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(generated from captions) THEME MUSIC at the future of home-grown fuel. On today's show we're looking more going for it Some argue that ethanol has a lot to fossil fuels. than just being an alternative agricultural communities. We are basically revitalising at a considerable cost Others reckon that could come to other rural activities. of ethanol per se We're not against the production the production of ethanol and we're not definitely against via biomass or some other method, through grain production but to have it mandated is just ridiculous. to pay tribute And we head to Western Australia to the great Gabrielle Kervella

crafting world-class cheeses who has retired after 25 years for her goat herd at Gidgigannup. in Australia, Simply the best goat cheese best goat cheese, and one of the world's of the woman. and due to the dedication focused on detail, Gabrielle is amazingly biodynamic cheese, quality herd, beautiful organic and in the cheese you really tasted that in the milk and you just can't fake that. Welcome to Landline. Hello, I'm Anne Kruger. from Sydney This week we're coming to you

and a major symposium on ethanol, and analysts from around the world. that's brought together experts keynote speaker at the conference - In a moment, we'll talk to the Todd Sneller, from the US Midwest. one of the industry's pioneers of course, is buzzing The biofuel business, over the costs and the benefits. over the increasing heated debate greener and renewable form of energy, Proponents argue it's a cleaner, into fuel will simply create yet critics say converting crops and skyrocketing commodity prices. food shortages

At Dalby on the Darling Downs, is under construction. a New Age fuel plant it will be producing biofuel, Come September, in the petrol production chain. which will be used to replace oil one of a new generation The Dalby Bio-Refinery will be making fuel from food. of Australian processing plants of sorghum a year We'll take in about 200,000 tonnes to fuel-grade alcohol. and convert that Ethanol is commonly made from sugar, from starch but it can also be fermented wheat, canola and sorghum in crops like corn, with existing oil-based fuel. and then blended being introduced around the world It's one of the key alternatives to reduce reliance on fossil fuels. the petroleum distribution That'll go into to the big oil majors. and that'll go by the likes of Caltex I think it's been announced off-take agreement with us that they have a very large oil majors in there as well, and there'll be a couple of other the fuel distribution chain. so it will go into is expected to increase By 2008, world demand if oil by a whopping 70%. implications are enormous. The price, supply and climate change is creating new concerns But the scramble for solutions into the fuel chain. as more and more food is diverted In the United States, is now being used to make fuel. up to a third of the corn crop

of grain in anyone's language, Now, that's a big, big amount a knock-on effect then - and that has the demand for corn you're increasing that are available for other crops, and that puts pressure on the acres be it soya beans or wheat. the increased demand for corn The concern is that is both driving up the price of food in poor countries. and reducing its availability about fuel versus food I think the debate globally going to see more of is something we're by political question and probably resolved more than anything else,

that less-developed countries and certainly I would believe the price of their food going up and poorer countries seeing some pressure points. is going to create We should expect that. TRAIN TOOTS Until now, and food prices in Australia the fuel-related impact on grain States' ethanol obsession has flowed largely from the United are operational where 139 bio-refineries are under construction. and another 61 is blended with ethanol More than half the country's fuel and Washington has passed a new law

gallons of renewable fuel annually mandating a staggering 36 billion by 2022. Here in Australia, commercial ethanol plants operating there are currently only three but the industry's ready to expand, of other rural industries. possibly at the expense

a significant impact on us. I think it'll have

in the market, It's another competitor whether it's a biofuels plant down the road, or another 30,000 head feedlot in the market. it's another competitor Jim Cudmore is the vice-president Association. of the Australian Lot Feeders

the nearby biofuel plant at Dalby, He fears that new competitors, like

of feed grain. will push up the already high cost of ethanol per se, We're not against the production the production of ethanol and we're definitely not against or some other methods, via biomass through grain production but to have it mandated is just ridiculous. has lead the opposition The Lot Feeders Association that have been set in the US to the sort of targets of biofuels. to boost production Late last year, a biofuel mandate New South Wales introduced sold in the State requiring that 10% of all fuel must be ethanol by 2011. of a mandate, Victoria has rejected the idea and WA are considering it. while Queensland from some farmers But they're meeting opposition because of the high cost of inputs. who are already downsizing

