per tonne in Table 3.10.

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Table 3.9 Total Annual Cost of Pasture Seed Production Including Establishment Costs ($/ha)

Cost Item Clover Medics Lucerne Sub-Clover Annualised Establishment Cost 68 50 49 50 Annual Production Cost 515 386 661 573 Total Annual Production Costs 583 436 710 623 Table 3.10 Total Annual Cost of Pasture Seed Production Including Establishment Costs ($/t) Cost Item Clover Medics Lucerne Sub-Clover Annualised Establishment Cost 184 114 95 76 Annual Production Cost 1,379 888 1,298 869 Total Annual Production Costs 1563 1002 1393 945 Lucerne production has the highest per hectare variable costs associated with annual production. This reflects, to some extent, the specialised nature of lucerne production. The variable costs of production associated with medic production are the lowest, which is due in part to the fact that all medic producers that completed the survey were dryland operators, thereby avoiding irrigation costs. Per tonne, clover has the highest production costs and sub-clover the lowest. This may be due to the low yields nominated for clover by the survey respondents and the high yields nominated for sub-clover. The results may be skewed due to the high volume of production in WA. A crude average drawn across the four pasture species would indicate average annual variable costs associated with pasture seed production of $588/ha and $1223/t. 3.2.3 Labour Costs (Management) In addition to the variable costs of production, an allowance must be made for the cost of management within the production system. That is, the annual management labour that is utilised within the pasture seed enterprise must be costed to reflect the value of this labour. Within the survey, producers were asked to indicate the amount of person months per annum that are devoted to the pasture seed enterprise on their property. Table 3.11 reveals the results of this analysis by pasture type. Table 3.11 Person Months Devoted to Pasture Seed Enterprise Per Annum Clover Medics Lucerne Sub-Clover Labour Months 6 2 6 9 The amount of labour devoted to pasture seed activities is between 2 and 9 months per annum. For the purposes of this study a standard monthly value of labour of $2,200 per month is used to give a value of labour5. The average value of labour per annum, across each pasture species, is reflected in Table 3.12. Table 3.12 Average Value of Labour per Annum by Pasture Type ($/enterprise) Clover Medics Lucerne Sub-Clover Average Value of Labour 13,200 4,400 13,200 19,800

5 The Senior Station Hand per week rate ($423.50) (NSW Farmers’ Association, 1999) was adjusted by 20% to reflect superannuation and worker’s compensation contributions. This was then converted to a monthly value.

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Due to the larger annual labour contribution associated with sub-clover, clover and lucerne enterprises, the total cost of labour associated with these pasture species is greater than the cost associated with medic seed production. In order to make these estimates correspond to the estimates of variable costs provided earlier, they must be adjusted to reflect per hectare values based on the area of pasture seed crops grown by individual producers and per tonne values based on yields achieved by individual producers. Table 3.13 lists labour costs per hectare and per tonne for each pasture species. Table 3.13 Labour Costs Associated with Pasture Seed Production ($/ha and $/t) Clover Medics Lucerne Sub-Clover Labour Costs ($/ha) 69 40 85 37 Labour Costs ($/t) 184 92 167 56 Therefore, on a per hectare basis, labour costs are largest for lucerne production and smallest for medic production. On a per tonne basis, labour costs are largest for clover and smallest for sub-clover production. 3.2.4 Fixed Costs Within the pasture seed survey, growers were asked to estimate the annual total fixed charges associated with the farm business. These fixed costs include charges for electricity, insurance, rates and rents, as well as general administration costs. Producers were asked as part of the survey to indicate the proportion of total capital items that they use within their pasture seed operations. In order to reflect fixed costs within the cost structure of the pasture seed enterprise, the fixed costs estimated by producers were allocated to the pasture seed enterprise based on the proportion of plant and machinery devoted to the pasture seed enterprise on the farm. This measure of fixed costs associated with pasture seed activities was then estimated on a per hectare and per tonne basis. Tables 3.14 details estimates of per hectare and per tonne annual fixed costs associated with pasture seed operations by pasture species. Table 3.14 Fixed Costs Associated with Pasture Seed Production ($/ha and $/t) Clover Medics Lucerne Sub-Clover Fixed Costs ($/ha) 64 82 90 253 Fixed Costs ($/t) 171 189 177 383 The fixed costs per hectare and per tonne associated with pasture seed production are reasonably consistent across pasture species with the exception of sub-clover. The figures provided by one respondent skewed the average costs associated with sub-clover. Removal of this respondent from the survey sample reveals an average per hectare cost for sub-clover of $107 and an average per tonne cost of $162. This is more consistent when compared with the other pasture species. 3.2.5 Land Cost Land as a resource, must be considered as a cost of production. Within the pasture seed survey, growers were asked to estimate the value of the land dedicated to pasture seed production, including any landforming costs associated with irrigation. In order to reflect the annual cost of land within the cost structure of the pasture seed enterprise, a lease value of 5% of the land value was used. This measure of land costs associated with pasture seed activities

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was then estimated on a per hectare and per tonne basis. Tables 3.15 details estimates of per hectare and per tonne annual land costs associated with pasture seed operations by pasture species. Table 3.15 Land Costs Associated with Pasture Seed Production ($/ha and $/t) Clover Medics Lucerne Sub-Clover Land Costs ($/ha) 101 66 168 94 Land Costs ($/t) 270 152 330 142 The pattern of land costs is consistent when expressed as either per hectare or per tonne. The high cost of land utilised in lucerne and clover seed production was consistent in survey responses and implies that these crops are grown on better agricultural land. 3.2.6 Capital Value In the same manner that fixed costs were included within the analysis of the costs of pasture seed production and distribution, the capital value of equipment and machinery must also be reflected as a cost within the pasture seed enterprise. The methodology adopted to carry this out involved determining the proportion of the total value of capital equipment that was associated with pasture seed production based on survey responses provided by producers. Following this, the value of capital was depreciated over a fifteen-year period, using the straight-line method of depreciation. Finally the depreciated value of capital items was adjusted by the number of hectares grown to reflect a per hectare depreciated value of capital equipment and the number of tonnes produced to reflect a per tonne depreciated value. The costs associated with the capital value of equipment and machinery were depreciated over fifteen years to more accurately reflect the diversity and age of machinery owned by survey respondents. Within the pasture seed survey, growers were asked to estimate the total value (auction prices) of plant and machinery on their farm. Allowing for growers to be involved in more than one enterprise, a timeline of fifteen years allows for the value of machinery that would be shared with other enterprises and for all plant held by growers. Tables 3.16 reflects the depreciated value per hectare and per tonne of plant and equipment across pasture types. Table 3.16 Depreciated Value per Hectare of Plant and Equipment ($/ha and $/t) Clover Medics Lucerne Sub-Clover Depreciated Value ($/ha) 80 77 79 75 Depreciated Value ($/t) 214 177 155 113 There is little variation in the depreciated value of capital items per hectare and per tonne across the four separate pasture items. This suggests that the average value of capital equipment is relatively consistent across different pasture species.

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3.2.7 Total Costs of Production Table 3.17 summarises the per hectare and per tonne total costs of production by pasture species. Table 3.17 Total Costs of Production ($/ha and $/t)

Clover Medics Lucerne Sub-Clover Annual Costs $/ha $/t $/ha $/t $/ha $/t $/ha $/t Establishment Cost 68 184 50 114 49 95 50 76 Production Costs 515 1,379 386 888 661 1,298 573 869 Sub-total 583 1,563 436 1,002 710 1,393 623 945 Labour Costs 69 184 40 92 85 167 37 56 Fixed Costs 64 171 82 189 90 177 253 383 Land Costs 101 270 66 152 168 330 94 142 Capital Depreciation 80 214 77 177 79 155 75 113 Sub-total 314 839 265 610 422 829 459 694 Total Cost 897 2,402 701 1,612 1,132 2,222 1,082 1,639 In summary, on a per hectare basis, the total cost of production is largest for lucerne, then sub-clover followed by clover and then medics. On a per tonne basis, costs of production are largest for clover, followed by lucerne, sub-clover and medics. 3.3 Comparative Analysis of Costs of Production 3.3.1 Introduction In order to carry out a comparative analysis of the costs of pasture seed production, the survey data was examined in three ways:

• by type of pasture seed (clover, medics, lucerne and sub-clover); • by geographical region of production (SA, WA, Victoria and NSW); and • by method of production (irrigated or dryland).

