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Rural and Regional Affairs and Transport References Committee
04/07/2013
Review of the citrus industry in Australia

KEENAN, Mr Michael, Private capacity

NANKIVELL, Mr Colin, Private capacity

[09:52]

CHAIR: Welcome. By the look of it, you have not made a submission. Would you like to make a brief opening statement?

Mr Keenan : Thank you very much. Certainly at this stage, our citrus industry is in a very critical position economically, with very poor returns from exports and the domestic market. Part of that is the high dollar, and that is a flow-on to the Australian market. However, I wish to make two particular salient points, because others will cover the economic position. The two issues that I wish to highlight include the improper allocation and poor management of government R&D funds for growers and the dollar-for-dollar matching by the federal government of taxpayer funds. I am a very strong supporter of the R&D model. I have had 50-plus years experience in the citrus industry. I was on the Horticultural Research and Development Corporation for two terms in the 90s. So I am very acutely aware and committed to research and development as a way forward to advance and help us compete in the world scene and the export market. I have a good understanding of that. However, the allocation of limited R&D funds by the Citrus Australia dominated Citrus Industry Advisory Committee and Horticulture Australia Ltd has been very much distorted. The allocation of funding has gone to research agencies—national and state and private. This in effect has certainly built up the staffing and role of Citrus Australia to the very strong disadvantage of research which has been substantially contributed and has been long involved with the state departments of agriculture, primary industries and CSIRO. Consequently, not only are we not getting support from those agencies because research is looking for external funding from industry; we are not getting it from the citrus industry. They are moving off to other horticulture industries or losing their jobs altogether, so there is a loss of research done by agencies. The distortion of the use of the R&D funds has really built up to Citrus Australia staffing and role to the detriment of the research and development, which has been very much contributed to by industry funding or partial funding of state and national research agencies.

The second issue that I wish to speak on is I am a strong believer in a national organisation, which is Citrus Australia currently—it has been the Australian Citrus Growers Federation. It has a very strong role to play in national issues, but I am also a strong believer in regional citrus organisations to do exactly the same: strong and capable, and dealing with issues on a regional level.

The other point I wish to make is the two national and regional organisations need to work very harmoniously and constructively together for the betterment of the industry. We are in a pretty dire position currently economically and we need all the help we can get; however, that is not the present scenario here in our region. The national organisation, Citrus Australia, does not have a high percentage of membership growers in Australia—probably 10 or 12 per cent. The regional organisations—Murray Valley Citrus Board, Sunraysia Citrus Growers and Mid-Murray Citrus Growers—have been in existence for 60,70, 80 years and are virtually ignored by the current national organisation, which has set up a local advisory committee which I have heard being announced. We do not need more organisations; we need strong representational ones.

CHAIR: We have been getting that message.

Mr Keenan : A demonstration of that was we have had a very competent and worthwhile field day and workshop, a technical field day in the district last week, which was attended by growers and others from around the nation. I have left a copy of the newsletter giving a brief report of that for your information to highlight the importance of regional organisations.

CHAIR: No trouble. Mr Nankivell, do you want to have a crack?

Mr Nankivell : Good morning, Senators, and thanks for the opportunity. This is not my submission; I am speaking on behalf of Mr Keith Richards who put in submission No. 23. Keith is unable to be here today. He is in Melbourne tending to his sick wife. I will do my best. If you ask me questions that I do not feel I can answer competently for Keith—

CHAIR: He has put a submission in. There would be no need to read the submission.

Mr Nankivell : I am not planning to read it; I will give you a brief overview. My friend Keith is a pretty positive person and he has raised four issues that he believes the Commonwealth could perhaps be a bit proactive in assisting our industry.

I will go through them one by one. AQIS fees and charges represent a significant addition to the cost of exporting fruit. The recent shift to full cost recovery by a national government organisation can only further exacerbate those costs. The second point he raised was export licence fees—and I think we have probably just been through that. That increase is also a significant addition to export costs. These being of a fixed nature also provides a great disincentive to small packing outfits, perhaps leading to less export, which in turn leads to greater pressure on our domestic markets.