back in October 2007, Well, we took significant steps the cattle on feed whereby we reduced by about 50%. over an 8-week period since January this year, We're currently, of our licensed capacity been operating at about 55%-60% or our more traditional feedlot capacity. But the alternative fuel producers argue that it's drought, coupled with high global demand that's really driving prices up. We've got a rampant and growing China and India consuming huge amounts of all sorts of commodities, Australia itself is benefitting from one of those - coal, base metals, et cetera,

so at the same time we've got wheat prices at an all-time high, but a lot of that is being consumed by people like China and India. And that's the large part where prices are being driven to by that kind of demand. But farmers say it's the fuel element that's compounding an already bad situation. It really impacted quite severely on our cost of production and our future planning going forward.

And farmers aren't the only ones being caught up in the price squeeze. We've seen in the last 12 months an almost unprecedented increase in our raw material costs. We've seen it right across the board - We've seen it in energy, which is quite obvious, with the price of petroleum, we've seen it with dairy costs, we've seen it with vegetable oils, we see it with wheat and related products. So it's right across the board now. And that's obviously feeding through into inflation. Food processor Unilever has just opened its upgraded factory at Tatura in northern Victoria. The company's investing almost $60 million in the plant over the next 5 years in new staff and technology but even with the efficiency gains the margins are tight. In the last 12 months the cost of wheat to Unilever has gone up 24% and there has been a 100% increase in the cost of oil used to make things like margarine. Company chairman Peter Slator opposes government support for biofuels, which he says will divert more food away from where it's needed most. In the course of the next 40 years, we're probably going to have a 50% increase in the worlds's population - 6 billion to 9 billion, and at the same time we've got to feed that population

with up to 50% increase in food production, so I think we've got to be very careful that the policies that we set as to land is actually used for supplying food or fuel and we certainly don't want the population to starve. And he's rejected the argument from biofuel proponents that prices in Australia aren't being affected by the diversion of land and grain into fuel.

Oh, it's not a furphy - we're in a global world, I'm afraid, and the markets in Australia are impacted by what happens outside Australia. We buy global commodities that are usually priced in US dollars, and, therefore, we see the impact of this on the price of the commodities on a worldwide basis, and that comes home to Australia. Both farmers and food processors here support research into alternative energy options, much of that work being directed by the CSIRO. ** CLEAR AND PAUSE ** The reason we're doing it is that all our calculations indicate that even if Australia were to use all its food and grain to try to make fuels we wouldn't have enough to keep Australians in automobiles and trucks.

So there needs to be a widespread search for new, alternative fuels. It's located in regions around... Scientists are working on extracting the energy from urban waste and the cellulose from weeds and non-food plants to create fuel At this lab in Melbourne they're producing a concentrated form of bio-crude oil from old newspaper and straw, using a process which could be replicated at small plants in rural areas to extract fuel from things like wheat stubble.

So, that the petrol tankers and diesel tankers which are returning every day

from providing fuels for tractors and cars and trucks in the bush could be used to back load this stuff. Climate change could further complicate the equation, tightening food supplies and creating even more competition between the food and fuel sectors. During a drought year, the amount of food

so the amount of feedstock to make fuel goes down drastically, and if we have a repetition of the 2000/2001 drought, for instance,

we'd be having trouble making even the quantities that people at the moment consider viable. If climate change were to be a reality, then our calculations indicate that these type of lowered potential could continue into the future.

Some believe that biofuels will at best be a useful stopgap on the road to developing more efficient electric vehicles, but that timeframe is uncertain, making a sustainable supply of biofuel critical. The electric cars aren't totally ready yet, the oil price is either very high or oil is very difficult to get hold of, and we need other fuels, and that's the reason we're doing this research because we do think there is going to be this intermediate period where transition fuels are going to be needed. While an alternative fuel is undoubtedly needed, it's finding the right ingredients at the right price that's the hard part. I think there is a huge amount of sympathy out there for anybody who's coming up with ideas that lessen the demand for oil and, therefore, these alternatives, when they're first presented, look to be very attractive.

I think there is a second debate starting to occur which is a much better, more informed debate that is starting to look at this rationally and decide probably that this is not the best alternative for oil. The bigger debate will be about what's a reasonable price that people can afford to pay for food, because food inflation is an issue on government agendas right now. But the ethanol industry continues to reject the contention that there is competition between the food and fuel industries. And it's convinced that plants like these will deliver both economic and environmental benefits. We are basically revitalising agricultural communities. If you look at where the world's foundation used to be in the past, agriculture formed the bedrock of most countries.

