3.1
A key consideration of the inquiry was whether Dairy Australia was able to deliver independence; an ability to support the interests of both farmers and processors; and effective research, development and extension (RD&E) activities for the dairy industry. This chapter discusses the role, structure, funding and effectiveness of Dairy Australia.
3.2
Since the commencement of the inquiry a new strategic plan for the dairy industry, the Australian Dairy Plan 2020–2025 (Dairy Plan), was released. Dairy Australia has been one of four industry organisations involved in the development of the Dairy Plan, which encompasses significant reforms to industry structures and the delivery of policy, advocacy and RD&E. The Dairy Plan is discussed in detail in chapter 6.
Background
3.3
The research and development corporation (RDC) system was introduced in 1989 in recognition of the importance of adopting best practice across industry at a time when government assistance was being systematically reduced. The RDCs allowed government to co-invest with primary producers in research and development to help drive innovation and efficiencies.
3.4
Dairy Australia is an industry-owned RDC and operates as a not-for-profit public company incorporated under the Corporations Act 2001. It is governed by a constitution, a skills-based board of directors, and a statutory funding agreement with the government.
3.5
The relationship between RDCs and the Australian Government is largely one of regulatory oversight. The Minister for Agriculture administers the enabling legislation and the Department of Agriculture, Water and the Environment (the Department) assists RDCs meet their legislative requirements, administers the flow of levy funds from primary producers used to partially fund the RDCs and advises the Minister on RDC-related matters. The Department does not direct RDCs in their day-to-day operations. However, the statutory funding agreement ‘allows for the performance of the RDC to be reviewed by the Commonwealth and, in circumstances where issues are identified, the ability for appropriate responses to be developed’.
3.6
According to the Department, industry-owned RDCs were formed not only in response to the government's deregulation agenda, but also a desire by industry to have greater control over investment decisions affecting them.
3.7
Due to the co-funded approach between government and industry, RDCs are prohibited from engaging in certain activities. For example, Dairy Australia must not use funds to engage in agri-political activity or act as, or imply that it is, an industry representative body. These restrictions result in Dairy Australia being unable to campaign for particular policies, such as price regulation, and represent the views of industry on such matters.
3.8
The context in which Dairy Australia operates, and its constituent regional development programs (regional offices), is shown in figure 4.1 below.
3.9
Dairy Australia's purpose is to support the profitability and sustainability of dairy farming by providing practical tools, services and advice to assist farming operations and the dairy supply chain. To achieve these goals, it invests in innovation which aims to increase farm productivity and the global competitiveness of the Australian dairy industry.
3.10
Dairy Australia has three strategic priorities:
Strategic priority 1 – profitable dairy farms
Strategic priority 2 – capable people
Strategic priority 3 – trusted dairy industry.
3.11
In 2019–20, Dairy Australia allocated its funding across the three strategic priorities and programs, in accordance with figure 4.2 below.
3.12
In 2019–20 approximately 80 per cent of Dairy Australia's expenditure was spent on activities which qualified as RD&E under the government's matching funding criteria. See figure 4.3, below, for a breakdown across priorities.
The government's review of rural research and development corporations
3.13
In 2019–20 the government undertook a review of the agricultural research and development system, which included Dairy Australia, and in September 2019 issued a discussion paper seeking contributions from industry, business, and the community for its improvement and modernisation.
3.14
RDCs were described in the discussion paper as the 'cornerstone' of the agricultural innovation system:
They have been instrumental in underpinning the profitability and productivity of Australia’s agricultural industries for four decades. The public–private co-investments made through the corporations [are] integral to the future of the system.
It is in our national interest to consider reforms to ensure our primary producers are best positioned for the 21st century. This needs to be a collaborative endeavour.
3.15
The discussion paper identifies a number of broad-scale 'megatrends' affecting agricultural innovation which are relevant to the Australian dairy industry. These are shown in figure 4.4 below.
3.16
The discussion paper also stated the requirements the government believes are necessary for a modern RDC system. Specifically, such a system needs to:
be future ready and responsive to change in an increasingly complex global environment;
deliver value for levy payers and taxpayers;
focus on turning research into tangible benefits for producers;
take advantage of available R&D innovation and entrepreneurship opportunities;
enable producers to remain competitive in the global market;
deliver real profitability gains to the farm gate; and
provide a strong and cohesive voice for industry.
