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Standing Committee on Agriculture and Water Resources
04/11/2019
Growing Australian agriculture to $100 billion by 2030

ARGIRO, Mr John, Chairman, Australian Table Grape Association

CRISP, Mr Peter, Chairman, Murray Valley Winegrowers Inc.

MANSELL, Mrs Anne, Chief Executive Officer, Dried Fruits Australia

ZAPPIA, Ms Jennifer, Representative, Australian Table Grape Association; and Member, Youth Farmers Advisory Council, Agriculture Victoria

Committee met at 13:17

CHAIR ( Mr Rick Wilson ): Welcome. Peter, you had a written opening statement. If you want to summarise that we'll move through the others and then get some general discussion going.

Mr Crisp : We represent around 300 growers in the Swan Hill and Sunraysia regions. We're headquartered here in Mildura. Our funding is derived from levies administered under the Victorian Agricultural Industry Development Act, which is collected and supervised by a statutory body. We also have an IDC associated which does work with our research and development.

The crush in this area was 346,000 tonnes of grapes. That is split between independent growers at 243,000 tonnes and 130,000 tonnes from winery-owned vineyards. It's made up of 161,000 tonnes, or 47 per cent, of red grapes and 185,000 tonnes of white grapes, or 53 per cent. In the last crush our pricing has been better for reds. The average price for reds in the region was $584 across shiraz and cabernet, and whites, which is predominantly chardonnay, at $371 to $365 a tonne. The water issue is one that we're all going to touch on, I'm sure, as affecting the cost of production.

Despite the perception that the wine industry is in recovery mode, which it is, 53 per cent of the growers I represent are still growing a white variety, which is very much a redundant variety or in overproduction. I have been advised that some growers are turning off the water in selected patches to focus their production on the varieties that will give them the best financial returns. There are longer term consequences when water is turned off the vines.

Although there is a future for wine to be a part of that $100 billion push there are a number of factors that I think are going to constrain that from the wine grape industry's point of view. Firstly, land and water—in particular water—and competition for that land and water from other horticultural varieties that can make a better return on investment. Currently table grapes, almonds and citrus, as major varieties in this region, return better than wine grapes. If you want the pecking order, Sunraysia Rural Financial Counselling Service have recently been advising the Victorian drought forum on what they see as the more profitable horticultural commodities in this community and on how they see the current high price of water playing out for those particular commodities.

In this particular drought, and on water, we recently met with both the Riverland and Riverina equivalents. We expect that the crush will be down about eight to 10 per cent this year. Many of our growers have decided to grow this crop with the resources they have available, but it will deplete their water resources and their financial resources to do it, and next year could be very, very difficult. I think there are many issues with water, and we're going to canvass those. Perhaps when we get to water consumption I will join as we discuss water security and the role water security plays in meeting your objective of $100-plus billion. Unless greater security is there within allocation security, be very nervous about growers investing a great deal of money in the environment that we have during droughts. More security for the existing entitlement to improve allocation risk is something that needs to be addressed. Thank you.

Mrs Mansell : Similarly to the wine grape growers, we have about 330-odd growers that are growing dried grapes from, basically, Swan Hill through to the Riverland in South Australia. We're headquartered here in Mildura as well, being the central part, and on both sides of the river: New South Wales, Victoria and South Australia. We're a highly mechanised industry sector. The only real labour we need is for pruning in wintertime. Everything else is harvested on the vine with what we call a swing-arm trellis and trellis dried. It is harvested with a machine, straight into a bin and taken straight to the processor. Sometimes they are dehydrated along the way to get the moisture content down just a little bit further. Basically no human hand touches the grape from growing right through until it's packed in a box and given to the consumer. Because of that we have the highest quality dried grapes in the world, and therefore we can demand a premium price for those dried grapes.

We're a very small industry, however, in terms of the world market. We say we have an average of about 20,000 tonnes a year. I only started 2½ years ago. We haven't seen that average since I started. We've had less than that, somewhere between 15,000 to 18,000 tonnes. In comparison, Turkey grows nearly 300,000 tonnes. As you can see, we are a niche producer of the most premium product you can get, in terms of dried grapes, in the world. Therefore our dried grapes going to those premium markets, particularly Europe, Germany and Italy, are utilised for some of the best panettone you can get in the world. Germany and Italy pay a very high price for that premium product. China and Japan are now looking at doing the same for that premium product we have. We still have 60 to 70 per cent that goes on the domestic market here both for retail and into industrial markets for breakfast cereal, muesli and so forth. We are trying to change that and see more going to the export market because the price is much better. We don't have supermarket competition trying to bring the price down.