We are raising environmental standards in the world contributing to some of the problems. We really don't understand arguments too well, no. Hard to understand the arguments that are being made by some people. Zoe Daniel with that report. Well, this year's ethanol conference in Australia coincides with the very lively debate here and overseas on the pros and cons of biofuels - arguments I suspect our next guest has heard many times over the past 30 years. Todd Sneller helped develop an alternative fuel industry from scratch in the US Midwest. He's from Nebraska - the corn huskers' state - that's putting more and more of that maze into motor cars. Todd Sneller, welcome to Landline. Thank you very much. Todd, I imagine you must've come up against some mighty big sceptics amongst the farmers in Nebraska 30 years ago when you first mentioned ethanol.

They thought it was an interesting and novel idea but one that perhaps was not very practical. but in the 1970s, the US and the world went through a number of oil shocks which demonstrated that there really was an opportunity to produce domestic fuels from a variety of renewable materials, and farmers at that point got quite interested in the concept.

And do you sense a similar degree of scepticism in Australia, even hostility? I think so. We've seen this recent years concerns about the use of E10 - the 10% ethanol blend. That's been dismissed for decades in the US.

So, I think we've seen with some experience comes better acceptance, and I think we'll see that in Australia

as well as many of the other countries that are currently evaluating biofuels. Critics also say that renewable fuels divert land use from food over to fuel. We really see an opportunity here to make both food and fuel. I don't believe that there's a conflict. I believe the way we currently produce greens and sugars allow us to meet requirements for both food and fuel. There is no inherent contact, and in fact I would dispute the notion a lot of people are making that charge. In my view, those who are making the charge are those who are accustomed to very cheap grain and cheap grain is not cheap for the taxpayer, and for the petroleum industry,

who's being required under federal mandates to relinquish market share. I think that's where most of the detractors are coming from, trying to express that opinion during a public policy debate. And I don't think it's based in fact. I believe that our experience shows that when making ethanol from grain and sugar we make food and fuel. From your experience, are mandates a necessary model here in Australia for ethanol to survive in the marketplace? It's become very clear the petroleum industry has not been willing to relinquish market share. So if public policy objectives are really goals that are important to the populous as a whole oftentimes policy makers have got to take steps - including requirements that these cleaner-burning fuels are used because they meet a number of objectives, whether they be economic, agricultural or environmental - biofuels can meet those objectives, but oftentimes they need to be introduced in the marketplace either with a carrot or with a stick, and sometimes a stick is more effective. It promises new industries for rural areas. What is in it for agriculture in Australia? Nebraska is primarily an agricultural state, and so many of our interests would the same as those of agriculturalists in Australia. It's an opportunity to open up a new market for commodities that are produced here, it's an opportunity to create additional value by processing those commodities and using them in a variety of applications here, it's an opportunity to have capital invested and these processing facilities and see it's additional value - jobs, and increased tax base - that comes with that. So all of those have been very important reasons in the US for using biofuels.

and, at this point, the results have been very, very positive in terms of jobs and economic activity and energy security and environmental quality. The US Energy Bill calls for a shift in the emphasis in ethanol to biomass. Tell us more about the research into other cellulosic elements? While we're confident that the technology is easy to use in grain and sugar crops, we also recognise there will be an increasingly larger demand for cleaner-burning liquid-transportation fuels. So there is real focus now on moving ahead and using the grain bridge to move us towards cellulose and biomass-based fuels. There is a number of benefits that come, there is a number of challenges that come with that evolution as well, but clearly it's a huge opportunity for the agricultural sector to use it as a waste-mitigation strategy, as well. And so we have an opportunity that's in front of us at this point that will require some encouragement from governments probably to help mitigate the risk and to attract the capital. But clearly it's an enormous opportunity, particularly for the agricultural sector. Well, after a prolonged drought here in Australia our farmers are concerned about the supply and the price of grain. So, are they going to lose out if ethanol production is in force here in Australia? One of the very important innovations

in distilling grain into ethanol is that we have all the protein in that bushel of grain left in a very condensed form. And we've seen over three decades that's an extraordinarily efficient and economic means of feeding livestock, whether it be dairy or beef or poultry or sheep. So we've seen an opportunity to do better with that corn