The third issue is fruit fly. Fruit fly is not endemic to our region. However, due probably to a much more mobile society, we seem to be seeing a greater chance of periodic infestation, much of which is in public or non-farming situations. At the same time, governments are withdrawing support for both interception and eradication. So I guess we are looking at having to fund full cost recovery for a problem that is not necessarily of our making. The fourth issue that he wanted to raise was rail infrastructure. I guess this is all about a north-south rail link, the benefit being quicker access to South-East Asian markets, with the obvious spin-offs being time, quality and cost.

I would reiterate that these are areas where the government could, for marginal cost, assist our industries, our employees and our regions. Indeed, if our industry is once again to be a vibrant growth industry, it probably would not cost much of the national purse at all, actually.

Senator STERLE: Mr Nankivell, your good friend Keith Richards wrote the submission. Is that the belief of the majority of growers from New South Wales whom you gentlemen are speaking on behalf of?

Mr Nankivell : I would think they are certainly issues that are pertinent to everyone in New South Wales. We would have some growers who are perhaps a long way removed from their commercial pack house and may not understand some of the issues. There is the issue of the DAFF export licence fee, for instance. I got this information from my next-door neighbour, who is a table grape grower but facing the same issues. His fee was $1,800, and it has gone to a bit over $8,000.

Senator STERLE: We are very aware of that, and I am not cutting you off. Yesterday in Griffith, and I think the other senators would back me up, we had a wish list that long that included bringing the Aussie dollar down and all sorts of stuff, which is beyond our control at the moment.

Mr Nankivell : Well, I think you should work harder!

Senator STERLE: Okay, we are on to it. We will put railway infrastructure to one side—it is an interesting topic at the best of times. I come from WA, where we only have one bloody railway line, and if it goes out we are knackered. But these other things are peanuts compared to what the industry contributes to the economy. That makes it look real simple without the railway line—to save the industry.

Mr Nankivell : For argument's sake, for someone who is, say, supplying fruit to one of our major pack houses, some of those costs would disappear into the system and, if you amortise them over one million cartons, it is perhaps not as significant. It is still a cost and it is cost that is coming directly off the bottom line, but, for a small pack house that might be doing 25,000 cartons a year—

CHAIR: Is most of the export through sea freight?

Mr Nankivell : I would think the majority of what we export would be sea freight.

CHAIR: Mr Keenan, thank you for your submission. We have been at this a fair while over the years, and one of the things I have found with research grants is that often a lot of the research grant is used up by whoever has it in looking for the next research grant rather than doing the research. They employ people to do it.

Mr Keenan : That might be an observation. I think that is probably unfair to researchers. With my long association with researchers, more and more of the time is taken up in application for research funding. I do not know the percentages, but it has increased the pressure on them to seek external funding.

CHAIR: That is the point.

Mr Keenan : Yes.

Senator XENOPHON: On the issue of the export fees that have been raised: to what extent do you think it is actually acting as a disincentive for people to put their hands up and say, 'We can't amortise the costs Senator Madigan has referred to with the earlier witnesses; it's just not worth us doing this'?

Mr Nankivell : For small outfits I would say it is a disincentive. As I said before, if you are Mildura Fruit Company and talking millions of cartons, it disappears into the overall cost structure. If you are a small pack house that is only doing 20,000 or 30,000 boxes a year, you are starting to talk about 30 to 50c a box.

Senator XENOPHON: Or more. Do you think a sliding scale would be much fairer—in other words, as you grow you can pay a bit more but still keep the same rates, using 550 as a starting point rather than 8,530?

Mr Nankivell : I guess a sliding scale is one thing, but I think—remember I am speaking on behalf of Mr Richards—the substance of Keith's submission is that this move to full cost recovery across all those issues we raised is detrimental to the future of our industry.

