Working with growers to drive RD&E
The GRDC’s new approach to RD&E, which is documented in the Research, Development and Extension Plan 2018-23, will achieve greater profitability for Australian grain growers.
This five-year RD&E plan is part of a 10–20 year strategy to deliver on the GRDC’s purpose: To invest in research, development and extension to create enduring profitability for Australian grain growers. The plan works to deliver results which maximise growers long-term profitability with its RD&E investment strategies based on profit drivers: improving yield, maintaining or improving price, optimising costs, and managing risk.
In developing this RD&E plan, the GRDC undertook extensive consultation to ensure that the RD&E priorities of growers, researchers and other industry stakeholders were clearly identified and effectively incorporated. Growers’ investment priorities were identified through a number of mechanisms, including workshops with GRDC advisory panels and representative organisations, as well as feedback from industry-wide consultation undertaken at the beginning of 2018.
GRDC’s consultation identified 29 investment targets which sit under five core objectives. These underpin the delivery of GRDC’s purpose.
Research, Development and Extension Plan 2018-2023
A strategic plan for future investment in RD&E.
- The five-year RD&E plan is part of a 10-20 year strategy to deliver on GRDC’s purpose.
- GRDC has shifted its focus to maximise growers’ long-term profitability with RD&E investment strategies based on profit drivers.
- Key Investment Targets, and associated investments, will deliver transformational gains and on-ground impact.
- It includes a flexible and responsive investment approach through a continuous cycle.
- Greater focus on high reward, transformational research to drive competitiveness.
- Regional delivery with national coordination & leverage.
Key investment targets
GRDC’s 29 new KITs are structured around the key drivers of profitability, which include yield, price, costs (on farm and post farm gate) and risk. The relationships between these drivers can be expressed as follows:
Kit objectives and key performance indicators
Key performance indicators:
- Minimum yield increases equivalent to 1% per annum for cereals, 2% per annum for pulses and 1.5% per annum for oilseeds, achieved while identifying and investing in technology for transformational improvement in yield potential and yield stability.
- Minimum 20% closure of the gap between potential and achieved yield over five years.
- 1.1 Minimise the impact of high temperature at flowering and grain fill on grain yield and stability
- 1.2 Minimise the impact of spring radiation frost on grain yield and stability
- 1.3 Change fundamental plant architecture, physiology and/or biochemistry to maximise water-limited yield potential in wheat, barley, canola and sorghum
- 1.4 Improve the Potential and Actual Grain Yield of High-Value Pulses, Oilseeds (Other than Canola) and Oats in Profitable Farming Systems
- 1.5 Reduce the gap between actual and potential grain yield through more informed and timely decision-making on: planting time, crop/variety choice, weed management, pest and disease control, and crop nutrition
- 1.6 Reduce the impacts of water repellence, compaction, hard-pans and other barriers to the capture and storage of water in soils
- 1.7 Reduce the impacts of soil salinity and sodicity on plant water uptake to improve grain yield and stability
- 1.8 Reduce the impacts of low pH, aluminium toxicity and other nutrient toxicities on plant water uptake to improve grain yield and stability
- 1.9 Reduce the impact of waterlogging to improve grain yield and stability
Key performance indicators:
- Identification of potential new products and investments where a supportive business case can be established.
- Support for and enhancement of current products through identification of opportunities for differentiation and maintenance of current market access programs.
- 2.1 Expand the area of high-value crops to boost average prices and profitability of farming systems, specifically: pulses, oats for food or industrial uses, linseed for industrial uses, sorghum for food, and soybeans for food and/or animal feed
- 2.2 Maintain and/or improve the price of Australian grain through differentiation based on: functionality, food safety and traceability, sustainability of production, reduced downgrading, new and/or enhanced grain classification processes, and optimal management of biosecurity issues
- 2.3 Improve wheat grain protein through increased availability of nitrogen and better nitrogen use efficiency
- 2.4 Develop new, novel, high-value uses of products and by-products targeted at: human health, nutrition and allergenicity; high-value feed uses; new industrial uses; biofuels
- 2.5 Improve processing efficiency for enhanced value
Key performance indicators:
- Maintenance of chemicals costs below the forecast trend for 2018–23, equivalent to $85.50/ha or a ratio of input costs: crop revenue of 0.166.
- Maintenance of fertiliser costs below the forecast trend for 2018–23, equivalent to $84.30/ha or a ratio of input costs: crop revenue of 0.164.