As I said, total production for this year was 15,200 tonnes, and that was because of some very severe heat units in January which brought our production down. Total exports were 5,570 tonnes last year. We do see great opportunities, as I mentioned before, in South-East Asia and across into China and Japan. We're working very hard with the new branding known as 'Australian sultanas' to get into those markets. We are working closely with the Victorian government to be exposed at trade shows, particularly Food and Hotel Asia and SIAL Shanghai, to try to boost sales into those markets. We are doing a project which we received funding for from the federal government looking at overall yield and looking at new technology to increase smart technology applications in growing dried grapes to make them even more highly mechanised and more technical.

But there are blockers to growth, and I have a list of them there. Certainly, investment in research and development is a huge blocker for us. We have very limited levies through Hort Innovation because they're based on tonnes. We charge $11 a tonne for our R&D levy, and then obviously Hort Innovation take a small percentage of that on the way through, as well as the levy collection service. So we usually get left with somewhere around $150,000 a year for R&D, which is nowhere near enough to be able to look at aspects of smart technology and winter pruning and those sorts of exercises that we're trying to do. We have a marketing levy, as well, of $7 a tonne. That is helping us with looking at research into the Asian markets.

Water, as Peter has already mentioned, is the huge one. Availability, deliverability, reliability—they are the key messages. For all growers in horticulture with permanent plantings, whether it's grapes, citrus or almonds, the reality is that water availability, reliability and deliverability is critical. If we don't have that, none of us have industries, and we certainly won't have an industry. Because we are niche, because we are a smaller industry, we also have competition in high-value sectors like almonds and some of the other commodities. One of the issues with that is that our growers might perceive that they can make more money from trading water than they can from growing product. That is a huge issue that we've been working on. Our processors are very aware of that, and they are working with growers at the moment to ensure that we keep up production because our processors obviously need as much production to also stay viable. So we're trying to do what we can as an industry and as an industry body to make sure that we retain as many of those 330 growers as we can.

Capital costs are one of the big issues for us as well. Because of the trellising systems that we have in place, the setting-up of a dried-grape vineyard can be quite expensive. We're looking at somewhere around $50,000 a hectare in set-up costs. Once it's set up, as I said, it's highly mechanised. But, to set it up to get that highly mechanised operation, there are significant capital costs.

Biosecurity is another issue we see as something that contributes, or could contribute, to scaling down rather than scaling up. We must protect Australia's biosecurity. If we had an infestation of something like Xylella, then all of our industries in this region would be in dire straits. Biosecurity is also critical to us in terms of the whole 'clean and green' market that Australia bases itself on. So the work that we've seen recently in biosecurity has been very much welcomed, and we would continue to support further biosecurity measures so that our horticultural industries in this region remain protected—particularly our dried grape industry, because we do get quite concerned about some of the incursions we're starting to see happen.

But I come back to that water issue. Our growers require probably eight to nine megalitres a hectare to grow a crop, but the costs of that water at the moment, if they don't have carryover, mean that we could see decreasing tonnages coming through into next year, and that's not the way we want to go. We've actually turned a corner in the last couple of years; we're starting to see investment coming in. But that could certainly be destabilised in terms of the current market constraints that we have with water.

CHAIR: Thank you. We'll go to the Australian Table Grape Association.

Mr Argiro : I'll let Jennifer go first, if you don't mind.

CHAIR: Okay.

Ms Zappia : I'd like to commence by welcoming the committee to our booming horticultural region here, as part of the federal government's inquiry into growing Australian agriculture to $100 billion by 2030. Both John and I are here today on behalf of the Australian Table Grape Association. John is the chairman of the Australian Table Grape Association, as well as the local Sunraysia Table Grape Growers association. I work within our family table-grape business in Merbein. I'm also a member of Agriculture Victoria's Young Farmers Advisory Council. The council provides advice to the Victorian Minister of Agriculture, Jaclyn Symes, on issues affecting young people in agriculture. The Australian Table Grape Association has asked me to attend today to allow committee members to gain the insights of young people on the land.

Young farmers are, without doubt, the future of Australian agriculture, as they are the individuals who will be responsible for growing Australian agriculture to $100 billion by 2030. Today I would like to bring your attention to the issues that are consistently of concern to local table-grape producers—that is, water and labour. I would like to acknowledge Dr Anne Webster's efforts in ensuring these issues are at the forefront of her agenda in representing the Mallee region federally.

