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									                                                            Council Members’

                                                           DF Issue 8: 07 November 2007

                                      Meetings of MDB Crisis Taskforce
                                       Canberra, July – October, 2007

                                              Summary of Outcomes

         A delegation from Horticulture Australia Council (HAC), the peak national association representing
         the horticultural industries, met - over a period of four months - with the Federal Minister for
         Agriculture, Fisheries & Forestry, Peter McGauran, his senior officials and officials from Centrelink,
         as part of ongoing discussions over implications of low water allocations in the southern Murray
         Darling Basin (MDB).

         The HAC delegation was established at a meeting in Melbourne in May convened, at the request of
         industry, by HAL. The initial delegation was asked to represent the affected horticultural industries,
         rather in the manner of a skills-based Board, and included representatives from industries most at
         risk: permanent plantings of citrus, nuts, pome/stonefruit, and vines (table and dried grapes). At the
         second meeting of the Taskforce, it was agreed that the industry delegation be broadened to cover:
           ♦ all impacted industries (within horticulture, this included vegetables and winegrapes); and
               Dairy, Rice and Cotton were invited from other sectors of irrigated agriculture; and
           ♦ each major region,
         to ensure we had the full picture from irrigators in the southern Basin.

         All affected industry peak bodies were fully supportive, and closely involved in input to both the
         formal Horticulture position, and the Taskforce itself.

         Horticulture Industry’s Position:

         HAC developed a Submission on behalf of the horticultural industries which went to Government in
         May, and was subsequently widely distributed within industry, Federal and State Government
         Ministers and Departments, NFF, etc. The original full submission is available at:
         www.hac.org.au/%20news_and_events/news/default.asp. A summary of the key points in the united
         industries’ position, presented to the latest meeting of the Taskforce in September 2007, is attached.

         Key Points Raised in Taskforce Discussions:

         ♦   Industry pointed out that, while most permanent plantings (except for citrus) are dormant over
             the cooler winter months, without irrigation and/or substantial ongoing rain over the growing
             seasons of spring and summer, the affected regions face a crisis. The Minister and departmental
             officials acknowledged that, if very low water allocations continue, many growers within these
             industries face potential disaster by the end of the year.

Members of HAC include: Agricultural Investment Managers Australia; Apple & Pear Australia Ltd; Avocados Australia
Ltd; Australian Banana Growers' Council; Australian Citrus Growers Inc; Australian Custard Apple Growers Association;
Australian Dried Fruits Association; Australian Mushroom Growers Association Ltd; Australian Nut Industry
Council; Australian Passionfruit Industry Association Inc; AUSVEG; Cherry Growers of Australia Inc; Growcom; NSW Farmers
Association; Nursery & Garden Industry Australia Ltd; Persimmon Industry Association Inc.; Strawberries Australia; Turf
Producers Australia
     DF Issue 8: 7 November 2007                                                    page 2

♦   On the water front, DAFF reported that, on current inflows, the picture is bleak; and it is very
    likely that there will only be two scenarios as a result of the water authorities’ scenario planning
    over September: colloquially – “really awful” and “complete disaster” for the lower part of the
    Basin (Goulburn Valley to Riverland) in particular.

♦   The industry delegation gave an update on the current water/plant survival situation. Industry
    agrees that, as a ‘rule of thumb’ for permanent plantings, less than 48% of normal annual
    allocation from 1 November would see, at “best”, severe disruption to the plants’ productivity for
    several years; and at worst, massive and unprecedented death of plantings along the MDB.

♦   Industry made it clear on all occasions that this potentially grim situation was not analogous to
    drought – it was analogous to a natural disaster such as Cyclone Larry or major frost/hail/tornado
    damage. Therefore the responses needed to be in keeping with the situation. This was not a case
    of non-viable or marginal farmers coming to the end of their financial and emotional tether as the
    result of years of being worn down by drought; on the contrary, the situation was arising because
    – for the first time ever – the ‘taps were being turned off’ in the entire southern Basin.

♦   The most significant point industry kept reiterating was that current eligibility criteria for
    EC and other disaster relief provisions did not suit intensive irrigated industries, and asked
    for specific changes to allow irrigators to successfully apply for such assistance (see following
    Position Summary).

♦   DAFF reported that in the current round of EC due to the drought itself, some 1,300 horticulturists
    nationally had successfully applied for assistance. It was acknowledged by all that, if the current
    scenarios became reality, this ‘trickle’ would become an unprecedented flood.