Senator XENOPHON: I pick up on two other issues. We heard yesterday from Fruit Juice Australia. They said that, even if we had decent country-of-origin labelling laws, it would not make much difference, because consumers will go for the cheapest juice. Do you agree with that or do you think consumers do not mind paying a few cents per litre more if they know they are going to get Aussie juice?

Mr Nankivell : You would like to think it would be the right approach. I am not a salesman; I am a bottom of the food chain citrus grower. To be quite honest with you, I am offended when I go to the supermarket and read labels. They are impossible. It is not just orange juice.

Senator XENOPHON: Is it your view that, at the moment, we just do not know what the impact will be on consumers, because there is no clarity in labelling?

Senator STERLE: If you want to say it is a rort, you will not get an argument from us.

Mr Nankivell : I think it is a rort, yes.

Senator STERLE: That is fine. We agree.

Mr Nankivell : It has been driven by the top end of town, not the bottom end. It is very easy to put a number on the bottom of a label that says 'made from Australian and imported product' and no-one knows what on earth is in it.

Senator XENOPHON: Finally, to both of you: do you think Citrus Australia has lost its way because it does not seem to have that same level of regional representation? That is the evidence we have heard in the last couple of days.

Mr Nankivell : Again, that is not part of the submission I am speaking to, but in my personal opinion? I am no longer a member of Citrus Australia.

Senator XENOPHON: That says it all—is that what you are saying?

Mr Nankivell : If I thought it was a worthwhile organisation, I would still be a member, wouldn't I?

Senator XENOPHON: Sure. Thank you.

Mr Keenan : My comment is back on observation of labelling. I think the pathetic effort at labelling is atrocious, but I do think there is an increasing number of people looking for Australian product. I still think it is in the minority, because a lot of people are under cost-of-living pressures and are looking for the cheapest product they can get. I think it is hard to distinguish between 'juice' and 'drink'. That is poorly defined.

On Citrus Australia: I have had a look at their submission. I support the move to a corporate structure to get the best people on the board of Citrus Australia as its replacement for the federation. What I have a strong exception to is that they moved towards the decimation of the regional and state organisations to build the empire. I think that has been detrimental. There have been a lot of regional contributions to the development of the industry, its improvement and its help to growers and the wider community. I think that has been to their detriment. In my opinion, they have a failed model and are not making good use of the resources which have been established. With new personnel, leadership is vital. So I am critical of Citrus Australia in their second phase, not their first phase.

CHAIR: Okay.

Senator COLBECK: I want to follow up on that because that seems to be one of the features of the discussion we have had. The concept of changing the way the industry is set up you support, but there are still issues with the way the structure is being managed. It was a feature of the conversation we had yesterday and it appears to have come through again today that there still needs to be some form of regional representation within the structure of Citrus Australia given that it is supposed to be the industry representative organisation—so having some capacity for interaction and discussion at a local level to deal with specific local issues where it appears that there are specific local issues in various regions around the country. That is still an important feature that needs to be a part of the way the representative body is structured.

Mr Keenan : Yes, I believe so. While it has moved from a federation model to a corporate model there has been a loss of that regional representation. I think it is incumbent upon the national organisation to redevelop that in their corporate structure. I think they have tended to ignore or disband. In our case here in the Murray Valley, Citrus Australia took a very aggressive no vote for the continuation of the Murray Valley Citrus Board. I thought that was an appalling state of affairs on behalf of the board of Citrus Australia. They should be gathering all the momentum of good people and good ideas from regions to build up and make good national policy. I think they have failed to do that. They have been self-focused in their own wisdom and have, instead of benefiting from and building on the good points of the previous, federation model to add to the new corporate identity and strengthen the industry, they have taken the very opposite approach. In my 50-plus years in the industry I have never been at such a low point in industry organisation and the relationships between the national and regional organisations.

Senator COLBECK: You think it has moved too far towards the corporate and away from the local?

Mr Keenan : It is ignoring the local. There are very hard issues. For example, if you had a national policy on fruit fly, it would be very difficult to apply that locally. The regional area has been dealing with fruit fly because it is not endemic. They have been supplying free material to growers in the core areas of fruit fly outbreaks. You could not possibly do that nationally, because Queensland would be wanting free material which the organisation could not afford.