Water, as you are all aware, is a highly contentious space at present. The rhetoric of 'just add water' isn't going to be enough to grow Australian agriculture to $100 billion by 2030. Just across the border in New South Wales, family farmers are turning off their permanent horticultural plantings, not because their operations are unviable but simply because there is no water in the lower Darling. How, as a nation, can we be expected to reach $100 billion in agricultural production by 2030 when family farmers do not have access to water? Without changes in water policy, Australia will dismally fail in its ambition of growing agriculture to $100 billion by 2030.

Access to a pool of legal and skilled workers is also of major concern to local producers. The challenges of local table grape producers mirror the findings of the research conducted by University of Sydney and University of Adelaide academics in their report entitled Towards a durable future: tackling labour challenges in the Australian horticulture industry. We ask the government to develop a reliable supply of labour that will allow dedicated horticultural workers to enter Australia on regulated visas. As such, these workers should only be able to work for employers who abide by a national labour hire licensing scheme. Implementing these recommendations will create a more even playing field for all horticultural producers, allowing Australian agriculture to reach $100 billion by 2030.

I would like to finish by acknowledging the Victorian government's efforts in actively seeking the input of young farmers in agriculture via the Young Farmers Advisory Council. As part of growing Australian agriculture to $100 billion by 2030, I would encourage the federal government to implement a similar council at a federal level to ensure the lived experience of young farmers is realised by policymakers. Thank you.

CHAIR: Thank you. John, did you want to add anything?

Mr Argiro : Yes, I've got just a short statement. Anne has touched on biosecurity and all those measures. On everything that Anne and Peter have said, I have basically the same view, so I won't repeat it; it would waste time. But I have one point to make on water. Here in Victoria, allocations of water are at 42 per cent. Farmers who do not have enough money to buy the other 58 per cent are forced to shut down 58 per cent of their permanent plantings. If the bank refuses you finance, you must sell a liquid asset, which is your high-security water rights, to survive for that season. Water is life. If you don't understand that, don't worry about reaching $100 billion in agricultural production by 2030. Thank you.

CHAIR: I understand you guys are very focused on water here. In Western Australia, where I come from and where we have been dramatically increasing our grain and meat production in the face of a 30 to 40 per cent drop in rainfall, we don't have access to irrigation water. So, while it's obviously a very important issue for you people in the Murray-Darling Basin, Australian agriculture is bigger than the Murray-Darling Basin. We're here to talk about some of the broader issues, like labour availability and encouraging young, innovative, energetic people like Jennifer into agriculture. Those are the sorts of issues that governments can actually have some influence in. We touched earlier on markets and broadening access to markets. I'll throw to the other members of the committee, who may have some questions or some further comments, and we'll just have some general discussion.

Mr BRIAN MITCHELL: You've all raised water as the key issue. I'll ask this, but I'm not sure what the answer's going to be: what does water security look like when the rain's not falling? We can't make it rain. You need access to water; I totally get it. But what does water security look like if it's not raining? What's the policy mechanism that can be created to provide that water security?

Mr Crisp : Within the southern connected Murray-Darling Basin, we have significant storages. The Murray-Darling Basin is divided into two geographically different basins. The northern connected basin is a very opportunist basin. It's on and off, and the crops that can be grown there have to be suitable for that environment. The southern connected basin, by Australian standards, is a reliable water source with large storages that are in low evaporation areas. That provides you with the security you need to invest in developing a high-value, permanent planting horticultural environment. Then over time things do change. There are a couple of documents here that are probably relevant at this time. This will be relevant to answering your question. We have a cap and trade system within the Murray-Darling Basin and within that process we have now recovered significant water for the environment that was probably water that would normally be available to be traded which has been brought back for the environment. You go into a particularly difficult period where there is less unutilised water to meet that trade demand. Each state has its own—

Mr BRIAN MITCHELL: When you say unutilised you mean environmental flow?

Mr Crisp : No. Unutilised water is when someone owns more water than they actually use. And example in the wine grape industry would be that if you're a New South Wales irrigator you would have probably have 12 megalitres to the hectare to grow your crop. You would use eight or nine. You've got a virtual full allocation this year, so you've got enough to grow your wine grape crop and three or four megalitres per hectare to sell. If you're in Victoria with it's Victorian high reliability water you currently have 42 per cent, projecting around about 52 per cent allocation this year. This comes about when Victoria and New South Wales share equally the waters that are the Murray and they have at their disposal what flows in through Goulburn or state rivers. Victoria has a far higher number of high reliability shares than New South Wales has—high security shares. Within those two, when you divide it up this year, New South Wales has 100 per cent and Victoria will probably land at 52 per cent. The New South Wales general security for a second year in a row is zero. Each stage is developed at a different currency. In understanding how water works between the three states, and how a cap and trade system works in the three states, it's like standing at the arrivals hall in a country and trying to figure out the currency exchange. It's that sort of complex—

Mr BRIAN MITCHELL: Sounds diabolical.