The costs of production by type of pasture seed have already been reported on, so this section examines the differences in costs of production between regions and methods of production. 3.3.2 Geographic Analysis The major limitation to carrying out a comparative analysis of the survey results based on geographical regions is the fact that as the representative sample size declines (for more tightly defined descriptive categories), there is greater potential for results to be skewed by an individual response. For instance, a comparison of the costs incurred by clover producers in different states involves comparing a number of producers in SA and Victoria, but only one producer from each of WA and NSW. Therefore, the results for WA and NSW may not be truly representative of the average for all producers in those regions. The simplest method of overcoming such problems is to expand the sample size to ensure there are multiple respondents within each sub-category that is to be analysed. However, for the purposes of this study, the sample size was set at forty respondents, therefore, all comparative results must be examined with these sample size constraints in mind and interpreted with caution.

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Tables 3.18 and 3.19 detail the total variable costs (annualised establishment cost plus production cost) for clover producers by region. Also included within these tables are the number of respondents in the sample. This allows the potential constraints discussed above to be readily identified. Table 3.18 Total Annual Variable Costs for Clover Producers by Region ($/ha) Cost Item SA WA VIC NSW No. of Respondents 4 1 3 1 Annualised Establishment Cost 97 234 36 57 Annual Production Costs 657 367 331 396 Total Variable Costs 754 601 367 453 Table 3.19 Total Annual Variable Costs for Clover Producers by Region ($/t) Cost Item SA WA VIC NSW No. of Respondents 3 1 1 1 Annualised Establishment Cost 226 1,950 85 129 Annual Production Costs 1,539 3,054 826 903 Total Variable Costs 1,765 5,004 911 1,032 Based on survey data, the cost of production varies considerably between regions. Whilst the usefulness of WA and NSW data is limited due to the small sample sizes, there is still considerable difference in the results with the cost of production in SA being much greater than that for Victoria. This is due in part to the fact that three out of four South Australian producers surveyed were irrigated operators, whilst only one of three Victorian producers were irrigators. Tables 3.20 and 3.21 detail the total variable costs for producers of medics by region. Table 3.20 Total Variable Costs for Medics Producers by Region ($/ha) Cost Item SA WA VIC NSW No. of Respondents 5 2 1 2 Annualised Establishment Cost 81 11 151 40 Annual Production Costs 389 258 600 417 Total Variable Costs 470 269 751 457 Table 3.21 Total Variable Costs for Medics Producers by Region ($/t) Cost Item SA WA VIC NSW No. of Respondents 4 1 1 2 Annualised Establishment Cost 182 79 493 62 Annual Production Costs 880 1,840 1,958 659 Total Variable Costs 1,062 1,919 2,451 721 There is a slightly greater spread in the survey sample for medics producers than clover producers. This is due to the fact that production is more balanced across the states than clover production, which is dominated by SA and Victoria. However, the single respondent from Victoria may not be representative of a truly average cost for medics producers in this region, and as such, these results should be interpreted with some caution. It can be seen that there is still considerable regional variation in variable costs. Annualised establishment costs per hectare tend to be higher in SA, as the average pasture stand life is smaller than in other states. Annual production costs per hectare are lower in WA than in SA and NSW, and this

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causes total variable costs to be substantially lower in the west than it is in the eastern states. The analysis per tonne alters the results significantly due to the relatively low yield achieved in WA. Similar information is provided in Tables 3.22 and 3.23 for lucerne producers. As only South Australian and NSW producers were targeted in the survey, the sample size ignores producers from WA and Victoria. Table 3.22 Total Annual Variable Costs for Lucerne Producers by Region ($/ha) Cost Item SA NSW No. of Respondents 8 2 Annualised Establishment Cost 35 133 Annual Production Costs 658 677 Total Variable Costs 693 810 Table 3.23 Total Annual Variable Costs for Lucerne Producers by Region ($/t) Cost Item SA NSW No. of Respondents 8 2 Annualised Establishment Cost 65 288 Annual Production Costs 1,262 1,464 Total Variable Costs 1,327 1,752 The variable cost of production of lucerne seed is slightly greater in NSW than it is in SA. This is due to the fact that the annualised establishment costs are larger in NSW reflecting shorter average stand lives for pastures in NSW. As can be seen, annual production costs are similar between states. Tables 3.24 and 3.25 provide estimates of total variable costs for sub-clover producers by region. Table 3.24 Total Annual Variable Costs for Sub-Clover Producers by Region ($/ha) Cost Item SA WA VIC NSW No. of Respondents 5 4 1 1 Annualised Establishment Cost 331 15 90 57 Annual Production Costs 670 261 1,157 448 Total Variable Costs 1,001 276 1,247 505 Table 3.25 Total Annual Variable Costs for Sub-Clover Producers by Region ($/t) Cost Item SA WA VIC NSW No. of Respondents 5 4 0 1 Annualised Establishment Cost 364 36 na 127 Annual Production Costs 736 654 na 994 Total Variable Costs 1,100 690 na 1,121 There are some extraordinary differences in total variable costs per hectare when survey results are examined by region. There are several underlying reasons for this, including:

• for NSW and Victoria, sample sizes of one mean that these results are not necessarily truly representative of average results for all producers in these regions;

• production within SA and Victoria is all irrigated (as reflected by the survey respondents), whilst production in WA and NSW is strictly dryland. This ensures costs in the two latter states are substantially lower than the two former states;

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• in SA, stands are re-sown each year on average, meaning that all establishment costs are incurred annually. In contrast, the average stand life in WA is 14 years. Therefore, there is a great divergence in annualised establishment costs; and

• annual production costs are substantially less in WA than other regions.

Despite the unanticipated size of the variance in the results in Table 3.24, these results do indicate that the cost of sub-clover production in SA and Victoria is substantially greater than in other states. The variation is less obvious when costs for sub-clover production are analysed per tonne. No yield results were available for Victoria. 3.3.3 Conclusions on Geographical Analysis The overall costs of production by State are summarised in Table 3.26. Table 3.26 Total Annual Variable Costs of Production by State ($/ha) State / Cost Item South

Australia Victoria New South

Wales Western Australia

Clover No. of Respondents 4 3 1 1 Annualised Establishment Cost 97 36 57 234 Annual Production Cost 657 331 396 367 Total Annual Variable Costs 754 367 453 601 Medics No. of Respondents 5 1 2 2 Annualised Establishment Cost 81 151 40 11 Annual Production Cost 389 600 417 258 Total Annual Variable Costs 470 751 457 269 Lucerne No. of Respondents 8 0 2 0 Annualised Establishment Cost 35 133 Annual Production Cost 658 677 Total Annual Variable Costs 693 810 Sub-Clover No. of Respondents 5 1 1 4 Annualised Establishment Cost 331 90 57 15 Annual Production Cost 670 1,157 448 261 Total Annual Variable Costs 1,001 1,247 505 276 The above results have demonstrated the difficulties in making comparisons between descriptive sub-categories that have small sample sizes. Wide divergences in cost estimates may be in part due to small survey sample sizes for particular regions, and certainly, where sample sizes include only one producer, it is difficult to determine whether the results provided are truly representative of average results for producers within that region. The results are not robust and it needs a great deal of caution in interpreting, comparing or drawing conclusions. Results for lucerne were not available for all states. However, despite these limitations, the analysis has shown that there are divergences in the cost of production across different regions. For instance, the analysis revealed that across all pasture seed types, the cost of production per hectare in WA was less than the cost incurred in SA. 3.3.4 Production Method Analysis

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Examining the difference in the cost of production of dryland pasture operations relative to irrigated pasture operations provides insights into how methods of production influence the costs associated with an enterprise. Obviously, the costs associated with a dryland enterprise would be expected to be less than those associated with an irrigated enterprise, as the costs associated with irrigation are avoided in dryland production. Fortunately, sample sizes for dryland and irrigated enterprises are greater than the sub-category sample sizes that were available in the regional comparative analysis. Therefore, there is a degree of robustness in the estimates provided in the production method comparative analysis. Table 3.27 details the total costs of production per hectare associated with dryland and irrigated pasture seed operations by pasture type. Costs associated with medics are not included, as all survey respondents who were medic producers were dryland operators. Table 3.27 Cost of Pasture Seed Production: Dryland and Irrigated ($/ha) Clover Lucerne Sub-Clover Irrig. Dry. Irrig. Dry. Irrig. Dry. No. of Respondents 5 4 6 4 6 5 Annualised Establishment Cost 80 57 70 20 189 18 Annual Production Costs 664 347 769 496 765 325 Total Annual Cost 744 404 839 516 954 343 There is a wide degree of variation between the costs associated with dryland and irrigated activities. The following factors influence these outcomes:

• annualised establishment costs are generally less for dryland operators, reflecting in part, longer average life stands for pastures; and

• growing costs are generally substantially greater for irrigated enterprises, reflecting the additional costs associated with irrigation.