Senator COLBECK: The evidence out of Queensland yesterday was to develop a national approach to deal with fruit fly.

Mr Keenan : I believe in a national approach to dealing with fruit fly, but it is whether in Queensland, northern New South Wales and the Central Coast you have an approach to controlling. In our regions here in Victoria, nearby New South Wales and South Australia, the program is eradication. You understand those things. It is a far different policy approach. In regard to attending to the seriousness of minimising fruit fly effect on our markets and our product, it is vital, and that has to be national. But there are regional issues which can deal with eradication versus control.

Senator COLBECK: So again you come back to the issue that, while you can have an overarching national approach and plan, there are regional nuances that need to be managed as part of that process.

Mr Keenan : Yes, there are, particularly in regard to the action you take. There are national issues about fruit fly research, market access and in-transit treatment for fruit fly control. Those issues are national, and I strongly support them. I commend Citrus Australia for the action they have been taking in those directions. But my point is that in our original issues, which are dealing with control, eradication and so on to minimise those costs—eradication is a big saving in our costs, particularly as we are on a very low bottom line where we are now—there is a role to play for both. I strongly support both very good national and very good regional organisation.

Senator COLBECK: That is good. Industry, manufacturing and agriculture generally have had it pretty tough for three or four seasons. In my patch it is vegetables, dairy and things of that nature. You all would have heard the discussions, particularly around dairy and the issues with price and supermarkets—all that sort of stuff.

Mr Keenan : Yes.

Senator COLBECK: So agriculture generally has had a pretty tough time, as has a lot of the manufacturing sector. But we have also seen in the evidence that the area that is being planted into citrus is actually growing at the moment. How much of the concern that is being expressed at the moment is to do with the change in the industry and changing practices in the industry and then applying that next to the general market conditions? The general market conditions are going to put everybody into an elevated state of concern, and that is understandable, because that is the reality of where we all are at the moment. But it also appears that the industry is changing. Is there an element of resistance to change as part of what is happening at the moment as well?

Mr Keenan : I guess that is always part of the thing, but there is change, and change is natural. I commend change. There has been a move towards larger farm sizes. Either corporate or large privately owned orchards are very much part of the scene these days. The areas to suffer are a lot of the smaller farms from earlier days, such as war service land settlement—small pockets.

Senator COLBECK: Which creates all sorts of dislocations.

Mr Keenan : Yes, it does, and it has a huge effect on communities. This has happened. It is the high dollar which has come in. There has been development of citrus quite extensively. The high dollar has been a more recent phenomenon which has been catastrophic for all export industries and others.

Senator COLBECK: Are you seeing a consolidation of farms in the local areas—smaller farms combining to be larger operations? Is that a part of what is happening in this region at all?

Mr Keenan : No. There is consolidation by purchase of smaller farms by younger ones who are moving towards expansion and getting a solid production base. There is some of that—a lot of it, sadly, in our region and in South Australia. There has been a lot of abandonment of farms. Part of that was the effect of the drought; part of it was the effect of separation of land and water. It is another subject. It has been very extensive. In some areas, such as here in this district, 50 per cent of the irrigation areas, which have been going for decades and decades, have been abandoned, cleared and sold. Some have been taken up by neighbours, but there is a very sad sight around these Murray Valley areas where horticultural places—wine grapes, citrus and dried fruit—have been abandoned and are feral. It is a bad scenario.

Senator COLBECK: Have they turned it to anything else or is it just fallow?

Mr Keenan : A lot of it is still abandoned. Some of it has moved to alternate production, and growers are to be commended for that. There has been some purchase by adjoining neighbours to improve that scenario. It is very slow. A lot of the new development has been on new land further up the Darling River and along the Murray River. They are large corporate areas, which have occurred not only in this industry but in the wine grape and almond industries. There has been a rapid shift towards large corporate farming.

Senator COLBECK: Mr Nankivell, would you like to make a comment as well.