Mr Crisp : It is. In that, a Victorian irrigator this year is looking to go to a market that has less freely available water, so, therefore, the price rises in a cap and trade system and a market system. But there is also a point where it is just simply not available at any price and that's what has caught us out. If you look at the dip in that curve compared to even the last drought there's far less water available in the market, so we're going to have to make issues about turning crops off. In the longer term there are solutions—

Mr BRIAN MITCHELL: I'm going to cut you short. In summary, what is the one policy mechanism that's needed to give you the water security you're after?

Mrs Mansell : Review the assumptions that were behind the cap and trade system, because we've got a highly variable basin with anywhere from 40,000 gigalitre inflows to 1,000 gigalitre inflows—an entirely variable system. It might be timely now to review the assumptions behind the introduction of that cap and trade system, because somewhere along the line there's been some assumptions that may need to be reviewed and changed in terms of water availability and reliability.

Mr Crisp : I would, supporting Anne, make another suggestion as well in this that each state—and I'll focus on Victoria—Victoria and New South Wales, needs to build another storage to hold water to improve the security of allocation. Since we have an extraction cap and there is no more water to run off in the hydrology and we're going into a drier climate, we can't take any more water out of the river, but we could improve the reliability. I've done a longer article on this, which I'm sure someone can pick up and read later when it finally gets published, that Victoria has the ability to carry water over. Both states do, but I've focused on Victoria. If you have unused allocation in one year, you can carry it forward to the next. It's like banking it for the future. What is required between Victoria and the Commonwealth is to fund storage for farmers with existing Victorian entitlements to store carryover water to give them security. They can then go to the bank and borrow that water in a year like this, and, if it continues, a year like next year, which will be very ugly. It's not that we need any more runoff, it's not that we need any more irrigation; we need to improve that security by allowing farmers to bank their carryover water in a secure location. As a former electrical engineer, I say you should make that particular storage a two-pond storage, then you can put pumped hydro in, and the farmers water can go backwards and forwards, contributing to our future green energy needs. That's not going to solve our problem today, tomorrow or next year, but we need some forward thinking to address this issue, otherwise we are going to lose investment confidence in irrigated horticulture, if every 10 or 12 years, when a drought comes along, you end up with a portion of your base dried off, and it takes you years to recover that. They are the issues. There are other solutions as well. There are engineering solutions, there are policy solutions; we just need to focus on them.

CHAIR: Jennifer, can I ask you to expand on some comments you made when we were on the bus earlier on, about attracting young people into agriculture and making agriculture 'sexy'—to use your term—for young people to think about as a long-term career.

Ms Zappia : Earlier we discussed mechanisms that look at attracting young people to agriculture. I grew up in Mildura, and the only place I found the course I started in, which was a bachelor of agricultural economics, was at a Melbourne University trade fair in May. Mechanisms need to be in place, within schools, that encourage, not even attracting young people at that stage to agriculture but embedding agriculture within schools so that young children come back to their parents and say, 'Look what I learned; this is how we grow seeds today,' and children are aware of agriculture in schools rather than when they're at the end of school and considering their career.

CHAIR: You mentioned something like having a food-and-fibre component of the curriculum for schoolchildren from primary through to secondary as a way of introducing them to agriculture, the growing of food and the satisfaction of being part of that process of producing food for our nation and the world. That's something you raised on the bus.

Ms Zappia : Definitely. I think embedding those procedures in schools at a young age would be beneficial in creating awareness of the agricultural industry and creating an appreciation, for those that don't work within those rural industries, of the efforts it takes to get your food to the table, because, unfortunately, the majority of Australians aren't aware of what goes into the process to buy that potato or even beans in a can.

CHAIR: Or grapes on the table.

Ms Zappia : Exactly.

CHAIR: We touched in the other session about markets and market access. What do you see as the opportunities or the challenges going forward for your various industries? If it's horticultural product, say, in the case of dried fruits, you're not actually looking to expand the volume; you're just looking to capture better value.