3.17
Following the release of the discussion paper, the Department received more than 180 submissions through its online forms. These submissions provided the government with a number of key messages from stakeholders, including:
a one-size-fits-all approach is not appropriate for issues within the RDC system;
the commodity-specific nature of the RDC system supports tailored approaches for particular industries and direct engagement with levy payers;
early and on-going engagement with farmers will ensure research is targeted to onfarm needs;
better mechanisms are needed to communicate research outcomes to the sector; and
advocacy could risk the credibility of RDC evidence and research.
3.18
The government will consider the feedback in a national agricultural innovation policy statement to be released in the first half of 2021.
3.19
In addition to the recent review, over the last decade a number of prior reviews and inquiries have been undertaken to help identify the needs of a modern RDC system. These identified a number of reforms which could also improve the existing system:
An increase investment in cross-sectoral and transformative R&D could enable the step change in productivity needed to remain ahead of Australia's competitors.
Better collaboration and structures could reduce duplication.
Consolidate planning and procuring research could increase efficiency.
More of Australia's R&D outcomes could be commercialised.
More levy-payer involvement in priority setting could drive uptake of R&D on farm.
Returns to producers at the farm gate from their levy payments could be clearer.
New models could deliver higher-quality industry advocacy.
Independence and the ability to support the interests of both farmers and processors
Corporate structure of Dairy Australia
Membership
3.20
Dairy Australia states that its ability to act independently and support the best interests of farmers and processors is underpinned by its membership and decision rights. It currently divides its membership into two groups: Group A and Group B.
3.21
Group A membership consists of levy-paying dairy farmers who elect to become members of Dairy Australia. This membership entitles them to vote on key decisions, including elections to Dairy Australia's board of directors and changes to Dairy Australia's constitution.
3.22
Dairy Australia states that all farmers who pay the levy are encouraged to become Group A members and have a say in the direction of the company. It also states that under the Corporations Act Dairy Australia 'cannot require any farmer to be a member of an organisation without their consent'.
3.23
Dairy Australia states that there are currently 3587 members, representing 63 per cent of known active dairy enterprises. The total of both nominated and joint members is 6737.
3.24
Group B membership comprises the dairy industry's representative bodies: Australian Dairy Farmers (ADF) and the Australian Dairy Products Federation (ADPF). Group B membership provides for representation on the Board Selection Committee, but provides no voting rights.
3.25
ADF describes itself as 'the national policy and advocacy body providing collective representation for dairy farmers in Australia' and is funded by its members, income collected on investments and a funding agreement with the Australian Government to deliver specific projects. Its membership is voluntary and comprises six state dairy farmer organisations:
NSW Farmers' Association Dairy Committee;
Queensland Dairyfarmers' Organisation;
South Australian Dairyfarmers' Association;
Tasmanian Farmers & Graziers Association Dairy Council;
Victorian Farmers Federation United Dairyfarmers of Victoria; and
Western Australian Farmers' Federation Dairy Council.
3.26
The ADPF represents commercial non-farm members of the Australian dairy industry (processors), and promotes their interests to state governments, the Australian government, and other sectors of the community. Membership of the ADPF is voluntary and it is funded by membership fees.
Board of directors
3.27
Dairy Australia's board of directors (the Board) consists of eight non-executive directors and a managing director. Dairy Australia's constitution states that at least four directors must have milk producer skills. A third of the positions on the Board are vacated each year and an election is held to fill the vacancies.
3.28
To determine nominations for any vacant positions, Dairy Australia has created the Board Selection Committee (the Selection Committee). The Selection Committee comprises two members from the industry representative body for dairy farmers (ADF); two members from the industry representative body for processors (ADPF); and one Dairy Australia board member.
3.29
The purpose of the Selection Committee is to identify and nominate candidates for the Board based on identified skill vacancies. The Selection Committee may engage external executive search firms to advertise vacancies and shortlist prospective candidates. The Selection Committee can make one nomination for each vacancy.
3.30
A second method of obtaining nominations for the Board is to seek the support of Group A members. If a prospective candidate receives the support of 100 Group A members, the nomination is referred to the Selection Committee so that it may review the candidate's skills and experience to determine the position the candidate should stand for.