Mr Nankivell : Yes. I am the chairman of a local irrigation corporation that supplies water to Narara, just over the river. In the mid to late nineties we saw a substantial part of that settlement remove orange trees and go to wine grapes. We are now seeing them go from wine grapes back to citrus. So I suspect that some of that expansion into citriculture may be at the expense of the wine grape industry.

Senator GALLACHER: Mr Nankivell, I want to go back to the fruit fly issue. There was a fruit fly outbreak where I live. People came around and inspected all the houses and the trees in the backyard. I am only eight kilometres from the centre of Adelaide, so are you saying the costs of that inspection move onto the growers in the Riverlea?

Mr Nankivell : I am not sure what is happening in South Australia but here in Sunraysia—and I think there will be some submissions later on that will probably be a bit more up to speed on this—traditionally, fruit fly has been handled by the department of agriculture's eradication unit, and in the villages it has been handled by the various departments of agriculture, with some input from industry. In recent times, industry has been asked to fund more and more of it.

Mr Keenan : Seventy per cent.

Senator GALLACHER: The point you are making is that a lot of the fruit flies are coming from urban areas into growing areas.

Mr Nankivell : I have a farm in Buronga, which is just across the river and fairly adjacent to the highway. We quite regularly see the grey nomads pull in for fuel, park around the back in the parking area and prepare their own lunches. Presumably, they remove their waste there. We have been having fly problem in that particular region for probably 18 months now.

CHAIR: There are no speed cameras in the area. There used to be speed cameras up the highway.

Mr Nankivell : In South Australia, they have got that wonderful rubber tyre that seems to keep them out. We have not got one of them.

CHAIR: There used to be inspection stations. If you went through Narrandera, they would pull you up. It is a wonderful new innovation. Junee shire is the same. We have got a weeds inspector in the shire now. He does not actually spray the weeds; he just inspects them. Senator Ruston, did you want to clarify something?

Senator RUSTON: I want to clarify something that Senator Gallacher asked, and that is the South Australian government, through PIRSA, will still pick up the entire cost of the situation that you referred to in Adelaide. We have not, in South Australia, moved to cost recovery to any degree like the other states have.

Mr Keenan : South Australia has had the benefit of the permanent roadblock at Yamba, and it has done excellent work. The cost of that is quite huge, I would imagine. There are a few random roadblocks which occur in peak times—and there will be more explanation on that. It is surprising that, despite these large signs on the sides of the road which people cannot see and the education program that is attempted, there is still quite a surprisingly high percentage of people who are caught carrying fruit and vegetables at these very few random roadblocks, which might occur at Christmastime or at Easter time.

CHAIR: It is quite interesting that the smoking materials still get through.

Senator MADIGAN: Mr Keenan, it seems that you are saying that there is a gap between the rhetoric and the reality, that we have more-national bodies that are supposed to represent the industry, which you support, but that there is a disconnect in their contact or in their implementation of what the state bodies are doing. Would that be a fair summary?

Mr Keenan : I support a lot of the work that Citrus Australia has been doing—

Senator MADIGAN: I realise that.

Mr Keenan : and I commend them for it, and there are some competent staff. I have a very strong objection to their policy of dismantling existing regional organisations to service regional needs. I think that has been an appalling decision. Part of that has been the capture of the R&D funds, which has been enabled by Citrus Australia's being player and umpire. If Citrus Australia are going to bid for funds—they are most welcome to and I encourage them to—but their should be an independent industry advisory committee. You cannot be umpire and player at the same time. I think this is a fallacy. I think the board of Horticulture Australia have been weak in rubber-stamping the recommendations that have come through from the Citrus IAC, which is predominantly Citrus Australia. There was some attempt last year to correct that, but it was really just shuffling cards, because the appointments to the Citrus Industry Advisory Committee are so strongly Citrus Australia. I would not mind that if they were not bidding for funds. I would not have a problem with that. But if they are bidding for funds—they cannot be umpire and player. Sadly, they have taken the advantage, and some of these allocations of funds to Citrus Australia have not come through on proper submissions, which we are all familiar with. There is a proper submission format to follow for any external funding, government grant or industry funding. That has not always been the case in the allocation of funds, and it has been to the benefit of Citrus Australia. I stand corrected: on not one occasion has an application from Citrus Australia for funding been rejected, whereas the submissions from the department of primary industries, researchers and so on, which go before a review panel, applying for the limited funds which are in R&D, have a very high failure rate. Citrus Australia has close to a 100 per cent success rate; so much so that they could be capturing 70 to 80 per cent of the total funding for R&D for [inaudible].