3.3.5 Conclusions on Production Method Analysis As expected, the annual cost of production associated with dryland operations is substantially less than the costs associated with irrigated production. This is reflected across all pasture types. Obviously, if undertaking a thorough financial analysis, these additional costs must be examined in light of the additional revenues that accrue to irrigated crops as a result of increased yields. 3.4 Key Cost Components Key cost components associated with the production of pasture seed can be identified from the above analysis, as well as responses to specific questions in the survey asking producers to identify key cost components and movements in these components over time. The analysis of survey cost of production data is summarised, by pasture type, in Table 3.28. Table 3.28 Key Costs of Production ($/ha) Cost Item Clover Medics Lucerne Sub-Clover

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No. of Respondents 9 10 10 11 Annualised Establishment Cost 68 50 49 50 Annual Production Cost Preparation Costs 0 31 0 56 Growing Costs 252 91 394 181 Harvesting Costs 232 229 204 301 Selling & Marketing Costs 31 35 63 35 Total Annual Production Costs 515 386 661 573 Labour Costs 69 40 85 37 Fixed Costs 64 82 90 253 Land Costs 101 66 168 94 Depreciated Capital Costs 80 77 79 75 It can clearly be seen that growing and harvesting costs are by far the most important cost components within the production system. In comparison with other annual costs, labour costs, fixed costs and depreciated capital costs, they are of a much greater magnitude. The number of producers, by pasture type, that nominated each cost component as being a key component of total costs is detailed in Table 3.29. Table 3.29 Key Cost Components Nominated by Producers (No. of Producers) Cost Component Clover Medics Lucerne Sub-Clover Total Overhead & Landforming Costs 4 6 2 3 15 Preparation Costs 6 5 5 4 20 Growing Costs 7 9 4 8 28 Harvesting Costs 6 7 2 7 22 Selling & Marketing Costs 2 5 1 7 15 Producers of all pasture seed (though lucerne growers to a lesser extent), recognise growing costs as the most important cost component in the production of pasture seed. Harvesting and preparation costs were also significant cost items. Less significant costs in the total cost of pasture production, as recognised by producers, were overhead and landforming costs and selling and marketing costs. 3.5 Movements in Key Cost Components Over Time There are two key sources of information that can be examined when seeking to illustrate how key cost components have changed over time. Firstly, there is the survey response data (both qualitative and quantitative) as provided by producers. Secondly, the Australian Bureau of Agricultural and Resource Economics (ABARE) collects data on how key cost components move over time. Each of these data sources are examined below.

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3.5.1 Survey Response Data Within the survey, producers were asked to provide a quantitative indication of the scale of cost component movements in recent years, as well as qualitative comments regarding the type of cost movements in recent years. In terms of the quantitative element of this analysis, producers were asked to indicate the movement in key cost components over the last five years by indicating the range of increases for the various production cost categories. Only significant movements in cost components were examined. Therefore, three brackets of cost movements were provided (10-50%, 50-100% and > 100%). The results of this analysis are listed in Table 3.30. The results indicate the number of producers that identified that costs had moved within each percentage bracket over the last five years. Table 3.30 Movements in Key Cost Components Over the Last Five Years (No. of Producers)

Percentage Increase in Costs Over Last Five Years Cost Category 10-50% 50-100% >100% Preparation Costs 24 2 0 Growing Costs 27 7 0 Harvesting Costs 22 5 0 Selling & Marketing Costs 15 5 3 More than half of the producers surveyed indicated that preparation, growing and harvesting costs had increased by between 10-50% over the last five years. One fifth of producers indicated that selling and marketing costs had increased by either 50-100% or by greater than 100%. This reflects the widespread belief amongst pasture seed producers that increases in certification costs in recent years have been the most important change to their cost structure over the last five or so years (see discussion below). In addition to this quantitative analysis, growers were also asked to comment upon recent trends in costs that have impacted upon the cost structure of their pasture production enterprise. An analysis of the comments provided indicated that there were several key concerns with trends in specific cost items. These key concerns were consistent both across producers of different types of pasture seed as well as across producers within different regions of Australia. Examining each cost category in turn provides an analysis of the key cost items that have exhibited upward trends in prices over recent years. Preparation Costs

Growers identified fuel and labour costs as the most important preparation costs that have exhibited increases in prices over recent years. Other important cost items to have exhibited movements in prices in recent years included costs associated with clearing remnant vegetation, levelling ground for sowing, costs associated with purchasing potassium, lime, gypsum and fertiliser and costs associated with improving water use efficiency. The point was raised by producers that preparation costs are affected by many factors, including soil moisture levels. As a group, there is the potential for preparation costs to decline via the adoption of better (more technologically advanced, more efficient) machinery and techniques. These efficiency improvements can offset higher costs, boosting the returns achieved from pasture production.

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Growing Costs

Producers identified increased chemical costs as the most important growing costs that have increased in recent years. Chemical cost increases have been due to both increases in the cost of chemicals as well as in the level of chemical inputs used within the production environment. A greater level of inputs is required in the crop production regime in order to ensure crop improvement and in response to the increased resistance of some weeds (e.g., ryegrass). Other important growing cost items identified by producers as moving considerably in recent years included water costs, fuel costs and fertiliser costs.

Harvesting Costs

The harvesting costs that exhibited the most movement in recent years were costs associated with the repair and maintenance of machinery, machinery costs, labour costs and costs associated with cleaning seed. Other costs identified by producers (though, to a lesser degree) include the cost of spare parts and fuel costs.

Producers pointed out that harvest costs depend on the weather conditions of a particular season, and therefore the state of the crop. Improvements in the efficiency of harvesting, such as the tandem hitching of machinery, can decrease harvest costs. Producers also pointed out that the pasture seed market is too small for the machinery industry to expend large amounts of capital to develop new technology. This limits the ability of producers to improve harvest efficiency via the replacement of old capital equipment with new, improved capital items. Also of concern to sub-clover growers is that harvesters are no longer being made commercially.

Selling and Marketing Costs

Certification fees were identified by producers as the single most important cost item in terms of movements in the cost of production in recent years. Numerous accounts were provided from producers detailing what they saw as excessive movements in the costs associated with certification in recent years. For example, in WA, a producer stated that certification costs increased from $1/ha in 1997 to $5.50/ha this season. A NSW producer stated that certification costs increased by 400% over a three-year period in recent years.

There were numerous grower comments that were made in relation to movements in the costs associated with certification. Some producers argued that the advent of PBR had decreased the margin derived by producers. Other producers felt that increases in testing and certification fees were less linked to changes in yield than could be argued for some other cost item increases. Some producers believed that certification costs had increased at a rapid rate due to the movement towards full cost recovery by the state departments that undertook the certification services. Finally, there was concern among growers of public varieties of seed, that they will face even higher selling and marketing costs in the future.

Summary of Grower Comments

Growers identified the following individual cost items as the most important in their production regimes, when measured in terms of movements in these costs over the last five years:

• fuel costs;

• labour costs;

• chemical costs;

• machinery repair and maintenance costs;

• seed cleaning costs; and

• seed testing and certification costs.

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3.5.2 ABARE Data In their annual publication, Australian Commodities: 1998, ABARE publish an index of prices paid by farmers for inputs into their production systems within Australia. This information provides a valuable overview of movements in key cost components over time. Though not specifically reflecting movements in cost components within the pasture seed industry, the cost items that are reflected are common cost items for all farmers within Australia. Figure 3.1 shows the movement in total prices paid by farmers from 1978/79 to 1997/98 (the base year chosen is 1987/88). Figure 3.1 Index of Prices Paid by Farmers – Total Prices Paid

In d e x o f P r ic e s P a id b y F a r m e r s - T o t a l P r ic e s P a id

0 . 0

2 0 . 0

4 0 . 0

6 0 . 0

8 0 . 0

1 0 0 . 0

1 2 0 . 0

1 4 0 . 0

7 8 -7 9

8 0 -8 1

8 2 -8 3

8 4 -8 5

8 6 -8 7

8 8 -8 9

9 0 -9 1

9 2 -9 3

9 4 -9 5

9 6 -9 7

Y e a r

Inde

x

(Bas

e Ye

ar =

198

7-88

)

Source: ABARE (1998) Costs increased steadily from the late 1970s to the mid-1980s. There was a rapid increase in the prices paid by farmers in the late 1980s in response to inflationary pressures, before prices reached a plateau in the early 1990s. There were some further increases in the index of prices paid in the mid-1990s, however, the rate of growth in the index of prices paid by farmers has once again slowed in recent years. Despite providing a good overview of movements in cost components over time, it is necessary to segment the main cost components in order to appreciate which particular segments have been subject to the most price pressure. Figure 3.2 provides a graphical representation of the index of prices paid by farmers for the major cost components over the period 1978/79 to 1997/98 (base year 1987/88).

