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clambering aboard the hay ride. On Landline today - a $200 million export earner. In 20 years it's grown into the first year, When we first started, of a million, had one employee. we turned over a quarter between 60 and 80 million, This year, we'll do anywhere disappointed in five years and I would be terribly at least doubled that. if we haven't So that's the goal. on compost. And spreading the good word It actually, on a nutrient basis, on synthetic fertiliser competes dollar for dollar of the organic matter and also has the added benefit into a farmer's soil. and improving the soil structure

Welcome to the program. Hello, I'm Anne Kruger. of the global price-spiral for food. We'll also look at the upside interests from the big end of town Kerry Lonergan reports on the renewed

in agricultural investments. SONG: # Money makes the world go around... # # The world go around, KERRY LONERGAN: For several decades

hard commodities it's been the so-called making the world go round. which has sent the world dizzy. Just lately, it's the price of food

to realise The money men are now starting of agriculture. the investment potential is now a hot commodity. The production of food One of the quiet achievers over the past two decades in Australian agriculture is the export hay industry. From quite modest sales, initially, $150 and $200 million annually. the business is now worth between of far-sighted farmers It's a tribute to a couple professionalism of an industry who have given the growth and their bottom line, that not only produces industry's worst weeds. but helps fight one of the grain

hate the hay season, It's said that hay growers' wives anxious and grumpy. for their husbands become because after the hay's cut, It's a nerve-racking time for more than a week to dry. it's left on the ground can ruin the crop. Even small falls of rain It's pretty depressing 100-150 hectares out there when you've got, you know, rainfall events in two weeks and you might have three deteriorating and you can just see it much more than straw. to a value that's not worth So that really does work. That one rainfall or poor quality and cut it in half straightaway, can take $170 a ton very good management skills, so farmers need to have and a bit of luck.

some stress remains, Even after baling, bales can catch alight. for if there's too much moisture, a lot this year. Which seems to be happening a lot of hay fires occurring There's certainly far too early. because people are baling the hay doesn't go up in smoke. Moisture tests are done to ensure less than 14% moisture, We just like having there, down the track, we don't run into any problems and that sort of thing. with spontaneous combustion

it's oaten hay. This hay isn't grass or lucerne hay - just before the grain fills. The oat crop is cut From that point on of carbohydrates you are going to get a transfer so we try and cut them, from the leaves into the seed, which is the perfect time, in the plant maintaining the most nutrition goes for grading purposes as far as feed value and other overseas markets. and for our customers in Japan

not to go into export hay. There are plenty of reasons It's a difficult crop to grow, is significant. and the capital investment hundreds of farmers say Nevertheless, of their rotation. hay is now a crucial part For not only is it profitable, the grain industry's worst weeds - it helps fight one of rye grass.

It has a huge ability to set seed, 20 plants a square metre and it's not unknown to go from to 1,000 plants a square metre, just with allowing one seed set, its numbers particularly quickly, so it has a huge ability to increase but perhaps even more importantly

it has the ability to adapt that are being used, to tolerate a lot of herbicides and I guess that's not new news of herbicide resistance that there was a lot in annual rye grass out there, but we are at the stage now chemicals to control rye grass. where we have very few post-emergent helps reduce this seed burden, Growing an oat crop for hay because when the crop's cut, to set and drop its seed. the rye grass hasn't had a chance when you are ready... Ready for a pick-up 2-WAY: No worries. Lyall Schultz has grown oat and hay South Australian grain grower for 12 years. He says it's a relief

of dealing with rye grass. to have a non-chemical method So did you find growing oat and hay, did that help with the rye grass problem? Yes, it sure did. We have a number of properties that we lease and share farm. That's an integral part of the rotations that we've got for that as well.

Probably 80% of the farmers I work with grow hay to control rye grass. Now some of them have built really big farm enterprises based on hay, so they've taken that message one step further - they've liked the industry and certainly enjoy the rewards of producing hay. The 700,000 tonnes exported there each year,

Japan is Australia's major buyer. I think they are very discerning. They pay a lot of attention to detail. They want quality, they want clean, safe product and they don't want second best. TRANSLATION: We don't have much land, so we can't produce our own grass. I think the taste is better than the hay made in the US.