than simply feed it whole, as has been done traditionally. Many of the same concerns were raised by US livestock feeders, but throughout the Midwest, where cattle populations are the most prevalent, we've seen an extraordinarily efficient means of using those distillery feeds that come from the whole corn and using those with local roughage that complete the diet. And, as a result of that, we've seen better carcass quality, we've seen better economics, we've seen better efficiency. So while initially this may be viewed as a threat or competitor, I think, overtime, if they take a look at the commercial practices that have evolved, they're going to recognise this is an opportunity, not a treatment. Todd Sneller, thanks for joining us on Landline. Thank you.

There is a reason ethanol producers like to use feedstock. Here's a graph of the ethanol yield per tonne of corn, which is the feedstock of choice in America. Cane - that's the favourite in Brazil -

and sugar beat, which is used in Europe. The clear winner, of course, is corn. Even without the subsidies corn finishes ahead on costs, as well. It's difficult to go past the connection between rising food prices and the production of ethanol. Let's look at the recent price rises for our food staples. Rice, the basic food for more than 50% of the worlds's population, has been heading north at a rapid rate. Here's the price graph since June of last year. Now, the price of wheat over the same period - it slipped a little in recent weeks, but it's still more than doubled in a year. Here's corn - this is more of a roller coaster simply because there's so much more of it available. But last week corn touched prices never seen before. Finally, another food staple - soya beans - again a slight fall over recent days, but, again, at near all-time highs.

So, booming ethanol production and rising food prices. Perhaps it's all just a coincidence. Here in Australia rice growers are all but out of business. Normally producers would knock out a million tonnes a year no problem, but the drought has reduced that production to a mere 50,000 tonnes. For a lot of people this will be getting towards the last throw of the dice, I think. There's 2,000 irrigation farms in Murray irrigation, probably all of those grow rice, and this year I think there's five farms got rice in the Murray Valley. Isn't it so often the case? Records prices and Australian farmers get hit by drought. Let's start our price check with grains: Dairy prices - and a couple of influences here. New Zealand's version of a drought

Dairy prices - and a couple of influences here. New Zealand's version of a drought has Fontera looking for product. And there's a huge volume of American milk swilling around world markets.

Now to livestock - well, there's little joy as producers start to get anxious about winter feed, and a lot of direct selling didn't help the saleyards either. Price falls were across the board. A lack of overseas demand and a drop in re-stocker interest as winter gets closer saw lamb prices slip. And pigs, where producers are absolutely livid at the Productivity Commission decision not to offer them any safeguards or protection against cheap imports. The boss of Australian Park, Andrew Spencer, didn't miss

when he described the commission as driven by "misguided and sterile ideology."

To wool, where the market slumped just over 1% at auctions where Europe and India supported China as our main customers. Finally a quick look at Agricultural Minister Tony Bourke at work in Tokyo.

There's got to be more Australian beef here than that. There certainly is. (Speaks Japanese) Let's have a look at more Aussie beef. Here he is with the MLA's Japan rep, Sam Jamieson, handing out the Aussie beef samples in a Tokyo supermarket. A fine example that producer levies and taxpayer dollars at work promoting our biggest food export - Australian beef. And that's the Landline commodities check.

Hello. I'm Kerry Staight. And, no, these aren't tuna rings, they're actually full of abalone. We look at a South Australian company making waves in the aquaculture industry. While Australian Bight abalone isn't trying to match the measurements of the monsters from the wild, it does have ambitious plans to upsize. Our ultimate goal is to be the biggest supplier, biggest producer of abalone in the world. It's the end of an era for Australia's cheese industry with the retirement of Gabrielle Kervella

and her partner, Alan Cockman. Kervella goat's cheese was widely regarded

as the benchmark for Australian farmhouse cheese production. While the brand may be no more, the Kervella recipes and, more importantly, the goats bred to produce their award-winning biodynamic milk have been passed on.