39

Figure 3.2 Index of Prices Paid by Farmers - Components

In d ex o f P rices P a id b y F arm ers - C o m p o n en ts

020406080

100120140160

78-79 80-81 82-83 84-85 86-87 88-89 90-91 92 -93 94-95 96 -97Y ear

Inde

x (B

ase

Year

= 1

987-

88)

M ate ria ls & S erv ices Labou r M arke tingO verheads C ap ita l Item s

Source: ABARE (1998) As can be seen in Figure 3.2, costs are divided into five key components. The costs included within each component are:

• Materials & Services: including seed, fodder & livestock, fertiliser, chemicals and medicine, fuel and lubricants, electricity, maintenance of plant, equipment & structures, contracts and other materials and services;

• Labour: including all labour;

• Marketing: including freight outward and selling expenses;

• Overheads: including interest paid, rates and taxes, insurance and other overheads; and

• Capital Items: including plant and equipment and structures.

Overhead costs have exhibited the greatest degree of variability over the last decade. Where the other cost components have exhibited continual growth over the last decade, overhead costs have fluctuated quite significantly. These fluctuations have occurred in response to movements in interest rates. Following the large increases in interest rates in the late 1980s, declines in rates have led to a marked decrease in the cost of interest payments in the 1990s, acting to offset large increases in the costs associated with insurance, rates and taxes. Labour costs have increased the most over the last decade, followed by capital items, with marketing costs and materials and services costs being more closely aligned. Appendix Four contains a more complete index of prices paid by farmers in Australia over the last two decades by individual cost items. 3.6 Environmental Issues 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 and issues that were raised by survey respondents are presented below.

40

3.6.1 Environmental Priorities The RIRDC R&D Plan (1997) lists a series of key issues that are to be used as a basis for establishing R&D strategies specifically for the environmental issues impacting on the pasture seed industry. These issues are:

• improving harvesting technologies to minimise or avoid damage to soils;

• developing integrated and sensitive production management models;

• developing management practices which minimise inputs of pesticides; and

• developing improved water use efficiency practices, particularly in irrigated seed crops.

To gauge some understanding of what producers thought of these goals, they were asked within the survey to indicate whether or not they believed each of the issues mentioned above was a priority for the industry in terms of ensuring the industry continues to adequately and responsibly deal with the environmental issues facing it. Secondly, producers were asked to indicate whether if increased importance were placed on a particular issue, this would increase costs for them as a producer. Table 3.31 details the results of the analysis of whether producers thought each issue listed above was a priority for the industry. The results list the number of persons who identified each issue as a priority. Table 3.31 Environmental Issues Identified as Priorities by Growers (No. of Respondents) Cost Component Clover Medics Lucerne Sub-Clover Total Harvest Technology 1 9 1 10 21 Production Models 3 3 4 6 16 Pesticide Management 5 9 10 6 30 Water Use Efficiency 4 1 8 5 18 Of the four key environmental issues identified in RIRDC (1997), growers identified pesticide management as the most important for the industry. This importance was reflected across growers of all pasture types. In terms of specific issues for particular growers, sub-clover producers identified harvest technology as the most important issue, lucerne growers identified pesticide management as the most important, medics growers identified harvest technology and pesticide management as priorities and clover growers identified pesticide management. Table 3.32 details the results of whether producers believed that if a particular issue was identified as a priority for the industry and increased importance was allocated to this, this would increase the costs associated with production. Table 3.32 Environmental Issues as Priorities Causing an Increase in Costs (No. of

Respondents) Cost Component Clover Medics Lucerne Sub-Clover Total Harvest Technology 2 1 1 9 13 Production Models 1 0 1 5 7 Pesticide Management 1 0 1 4 6 Water Use Efficiency 3 0 0 3 6 Sub-clover producers were the most concerned that if a key issue was identified as a priority for the industry, that this would increase costs for their operations. Particularly with reference to harvest technology, sub-clover producers were concerned that the potential exists for their costs to increase. In

41

aggregate terms (across all producers), similar numbers of producers believed increased importance being placed on either production models, pesticide management or water use efficiency would lead to increased costs for producers. 3.6.2 Environmental Regulation As part of the survey, producers were asked their views on whether or not they believed some form of environmental regulation was required within the industry to ensure production practices were environmentally responsible. Producers were asked whether they favoured industry or government regulation, or whether they preferred no regulation for the industry. Overwhelmingly, producers were not in favour of government regulation to ensure environmentally responsible management practices were adopted and adhered to. There were, however, some producers who did see a role for government regulation. There was a reasonably even split between those who believed that the industry did not require any environmental regulation, and those who believed some form of industry-imposed regulation was required. In many cases, those who indicated they agreed with industry-imposed environmental regulation believed that this could be achieved without any formal procedures or requirements (i.e. by relying upon voluntary compliance from responsible producers). Specific comments that were provided by growers regarding industry-imposed environmental regulation raised several important issues that could in turn allow the adoption of some form of regulation. The major issues were:

• Wind Erosion: ensuring post-harvest land management practices minimise soil erosion caused by wind. Ensuring pastures are planted where they are ridged against such wind erosion is one way of doing this;

• Aerial Spraying: controlling aerial spraying practices to minimise spray drift; and

• Chemicals: ensuring correct storage, use and application of chemicals and ensuring withholding periods are abided by. Also, reinforcing current safe practices regarding chemical use.

Other issues that were raised by growers included rectification of noxious weeds and ensuring appropriate water use practices were adhered to. Information was received from a producer outlining a trial being undertaken by growers near Naracoorte in SA, where growers in a Landcare group have trialled spreading cereal straw post-harvest to control nutrient loss. First-year results from the trial indicate good outcomes. The opinions on the level at which any form of regulation would need to be implemented varied between growers:

• many producers believed that no regulation of any type was required, as producers were already sufficiently adopting environmentally sustainable practices of their own accord;

• some producers believed that a grower organisation sponsored industry code of practice needed to be implemented;

• other producers foresaw a future role for district level committees in environmental regulation;

• whilst some growers believed Quality Assurance (QA) programs for properties were required, others contended that QA programs increase costs for both growers and consumers;

• for those producers that supported some form of government regulation, a role for government was foreseen in the area of integrated pest management. Developing a district/regional approach

42

to pest management and reducing pesticide use were identified as measures of government regulation that could benefit the industry; and

• some growers argued self-regulation (e.g., self-regulation of harvest in adverse weather) would be adequate to ensure that environmentally sustainable outcomes could be achieved.

43

4. FUTURE RESEARCH REQUIREMENTS Within the survey, producers were asked their thoughts on priorities for future research within the pasture seed industry, particularly if this was to lead to a lower cost of production for producers. Producers were asked to indicate which of the following cost components they viewed as priorities for future research to decrease the cost of production. In addition to indicating which of these cost components they viewed as research priorities, producers were asked to specify any particular area that they thought were priorities for research. Table 4.1 details the number of producers who identified each cost component as a priority for research. Results are listed by pasture type to give an indication of how different producers view research priorities. Table 4.1 Research Priorities for Lowering the Cost of Production (No. of Respondents)

Cost Component Clover Medics Lucerne Sub-Clover Total

No. of Survey Respondents 9 10 10 11 40 Preparation Costs 3 1 1 1 6 Growing Costs 7 4 7 6 24 Harvesting Costs 2 6 2 5 15 Selling & Marketing Costs 0 6 3 6 15 Other Costs 5 3 2 1 11 Producers viewed growing costs as the most important cost component for future research to address, followed by harvesting, and selling and marketing costs. Consistent themes were raised both across different pasture species and across different regions by growers with regard to specific areas for future research. Table 4.2 provides a more detailed overview of the research priorities identified by growers for future research. The vast majority of the issues identified are aimed at decreasing the costs of production. The issues are not listed in any order of importance. Based on the type of comments and how often the issues were mentioned, the most important issues for future research are:

• 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.