I think the cows eat more. Demand in Japan has grown an astonishing 100% in the last four years. 40% of the hay Mikihisa Tojo feeds his 80 dairy cows is from Australia. The rest comes from Canada and the US. TRANSLATION: The taste is good for the cows, and compared to US-made oats, the sugar levels of Australian hay is higher because it's an arid region. The sugar level is high in arid regions, it's important for cows. In the USA they use a lot of nitrogenous fertilisers and it makes it grow faster. In that sense, it has bad effect on the cows, and it's not good. So I try to use Australian-made hay as much as possible. The father of the export hay industry is Western Australian farmer Peter Mackie. It was his company that really got the industry going 20 years ago. His first customers were the Japanese. The first year we exported 1,200 tonnes of hay to Japan.

Our best year was probably about three years ago when we exported 184,000 tonnes to Japan, South Korea and Taiwan.

And when he couldn't find the right equipment, Mr Mackie built his own. The machines that were available 20 years ago were quite limited, and the best of them were coming out of USA,

and they were suited to US conditions, not ours, but we decided, along with most others in Australia to build something that could handle the big square bale.

In 2004, Mr Mackie released a machine called a Super Conditioner that halved the time hay took to dry in the paddock.

It revolutionised the industry. The quality now is far superior than it was 15 years ago.

That's been assisted by some advances in machinery, and super conditioners in particular have really created a role for themselves. And that's simply so that we don't have hay sitting out curing in the paddock for three weeks. The least time it's out in the paddock, the less chance there is of getting damaging rain on it. The business that started in a converted farm shed now has five hay processing-plants in three States.

Mr Mackie never expected the industry or his company to get so big. No, never had a vision or anything like it. Our first containers went out in late November, early December 1987,

and got a contract for the Japanese for 3,000 tonnes the following year, and there's just been one slow step after another from then.

Mick Faulkner says one of the reasons the industry's been a success is its constant focus on improving quality. We started to understand hay probably about 15 years ago, but we were almost at the bottom of the pile, I guess, 'cause we weren't - we didn't understand how to grow hay

and what the Japanese really wanted. But I think we've learnt that very, very quickly. Mick Faulkner's been with the industry since the start, and its growth has surprised him. Really couldn't foresee sheds on a farm

with 2 to 3 to 5, 10,000 bails of hay in them. Unfortunately, the drought has stalled the industry's steady growth. This season was pretty ordinary. Not the best, but not as bad as the previous one. This year we're probably down about 30% in exports compared to the previous year. Do you think you'll ever be bigger than Gilmac. Oh, yeah, I reckon I will be. Peter would have a smirk, but I think we will be. We are not very far away now. I might even beat him this year. Healthy competition. Malcolm May is the other dominant figure in the export hay game. The South Australian grain grower runs Balco - the second biggest hay exporter. He's been on a hay mission for 19 years, ever since he decided to do something for his dying home town of Balaklava. Well, there was quite a few shops were vacant,

and I don't think we were rare, I think it was like that in every community, but there was a feeling of despair or a little bit of lack of hope. We had a lot of talented children in the district, and to further their career, they would disappear. That particularly annoyed Malcolm,

who said, "Well, you know, there's nobody to come back onto the farms

"and keep the next generation going "unless we do something about it." 19 years ago, when he was growing export hay, it struck Malcolm May that the fledgling industry might bring hope to Balaklava.

He and three local men -

livestock agent Murray Smith, machinery dealer Murray Mickel, and the then school principal Geoff Spence - each backed his idea with $50,000. PIP COURTNEY: What was the first year like? Tough. We packed containers by hand and exported 5,000 tonnes. We had manual strapping of the bails

as they were pressed on an old pickering press. At the time it was not frightening, but we believed in what we were doing, but when we looked back we go, "Gee whizz, that was courageous." Michael May might be the boss of Balco, but that doesn't mean he's giving farming away. He still has a cropping operation to run, which, of course, includes hay.

We grow one-sixth of our farm to oat hay, because once it's cut, it actually leaves the ground clean and clear for things like canola to follow, and it also reduces rye grass and weeds, and you are also cutting it before the head matures, so it's not using all the moisture in the ground, so there are a lot of plusses, obviously, to grow oat and hay. The weather look likes it's going to remain fairly fine, doesn't it, really?