3.31
After finalising nominations, Dairy Australia holds an annual general meeting where Group A members vote on the nominated board candidates, with a minimum of 50 per cent of votes required for a director to be successfully elected to the Board. Group B members do not have voting rights.
Dairy Australia Independent Performance Review 2020/21
3.32
Under Dairy Australia’s statutory funding contract (SFC) with the Australian Government, an independent performance review must be conducted every four years. Matters considered in performance reviews include the extent to which Dairy Australia has met its statutory and contractual obligations and targets under its strategic plan; governance arrangements and practices; and its consultation of, and delivery of benefits to, members and levy payers and their representative bodies.
3.33
The review covering the period 2017–20 was conducted by Anwen Lovett Consulting and completed in early 2021.
3.34
The review made a number of recommendations aimed at maintaining effective communication with all levy payers. The review acknowledged that while there was ‘a majority of dairy farmer support for the work done by Dairy Australia’, there was also ‘an active group of Dairy Australia detractors who do not believe Dairy Australia meets their dairy farming needs’.
3.35
The review noted that with the reform of industry structures under the Australian Dairy Plan, industry recognition of the distinction between the service provision role of Dairy Australia and the representation function of the ADF and ADPF could pose challenges:
When farmers pay levies, it is with an expectation of full-service delivery and returns in all of the areas important to them … The independent review has concerns that if levy payer desires are not met, the unjustified responsibility pointed at Dairy Australia could be significant.
3.36
It review also stated that the benefits of Dairy Australia's research, development and extension partnerships were ‘poorly understood’ by stakeholders and suggested that Dairy Australia put in place formalised arrangements to strengthen advice and feedback received from its regional development programs about regional research and development priorities.
3.37
While the review made no specific recommendations on the governance of Dairy Australia, with regard to the skills and recruitment of board members, the review noted that the reviewers considered the 'processes around ensuing the right mix of skills and experience fully satisfy Dairy Australia’s SFC requirements'.
Views on independence and the ability to support the interests of farmers and processors
3.38
Inquiry participants expressed a variety of views on Dairy Australia's structure and responsibilities across the dairy supply chain. The most contested issue was whether Dairy Australia should, or was able to, provide services to support the interests of both farmers and processors.
3.39
Rabobank Australia, a financial services firm for the agricultural industry, highlighted the need for upskilling farm operators and having a continued focus on capability and performance. In doing so, it recognised the important role that Dairy Australia plays through its investments across the dairy supply chain and by promoting coordination and collaboration.
3.40
Norco, a dairy cooperative located in northern New South Wales, in its submission to the inquiry, stated that a transformation is required to provide better support and services to all dairy businesses. It contended that the work undertaken by Dairy Australia, and others, in developing the Australian Dairy Plan is a 'positive step for the industry'.
3.41
The South Australian Dairyfarmers' Association (SADA) noted that, as levies are paid by dairy farmers, there is an expectation that Dairy Australia take a stronger advocacy role within the industry. SADA identifies the risks involved with this approach, and concluded that 'advocacy should remain within the ambit of the SDFOs [state dairy farming organisations] and ADF'.
3.42
Mr Graham Forbes, president of the Farmers Group of Dairy Connect, pointed out that there were misunderstandings among farmers on the role of Dairy Australia and its ability to undertake advocacy:
I think a lot of farmers don't understand the structures that operate within the dairy industry. There's still quite an amount of confusion there. Dairy Australia is an RD&E organisation, not an advocacy or a policy-developing organisation. I think a lot of farmers don't understand that.
3.43
The peak representative body for dairy farmers in Victoria, the United Dairyfarmers of Victoria (UDV), expressed the view that Dairy Australia does act in the best interests of both farmers and processors. UDV stated that Dairy Australia's role is not to maintain the profitability of individual farms, but to 'provide farmers with the tools to assist with their business' short and long term viability'.
3.44
UDV noted that, as an organisation funded by taxpayers and levy payers, Dairy Australia should not act independently of these stakeholders and that stakeholders should be able to influence where their monies are spent. Given this, UDV recommended that processors should co-invest in relevant research, development, and extension activities undertaken by Dairy Australia.
3.45
Farmer Power, a Victorian-based group established in 2013 to promote the interests of farmers, advised that an independent review of Dairy Australia is overdue, and that such a review is essential to determine whether the government and levy-paying farmers are receiving value for money.