You go to Italy,

You go to London, they've heard of Gabrielle Kervella. You go to New York, they've heard of Gabrielle Kervella. So she is one of the exceptions in our cheese industry. Just simply the best goat's cheese in Australia and one of the world's best goat's cheeses and really due to the dedication of the woman. I mean, Gabrielle's just amazingly focused on detail, quality herd, beautiful, organic biodynamic cheese and you really tasted that in the milk and in the cheese. And you just can't fake that. As tributes flowed from across the nation, friends, family, and devoted fans of Kervella goat's cheese

gathered for a last picnic at the Gidgigannup farm north of Perth, which has been home to Australia's benchmark farmhouse cheese maker. People have turned up from all over the State, from down south, Perth, restaurants who've used their cheese, foods distributors who've distributed her cheese, people that have just been following her for years, slow-food members, people who've worked on her farm, just everybody. And it was a wonderful turnout, especially in this really hot day. And tucked in every picnic basket, the sort of food which Gabrielle Kervella could only have dreamed of when she established her cheese brand a quarter of a century ago. Now, what was it like 25 years ago compared to now? It was shocking. Um, you know, Australians, in general, were not exposed to eating goat's cheese.

In fact, a lot still are fairly focused on the Cryovac cheddar from the supermarket, although we've come a long way. So, at tasting tables, I would have difficulty persuading people to have a taste. In fact, many people would sort of approach the table holding their nose, and it could get pretty discouraging after a few hours. Building the Kervella brand has been a 7-day-a-week commitment and with her family grown and demand for her cheeses outstripping the dairy's 140-litre-a-day output, Gabrielle Kervella decided it was time to go. I think there was many things that came together.

These farms are very labour-intensive and my children were not interested in coming into it with me. We needed to apply ourselves more to selling directly to the public, which we were doing - you know, the markets and maybe selling online and other things like that. But I think also I had got - really reached the stage after 25 years non-stop of wanting to do something else and feeling a bit tired. I've got 5. 10 for you.

20 now.

MAN: 25. 25. WOMAN: 30. 3O! I have. As part of the slow-food movement's tribute to the pair the last precious produce from the Kervella cheese house went under the hammer for charity. Round of applause! The cheese is yours. Sold down there! There are five of these cheeses in existence. And this is around a kilo. It's an amazing surface mould-ripened cheese,

and, I gotta say, to me it's...this is history,

Five pieces of history left. MAN: Bit of history about it - it was actually made - Gabrielle started making them for Neil Perry at Rockpool. At the internationally famous Rockpool restaurant in Sydney,

goat's choose tortellini has been a house speciality. Chef Neil Perry says it's not the same dish with Kervella cheese. Well, it's funny - I've been looking around at a few different goat's cheeses around Australia, and using some. I'm looking at an imported French one at the moment, but I'm quite seriously thinking about taking it off the menu for the first time in 16 years. It's always been difficult to get really good-quality farmhouse cheese in Australia although the Australian cheese industry would tell you that it's thriving and doing great things. If you benchmark it against the best cheeses in the world,

there are only a few that are doing a really good job and, to my mind, Gabrielle was the absolute star of that. I mean, I really feel sad for the industry, for Australia, for all the chefs who love cooking with great product, and for all the consumers that loved great cheese, I feel really sad that she's now left the industry. Thoughts shared by cheese author and distributor Will Studd. I think that Gabrielle is - has been a wonderful pioneer and she's certainly, as I say, set a benchmark for the industry and her legacy is an industry which will continue to grow. There are hundreds of different cheeses made from goat's milk in Australia. It's a relatively simple cheese to make, but making the quality to the standard that Gabrielle has set is something else altogether. WOMAN: Come on! Come on! MAN: Come on, girls. Good.

Five hours south of Gidgigannup, near Albany on the south coast of WA, the Kervella goat herd has a new home.

John and Toni Louise Saunders bought the Kervella cheese house. Later this year, they hope to produce goat, sheep and cow's milk

at Ringwould, their 250 hectare farm.

So, how are the goats settling in? Very well. They're enjoying the cooler weather - being up in Gidgigannup - it's pretty hot up there, and they're enjoying our bush, as well, which is... We haven't had any problems, really, with them, and, yeah, all getting pretty used to us. For John Saunders, working with goats has been a pleasant surprise after a family history in fat lamb production. I don't want to offend the sheep, but they do seem a little bit more intelligent. I guess it's just been domesticated that bit more, I'm hoping the sheep will - I'm intending to milk the sheep as well, so, hopefully they'll be on par with intelligence after a bit of handling. Toni Louise Saunders admits it's a daunting prospect following in the footprints of an industry pioneer, and she's been grateful for some generous mentoring. Definitely a daunting challenge. She's very well-known and her cheese is very well-loved,

and mainly Alan's teaching with the cheese making,

we'll be starting with the same recipes as they were. And I - hopefully the feed change won't make the cheese taste that much different. Ringwould is currently in conversion to become certified biodynamic,

and according to Gabrielle Kervella, this is an important ingredient in her recipe for success.