These days sons Simon and Nick May do much of the work so he can focus on making Balco even bigger. Eight years ago, Balco built a state-of-the-art packing plant outside Balaklava, and, five years ago, it set up South Australia's first inland container terminal. The hay is compressed, packed in containers and railed to Adelaide. We have to get 26.4 ton in a 40-foot container, 'cause freight is critical. A third of the cost of the hay to the Japanese is actual freight, hence, we crunch the hay up so we do fit it in a container.

Balco now turns over $30 million a year and has 140 employees in five processing plants in three States. The first year we turned over $250,000

and had one employee. This year we'll do anywhere between 60 to 80 million, and I'll be terribly disappointed, in five years, if we haven't at least doubled that. This year Balco will export 150,000 tonnes of hay to Japan. Malcolm May believes demand there will grow slowly and that the next best growth prospects are Taiwan and Korea. In the longer term, he says

the Middle East and China could become big customers.

There's some big orders going now out for various hays

for their dairies and camels and everything, through that area, and I think the whole industry from Australia is going to have to unite eventually to meet the Middle East so we can put up a decent-sized parcel. We've been over to China for a look and we've actually got an agent over there doing some work for us

and he has our posters and all our information.

They've bought our dairy cows, and if they want to increase production

I think we can actually supply them hay long term. I know it's a big market, but we've got to try all avenues, like Vietnam, Malaysia - everywhere.

At the moment I think we won't be going straying very far from Japan, South Korea, and Taiwan, although there is some hay being exported by other Australian exporters into the Middle East, but I think it'll be some years yet before those two markets will be as strong

as the Japanese and Korean and Taiwanese markets.

To meet growing demand, Balco needs more growers. Landline first met the Balco team at a Birchip cropping group field day two years ago. In this part of the world, in the Wimmera and certainly up in the lower Mallee areas, there was a definite place for growing export hay as part of your rotation...

Farmers liked that hay was a solution to rye grass and that because the crop is cut early, it doesn't use up all the moisture in the soil. We've seen some fantastic results of growing the crops after oat and hay, because of that storage and carry-over of water. It might be a while before the Birchip farmers sign up to grow hay, though, as the drought's made growing anything tough. And we'd like, for instance, the Birchip Group, to grow lots of hay, for the mere fact we are short in Victoria. This year we thought we were going to get 45,000 ton over there that we have had contracted, and we've ended up with about 12 or 13,000 tonnes. The three main hay exporters - Gilmac, Balco and Johnson & Sons - have worked together to tackle industry issues and crack new markets. One thing they're agreed on is the need for more research. Grower levies help fund the work of plant breeder Pamela Zwer,

at the South Australian Research and Development Institute. She runs the national oat-breeding program and for the last 10 years has been building better varieties. We are very pleased that we've released three new hay varieties, with good productivity, with improved disease-resistance, and the third area that is very important, particularly for the export market, is quality.

Hay quality is associated with the preference, and calves really do have a sense of what they like and what they don't like. Lyall Schultz says Pam Zwer's work has been hugely important. The wintry take-up has been enormous right across Australia now, so, for her to come up with a variety first up and manage to get that sort of uptake has been absolutely fantastic. It's a real feather in her cap and it really does amplify the fact that we need a lot more money for research and development going into these projects, because without these varieties and without getting good colour and good quality and good yields,

we're - the margins are not there. From day one when Pamela first arrived at SARDI she saw that the oat and hay market needed development of new varieties

and she started working on it and we're really only just starting to see the first generation of Pamela's varieties hitting the marketplace now. Pam Zwer says growers have got value for their money. And for every dollar that they've put into our breeding program, it's generated $43, so it's fairly substantial. Her next job is to breed an oat that can withstand drought. I think it's absolutely vital, and if we have a look at the last couple of years, and certainly seeing oats in the Victorian Wimmera and Mallee in 2006, and in a lot of South Australian by 2006, 2007, they do perform poorly under drought stress, and heat stress. So, yes, I think the genetic base has to be broadened. Even this bigger shop here was an old four-square shop - there was no one there... The decision to go into hay 20 years ago has rejuvenated Balaklava. We've got 80 people here, many of whom has got young families, so the schools haven't lost their number and the business are still getting, the supermarket is still getting trade and the shoe man is having shoes bought there and they are important issues for us,

just to keep the people in the community, so I believe it has been successful, yes. I am not sure that Balaklava, 20 years ago, did have a long-term future, but I believe it has now, definitely, got a long-term future. I'm really quite community-proud and fiercely community, matter of fact, fiercely country,

because I love employing country people, and I think we've got to look after ourselves, and make it work.