3.46
In its submission to the inquiry, Farmer Power made the following points regarding Dairy Australia:
Dairy processors do not contribute to the operational costs of Dairy Australia; however, they appear to be over-represented on the board of directors.
Dairy Australia's constitution provides for dairy processors and major industry bodies to have undue influence in the selection of board members.
Dairy Australia's activities are not in the best interests of dairy farmers as its activities have not addressed key concerns around farm gate price, direct sale to consumers, and the elimination of restrictive trade practices.
3.47
In his submission to the inquiry, Mr Kevin Ashworth claimed that Dairy Australia is run by the processors, and that its ability to act independently 'has been seriously eroded since its formation'. Further, he states that information gathered by Dairy Australia 'is portrayed in their favour' and 'not representative of the actual position of farmers'. He argues that spending is structured in a way that makes Dairy Australia 'appear constructive but with no return, nor benefit to the farmer'.
3.48
In assessing Dairy Australia's ability to act independently and support the interests of both farmers and processors, ADPF, the peak body for non-farm industry members, noted in its submission that 'while DA [Dairy Australia] may consider the 'whole of chain' impact, its leadership is farmer-centric and cannot offer independence'. This position was also endorsed by Fonterra Australia, a member of ADPF and a New Zealand-owned processor.
3.49
In their submission to the inquiry, the Far North Coast Dairy Industry Group (FNCDIG) indicated that farmers are disenfranchised with industry bodies, such as Dairy Australia, and are calling for major change. Specifically, they said:
Dairy farmers … made it very clear their industry needs major changes at all levels including Dairy Australia. Our industry is shrinking and dairy farmers are demanding that change is necessary for our future. The profitability of our industry has been declining and farmers are disenfranchised with industry bodies that should have been protecting and growing the interests of farmers.
3.50
Queensland Dairyfarmers' Organisation (QDO) submitted that Dairy Australia does not support the best interests of the dairy industry. The executive officer, Mr Eric Danzi, stated that tropical and subtropical dairying regions required specific research to improve farming efficiency and indicated that, currently, there was insufficient investment in RD&E for these dairying regions. QDO president, Mr Brian Tessmann, indicated that this lack of specific research may be a result of farmers and farmer organisations having insufficient control over Dairy Australia's operations. In evidence to the committee he stated that:
Our feeling is that the set-up of Dairy Australia is not really a democratic process as we would see one that should be in place—a process where farmers directly elect people to the boards, or certainly the majority of the boards—whatever way you look at it. That, I think, is a critical issue. It's simply that the farmers and the farmer organisations don't have enough control over what Dairy Australia is delivering and how it's done. Specifically, I suppose, that's amplified in places like Queensland where, as we've said, for some time there's been a shortage of RD&E and services provided. There's clearly been more of a focus on some of the southern regions. So it's certainly been amplified, and the farmers certainly feel they do not get bang for the buck they put into Dairy Australia. At the same time, they don't feel that they're heard and their complaints are heard. That is the problem.
The role that Dairy Australia plays in the industry is a very important role. We need somebody with RD&E and to provide services to the industry. Our complaint is that it could be done a lot better and probably in a better fashion.
3.51
In answering a question from the committee regarding the democratic process for elections to the Board and how much influence farmers have, Mr Danzi responded with:
… the answer is 'very little'. That's why we're certainly favouring a democratic process for election where all farmers get an equal say, not just those who are in the tent, which is the current system. The only people who go to Dairy Australia AGMs typically are those who align to Dairy Australia personally or through the regional development groups that sit underneath them. That's why we're strongly favouring a regional process where farmers in a region get to select the representatives.
Funding and consultation on research, development, and extension activities
Background
3.52
Australia has applied a levy on dairy products since 1958. It was originally collected to fund research into matters related to the dairy industry, such as pasture improvements, reducing dairy cattle diseases, and improving produce quality. The levy was also utilised to promote sales on the domestic market and, subsequently, given to processors as an export subsidy.
3.53
Dairy Australia obtains revenue through a dairy service levy and government funding for eligible research, development and extension activities for the benefit of the Australian dairy industry.