Complete dedication, which was always - it was never difficult for me - I'm very particular about that - but I'm also a believer in that really the cheese is, to a large extent,

is good for the quality of the milk, and of course the biodynamic farming was, for me, the source of all of that. Gabrielle Kervella converted her own farm into a biodynamic haven 10 years ago, when Alan Cockman joined her as partner in the business and, later, in life.

Basically what this is is cow manure that's been packed into cow horns, buried in a pit - it's about 1ft, 1.5ft deep - covered up with soil and left for a year. What comes out is this beautiful rich inoculant. My whole passion has been about living soil. 'Cause when the soil is alive it's like a community that gets rid of crime and poverty and it flourishes, and I suppose it's a bit of a utopian outlook on it but that's how I see the soil, and the rest of the animals and the crops will look after themselves as long that soil is viable.

Now as the pair contemplate retirement they may write a book, and hope to establish a consultancy to help other small-farm owners run viable businesses. ALAN: I think the thing we really would like to do is to just relax, just get rid of the pressure we've been under for such a long time and, ultimately, find a small block where we can just live a sustainable life,

because that's what our whole purpose in life has been about,

is living sustainably, and consulting. There's a lot of wonderful cheeses out there, but I think that we could help make them even greater. That would be a good thing to do. GABRIELLE: Probably one of my real passions is to get a better return for the producers, for the farmers in general, but most especially for the producers.

You know, as we were doing - we were farming, we were growing our own crops, and we had the herd and the herd management and the genetics and the manufacture of the product and the marketing, and I just believe that there should be a much better return for the producer. And now to an aquaculture industry that's virtually come the full circle.

Around 20 years ago, abalone began being grown out in tank-farms ashore

to cash in on the demand, particularly in South-East Asia, for this valuable delicacy. Now, even farmed abalone are going back out to sea as a new generation of entrepreneurs gear up to supply the growing market in North America, as well.

When you produce as much food as they do around here, why wouldn't you call the place the Great Australian 'Bite'? This rugged coastline separates the Eyre Peninsula's farming communities from some of the most sought-after surf breaks in the country.

And now, just a little further out to sea,

another type of farming is catching on. And it's creating plenty of waves in the aquacultural industry. Our ultimate goal is to be the biggest supplier, biggest producer of abalone in the world. Elliston, a 1.5 hour drive north of Port Lincoln, has been a draw card for abalone drivers for years. The wild fishery is stocked with the prized green-lipped abalone. Just one of these sea snails fetches around $60. Elliston has the best quality water for abalone growth, we consider in Australia and possibly the world. The aquaculture industry, in relation to abalone, probably picks areas for their accessibility to infrastructure and labour,

whereas we pick the water quality first, and everything else follows from there. And that led Andrew Ferguson

and his colleagues at Australian Bight Abalone to this spot - 2 nautical miles offshore. It may look like a tuna farm, but this is one of only a few marine-based abalone farms in the country. And certainly the biggest.

Essentially what we're doing that is unique is creating artificial reefs. Unlike any other form of aquaculture, we're creating a self-sustaining system, so a system that's commonly regarded as a most environmentally friendly aquaculture in the world because we don't input things into the ecosystem, we create an ecosystem

not similar to, but exactly the same as the wild system. What's your average at? RADIO: 6 metres. Roger, 6 metres. No worries, mate.