To that end, Balco staff bonuses are vouchers to be spent in Balaklava.

Mr May says it's one of the many ways Balco backs the town. We are great supporters of the arts, the Eisteddfod, the local art gallery, the football clubs, the golf club, the schools. We give to most things, and we try to do that wider than just Balaklava, as well, and we also do that in Victoria and Western Australia, because no matter where we are, we want to be community-focused and part of the community to make it successful. I don't think we could ask for possibly a better company than Balco to have come in and done what they have done and are continuing to do. As well as putting on barbecues so farmers can chat with staff, Balco runs regular farmer trips to Japan. There's a whole range of different customers - from the smallest little dairy that took one or two bails of hay right to the largest feedlots that take 40-foot containers and several of them every time. It was very, very interesting. We had sort of no idea, intrinsically, whether this was an industry here for the long term, but having been there,

and seeing how the operation works at their end, came home with a lot of confidence that this was not just a fly-by-night activity. Do you find that hay is now a permanent part of your rotation? Yes, it's probably 20% of our rotation every year. We've got a rye-grass problem on our property so we just won't ever go away from hay, and it'll only get bigger. As for the future,

Malcolm May's job is to find more farmers to grow hay for him, as Balco can't meet overseas demand. Peter Mackie says industry's biggest challenge

is riding out the damage being done by the high dollar.

Growers say they just want to be the world's best. I'd like to see hay go all over the world. I think we grow the best hay in the world. The Japanese are very hung up on Timothy grass out of the US - I think we've just got to change their perception on ours, and just prove to them that it's the best in the world. So, give the Yanks a run for their money? Absolutely! That's what we are here for.

For decades the investment climate in Australian agriculture has been dominated by quick turnover-tax schemes that made some people a lot of money, but hardly encouraged long-term commitments of cold hard cash. They still have their place, but a couple of important factors have led to the renewed focus of investing in agribusiness with solid long-term prospects. There are more and more mouths to feed and it's going to cost a lot more to feed them. SONG: # Money makes # The world go around, the world go around

# Money makes the world around # It makes the world go around... # For several decades it's been the so called hard commodities

making the world go around, but just lately it's the price of food which has sent the world dizzy. The money men are now starting to realise the investment potential of agriculture. The production of food is now a hot commodity. MAN: We think we're now into the long-term bull run for soft commodities. The commodity prices have lifted, as you've seen, out of the demand and supply, so we've got the Asian economic growth and the Asian population growth right on our doorstep driving that for us. We've got the ethanol coming in - that's pushed the commodity prices up - so that's, I think, put a bit of a nice floor into it, where we are at the moment. What we are seeing now, of course, with the increase in the value of soft commodities is that the potential yield on that investment is going to improve and likely to stay improved for a number of years going forward from here. SONG: # Feed the world # Feed the world... # The world's population is growing at an alarming rate. It's alarming because the biggest question arising from this growth has yet to be answered - how do we feed them all?

In 1950, about 2.5 billion people were on this planet. By 1975 this had become 4.1 billion. By the turn of the century their number was 6.1 billion. In 17 years from now it will be 8 billion. And, by 2050, the world's population will be 9.2 billion. GUNSHOTS Can we feed them? Today's food riots would suggest there will be a major problem. There'll be issues not just of price, but of supply. Even if we can somehow keep a lid on prices, will there be enough food to go around? World Food Program head Josette Sheeran says yes, she's confident the world could produce the food it needs, it's just a question of riding through this difficult period

and getting enough resources to investment. Australia's Macquarie Bank is to confident about the future of agriculture it's looking to build

a billion-dollar food investment portfolio. We've been looking at agriculture now since 2005. We started the Macquarie Pastoral Fund in July of last year. We've now made two significant acquisitions. We've bought the Pooginook Merino sheep stud in NSW. We've bought the bulls run, which is a mixed cropping and sheep property, just outside of Wagga. We intend to make significantly more investments. In that fund, we are looking to raise $1 billion which will be spread investment across Australia basically in sheep and cattle production with a little bit of cropping on the side. Across town, Rabobank - the biggest lender of money to rural Australia - is also upbeat about farming, but councils simply owning the means of production is not the key, it's how that production is managed. Historically, agriculture is a good investment,

so if you go back 11 years and say, look at broadacre cropping, it's giving a return of somewhere between 15%-20% per annum. So, historically, it is a good investment however, probably it's an investment that you need to be hands on in