Mrs Mansell : We are trying to expand the volume as well. Our aim is to have 30,000 tonnes by 2030. That will make us a consistent producer to be able to supply those markets. We're about halfway there; so we have a way to go. But, yes, market access is critically important and maintaining markets is critically important. We are transitioning in terms of looking to supply a further portion into our export markets and really looking at those Asian opportunities for our industry to really benefit the industry overall. Obviously, as a growing middle class in a range of those Asian markets that want to have good, clean and, as I said, the best quality dried grapes in the world, they are keen to partake of those and we are keen to be able to supply those. So market access is critically important, and having a look at new markets, particularly across Asia. The tremendous free trade agreements have helped all our industries, but there is still more work to be done. We are very grateful for the work that is continuing in that area, and we would like to continue to see that given lots of support.

CHAIR: What about logistics in the supply chain? With table grapes, it is obviously critical to get them to the market as quickly as possible and in pristine condition. Are the current supply chains working for you?

Mr Argiro : We have the rail up here and road transport. Logistically, I don't see it as a major concern at the moment. We have to finish the upgrades to the rail that the state government started over the last three years, but it's improving.

CHAIR: So, at the moment, your product is going down to Melbourne on rail or—

Mr Argiro : Yes. Probably 80 per cent of it to Melbourne and 20 per cent to Adelaide by road.

CHAIR: How much of the table grape product is exported?:

Mr Argiro : About 80 per cent. We had nearly $600 million in exports last year. I believe that in two to three years we will be at a billion dollars.

CHAIR: That's what we need. That's good to hear. Are there any further questions?

Mr BRIAN MITCHELL: Very briefly. Ms Zappia, further to the labour issues, I know that you are supportive of a visa, as many people are, but I touched on the issue of the high regional unemployment rate for young people, in particular. We're just can't get young Australians on farms, and we touched on the idea of a curriculum subject. What else do we need to be doing to get young people into the workforce in agriculture?

Ms Zappia : I think there's definitely scope to broaden the number of scholarships that are available to attract young people once they finish their high school education—whether it be university degrees or staying in their regional communities and completing TAFE course. For people who are already living in the country working on their family farms and who don't want to go away and study and miss out on three years on the farm, there could be the opportunity to maybe bring those reputable universities to country areas so that those people can develop the skills at a university at the same time that they are upskilling on the farm.

CHAIR: I think we are talking about two different things here. You are talking about the management level university training, but I think Brian is talking about getting people out picking fruit.

Mr BRIAN MITCHELL: A bit of both.

Mr Argiro : If I may, I will make a comment. You won't get any young people to come out and harvest your grapes. It just doesn’t happen anymore.

Mr BRIAN MITCHELL: I know there's a season issue and the logistics of that. Also, it is often put to me that Australians just don't like the hard yakka; whereas the migrants will do the hard yakka. I don't know whether I necessarily buy that, but the evidence is there. There are kids in towns with high regional unemployment and yet we have farmers crying out for labour. It kills me that we talk about visas, even though I can see the need, when we have kids unemployed. How do we join the dots? Do you reckon we can't, John?

Mr Argiro : We've had these young people out on government schemes and what have you. At the end we prefer to pay them money to stay home. It's not worth the headaches. It's the best way. They won't come to work. It's just too hard—I'll be honest with you.

Dr WEBSTER: You were talking about your logistics of getting the grapes to both Victorian and South Australian export markets. I just want to clarify that you were using trucks as opposed to rail, because the rail is not up to scratch. Is that right?

Mr Argiro : The rail is to be finished off, as I understand. I don't believe it is quite up to scratch, but it's certainly a lot better than it was two or three years ago. I think they're still looking for funding to finish it off. But we need the rail going up here finished. With the amount of export that's coming out of this town over the next five years, the roads won't be able to handle it. Already here from Robinvale through, Manangatang Road has been dropped to 80 kilometres because of the transport. We need significant money here for our road upgrades to get our product out of the region.

Dr WEBSTER: Again, just to clarify: at the moment you're using road rather than—

Mr Argiro : We're using road and—

Dr WEBSTER: And some rail?

Mr Argiro : Yes. We see ways to do the rail. I believe it's probably fifty-fifty, but in the future I think it should be 80 per cent by rail and 20 per cent by road.

CHAIR: Thank you. We've run a bit over time, but we started late. Thank you very much for coming in today and giving us your evidence and some ideas and thoughts. If you have been asked to provide any additional information, please forward it to the secretariat by Thursday 28 November. You'll be sent a copy of the transcript of your evidence and will have the opportunity to request corrections to transcription errors.