3.54
In 2019–20 the rate of milk levies was 2.8683 c/kg milk fat and 6.9914 c/kg protein. The dairy service levy is deducted from payments made to farmers by milk processing companies which are then remitted to the government. However, unlike other agricultural commodities, such as sugar, processors within the dairy industry do not pay the levy.
3.55
A statutory funding agreement between Dairy Australia and the government includes terms for the provision of contributions which match the industry levy to a maximum of 50 per cent of the gross annual milk production by the Australia dairy industry for eligible research and development activities.
3.56
A breakdown of Dairy Australia's funding profile for 2019–20 is provided in figure 4.5 below.
3.57
Under clause 15.1 of Dairy Australia’s statutory funding agreement with the government, Dairy Australia ‘must ensure that it effectively represents and reflects the interests of its members and Levy Payers in undertaking Research and Development Activities and Industry Services Activities’.
3.58
Although some inquiry participants were critical of Dairy Australia's consultation and engagement with industry, Dairy Australia claims in its submission that it is 'committed to open, accountable and responsive decision-making, informed by effective communication and consultation between Dairy Australia, levy payers, the Government and industry stakeholders'.
3.59
Further, Dairy Australia states that it customises its expenditure to provide value to dairy farmers through the establishment of regional offices in each key dairy region, allowing it to respond to local conditions and priorities and tailoring the development, delivery, and communication of services so they address specific farmer needs.
3.60
In its submission to the inquiry, Dairy Australia listed a number of consultation and engagement processes it is currently involved in across the industry. These include:
the Dairy Moving Forward project to create a blueprint for RD&E investment;
consultations with Group B members regarding strategic planning and the annual operating plan;
five policy advisory groups, which make recommendations on dairy farmer policy and advocacy to the ADF National Council;
various reference committees, such as the Nutrition Policy Reference Group;
regional priority setting through local consultations held by Dairy Australia's eight regional offices;
the development of the draft Australian Dairy Plan; and
frequent travel to dairying regions by the managing director, non-executive directors, and senior staff.
Views on funding and consultation on research, development, and extension activities
3.61
In its submission, UDV noted that, historically, dairy farmers owned a high percentage of milk processors in Australia. Given this structure, UDV stated that it would not have made sense for these processors to pay a levy, as it would, in effect, result in farmers paying it twice.
3.62
However, given the changes to the ownership of processing businesses over recent years, UDV informed the committee that processors should contribute to the funding of Dairy Australia. On this point, UDV highlights that the work of Dairy Australia benefits the entire dairy supply chain, including processors. Specifically it states that '[p]rocessors are gifted improved farm output, better promotion of products and increased trade capabilities through Dairy Australia, all at no cost to processors'.
3.63
Mr Paul Mumford, UDV president, and Ms Ashlee Hammond, UDF manager, suggested to the committee that funding from processors should be in the order of 'some $10 million' and that this figure represents the 'components of the RD&E investment through Dairy Australia [that] contribute to the post farm gate component of the industry—that is, developing international markets, marketing of dairy products in general, and the like'.
3.64
UDV also commented on the matched funding arrangement currently in place, with government payments accounting for 39 per cent of Dairy Australia's revenues. It noted that these payments reflect the value of the agricultural industry to the broader public and Australian economy, and highlighted its belief that this arrangement is crucial to the future of the Australian dairy industry. UDV also stated that 'funding should be more evenly shared between RD&E components of industry and policy and advocacy'.
3.65
In its submission, Rabobank Australia undertook a 'global scan' of voluntary and mandatory funding models of similar organisations to Dairy Australia. After undertaking this process, it concluded that the 'Dairy Australia levy is comparable to levies imposed in other jurisdictions'. Rabobank, however, did not have a view on the efficacy of Dairy Australia's consultation and engagement process on the expenditure of the levies it collects.
3.66
When questioned by the committee on whether Dairy Australia was servicing the dairy industry to the best of its ability, the chief executive officer of industry advocacy body Dairy Connect, Mr Shaughn Morgan, responded with:
As to whether [Dairy Australia] deliver[s] the appropriate resourcing to dairy farmers themselves, I believe that there are probably mixed opinions on that. Some would say that their levy money is spent in an appropriate manner, while others would indicate that they believe the levy should be used for other purposes.