or at least have someone who's pretty committed to doing the right thing by you in managing the operation because there's a lot of skill that's required to manage the operation properly, and, as I say, you need to take those seasonal considerations into account because times been pretty tough, and volatility can come into it in the short term, but, over the longer term, it can provides you a pretty good return. Until recently much of the investment coming from the cities into farming

was based on tax incentives, but agriculture is now seeing a subtle but distinct change. Investment money is now being placed with a long-term, strategic view. When we were out first talking to people about agricultural investment they were still impacted by tax-effective schemes. That's what most people thought about agriculture -

when they thought about investing, they thought about a tax effective scheme. Thanks to the changes by the Federal Government, and the fact that we are now seeing this thematics of food inflation being splashed all across the media almost every day

people are very much focused on the long-term benefits of investing in agriculture. Just as an anecdote, I was in Africa last week, I was reading the South African newspaper one day. Four times within the same newspaper you saw articles on food inflation. Agriculture is a long-term business. and to invest in broadacre agriculture it's not something that you do overnight. There's systems to be put in place, production processes to get up and running. Agriculture has always been a long-term investment. I think the shift out of the managed investment schemes is simply a realisation that the nature of investing in agriculture needed to change, and we just opening up a new opportunities, I guess. But the ultimate driver of investment is what comes out at the end - the returns.

And driving investment at the moment is the return on the basic staples. These figures are well-known, but they're worth repeating. In the past year corn has risen 31% in price, rice has lift the 74%, soya beans are up 87%, and wheat has skyrocketed 130%.

In a country like Australia, which exports as much of 80% of the food and fibre it produces, there's an automatic relationship between these price spikes and investment. What sort of impact has the recent spike in food prices had on the investment picture? Well, as I say, it's a commodity spike that actually comes up here, and that's out of the demand and supply, and that will lead to increased investment over time. We need good seasonal conditions to allow people to get good stuff off the field, good produce, and when they get those results, that harvest, in a good year in a good season, that will allow them to actually catch up and be in a stronger financial condition to go forward again. Firstly, I think for a first time in a long time, people outside of agriculture starting to look at this as being a positive investment, so you are seeing, even in Australia, people from outside Australia coming in

and buying up properties at the market. As I mentioned, I was in Africa last week - you've got a diverse group of people, from the Chinese to the Europeans, to the Americans, all looking at opportunities over there because of the amounts of uncultivated lands. It's a thematic which is somewhat difficult to get exposure to basically because most of it is in private hands. Investment opportunities like ours are somewhat unique at the moment. SONG: # Money makes the world go around # The world go around # The world... BELL JINGLES # Money makes the world go around # The clinking, clanking sound... # So where do the average punter put their money in agribusiness? The big banks will automatically sell you their own product, but for an outsider there's a simpler approach. Well, my flippant response would be I'd go out and buy some land and go cropping. The biggest issue is that a couple of hundred thousands doesn't get you very far on your own. So I'd be looking at the agribusiness sector, and that would include managed investment schemes which involve owning broadacre land and operating that land - wouldn't be that interested if they weren't owning the land - but also we need to look at the suppliers into the agribusiness sector - suppliers of inputs and services - the grain corps, the AWBs, the ABBs, the pivots - that class of company, listed-company,

on the stock exchange. They would also be reasonable additions to a portfolio into the agricultural sector at the moment. 'MONEY, MONEY' CONTINUES TO PLAY

Let's start our price check with a look at how some of those agribusiness shares just mentioned are travelling: The daddy of them all has been Incitec Pivot - in just one year their shares have elevated 200%. You'd have to think they'd all continue to do well if we have a good season. Compare these performances against the ASX All Ordinary's index: It looks like a lot of investors have confidence in the future of agribusiness. Moving on - let's start with grains: ** CLEAR FOR GFX **

ASX is also no doubt happy to report their futures marketing has just passed another milestone - it has now traded in excess of 9 million tonnes. Incidentally, grain growers in NSW had some good news this past week. Pacific National Rail will continue to carry export grain, at least until the middle of next year. This decision will save growers from using road transport to shift several million tonnes of winter crop. Overseas now:

Analysts everywhere are tipping bin-buster crops. World production could be as much as 655 million tonnes. This would be their first time in years production would exceed usage. Let's go to livestock, and it looks as though the live cattle trade with Egypt could be set to resume, after Cairo agreed to strict new slaughter protocols. Shipments were suspended two years ago over animal welfare issues at that end. Incidentally, Tuesday's Federal Budget is expected to commit almost $10 million to improving the overall standard of live exports from this country. To the market now -

and Profarmer newsletter confirms what a lot of producers might be thinking at present. The newsletter suggests cattle markets are headed for a rocky ride.