You've got 60 minutes of bottom time remaining. Over. Right now there are 36 9m deep cages with up to 120,000 abalone in each. The shell fish are placed on specially designed trays at the bottom of the cage when they're 6-9 months old. They're then left to mature for 3 years, feeding on algae, which grows in the trays and netting. It's been developed over 13 years by a person that we've just recently purchased the technique off of. As far as I know nowhere else has got it, and nowhere else will hopefully get it for a long time to come. What cage is this one, Bill? It's No. C6, this one. This is the 2 year olds. Yeah, it's a pretty good size. Got a year to grow. Bill Bascomb may control the day-to-day running of the farm but it was his dad who had the original brainwave. The former abalone diver still has a wild fishery licence, but it's these smaller and younger farmed animals that he's now banking on. This has been really expensive. I've put many millions of dollars into this and basically my kids' future in this,

that's why my son now manages the operations and my other son contracts to the company and it is basically our future is involved in this company. The floating farm has already cost $30 million and there are plans to invest another $20 million this year.

But one expense the company doesn't have to worry about is the quality or quantity of its water. It's a completely different matter on land, where most abalone farms are. For example, this one churns though up to 1,000 litres of water a second to maintain oxygen and moisture levels

and create a clean environment for the growing animals. I don't think the land base is really that viable. There's too many costs and too many things that can go wrong, like the water can warm up, pumps can stop. That's just not going to happen here. Fatality rates are low, due to the water temperature. There's always gonna be fatalities. There's no - that's the way it is. With the water temperature we only see rises of maybe between 4 and 5 degrees, whereas on land they get that per day, whereas we get that over a per-year basis. But that doesn't mean land-based farms are on their way out. In fact, companies like Australian Bight Abalone rely on them to give their juveniles a kick start. We get the breed stock from the wild, we then take them down to the hatcheries, they spawn them for us and grow 'em to a certain size, we purchase them back off of them and then we put them in our farms to grow out from a certain size to a saleable size. That's one of the things that land base will be - mainly, mainly hatcheries growing abalone to about 30, 35ml, 40ml - and they'll go out on to either the ships or offshore, and they'll grow from there. Don Morrison knows all about the ups and downs of the industry. The former diver pioneered abalone farms ashore in the '80s. REPORTER: Don Morrison's abalone aquaculture operation was the first and is now one of the largest and most advanced in Australia. It's taken him 20 years to get where he is today. And has he discovers more and more about the animals

he's getting better and better results. Is it a lot easier than picking them up off the ocean? Yeah, a lot easier.

You don't have any bent problems banding over a tank. That's about it. Since last speaking to Landline almost a decade ago, Mr Morrison's farm has been taken over and turned into a nursery. It now supplies stock to the 'Destiny Queen', which is said to be the world's only ship with an abalone farm on it.

But while this industry veteran sees the role of on-land farms changing, he doesn't think the marine operations

can do things much cheaper.

All they haven't got is the pumping costs, electricity costs. They've still got the labour costs, and on top of that they've got boats and divers and that.

I think it'll cancel itself out. They'll have just as many expenses as what the land based ones will eventually. So, I think it's just gonna be another way of actually growing abs.

Convincing some residents that system is not going to spoil the environment and endanger the nearby sea lion colony has also been something of a challenge. A few years back opponents tried to stop the aquaculture development after some of its sea trays at the farm broke loose. The company says they've sorted that out and the rings are now secure. And there's no sign the local sea lions are suffering any ill effects. We've introduced some strategies to deal with any risk of storms

including a grid-anchoring system, which is cyclone tested. We've had storm weather out on our lease with 30ft swells and 50-knot plus winds, and had no damage whatsoever. I think the system that's proposed is as close to being balanced in an environmental sense as you can get. They're using the environment to create feed, so the algae is created on plates, there's little impact with the local sea lion colony 'cause they can swim in and out of these cages, there is no nets or anything that they have to try and jump over.

Really, that's what good sustainable aquaculture's all about -

it's balance. The other major snag is the threat of disease. South Australia has so far remained free of the virus that's crippled part of Victoria's abalone aquaculture industry. Some, though, would still prefer to see abalone farms stay ashore.