3.67
SADA noted that it was inevitable for boards to make decisions which some stakeholders disapprove of. In the case of Dairy Australia, however, SADA believes there are adequate mechanisms in place, such as seeking election to the Board, for levy payers who are unsatisfied with the decision-making process to utilise.
3.68
In its submission, Farmer Power stated that it does not believe farmers, the Australian government, or the general public, are getting value for money from Dairy Australia's activities. Further, it questioned whether an entity such as Dairy Australia is even required at all.
3.69
Mr Kevin Ashworth, representing Farmer Power, told the committee that it is Dairy Australia's 'job to make the farmers profitable'. He added, if 'Dairy Australia argue that it's not their responsibility, then remove them from receipt of the levy and allow the farmers to pool their own money into research and development that will, or should, make them profitable'.
3.70
Mr John Dahlsen submitted that the influence of processors in Dairy Australia was too great. He put forward an alternative funding model where processors and farmers would each contribute $15 million to Dairy Australia and the additional $15 million currently collected from dairy farmers for the Dairy Australia levy instead be diverted to an alternative advocacy agency under dairy farmer control.
3.71
Dairy Connect stated that the education and training provided by Dairy Australia is valuable to the industry, and that consultations with its membership indicated that their members did not, generally, object to funding Dairy Australia through a levy system.
3.72
Victorian dairy farmer Ms Shannon Notter, made the point that farmers need to prioritise education and development for themselves:
I believe that Dairy Australia is adding value to our industry for the levy being paid. The information that they’re producing doesn’t directly land in our lap; we have to go out and search for it. Without the research that they do, I believe we risk being left behind by other dairy regions in the world. That’s not to say that I don’t think that they can improve. In the same ways that we need to aim for continuous improvement, so should they.
3.73
In relation to its ability to influence expenditure on research, development, and extension activities, the national advocacy body, ADF, highlighted its involvement in the development of an annual operating plan for Dairy Australia. Specifically it stated that:
Australian Dairy Farmers' role, along with the other stakeholder—that's Australian Dairy Products Federation—is to undertake an annual consultation process with Dairy Australia to set out their annual operating plan. Guiding that, we have an organisation called Dairy Moving Forward, which acts to coordinate the overall strategic direction and coordinate the resourcing of the work that is carried out through Dairy Australia. There's cross-commodity coordination also, to ensure that resources are utilised appropriately and decisions are based on specific criteria. Within Dairy Moving Forward, we have Dairy Australia but also government, university and commercial sectors, and of course there are farmer representatives participating in that decision making process.
3.74
The director of strategy and policy at ADF, Mr Craig Hough, provided a brief explanation of how Dairy Australia is set up to service the various dairying regions around Australia, while also noting there are problems in relation to farmer participation in extension activities, such as seminars and webinars. He said:
How Dairy Australia is set up is: they have what they call regional development programs, and they're clustered according to the dairy regions. Subtropical dairy is essentially northern New South Wales and Queensland. So they provide the extension, and so what they should be doing is feeding that up and down the chain. With new innovations that come around different pasture varieties or feed based changes, they extend that work to the farmers. We know that there is a bit of a problem in relation to participation in some of those seminars and webinars and that.
3.75
Mr Paul Roderick from Subtropical Dairy, the regional arm of Dairy Australia across Queensland and northern New South Wales, explained that formerly the Queensland Department of Agriculture had supported RD&E in Queensland through the provision of state funded extension staff but that the number of extension staff had been significantly reduced. He recalled:
Historically, these officers analysed your businesses, often informally, brought innovation to you and to the farm gate, and helped change your business practices. This still happens today, but not as regularly, and it is not as personalised and customised as it once was. Our current extension model is very different, like many activities linked to specific projects and events. This means that today farmers need to be motivated to seek out the innovation, as opposed to having the innovation arrive at their front gate.
3.76
QDO believes that Dairy Australia's consultation and engagement with farmers and farmer representative bodies is poor. In its submission to the inquiry QDO stated that:
Grass-roots farmers are not consulted in Queensland. Unless there is a direct relationship with DA [Dairy Australia], Subtropical [D]airy and those employed by these organisations, very few farmers are engaged except when they attend workshops or field days facilitated by DA.
Levy payers should be deciding investment decisions not be[ing] informed as to what they are. There are priority setting workshops, but many are disengaged from the process and believe they won't be listened to given previous experiences.