This comes from a combination of Korea, Japan and seasonal conditions. To the numbers now:

Our biggest market remains America but China is attracting interest, taking more than 1,6OO tonnes during the month.

Wool had a very poor week, closing down 2.5%. Pass-in rates were very high. That's the first time it's been below 900 cents

since August of last year. The latest wool export figures reveal China is now taking more than 63% of the wool we produce. And that's the Landline commodities check. One commodity price nearly everyone is fixated with at present is the price of oil, which climbed to a new high this week on world markets. News that once might have sent a shiver through an isolated community like Innamincka that relies on diesel generators for all its power. To power our home for a year is costing us $9,000-odd in diesel alone. But now the locals in this outback South Australian township are laughing.

They are about to plug into a new source of emission-free electricity, and it's not costing them a cent. It's all part of a pilot project to prove the viability of the 'Hot Rock' geothermal system that taps into the power of some of the oldest and hottest rocks in the world 4km beneath the surface of the Cooper Basin. Potentially this area we can double the world's geothermal power. This is the company's first successful production well, and it's now drilling another, and expects to have a one megawatt power plant operating by the end of the year. If this technology is proven up, as we expect it will be,

we will be want to link it in to the national grid so that South Australia is a net exporter of a massive amount of green energy. And they are not the only community this week celebrating the spoils of working smarter with natural resources. In the NSW Riverina this barricade build through the Barren Box Wetlands

created a smaller deeper storage system is credited with saving around 20,000 megalitres of water.

We've got a much small area. In fact, at the moment, there's only 10% of the area with water in it, and that's giving us some major savings from evaporation. And the water goes back to the environment without irrigators having to give up any of their own allocation. It's great. I mean, Water For Rivers job is to return 282,000 megalitres.

Most of that will go down the Snowy, some to the Murray, so 20,000 is a fair chunk of that. The next stage of this 30 million rehabilitation project is to replant the black box trees, giving the wetland a new lease on life. And outback Queensland's historic tree of knowledge is being given a new leaf on life as well. Scientists say they've successfully cloned the ghost gum regarded as the birthplace of the Labor Party, which was poisoned a couple of years ago in Barcaldine. It's been a huge responsibility, but I'm just proud that we've been act use our skills we've gained here to save this iconic tree. And in Alice Springs, May Day this year marked the 50th anniversary of the town's Bangtail Muster - a celebration of central Australia's rich pastoral history. It's a throw-back to the days when livestock was driven through the streets, but these days, it's more conventional driving that's on show. The attention later switched to Pioneer Park and the running of the Alice Springs Cup. RACECALLER CALLS RACE And being May Day, it was appropriate that the winner, by half a length, was a nag called Tradesman's Choice. They reckon there's a time and place for everything, and so it is that this past seven days has been designated Compost Week - an opportunity for the industry to really spread the word to agriculture. You see, while it's nutrient-building attributes are well-known fewer than 5% of Australian farmers are using it.

Now, it's not just become a more cost-effective alternative to chemical fertilisers, but a way of conveniently sequestering carbon down on the farm. Australia is building a mountain of compost. In just 10 years the industry has grown from 80,000 tonnes produced annually to more than 1 million tonnes, and is worth $500,000. That's about 25% of the available organic material in the waste stream, so we are basically 25% into our market lifestyle. At Australian Native Landscapes on the western fringe of Sydney they turn human waste into money-making compost. We do about 50,000 ton of sludge, which comes from Sydney Water treatment plants

in the Sydney basin, and that's bulked up, if you like, with green waste also from the Sydney basin, and we would bring in about 200,000 ton of that and they're composted together. It's the biggest composting site in Australia,

but like the industry around the nation,

its product goes largely into landscaping

with less than 5% taken up by agriculture.

It's high carbon but low in nutrients, and farmers, when they buy fertiliser, they are buying nutrients, so if it's low in nutrients, it's low value, it's bulky, so that makes the nutrients expensive. Peter Cornish is professor of agriculture at the University of Western Sydney and is part of a push by the compost industry to find new markets in agriculture.