44

Table 4.2 Specific Issues Identified by Producers as Priorities for Future Research Cost Categories Research Priorities Preparation Costs • Improvements in irrigation layout and design;

• Clearing stands of weeds/grasses/pastures before planting new varieties; • Working ground to a fine seed bed; • Seeding techniques and establishment; and • Production of better varieties of seeds1.

Growing Costs • Increasing herbicide efficiency; • Increasing herbicide effectiveness; • Decreasing chemical and fertiliser costs; • Developing new chemicals2 for weed, grass and pest control; • Developing alternatives to established chemicals3; • Providing advice re: timing and level of inputs; • Decreasing water costs; • Decreasing labour costs; • Developing insect resistance in crop cultivars; and • Research into pollination and use and valuation of certain bees.

Harvesting Costs • Efficiency improvements in harvesting; • Improving harvest speed (vacuum too slow, less suction); • Decreasing cleaning costs; • Improving seed drying processes; • Minimising soil damage associated with harvesting; and • Improving machinery design.

Selling & Marketing Costs • Decreasing certification costs4; • Decreasing inspection fees; • Developing marketing opportunities, including export opportunities; • Researching alternative customers for products5; and • Promoting the benefits of higher germinating seed over less expensive

varieties. Other Costs • Encouraging soil nutrient retention post-harvest. 1. Some producers indicated that production of better varieties will encourage less price responsive behaviour

amongst producers and potential producers rather than decreasing the cost of production. 2. Especially for weeds and grasses that have built up resistance to established chemicals. 3. Especially for chemicals that are required yet deemed overly expensive. 4. Especially for dryland operators who have lower yields. 5. Diversify the customer base to avoid troughs such as presented by a decline in traditional livestock industries.

45

5. CONCLUSIONS This study has provided:

• a detailed overview of temperate pasture seed production and distribution within Australia, based on available information. This included an analysis of important recent changes to the industry, including the impacts of PBR’s on production, the role of certification schemes and the changing structure of the industry at all levels;

• an overview of the total costs of pasture seed production and distribution. Comparative analyses revealed:

• on a per hectare basis, lucerne seed production incurred the greatest production costs, medics the least;

• on a per tonne basis, clover seed production incurred the greatest production costs, medics the least;

• there was variation in costs associated with particular pasture types between different regions; and

• there was variation in costs associated with particular pasture types when different production methods (dryland vs irrigated) were adopted.

• an overview of the key cost components within the production sphere, namely growing and harvesting costs;

• an analysis of those cost items that are considered key items in terms of movements in costs in recent years. These included costs associated with fuel, labour, chemicals, machinery repairs and maintenance, seed cleaning and seed testing and certification;

• an identification of the role of environmental regulation within the industry. Basically there are no specific environmental regulations that apply to the pasture seed industry, however, there are important environmental issues. Producers favour either industry-imposed or self-imposed environmental regulation, rather than government regulation, in order to ensure environmentally sustainable production methods are employed; and

• an identification of future research priorities for the industry. Priorities for future research, as identified by growers, 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.

46

6. ABBREVIATIONS USED IN THIS REPORT ABARE Australian Bureau of Agricultural and Resource Economics AFFA Agriculture, Fisheries and Forestry - Australia CLIMA Centre for Legumes in Mediterranean Agriculture, Western Australia DPIE Department of Primary Industries and Energy (Commonwealth) NACMA National Agricultural Commodities Marketing Association OECD Organisation for Economic Cooperation and Development PBR Plant Breeder’s Rights PVR Plant Variety Rights QA Quality Assurance R & D Research and Development RIRDC Rural Industries Research and Development Corporation SIAA Seed Industry Association of Australia UPOV International Union for the Protection of New Varieties of Plants

47

7. PERSONS CONTACTED AS PART OF THE STUDY Name Organisation

Pasture R & D Advisory Committee

Hugh Roberts Chairman (NSW)

Jock Kreitals Member (Grains Council of Australia)

David Pengelly Member (SA)

Pat Trethowan Past Member (Victoria)

Penny Hendy Member (Victoria)

Jeff Davis RIRDC

Other Contacts

Nigel Phillips NSW Agriculture Wagga Wagga NSW

Eric Elliot NSW Agriculture, Forbes NSW

Mark Holland Manager AgWest Plant Laboratory, Ag WA

Max Jongebloed Seedco, South Australia

Dr Angela Avery DNRE, Rutherglen Victoria

Chris Sykes Seed Industry Association of Australia, WA

Steven Stilletzi University of Western Australia

Dr Kevin Boyce Program Manager Seeds, Seed Services, Primary Industries and Resources South Australia.

Peter Smith Senior Seeds Officer, Seed Services, Primary Industries and Resources South Australia.

Bill Sharp Paramount Seeds, WA

Irwin Hunter Irwin Hunter & Co., WA

Graham West Auswest Seeds, NSW

Neil Ballard Ballard Seeds, WA

Peter March Producer, SA

48

8. REFERENCES ABARE (1998) Australian Commodity Statistics: 1998, Commonwealth of Australia Blackstock J.M. & Mock R.J. (1992) A Review of Seed Certification Schemes in North America and

Europe and Recommended Measures to Improve the Cost-Efficiency and Effectiveness of Australian Certification Schemes to Industry, Rural Industries Research & Development Corporation, Project Reference No. SED6A.

Boyce, K. (1996) A Profile of the Australian Seed Industry with Particular Reference to South Australia,

a background paper prepared by Dr Kevin Boyce, Program Manager Seeds, Primary Industries South Australia, July 1996, unpublished.

Cregan P.D. & McDonald W.J. (1984) Pasture Legumes 1984: Temperate Pastures, NSW Department

of Agriculture, AgFacts, Agdex 137/92. Cregan P.D & Wolfe E.C (1988) Subterranean Clover in NSW – Identification and Use, NSW

Department of Agriculture, AgFact P2.5.16. Grains Council of Australia (1994), Report on the Technical Feasibility of a Non-Government

Run Seed Certification System, Industry Steering Committee on Seed Certification (cover page only, prac worker to chase).

Hacker B & Jones D (1997) Tropical Pastures in ‘Australian Agriculture: 1997-98’, Douglas F (ed.),

Morescope Publishing Pty. Ltd., Camberwell. Hendy P (1999) Unpublished written information provided to Hassall & Associates, North-East Seeds

Branch of the Victorian Farmers’ Federation, March 1999. Jones J (1999a) New Pasture Seed Varieties, in ‘Australian Farm Journal’, April 1999, Rural Press

Publications, Melbourne. Jones J (1999b) Growing Seed to Meet Requirements, in ‘Australian Farm Journal’, April 1999, Rural

Press Publications, Melbourne. Loch D (1999a) Industry looks to new century’s challenges, in ‘Australian Farm Journal’, April 1999,

Rural Press Publications, Melbourne. Loch D (1999b) Tropical Pastures in ‘A Snapshot of the Australian Seed Industry’, 1999, The Australian

Seed Magazine. Loch D. S (1995) Australia: A Comprehensive Survey of the Seed Sector, Country Report No. 6, Asia

and Pacific Seed Association. McDonald W.J & Waterhouse D.B (1989) Lucerne for Pasture and Feed, NSW Department of

Agriculture, AgFact P2.2.25. NSW Agriculture (1999) Selected Information from the NSW Agriculture Internet Site,

http://www.agric.nsw.gov.au/, Orange.

49

NSW Agriculture AgFacts on Cost of Production of Pasture Seed from the 1980’s to as recent as 1992. A number of these were prepared by Eric Elliot.