- 3.1 Develop and implement management options to minimise the cost of effectively and sustainably managing weeds
- 3.2 Generate more informed, accurate and timely input for decision-making (e.g. sensor/monitoring technology or decision support models)
- 3.3 Develop and implement management options to minimise the cost of effectively and sustainably managing diseases
- 3.4 Develop and implement management options to minimise the cost of effectively and sustainably managing vertebrate and invertebrate pests
- 3.5 Develop technology to reduce fertiliser manufacture and/or application costs and improve fertiliser use efficiency
- 3.6 Improve nitrogen and phosphorus availability by: greater capture of value from soil biota; optimisation of nitrogen-fixing legumes in rotations; soil amelioration to improve nutrient availability
- 3.7 Identify engineering solutions to reduce labour costs and/or improve the efficiency of repetitive tasks (including automation and robotics)
- 3.8 Identify engineering and novel business model solutions to reduce capital costs and running costs
Key performance indicators:
- Timely RD&E-based submissions to government to support policy decision-making.
- Timely addressing of technical barriers to trade issues.
- 4.1 Support research to advise policy and investment decisions that lead to reduced post-farm-gate costs
- 4.2 Invest in R&D that informs industry and government approaches to trade and market access for Australian grain into export markets
- 4.3 Improve the reliability and cost-effectiveness of on-farm grain storage to reduce handling costs and capture market opportunities
- 4.4 Improve automation of transport and handling activities and/or alternative logistics and distribution models to realise greater value capture by growers
Key performance indicators:
- The number of growers undertaking business training.
- Establishment of a behavioural economics initiative to research grower decision-making.
It should be recognised that the strategy summaries are targeted at a diverse audience and as such will be complemented by more detailed KIT strategy documents which will be released on the website as soon as they are finalised. We expect this to be within the next six to eight weeks. It is anticipated that the majority of the 15 remaining KIT strategy summary documents and detailed strategies will be available before the end of this calendar year.
GRDC welcomes feedback and questions about the KIT summary strategy documents and detailed strategies. Any questions should be directed to KIT@grdc.com.au
Grain growers strategically plan crop rotations over an extended period (five to seven years) but maintain a degree of flexibility to manage constraints and capture opportunities that impact on overall profitability and sustainability. Similarly, growers will often adjust farming practices within a season to manage risks to optimise profit. Simply put, growers continually adjust both long-term and short-term activities to achieve the ultimate objective of maximising profit and sustainability. The GRDC will administer the RD&E portfolio in the same manner, maintaining a focus on delivering its purpose while adopting flexibility in the scope and management of investments to meet unforeseen challenges and/or capture new opportunities.
The GRDC will implement RD&E programs and individual investments that embrace the principles of agility through:
- collaboration with growers (as key beneficiaries) and other stakeholders, to identify the objectives and key investment targets that best deliver on the GRDC’s purpose
- the deployment of cross-functional teams (that include external experts) for each investment target, to undertake gap analysis and identify the desired outcome aligned with the purpose, utilising a program logic approach
- a focus on the delivery of clear outcomes based on Specific, Measurable, Actionable, Realistic and Time-bound (SMART) principles rather than rigid planning of activities
- the establishment of close working relationships with partners, to facilitate a flexible approach to delivering the activities required to achieve a desired outcome
- active management of investments that promotes responsiveness to change
- continual improvement of investment planning and management as the GRDC and its partners identify areas of relative strength and weakness.
As part of agile investment management, detailed individual investment plans for each KIT will be developed. In a changing operating environment, these plans will be continually monitored and adjusted to ensure that they deliver the outcomes desired and to accelerate the delivery of transformational outcomes where they are identified. Growers and other stakeholders will be encouraged to interact with the GRDC on an ongoing basis during the life of each investment plan, to identify new investment targets as they arise. Where new targets provide a compelling case for action, the investment portfolio will be adjusted to accommodate the required RD&E programs.
To invest in research, development and extension to create enduring profitability for Australian grain growers.
Focus on profit
This five-year RD&E plan is part of a 10-year to 20-year strategy to deliver on the GRDC’s purpose: To invest in research, development and extension to create enduring profitability for Australian grain growers.
The key drivers of grain grower profitability are yield, price, costs (on farm and post farm gate) and risk. The relationships between these drivers can be expressed as follows:
Profit = [Yield x Price – Costs] x Risk.
It is important to note that the importance of different drivers varies across grain-growing businesses and environments. This will have a significant impact on the shape and scope of the GRDC’s RD&E investment portfolio at the national level, and on the activities and approaches required to support adoption of RD&E outputs at the regional and local levels.
Closing the yield gap
Analysis of the current gap between actual grain yield and potential grain yield across Australia (modelled on wheat yields) highlights the considerable scope that exists for improvement.