Most of our soil's naturally low in organic matter and with years of cultivation it's got much lower, and that's reduced their water-holding capacity, their capacity to retain nutrients, and it's important for most farmers to start to reduce that carbon and in our climate and our production systems it's difficult to rebuild it without bringing it on to the farm, so that's one reason we are really interested in compost and making compost a more attractive option for farmers. The expense of transporting compost from the nation's largest waste streams has been been one of the industry's problems. But a number of new companies, such as Rivcow Environmental,

are based near their market. Rivcow has contracts with four cattle feedlots in NSW and Victoria and produces 500,000 cubic metres of composting manure each year

transporting it to farms within a 200km radius. It's a stable product and it's consistent. If there's one thing we are able to change in the marketplace is a perception that it's not just cow manure and it's not sort of like wet and smelly and lumpy. If you can actually produce it into a good quality compost,

it can be cow manure, it can be anything. How does it compare with synthetic fertilisers? Extremely well, and especially given recent events of price hikes in fertiliser, it actually, on a nutrient basis, competes dollar for dollar on synthetic fertiliser and also has the added benefit of the organic matter, and the improving soil structure, and to farmers soil.

Near Leighton in the NSW Riverina, 230,000 walnut trees were planted last year using Rivcow compost to boost soil low in organic carbon.

We spread about 6,000 ton, banded it in the tree lines, so everything that we put on the ground

was actually going to be where the tree roots were. We used it along in conjunction with gypsum and lime to get a balanced soil for the trees to get started in. How useful would a ready-made product with things like gypsum and lime blended into them, be to you? Oh, invaluable.

It would would be ideal but I don't think that there's such a product at the moment that has the whole three organic-based fertilisers in one go. The compost industry believes compost blended with minerals is the key to unlocking markets in horticulture, viticulture and broadacre agriculture. What I think we need to do as an industry, and what we are starting to work on is programs to tailor compost

so you deliver just more than just the carbon contribution. They can delivery nutrients - phosphorous, for example, is a problem in agriculture. there's a shortage of phosphorous, there's an enormous amount of phosphorous tied up in agricultural soils. We're currently developing products that can liberate that phosphorous and ease some of the costs that are now associated with the increased cost of chemical fertilisers. At Ylad, near Young on the south-western slopes of NSW, they are already producing prescription blends of humified compost for 300 farms across Australia. In general, we would put compost

with lime, gypsum, soft-rock phosphate sometimes some magnesium-based products - depends on the area and soil nutrient analysis. But generally when you mix nutrients with humified compost the humus binds everything together and stops it wanting to - stops nutrients wanting to tie up with other nutrients, so nothing gets to go anywhere without humus saying so. So when you combine them with humus and humus-based compost you find that you can use a lot less of those minerals and get the same balancing effect in the soils. Alright, we've actually dropped the CO2 to 2% so we've reached that... Ylad was established by fourth-generation farmers Rhonda and Bill Daily, who started dabbling in biological agriculture

when production began declining on their 1,600 hectare mixed farm.

RHONDA: And we fluffed the pileup so it's nice and full of air again. We grew some magnificent crops of wheat here and ever since then, we probably started to never get the yields, we'd create similar yields but we'd never get the high yields and we seemed to be putting more and more fertilisers on, trying to achieve the same end,

and I started to question what we were doing, and I guess the big one for me was I suddenly realised we were actually mining our soils, we were mining our natural resource. For Rhonda Daily, spreading a gospel of better soil health is almost a religious calling. The moisture is now around 40% now, after turning with moisture... Seven years ago I nearly died with a life-threatening illness and I was guided that I needed to heel the soils and help other people. So, I'm following my guidance and I truly believe this is my purpose in life

and I'm very blessed and things keep coming to me. In the hilltops region of central NSW, Roger Clark grows wine grapes, Angora goats and fat lambs. Last year he used humified compost on a hectare of his vineyard which was salt-effected. I tried gypsum, I tried lime, I replanted own rooted vines, the first time. Second time, I replanted with salt-tolerant root stocks. Both times they died. Last year, again, I replanted anything that had died and I dressed the row with eight tonnes to the hectare of compost with a mineral blend mixed with it, and I've had the best results with these salt-affected vines of any treatment I tried, and, certainly, it shows lots and lots of promise. The true holy grail for the compost industry will be getting more broadacre farmers, such as Donald Baartz, to use their product. He buys his manure-based compost for $40 a ton and reckons it's saving him money, particularly if he can manage an opportunity group on his 700-hectare irrigated and dry-land cropping enterprise at Norwin, on the Darling Downs in Queensland.