NSW Agriculture & Fisheries (1991) Cropping Industry: Pastures and Seeds Industry, in ‘Australian

Agriculture: 1991-92’, Cribb J (ed.), Morescope Publishing Pty. Ltd., Camberwell. NSW Agriculture, Division of Plant Industries (1988) Lucerne Varieties: 1988, NSW Department of

Agriculture, AgFact P2.5.13. NSW Farmers’ Association (1999) Pastoral Award Rates Information Supplied upon Request. Orchard P, Read J & McDonald W (1989) Temperate Pasture for NSW, NSW Department of

Agriculture, Agfacts P2.1.9. Pasture Seeds Working Party (1993) Cost Alternative Seed Certification Services, Rural Industries

Research & Development Corporation, Research Paper No 93/5. Pasture Seed Production Costings prepared by the South Australian Department of Agriculture in the

1970s and 1980s (contact Graham Trengrove, Central Office Department of Primary Industries). RIRDC (1999) Selected Information from the RIRDC Internet Site, http://www.rirdc.gov.au/, RIRDC,

Canberra. RIRDC (1997) R&D Plan for the Pasture Seeds Program 1996-2001, RIRDC, Barton. Saunders J (1999) Unpublished written information provided to Hassall & Associates, Agrifood

Technology, November 1999. Schroder P (1997) Temperate Pastures in ‘Australian Agriculture: 1997-98’, Douglas F (ed.), Morescope

Publishing Pty Ltd, Camberwell. Seed Industry Association of Australia (1999) A Snapshot of the Australian Seed Industry, The Australian Seed Magazine, Toowoomba. Stewart & Phillips (1994) Pasture Seeds Industry, in ‘Australian Grains’, Morescope Publishing Pty.

Ltd., Camberwell. Stür W (1997) Pasture Seed Production and Marketing, in ‘Pasture Production and Management’,

Lovett J.V & Scott J.M (ed’s), Inkata Press, Melbourne. Teague T.J. (1999) Selected Information from the TJ Teague Internet Site, http://www.tjt.com.au, TJ

Teague, Adelaide. WA Department of Agriculture (1995) Seed Certification Rules, Bulletin 4309, AgDex 100/43. Young R.B, Morthorpe K.J, Nicol H. I & Croft P.H (1994) Effects of sowing time and grazing on the dry

matter yield, phenology, seed yield, and hardseed levels of annual pasture legumes in western New South Wales, in ‘Australian Journal of Experimental Agriculture’, 1994, 34, 189-204.

50

APPENDICES Appendix One Directory of Seed Industry Commercial Stakeholders State/Organisation Contact Address Phone No. Fax No. Business

Type Specialises in...

NSW

Auswest Seeds Graham West 28-34 Tobias St, Forbes, 2871 02 6852 1500

02 6852 1393

Merchant

Sydney Seeds Pty Ltd

Bill Jamison PO Box 722, Seven Hills, 2147 02 9674 8011

02 9674 8030

Merchant Clover and Lucerne

South Australia Adelaide Seed Co. Pty Ltd

Bill Blackwood

Port Adelaide Business Centre, Port Adelaide,5015

08 8240 1577

08 8240 1844

Wholesalers Researching & Marketing Mixes

Booborowie Seeds Pty Ltd

Andrew Phin Third Street, Booborowie, 5417 08 8893 2334

08 8893 2338

Merchant Lucerne

Naracoorte Seed Sales inc. SA Seed Marketers Pty Ltd

Bob Tidy PO Box 13, Naracoorte, 5271 08 8762 1944

08 8762 2639

Merchant Sub-clover, white clover. lucerne

Seedco Max Jongebloed

78 Burbridge Rd, Hilton, 5033 08 8234 9333

08 8234 6133

Cooperative P’ction & mkting of forage seeds,

subclover Keith Seeds Tim Cadzow Highway Terrace, Keith, 5267 08 8755

1777 Grower

owned company

Lucerne

South East Seeds Pty Ltd

John Prebble or Craig Altmann

PO Box 25, Naracoorte, 5271 08 8762 1166

08 8762 3786

Merchant/wholesaler

Lucerne and clovers

Tymko Seeds Wally Tymko PO Box 417, Bordertown, 5268 08 8752 2955

08 8752 2954

Wholesaler/retail

Lucerne & Clover

DR, JM & RH Verner

David Verner “Akeringa”, Korunye, 5502 08 8520 2181

08 852 0213 Marketers Medic

TJ Teague Tim Teague 118 Halifax St, Adelaide, 5000 08 8232 0664

08 8232 0702

Broker

51

State/Organisation Contact Address Phone No. Fax No. Business Type

Specialises in...

Victoria

Heritage Seeds Pty Ltd

Dale Skepper PO Box 4020, Mulgrave, 3170 03 9561 9222

03 9561 9333

Distributor

Vicseeds Pty Ltd Patrick Keane PO box 1544 Geelong, 3320 03 5282 5577

03 5282 5478

Wholesalers clovers

AWB Seeds Phil King PO Box 17, Dimboola, 3414 03 5389 1355

03 5389 1121

Wholesale Medics

Stephen Pasture Seeds Pty Ltd

Jim Stephens 27 Wiltshire Ln, Delacombe, 3356

03 5335 8055

03 5335 8088

Retail/Wholesale

Western Australia

Paramount Seeds Bill Sharp 4 Harbour Rd, Esperance, 6450 08 9071 1053

08 9071 5007

Wholesaler medics

Ballard Seeds Neil Ballard Box 7, Tincurrin, WA, 6361 08 9883 2005

08 9883 2063

Irwin Hunter & Co Irwin Hunter Box 232, Cottesloe, WA, 6011 08 9383 4708

08 9384 8029

Wholesale Agricultural seeds

Southern Seeds Centre

Don Steven MacDonald Avenue, Mt Barker 08 9851 1306

08 9851 1587

Merchant/wholesaler

Sub-clover

Eastern Districts Seed Cleaning Co.

Ian Doncon Box 21, Kellerverrin, 6410 08 9045 4270

08 9045 4239

Retail/w’saler

Source: Paramount Seeds and industry sources

52

Appendix Two Background Information on Survey Respondents Clover Producers Indicator Unit All

States SA WA VIC NSW Irrig. Dry.

Avg 17 12 44 18 8 14 21 Max 44 18 44 20 8 20 20 Years in industry Min 7 7 44 14 8 8 7 Avg 8 9 10 7 4 8 8 Max 10 10 10 8 4 10 10 Years of last 10

grown pasture Min 4 7 10 6 4 4 7 Avg 1954 2563 4250 629 1200 2280 1547 Max 6400 6400 4250 800 1200 6400 4250 Total Farm Area Min 288 850 4250 288 1200 800 288 Avg 177 253 440 53 60 179 176 Max 476 476 440 90 60 476 440 Pasture Seed Area Min 30 140 440 30 60 38 30 Avg 5 4 1 10 3 4 7 Max 20 5 1 20 3 5 20 Stand Life Min 1 1 1 4 3 3 1

Medic Producers Indicator Unit All

States SA WA VIC NSW Irrig. Dry.

Avg 27 25 26 27 33 n/a 27 Max 40 30 40 27 35 n/a 40 Years in industry Min 12 20 12 27 30 n/a 12 Avg 9 10 7 10 10 n/a 9 Max 10 10 10 10 10 n/a 10 Years of last 10

grown pasture Min 4 10 4 10 10 n/a 4 Avg 1808 905 5454 1600 524 n/a 1808 Max 8000 1100 8000 1600 604 n/a 8000 Total Farm Area Min 444 666 2907 1600 444 n/a 444 Avg 131 58 793 40 28 n/a 131 Max 793 110 793 40 40 n/a 793 Pasture Seed Area Min 15 32 793 40 15 n/a 15 Avg 4 2 20 1 4 n/a 4 Max 20 6 20 1 4 n/a 20 Stand Life Min 1 1 1.5 1 4 n/a 1

53

Lucerne Producers Indicator Unit All

States SA WA VIC NSW Irrig. Dry.

Avg 28 27 n/a n/a 31 23 34 Max 41 36 n/a n/a 41 30 41 Years in industry Min 14 14 n/a n/a 20 14 30 Avg 10 10 n/a n/a 10 10 10 Max 10 10 n/a n/a 10 10 10 Years of last 10

grown pasture Min 10 10 n/a n/a 10 10 10 Avg 1620 1601 n/a n/a 1687 1785 1414 Max 3400 3400 n/a n/a 2444 3400 3000 Total Farm Area Min 340 340 n/a n/a 930 340 808 Avg 164 192 n/a n/a 68 227 85 Max 600 600 n/a n/a 120 600 156 Pasture Seed Area Min 16 49 n/a n/a 16 16 16 Avg 8 9 n/a n/a 5 7 12 Max 18 18 n/a n/a 5 9 18 Stand Life Min 5 6 n/a n/a 5 5 5

Sub-Clover Producers Indicator Unit All

States SA WA VIC NSW Irrig. Dry.