Table 3 shows the estimated gap between actual average wheat yield and the modelled potential wheat yield for each of Australia’s three grain-growing regions, based on 80% of maximum water-limited yield in the region. Yield gaps range from 0.7 tonnes per hectare in the Southern Region to 0.9 tonnes per hectare in the Northern Region. Exploitation of the yield gap has the potential to deliver more than $3.8 billion of increased value annually to Australian wheat production. Yield gaps of similar proportions are likely for other crops; research is underway to determine their values.
|Western Region||Southern Region||Northern Region|
|Average yield (tonnes/hectare)—A||1.6||1.8||1.7|
|Yield potential (modelled) (tonnes/hectare)—B||3.0||3.2||3.3|
|Targeting 80% of water-limited yield to account for production risk—C||2.4||2.5||2.6|
|Exploitable yield (tonnes/hectare)—C – A||0.8||0.7||0.9|
|Value gap ($/hectare/year at $220/tonne)||176||154||198|
|Five-year average crop area (‘000 hectares)||8,221||6,829||6,696|
|Annual value lost ($’000)||1,446||1,052||1,326|
Source: Yield Gap Australia
A significant proportion of the current yield gap could be filled through adoption of outcomes from previous grains R&D investments and/or the conduct of additional proof-of-concept R&D. In most production systems, the adoption of many innovations is complex and affected by a range of business constraints and grower motivations. Gaining a better understanding of key influences on successful grower adoption of technical innovations will assist greatly in the design of strategies to improve rates of adoption of new innovation.
Increasing yield potential
A goal to close the gap between actual and potential yields for all crops is clearly a worthwhile objective. However, delivering enduring profitability to grain growers will also require investments aimed at further extending the yield potential and yield stability of Australian grain crops. Extending yield potential can be achieved by increasing the genetic yield potential and by limiting the impact of yield constraints (e.g. frost, hostile soils and heat).
Maintaining yield stability under the impacts of various environmental factors is an important consideration in limiting exposure to production risk and underpins stability of supply. Investments in this area may involve relatively high risks and long timeframes to delivery.
Supporting and enhancing current products
Most Australian grain is exported as bulk commodities. Therefore, prices can be volatile and strongly impacted by many interacting supply and demand variables in global trade. Maintaining current market positions will depend on maintaining the premium quality of Australian grain. Important functions driving the maintenance of premium quality include Australia’s grain classification systems as well as the effective and prompt management of trade and market access issues as they arise.
Enhancing the value of Australia’s current grain products will require efforts to further differentiate bulk commodities, with a particular emphasis on functionality. The aim is to capture a greater proportion of premium-paying global markets by identifying, segregating and delivering specific functionalities that address specific end-user needs.
Traceability and demonstrated food safety are also likely to remain key customer requirements and are expected to increase in importance in the short-to-medium term. Australia appears to be well placed to capture greater value from being able to create identity-preserved supply chains with assured food safety.
Global trends in relation to food safety and sustainability of production are likely to drive much greater demand for quality-assured products and traceability.
Exploring new products
While the export of bulk commodities will remain a significant part of future Australian grain trading, opportunities to change the functionality and/or composition of traditional commodities will underpin future increases in demand and prices. Opportunities to attract premium prices from novel functionality have been exploited in the past—examples include omega-3 canola, ultra-low-gluten barley and high-amylose wheat developed jointly by CSIRO and the GRDC.
A global population that is more conscious of health and the environment and has a greater proportion of disposable income creates the opportunity to capture value from novel functionalities related to health and wellbeing.
A wide range of opportunities exist that can lead to incremental and transformational reductions in input costs while optimising production. The challenge is to identify and prioritise the incremental opportunities to match costs with production at a regional scale while also identifying transformational opportunities on a national scale.
The relatively small size of the input market in Australia (compared with global markets) presents challenges for external investment in new crop protection products and innovations in farm machinery. The GRDC will need to collaborate more widely, including internationally, to ensure that the Australian grain industry’s needs are met.
The costs of identifying, developing and commercialising new crop protection chemistries have almost doubled, from US$152 million per chemistry in 1995 to US$286 million in 2014 (Figure 13).
Figure 13: Discovery and development costs of a new crop protection product
Source: Philips McDougall (2016), The Cost of New Agrochemical Product Discovery, Development and Registration in 1995, 2000, 2005-8 and 2010-2014. R&D expenditure in 2014 and expectations for 2019, https://croplife.org/wp-content/uploads/2016/04/Cost-of-CP-report-FINAL.pdf
The increase is mostly attributed to activities necessary to meet increased regulatory requirements. Such increases in discovery and development costs are likely to be reflected in increased cost of chemical inputs to grain growers.