Probably the three major nutrients - the nitrogen, the phosphorous and the potassium - in the compost represents equal value, so everything else in the compost is basically an added bonus. So, there's calcium and sulphur, and zinc and the big one, I guess, is the organic carbon. It's hard to measure some of those things. We do have to apply those nutrients at times,

so, yeah, that is a big saving.

Down the road, John Cameron has been using compost on his 400 hectares of rain-fed black soils, and he's been analysing soil samples for five years.

What we've been finding with our soil testing is that our base level of phosphorous, for example, in this soil, is around 17 or 18 parts per million.

What we are finding after application of compost is we can jump that number up to about 35 parts per million, which we were never able to achieve with any rate of in organic fertiliser, and we were able to hold it up there for two crops,

which in many cases is three years throughout the life of the soil. More than anything else, it could be the looming carbon economy which creates a viable market for compost. The Government needs to find mechanisms to value carbon sequestration in agricultural soils,

see that sequestration recognised within the farming community, so there is a carbon offset, there is a way of valuing that returning of the carbon, and there doesn't seem to be an understanding within government that if we want to become the third bowl of Asia, if we want to get where we want to be in the next 50 years, we have to return carbon to agricultural soils, and it's as simple as that. We have carbon sources in the population centre, half it's come from agricultural produce, there's about 500,000 ton of food waste goes into landfills every year, so it's pretty large scale carbon export from the agricultural sector to urban centres, and we seem to have been unable to get governments to understand that there's an obvious reconnect

by exporting these sorts of materials back out to agricultural soils. The Commonwealth Government is now working on the shape of Australia's emission trading scheme, but the compost industry fears state and local governments may corrupt its potential markets. If methane producing food and green waste are banned from landfill, it will flood the market with up to 20 million tonnes of waste -

four times what composters will recycle this year. Normally, supply influences demand or demand influences supply, In this case the supply material it comes on line when a council believes that it wants to introduce a system. We support that wholeheartedly. It's good for the environment. The organics in landfill constitute a greenhouse gas problem, and if we can keep the organics out of the landfill

we'll reduce our carbon footprints on the planet. So there's a number of multiple benefits here in removing that material, but in terms of banning, we've resisted a ban in the past because of the fact that the markets haven't been there to take up the material, and this is where we'd like to see government take a bit of a role, providing incentives of some description. Whether that's through environmental reform or other mechanisms, this is what we think should happen.

There's been little joy rainfall-wise over the past week and, unfortunately, there doesn't appear to be much moisture around for the next few days at least. There's some chance of rain in the east, maybe next week. We'll just have to keep watching and hoping.

Now this map looks at rainfall deficiencies since last October. The deeper the red the drier the conditions. Most of the big dry has been in the centre. You'd have to think the next map in this series would include a fair chunk of eastern Australia, as well. But this next map looks somewhat promising. Here's the latest bureau forecast for the outlook from now through until July. The numbers represent the percentage chance of average or above-average rainfall. It certainly looks good

for a fair section of the eastern part of the continent. Not so hot for southern NSW and Victoria. South Australia might also struggle, but the west could be in for another cracker season.

You can, of course, check what's happening right now, weatherwise, in your part of the world right now by logging on to our website - there it is! -

and following the links to ABC Rural Weather. That's just about it for now. When we return next week, we'll check out the claims and counterclaims before the national inquiry into grocery prices. Hello, I'm Chris Clarke in central-west NSW.

Next week, we'll hear from fruit growers who say they are being ripped off by supermarkets and wholesalers. But will a government-ordered inquiry do anything about it? I have no confidence whatsoever in the ACCC running this inquiry with the experience I've had with them before. If we are to have a mandatory code it must not only be targeted on wholesalers and growers working with wholesalers, it must also encompass the retailers, the processes and exporters, because there's no good having a code that's not effective over the whole market process. The grocery price blame-game - one of our stories next week. Hope we'll see you then. Thank you. And to all the mums out there - happy Mother's Day. Bye for now. Closed Captions by CSI

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