Avg 23 20 26 30 12 22 23 Max 30 26 30 30 12 26 30 Years in industry Min 12 15 20 30 12 15 12 Avg 9 10 7 10 9 10 8 Max 10 10 10 10 9 10 10 Years of last 10

Grown pasture Min 3 10 3 10 9 10 3 Avg 1475 448 3197 310 890 425 2736 Max 6270 800 6270 310 890 800 6270 Total Farm Area Min 290 290 1080 310 890 290 890 Avg 550 86 1344 150 100 96 1095 Max 3000 160 3000 150 100 160 3000 Pasture Seed Area Min 50 50 70 150 100 50 70 Avg 6 1 14 7 4 2 12 Max 20 1 20 7 4 7 20 Stand Life Min 1 1 3 7 4 1 3

54

Appendix Three Index of Prices Paid; 1978-79 to 1997-98

Year Cost Item 1978

-79 1979-80

1980-81

1981-82

1982-83

1983-84

1984-85

1985-86

1986-87

1987-88

1988-89

1989-90

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

Materials & Services Seed, fodder & livestock Seed, seedlings and plants

50.3 56.7 63.7 73.9 81.5 86.6 84.7 87.9 93.6 100.0 111.9 114.3 114.5 118.4 121.6 123.4 132.9 140.6 138.0 139.1

Fodder and feedstuffs

59.2 66.4 80.0 82.4 92.8 95.2 90.4 90.4 92.8 100.0 111.2 114.7 109.6 117.0 114.0 116.1 133.8 139.5 133.9 135.6

Store and breeding stock

na na 70.9 69.5 68.8 77.3 81.6 77.3 87.9 100.0 111.2 106.8 98.8 96.0 95.0 114.5 116.5 115.8 107.8 120.5

Total Seed, Fodder & Livestock

55.1 61.8 73.5 75.7 77.2 86.0 85.3 83.8 90.4 100.0 111.3 109.9 103.5 104.4 103.1 115.8 123.3 125.3 118.4 126.8

Fertiliser 47.0 57.0 68.0 75.0 77.0 82.0 91.0 100.0 98.0 100.0 114.1 119.9 124.5 127.6 125.3 124.5 127.1 136.1 137.0 136.5 Chemicals and medicine

55.8 64.9 68.2 70.1 74.0 78.6 85.7 94.2 100.0 100.0 101.9 104.2 107.7 109.0 109.6 108.6 109.4 110.0 110.9 112.1

Fuel and lubricants 37.0 52.0 65.0 71.0 82.0 89.0 95.0 98.0 97.0 100.0 90.7 103.3 119.5 112.3 117.4 113.4 108.9 113.3 118.3 112.8 Electricity 44.8 48.1 54.6 61.7 78.1 84.7 88.5 90.7 94.5 100.0 104.8 108.3 112.1 116.4 118.0 116.9 113.9 113.4 115.3 115.9 Maintenance Plant and equipment 41.3 45.4 51.0 56.6 62.8 68.9 74.0 82.1 91.8 100.0 105.9 114.0 124.1 130.8 135.6 140.5 144.7 149.1 152.6 156.5 Structures 46.7 52.7 60.6 67.9 75.7 81.2 85.4 90.3 96.3 100.0 106.7 115.2 122.6 126.4 129.2 131.5 133.6 136.6 137.8 144.5

Total 43.1 47.8 54.1 60.3 67.0 72.9 77.7 84.8 93.3 100.0 106.2 114.4 123.6 129.4 133.5 137.6 141.1 145.1 147.9 152.6

Contracts 53.5 58.0 63.7 70.1 80.2 85.3 91.1 94.3 96.8 100.0 107.0 113.4 121.0 126.0 129.9 133.8 136.3 137.7 139.4 140.0 Other materials & services

49.4 52.9 57.5 63.8 70.1 75.3 78.2 84.5 93.1 100.0 107.4 115.8 122.0 123.2 124.9 127.2 130.8 135.4 135.1 135.2

Total Materials & Services

47.4 54.7 64.3 69.5 75.3 81.8 85.3 89.3 94.0 100.0 106.5 111.3 115.2 116.7 118.0 122.3 125.4 128.8 128.3 131.0

55

Cost Item 1978

-79 1979-80

1980-81

1981-82

1982-83

1983-84

1984-85

1985-86

1986-87

1987-88

1988-89

1989-90

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

Labour 52.8 57.1 62.1 69.6 76.4 81.4 87.6 91.9 95.7 100.0 107.3 115.2 120.7 126.3 130.9 132.8 134.7 138.7 141.6 145.9 Marketing Freight outwards 48.8 54.8 60.2 68.7 76.5 82.5 86.7 92.8 97.6 100.0 104.0 108.0 113.5 115.1 116.3 117.1 117.1 117.0 117.1 118.8 Selling expenses 50.9 57.3 63.7 68.8 72.0 80.2 83.4 87.9 93.6 100.0 110.9 114.3 114.6 116.2 115.9 119.4 122.6 127.8 127.7 133.7

Total Marketing 50.3 55.9 62.1 68.3 73.9 80.7 84.4 89.4 95.0 100.0 109.6 113.1 114.3 116.0 116.0 119.0 121.5 125.7 125.7 130.8

Overheads Interest paid 30.5 33.3 40.7 52.0 65.9 67.9 73.2 97.2 109.8 100.0 126.7 149.3 127.2 104.3 80.2 74.9 84.6 95.6 87.4 74.7 Rates and taxes 39.2 42.0 47.2 56.1 63.2 70.3 77.8 86.3 93.4 100.0 109.2 119.9 130.3 133.2 136.4 137.2 140.5 137.4 142.5 149.1 Insurance 61.7 61.7 67.1 77.2 91.3 96.6 100.0 92.6 101.3 100.0 106.0 122.5 128.1 126.9 132.4 140.4 146.3 179.2 193.8 197.5 Other overheads 47.5 52.4 57.2 63.3 70.6 75.4 78.6 85.2 93.2 100.0 106.2 113.2 119.6 129.6 132.2 134.4 135.9 139.4 141.2 140.5

Total Overheads 40.2 43.0 49.1 58.6 69.5 73.7 78.9 91.5 101.3 100.0 117.6 134.4 126.1 116.4 105.1 103.6 110.2 119.4 117.6 112.0

Capital items Plant and equipment 41.3 45.4 51.0 56.6 62.8 68.9 74.0 82.1 91.8 100.0 105.6 110.3 112.9 115.0 119.8 125.7 129.3 134.4 136.7 138.1 Structures 46.7 52.7 60.6 67.9 75.7 81.2 85.4 90.3 96.3 100.0 106.8 115.9 123.8 126.7 129.7 132.1 134.1 136.7 138.6 143.6

Total Capital Items 41.8 46.1 51.9 57.6 64.0 70.0 75.0 82.8 92.2 100.0 105.7 111.1 114.3 116.5 121.1 126.6 129.9 134.7 136.9 138.9

Total prices paid 45.9 51.1 58.1 64.5 71.5 77.3 81.9 88.3 95.9 100.0 109.0 116.3 117.6 117.5 116.9 119.8 123.4 128.2 128.1 129.7

Excluding capital items

47.2 53.0 61.0 67.4 74.2 80.1 84.3 90.0 95.7 100.0 109.4 116.9 118.0 117.6 116.4 119.0 122.6 127.4 127.0 128.5

Excluding capital & overheads

48.7 55.2 63.6 69.3 75.2 81.6 85.5 89.7 94.4 100.0 107.2 112.2 115.8 117.9 119.4 123.1 126.0 129.6 129.6 133.0

Excluding seed, fodder and store and breeding stock

45.2 49.7 56.5 63.3 71.2 76.8 81.9 89.3 96.6 100.0 108.6 117.3 119.9 119.6 119.1 120.5 123.4 128.7 129.7 130.1

Source: ABARE (1998)

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Appendix Four Survey Form For the purpose of future comparisons and/or updating the results, one version of the survey used (for Clover Seed Producers) is included in the following pages.

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PASTURE SEED INDUSTRY SURVEY The survey has four sections. The first contains personal profile details that will help with aggregation of data into regional “benchmarks”. The second collects average or typical per hectare cost information for the activities carried out in the production of pasture seed on your farm. The third section seeks to collect information related to the output produced from your pasture seed operation. The fourth section of the survey seeks to collect your views and comments on how costs have changed over time, priorities for research and the costs involved with environmental regulation. To help in the completion of the survey, some example material from a State Department of Agriculture is included as appendices. This information relates to the type of costs incurred in the production of clover seed and is only a guide. The costs listed are merely indicative and in many cases are some years old. If there are additional costs incurred in your enterprise that are not in the example material, please name and cost these items in the survey.