3.77
QDO also believes Dairy Australia has developed programs and campaigns which, if they had been peer-reviewed prior to commencement, would have been altered in scope or would not have run at all. On this point, Mr Brian Tessmann said the following in his evidence to the committee:
I think the specific subtropical region dairy breakthroughs in the last 20— or probably longer than that: towards 30 years—have been few. I think there's really been little money spent directly on the systems and the needs of those farmers. Certainly we've had programs delivered to us on things like mastitis and other things, but they've generally been system things that are needed in southern Australia and not specifically needed for northern Australia. But it actually goes a little further than that, too, in that often they have been delivered in a form that suits, say, Victoria or Tasmania, where farmers and regions are close to each other. Whereas, particularly in Queensland we've still got a number of dairy farmers, but they're spread out over a wide area, and getting them together is more difficult. So often the way they're delivered results in poor attendance at those functions. Even those things are not extended well there and, probably as a result of that, maybe uptake isn't as good. But the bigger problem than that is simply that they're not addressing the issues in Queensland.
3.78
The concern that subtropical region dairy required a specific focus was also shared by chair of the Dairy Committee within NSW Farmers, Mr Colin Thompson:
… the RD&E issues have largely been overlooked by Dairy Australia, which has focused predominantly on the traditional pasture based systems of Victoria and New South Wales. I guess that's where most of the farmers are and where the greater volume of Australian milk is produced, sure, but the Queensland and northern New South Wales industries are very important, and it's critical that those industries are maintained and grown. As you're probably well aware, Queensland now produces around half of their drinking milk requirements. So it is really important that RD&E is directed back into that area and allows farmers to become sustainable again.
3.79
Mr Danzi commented on the lack of innovation resulting from the significant investments made in RD&E. He said:
Because there's such a massive void in the RD&E sector, an organisation such as QDO have had to go into that space, despite the fact that there's been close to $200 million investment in RD&E in Queensland and New South Wales over the last 20 or 30 years through government levies and farmer levies, which has gone into the wrong areas. There's been little output or outcome from that, despite the massive investment.
3.80
The FNCDIG also maintained that Dairy Australia does not provide adequate region-specific programs. In its submission to the inquiry it stated that:
The farmers we represent do not believe that our region receives the programs that are specific to our needs and delivered at relevant times in our area.
Changes to structure need to be seriously explored to better meet the needs of farmers which will be reflected in a stronger industry going forward.
3.81
In response to concerns by witnesses, Dairy Australia pointed to a number of extension projects and activities that it had undertaken in Queensland and northern New South Wales in 2018–19 including over 130 workshops and events attended by more than 1600 farmers and work on developing improved tropical grass varieties and more efficient irrigation and feeding systems.
3.82
When asked what RD&E is being undertaken in Queensland and northern New South Wales, Mr Graham Forbes, the president of the Farmers Group within Dairy Connect, conceded that there had been had been 'quite an investment' in these districts but further responded:
… I think the real question we need to ask is around how, while we have a lot of organisations delivering some of that RD&E, collectively it's totally ineffective. Whilst portions of those organisations are probably quite successful, when we turn it around and have a look at the actual results, the industry is failing totally in delivering on RD&E.
3.83
His colleague, Mr Shaughn Morgan, continued:
RD&E is vitally important for the industry, particularly in the northern states where we need to ensure that Dairy Australia is able to continue to provide information, including marketing, at a level that is consistent with the other states. That is something that we need to ensure they are able to provide.
3.84
Mr Thompson of NSW Farmers highlighted the investment gap in training farmers, scientists, and consultants. He stated that Australia is lagging behind competing countries when it comes to investing in people, infrastructure and technology due to 'the depressed state of the industry and the declining revenue available through levies that go into R&D'.
3.85
Mr Thompson recalled that he had to look to the United States to source the expertise to design a facility that would fully house his cows in the central west of New South Wales. In his evidence to the committee he said:
It's quite an issue in Australia that RD&E has lagged behind leading farmers in Australia and has more focused particularly on the traditional pasture based farms in southern Victoria and Tasmania. It's a long way from Warrnambool to Cairns, and there are a lot of different farming systems and environmental conditions that are simply not catered for under our current RD&E structure.