There are greater potential risks with sea-based operations and they come interest the fact that through intensive production systems there is a greater opportunity for viruses and pests to be generated within those systems. Once those viruses or pests occur in those intensive farmed environments they are readily transmitted into the wild,

into our natural populations. Bill Bascomb says the offshore operations are running at fairly conservative stocking rates - around half the size of land-based abalone farms. And every new batch is checked by government vets

before being slipped into the sea. I believe that they've been scrutinised and scrutinised more than enough. They have been through that many government departments to get it to where - it's taken 'em probably 10 years to get it up to get it in the water,

so if they haven't been scrutinised enough I don't think they ever will be. Michael Wandel is the chairman of the district council of Elliston, which covers a massive area of around 670,000 hectares and has a population of just 1,200. Like many locals he farms - mainly barley, wheat, sheep and cattle. He's more than happy to see abalone added into the agricultural mix. I believe that it's probably the - something that Elliston's been looking for the last 15, 20 years ever since we had dry times and high interest rates in the 1980s, and to see your town's dying, your shops - we had three shops, we went back to one shop - and you can't keep going like that because you're not sustainable. So, if you can get an industry anything like aquaculture started in your district, and be profitable and employ people, well, that's what you look for. Australian Bight Abalone employs 45 people right now, with jobs onshore, as well as at sea. We've seen the town increase in size and people that were against us are now coming and asking for jobs because they are saying it hasn't had the detrimental effect they thought it would and it's having a positive effect on the environment and on the community. And that workforce is set to triple with the company stepping up production. By the end of June, there'll be around 100 of these ring tops out here, which is almost as many as what the tuna industry has in Port Lincoln. There's certainly no shortage of buyers for the extra abalone. The company's first harvest - around 100 tonnes of abalone - will end up on dinner plates in Hong Kong and mainland China, where most of Australia's sea snails are sent. But the next batch is heading in a totally different direction. Oh, terrific... ABA has just secured a multimillion-dollar deal in North America - a market which had all but disappeared since the shutdown of the US wild fishery. We're looking at up to 300 tonne a year, possibly more, of our largest sized animals, and we'd be looking at a deal worth to us over 5 years of more than $100 million, which obviously is significant.

Jim George has seen more than a few of these money makers pass through his doors over the years. He runs Western Abalone Processors in Port Lincoln,

one of the main exporters of green-lipped abalone in Australia. His freezers are piled high with offerings from the wild, land-based operations and now the floating abalone farm.

Kerry, these are land based abalone and these are from ABA, which you can see the different colouration there. These are actually fed on natural sea weed.

So, they're a lot greener. They're a lot greener on the lip. These are fed with artificial feed. And then this is, in comparison, to give you a comparison, this is what we call ocean court or wild green-lip, so, for a size comparison this is our largest size, but these are probably 2 or 3 years old. These are probably maybe 8 or 10 years old.

While Australian Bight Abalone isn't trying to match the measurements of the monsters from the wild, it does have ambitious plans to upsize. It wants to grow bigger animals, have bigger farms, and, of course, get bigger returns. We have the capacity at Elliston to produce 1,500 tonnes a year, which is a lot, and we have the capacity South Australia-wide to produce significantly more than that. But it will take us another 10 years to do that. If you look at the growing demand for seafood there is absolutely no other way than farming it through aquaculture. You'll see more in-sea farms, you'll see more aquaculture

and in countries like Australia you'll see it managed in a way that can be very environmentally sustainable. Not much to report on rainfall for the past week. You can see some good showers over the east coast, some rain in the Pilbara and in the south-east corner. We're also seeing the last stages of the wet season in the north, while, elsewhere, farmers and graziers will just about be looking for the worry beads, in terms of planting rain and moisture for some winter feed. This next map might give some encouragement - the outlook for rain from April through until June. The higher the number the greater the chance of above-average rain in that period.

You can see the good numbers in the east, as high as 70% over grain-growing country of Queensland and NSW. About 50% in the west, but not so much emphasis there on sub-soil moisture as there is in the east. You can almost smell the diesel as the tractors are made ready for planting.

The next month will be crucial to see how much diesel they'll need - both now and later in the year. And that's the Landline weather check. That's just about all we have for you this week. Next week, we look at the legacy of dairy deregulation eight years down the track.

Hello, I'm Pip Courtney, and I'm on a dairy farm on the outskirts of Brisbane. This is one of the properties that shared in the $2 billion restructuring package - easily the biggest in Australian agricultural history. With the last cheques in the mail, we look at what difference it made

to those who chose to stay in the dairy game. I think it brought a lot of people together. We really felt under threat, and there was a lot of meetings there was people in tears. It was, you know, quite heart-wrenching for a while. But those that have hung there, I think are now glad they did. The winners and losers in a deregulated dairy industry - one of our features next week.

Thanks for your company today. We'll see you next time. Closed Captions by CSI