Likewise, current fertiliser costs reflect the cost of raw inputs—most notably, the cost of natural gas is reflected in the cost of nitrogen fertilisers. Given the trend toward higher raw input costs, the price of fertilisers is likely to increase in the future.
Changes to Australian domestic freight and supply chain logistics are complex and largely beyond the purview of the GRDC. However, continued R&D into understanding the variables that drive supply chain costs, to inform policy, remains valuable.
The long-term increase in variable input costs, coupled with modest increases in farm income, has contributed to Australian grain grower profit margins remaining very tight in most years. Importantly, the increase in input costs significantly increases the financial risk to which farm businesses are exposed. This trend is consistent across regions.
Risk is an important part of the profit equation. Risk management practices that are overly conservative can limit profit in above-average production years, while approaches that are overly aggressive can expose growers to large losses that in turn could contribute to business equity issues that ultimately impact profit and future operations. In addition, grower attitude to risk is a key determinant of the speed and scale of uptake of new technology.
A key aspect of this RD&E plan is better understanding growers’ decision-making and attitude to risk. This will be fundamental not only in developing investment strategies to assist in the management of production and business risk but also in tailoring RD&E to develop and maximise the adoption of new technologies that will underpin profitability.
The planning and delivery of a portfolio that delivers a balanced mix of investments is a key function of GRDC and the focus of this R&DE Plan.
The planning and delivery of a portfolio that delivers a balanced mix of investments is a key function of the GRDC and the focus of this R&DE plan.
Maintenance, incremental and transformational impacts
Investment in RD&E can have a different quantum of impact (either directly or indirectly) on each profit driver, ranging from maintenance of current profit, through incremental improvements in profit of 1% to 2%, to transformational changes of 10% to 20%.
The GRDC will continue to invest in RD&E to maintain grain grower profitability, including investments in aspects of biosecurity; pest and disease management; weed management; grain quality and grain classification; and access to and competitiveness in international markets.
RD&E investments to support incremental improvements in profit generally deliver on-farm changes in the short-to-medium term (up to eight years), and are characterised by having lower levels of technical, commercial and/or adoption risk than those aimed at transformational impact.
Transformational impact is required for the Australian grains industry to remain competitive in the long term and potentially provides opportunities for Australian grain growers to establish dominant positions in some markets. RD&E to support transformational change is generally characterised as being high risk and often requires relatively long periods for delivery.
Following consultation with growers and researchers, a target for investment in transformational RD&E of at least 50% has been established, reflecting the general agreement that, over the longer term, the cost–price squeeze currently experienced by most growers will not be sustainable and transformational change will be needed to support future profitability. Adjustments to the investment portfolio to transfer the focus to higher levels of integrated transformational approaches will take some time to implement, given current investments with out-year commitments. However, it is expected that the target level of transformational investments should be met by the end of the second year of this plan.
The GRDC’s focus is on maximising the impact of RD&E investment on the profitability of the growers that contribute the majority of funds, rather than on the locations where the funds are invested. While investment on a regional and local basis is a critical component of any program seeking to influence grower attitude, motivation or ability to adopt new innovations, the physical locations of the RD&E activities to support the development of new innovations will be determined only by their capability and capacity to deliver. This investment posture is important if the GRDC is to target transformational outcomes for Australia’s grain growers in every region.
Therefore, for the provision of strategic and applied research at least, the GRDC will continue to identify the most suitable providers based on merit regardless of location or other political and/or social factors. This includes partnering in investment with international entities where appropriate.
The GRDC is entering this RD&E strategic investment period in a strong financial position. Over the life of this plan, the GRDC will continue to make consistent and significant investments in RD&E to deliver on its purpose.
Income and expenses
While financial modelling cannot take into consideration any unforeseen environmental or legislative change impacts, it is expected that RD&E expenditures and operational costs will be relatively stable across the period. Any short-term revenue variability and the forecasted annual deficits will be managed by using cash reserves.
The GRDC expects to invest in the order of $1 billion in meeting its purpose over the five years of this plan (Table 4).
Allocation to research and development
Figure 14 indicates how the GRDC’s RD&E investment budget will be allocated to priorities in relation to the key drivers of grower profit and the core frameworks that underpin the delivery of RD&E outcomes.
Figure 14: Allocation of RD&E investment
These proportions will change over the life of the RD&E plan as strategies are developed and the portfolio is adjusted to reflect changes in the priorities of growers and other stakeholders. Changes to investment allocations will be reflected in the annual operational plan and annual report.