3.86
In his evidence to the committee, the president of ADF, Mr Terry Richardson, highlighted the significant productivity gains resulting from investments in RD&E by stating that it is estimated to have accounted for almost half of the total productivity gains over the three decades to 2010. He did, however, acknowledge the practical limitations of Dairy Australia in providing resources across all systems and practices in place across Australia. On this point he said:
I know that organisations like Dairy Australia do access knowledge and technical advice from a number of sources. If we look at our own dairy farming space, there are many who will go outside the Dairy Australia structure. For example, a lot of pasture based knowledge comes from Ireland and New Zealand and is incorporated into farming practices here. So Dairy Australia does provide a role of coordinating resources from a number of places. So I think that for Dairy Australia to have on hand all the resources and personnel required to cover all farming systems and management practices might be more than we could reasonably expect.
Committee view
3.87
The committee recognises that consideration of the role, structure, funding and effectiveness of Dairy Australia is taking place within the wider context of the discussions within the dairy industry for the transformation of industry organisations.
3.88
The committee is aware that one option proposed by the Joint Transition Taskforce under the Australian Dairy Plan is a combined national body to encompass policy, advocacy, research and development and marketing. It understands that it is also proposed that this new national body be the mandated research and development corporation for the Australian dairy industry. This and other options for structural reform are considered further in chapter 6 of the report.
Independence and the ability to support the interests of farmers and processors
3.89
The committee notes the diverging views from inquiry submitters on the existence of, or indeed desirability of, 'independence' in the operations of Dairy Australia. For some submitters, independence is the ability to act impartially for the benefit of the wider industry in supporting both farmers and processors. For others, independence is the ability of Dairy Australia to act for farmers without the influence of processors.
3.90
The committee is aware of calls for an independent review of Dairy Australia, both from some submitters and in the recommendation of the Senate Economics References Committee inquiry into the dairy industry in 2017. However, the committee is of the view that as the restructuring of RD&E delivery is under active consideration under the Australian Dairy Plan, and Dairy Australia has recently been subject to a review as part of its 2017–20 statutory funding agreement, it would be premature to initiate a further review at this time.
Effectiveness of research, development and extension activities
3.91
The committee affirms that the dairy industry needs strong RD&E services to assist dairy farmers to take advantage of technological innovations and advances in production systems to increase the profitability, productivity and sustainability of dairy farming.
3.92
The committee is concerned by reports of the reductions in agricultural extension officers employed by state agriculture departments and the affect this has had on the provision of on-the-ground business assistance to individual farmers. The committee calls on state governments, and in particular the Queensland Government, to make additional funding available for extension services.
3.93
While the inquiry has highlighted the receptiveness of farmers to innovation, the committee is concerned that many farmers have stated that Dairy Australia's RD&E activities are fragmented and directed primarily at the southern dairy regions.
3.94
The committee recommends that the Department requires that Dairy Australia increase its research, development and extension activities into tropical and subtropical dairy regions.
Consultation with farmers
3.95
The committee acknowledges the concerns of some farmers that consultation from Dairy Australia is not as effective as it could be. The committee observes that inquiry participants' views on Dairy Australia's RD&E activities are consistent with the results of the Australian Government's recent review of the research and development corporation system, particularly its findings that:
early and on-going engagement with farmers will ensure research is targeted to onfarm needs; and
better mechanisms are needed to communicate research outcomes to the sector.
3.96
The committee is of the view that government action is required to ensure that more levy payers engage with Dairy Australia and that Dairy Australia is working for levy payers by delivering targeted, regionally specific, on-farm benefits of RD&E activities.
3.97
The committee agrees that before negotiating a renewal of the statutory funding agreement with Dairy Australia, or a new statutory agreement with a successor RDC, that the Department ensures that Dairy Australia addresses issues with the engagement of and communication with levy payers.
Funding
3.98
Stakeholders have told the committee that they want an organisation that is responsive to, and constituted by, those who contribute to it. They also require transparency on where and how their levies are spent.
3.99
The committee agrees that if processors are represented in the structure of Dairy Australia, or any future national organisation responsible for industry services, and if processors benefit from the services of that organisation, then processors should contribute financially.
3.100
The committee recommends that the government amend the Primary Industries (Excise) Levies Act 1999 to require processors to pay a levy to fund Dairy Australia.