CHAIR: Do you think it might be insider trading?

Mr Keenan : They have the inside running, haven't they? We need more and more R&D. The industry has gone to ask the citrus growers to lift the levy. I support that, but our bottom line is so appallingly atrocious—I have never lost as much money as I have over the last three years—out of growing citrus for 60 or 70 years—that you do not want any more taken off your bottom line because you are losing money anyway.

CHAIR: We will get to that.

Senator RUSTON: Back to the issue of regionality and the obvious disconnect that has occurred between your peak body and the regional areas, I understand that in Victoria you still have both a state board and your state association.

Mr Keenan : Citrus Growers.

Senator RUSTON: What is the relationship between those two organisations and Citrus Australia. I did not realise there was an advisory committee. You have an existing structure that is obviously working really well. It is collecting money via a statutory levy and doing what it is supposed to—you do not have fruit fly in this region, so you are obviously doing something right—

Mr Keenan : We do.

Senator RUSTON: You do; all right, we will not do that today. What is the relationship between those two and what is not working there?

Mr Keenan : I think it is particularly fractured coming from Citrus Australia to the regional organisations. There was Sunraysia citrus growers originally. Murray Valley Citrus Board is a statutory board. Therefore it is limited as to what it can do. It certainly cannot take on political issues and take political action in regard to government policies and so on. That is a role for citrus growers themselves or Citrus Australia. It needs to be out of the statutory realm. Both the citrus board and the citrus growers work pretty much in tandem. The citrus board is far more active and has a bigger budget and it wishes to play a role in the national organisation. Unfortunately, it is very apparent that the board of Citrus Australia do not wish to have much to do with the two local regional organisations, the board and the growers. They took a very active 'no' campaign publicly when the citrus board was having its four-year vote from growers to continue the board, in the middle of last year, with Citrus Australia. That is why I stopped my membership through Citrus Australia because they took a very aggressive 'no' vote approach and went publicly and went in fact to wipe out the end of the Murray-Valley citrus board. So whether they had their eye on the assets of the board and their income—and the same with the citrus growers? So I have been very critical of their very public, aggressive anti-industry support for regional organisations.

Senator RUSTON: Taking Citrus Australia and the advisory board in this region, did either of those two organisations have any involvement in the selection of the people?

Mr Keenan : No.

CHAIR: Thank you all very much. You would think we had learned from firefighting. One of the reasons fires are getting bigger is that they have done away with volunteers for the units in the paddocks and they have centralised it all with tankers and helicopters. It is a TV product now and you have got hundreds of blokes in headquarters, a hundred miles from the fire, thinking they know what is going on with a fire. Thanks very much for your evidence today.

Mr Keenan : Could I make one brief point?

CHAIR: Yes.

Mr Keenan : I would have thought it would have been a very wise strategy for Citrus Australia, in looking at regional input into the national organisation, to encapsulate both the Sunraysia citrus growers and those in the Murray as part of their advisory thing. They could so access their membership and develop the membership of Citrus Australia by taking a much more inclusive approach to an industry organisation in this region.

Senator STERLE: You might not get the answer you are looking for.

CHAIR: Anyhow, I am going to impose a discipline on you. It is time for a cup of tea.

Mr Nankivell : Senator, if I could just say that with Keith's submission the drive for that is all about stepping back from full cost recovery in these government organisations.

CHAIR: Yes. Thank you very much.

Proceedings suspended from 10:33 to 10:47