SECTION ONE: GROWER PROFILE Contact Name: Property Name: Address: P/code: State: Phone: Fax: Email: For how many years have you produced pasture seed? For how many of the last ten years have you produced pasture seed? Is your pasture seed enterprise dryland or irrigated? Please indicate the main varieties of clover that you grow on your property? Please indicate the most recent production year for which you can provide information? (i.e if this year, write 1998/99)

SECTION TWO: COST ESTIMATES FOR YOUR SEED ENTERPRISE

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The information we seek in this section is divided into:

a) overhead and landforming costs; b) the cost associated with the establishment of the clover stand in year one; and c) the annual costs of clover seed production.

Within the establishment and annual production cost sub-sections, detailed information is requested on: • Preparation costs;

These include costs involved with preparing ground for the establishment of the clover crop, pre-irrigation costs, cultivation costs (ploughing, scarifying), seed costs, inoculation costs, sowing costs and certified crop establishment costs (cultivar fees, call-out fees and inspection fees).

• Growing costs;

These include herbicide, pesticide and fertiliser costs, irrigation costs, pollination costs, roguing weeds costs, paddock inspection costs, preventative maintenance and implement repairs for machinery and mowing, raking and baling costs.

• Harvesting costs; and

These include dessication costs, seed harvesting costs, on-farm storage and handling costs, freight costs, seed cleaning costs, grading costs, seed bag and bagging costs, storage costs and insurance.

• Selling and marketing costs.

These include marketing costs, seed testing costs (purity, germination and electrophoresis tests), certification fees, research levies and other levies and agents commissions.

These listings are not exhaustive. If there are additional costs incurred in your enterprise, please name and cost these in the spaces left in the relevant tables in the following pages. 2.1 Overheads and Landforming Costs What is your total farm area? ha For the year data is provided, how many hectares of clover was grown? Ha On average, how many years do you receive from a clover stand before the area has to be resown? years What do you estimate to be the value ($/ha) of the land dedicated to clover production, including any landforming costs associated with irrigation? $/ha What do you estimate to be the capital value (sale price) of irrigation water used in the enterprise? $/ML

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What do you estimate the total value (auction prices) of plant and machinery on your farm? $ What proportion of this plant and machinery is devoted to your pasture seed enterprise? % What do you estimate to be the annual total of fixed charges associated with the farm business (fixed charges include electricity, insurance, rates and rents and general administration). $ How many person months per year are devoted to your pasture seed enterprise? (i.e, if you spend three quarters of the year (excluding annual holidays) on your clover seed enterprise, this would be nine months. If two persons spend twelve months, this would be 24 months). Months/year 2.2 Costs of Clover Establishment (Year One) Appendix One outlines the major costs associated with the establishment of certified white clover seed production. This information was compiled by NSW Agriculture & Fisheries for the 1988/89 season. Despite being outdated, this information has been produced to assist you in estimating the relevant items and costs for your operation. In Table One, please list the costs associated with the establishment phase of your clover crop in year one. Some example costs (based on the 1988/89 season) are provided as a guide. If there are other activities that incur costs in the establishment phase please list them at the bottom of the relevant cost component section and estimate indicative costs. Please note, all cost items provided in the survey are measured on a per hectare basis. Table One Costs of Clover Establishment (Year One) Cost Component Indicative Cost

($/ha, 1988-89) Your Estimated Cost

($/ha) Preparation Costs Land Development Cost* Cultivation 58 Pre-Irrigation Seed Costs 12 Inoculation 0.36 Sowing (included in cultivation) Cultivation, Callout & Inspection Fee Growing Costs Fertiliser & Application 32 Herbicide & Application 30 Insecticide & Application 2 Irrigation Machinery Repairs & Maintenance 10 TOTAL COST 144 * Do not include irrigation development costs. These are included in the overheads and landforming costs.

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2.3 Annual Costs of Clover Seed Production Appendix Two outlines the major field and seed costs associated with the annual production of certified white clover seed. Once again, this information was compiled by NSW Agriculture & Fisheries for the 1988/89 season, and has been reproduced here to provide a guide to the items and costs associated with the annual production of clover seed. In Table Two, please list the annual production costs associated with your clover seed crop. Some example costs (based on the 1988/89 season) are provided as a guide. If there are other activities that incur annual production costs, please list them at the bottom of the relevant cost component section and estimate indicative costs. Once again, all costs are to be estimated on a per hectare basis. Table Two Annual Costs of Clover Seed Production Cost Component Indicative Cost

($/ha, 1988-89) Your Estimated Cost

($/ha) Preparation Costs These will be as listed above Growing Costs Fertiliser & Application 11 Herbicide & Application 21 Insecticide & Application 18 Irrigation 81 Repairs & Maintenance 7 Roguing Weeds 15 Pollination 145 Cart/Store Hay 27 Tractor Costs 42 Inspection Fees Harvesting Costs Dessication 24 Seed Harvesting 17 Freight Seed to grading plant 4 Seed Cleaning 200 Seed Bags 13 Seed Storage 2 Harvester Hygiene 50 Selling & Marketing Costs Marketing 10 Seed Testing 1 Certification Fees 11 Seed Research Levy TOTAL COST 699

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OUTPUT Please complete Table Three indicating clean yield, % sold, average sale price (across all varieties) and value of production for the output derived from the clover stand (once the clover stand is established). Table Three Output Derived From Clover Stand Output Total Clean

Yield (t) % Sold Sale Price

($/t) Value of

Production Hay Seed Livestock (calculate below) Months grazing mths/year No. of stock grazed Type of Stock

SECTION THREE: FURTHER COST COMPONENT ISSUES 3.1 Recent Changes In Your Cost Structure What trends have emerged in recent years which have affected your cost structure? Please tick the box associated with each item if the costs associated with the item have changed (either positive or negative changes), and provide relevant details of this change. Overheads & Landforming Costs

ο What has happened? When? Preparation Costs

ο What has happened? When? Growing Costs

ο What has happened? When?

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Harvesting Costs

ο What has happened? When? Selling & Marketing Costs

ο What has happened? When? 3.2 Movement in Production Cost Components over Time Indicate those costs that have exhibited significant increases over the last 5 years. Please tick the relevant box for each item, if applicable. A significant increase is defined as in excess of what is expected given rises in inflation of 10% over five years.

% Change in Price over last five years Production Cost Component 10 – 50% 50 – 100% > 100% Preparation Costs Growing Costs Harvesting Costs Selling & Marketing Costs 3.3 Research Priorities If research was aimed at lowering the cost of production, which of the cost components listed below would you like to see as priorities for research? Please tick those cost components you view as priorities. Also list any specific costs within each category that you wish to emphasise. Preparation Costs

ο Specific Costs Growing Costs

ο Specific Costs

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Harvesting Costs

ο Specific Costs Selling & Marketing Costs

ο Specific Costs Other Costs

ο Please list: 3.5 Environmental Issues Do you believe that industry imposed environmental regulation is required within the pasture seed industry? (i.e producers ensure their practices are environmentally responsible without the need for government regulation). Please tick either yes or no.

Yes ο No ο Do you believe that government regulation is required to deliver environmental responsibility by seed producers? Please tick either yes or no.

Yes ο No ο Please specify the types of environmental regulation (either self-imposed or government regulated) required within your industry to ensure that environmentally responsible production occurs. If nil regulation is required, state “nil regulation”. Some types of environmental regulation include harvest restrictions to minimise adverse impacts (e.g. dust), restrictions on the use of chemicals and restrictions on aerial spraying (especially with regards dessication).

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For the following items, please indicate what you see as the priorities for ensuring that the industry continues to adequately and responsibly deal with the environmental issues facing it. Also indicate whether you believe if increased importance was placed on that issue whether this would impose increased costs on your production system. Priority for the Would Increase

Industry Costs for You Improving harvesting technologies to minimise or avoid damage to soils

ο ο Development of integrated and sensitive production management models

ο ο Development of management practices which minimise inputs of pesticides ο ο Development of improved water use efficiency practices, particularly in irrigated seed crops

ο ο

END OF SURVEY

THANK YOU FOR YOUR ASSISTANCE

PLEASE FAX BACK ON 02- 9241 5684