♦   The differences in allocations, decision processes, and timing of announcements varied widely
    from state to state, and water authority to water authority. Industry needed timely, accurate and
    simple information on a regular basis from the water authorities (i.e if ‘X’ inflows lead to ‘Y’
    storages, then resulting allocations are likely to be ‘Z’).

♦   The Minister acknowledged potential issues related to the survival of - in many cases decades’
    worth of - genetic materials (held in DPI or CSIRO research stations, industry breeding programs,
    etc.) being at potential risk in the case of insufficient water. Any mass re-planting programs were
    dependant not only on this material, but also on the capacity of the production nurseries to
    re-produce massive numbers of seedlings in short order – currently subject to the vagaries of State/
    Local government decisions (eg water authorities/water restrictions). The Minister undertook to
    raise these issues in the appropriate quarters.


The media interest in the Taskforce and the horticulture ‘story’ in the Basin has been excellent –
though some media did tend to focus on the ‘price rises for food in the city’ angle, many were willing
to consider the fuller picture.

The HAC-led industry delegation has been pleased with the success of the Crisis Taskforce meet-
ings to date, in terms of its translation into Government (and Opposition) policy. Centrelink has
picked up on all our major recommendations in the Supporting Farming Families policy. Most of
the elements of the first phase of the MDB Recovery package were equal to, or higher than, those
proposed. We look now to the second, and significant, phase – of re-planting, and community
support for ‘the long haul’, until all affected industries are back in full production.
      DF Issue 8: 7 November 2007                                                 page 3

         Summary of Horticulture’s Position on MDB Crisis Response
The Problem

Background – Horticultural & the MDB in a Nutshell

♦   Horticulture is a $7bn industry nationally
♦   45 individual commodities
♦   Exports about $800m
♦   Fastest growing sector in agriculture
♦   Over 25,000 enterprises
♦   Approx. 30% of all agricultural employment
♦   Last year, larger than Grains; larger than Dairy and Wool combined
♦   Value of Horticulture to the community is estimated to be $20bn.

 MDB specifically:
♦ Over 138,000 hectares of permanent plantings
♦ $1.6bn fruit per year (ABS, 2001)
♦ 60% of the nation’s fruit comes from MDB (plus significant vegetables, dairy and rice); and 41% of
  total Agriculture
  ο     60% Aust wine relies on MDB; 80% Australia’s wine exports
  ο     70% table grapes
  ο     80% Citrus exports come from MDB
  ο     98% Dried grapes
♦ On fruit alone, using standard multiplier for horticulture x 4 - 6, = $6.4bn value to regional
  communities in the Basin
♦ Lost income = $8.2bn in the worst-case scenario
♦ This is likely to have a significant recessionary economic impact on GDP
♦ Costs to replant permanent plantings between $15-40,000 /ha (depending on industry) - worst case
  scenario of 138,000 hectares x average of $30,000 = $4.1bn
♦ Horticulture uses only 17% of national irrigation water; but produces more than 40% of the output
  from irrigated water – a high value user of this resource.

Government has a major challenge to:
 1. Minimise the economic impact (which will affect MDB for 5-10 years or more) on families, af-
    fected small businesses and regional communities
      ο     and therefore the national impact on GDP and consumers.
 2. Support industry restructure and recovery to assist in the development of long-term sustainable
    agriculture in the Basin; and, in the medium term.
 3. Minimise environmental impact from this disaster.

Regional Communities Impacted
    Goulburn Valley, Vic
    Sunraysia, Vic
    Riverina, NSW
    Riverland, SA
    Virginia, SA
    MIA [Unlikely to have severe impact in 2007-08 season; future outlook uncertain].
 DF Issue 8: 7 November 2007                                                        page 4

Social Impact Potentially Huge
 ♦ Depression
 ♦ Family break-up
 ♦ Stress related issues
 ♦ Suicide
 ♦ Significant loss of services in communities (loss of medical/educational/communication and other
   public services, and consequent impact on services such as banks, etc)
 ♦ Potential loss of community infrastructure, support and cohesion.

The Solution:

     Development of a two-phase MDB Recovery support package which is timely, equitable and
     meets the need of not only farmers and affected businesses, but the whole of the community.

1. Crisis Response Unit
     Immediate announcement of a bi-partisan Crisis Response Unit, situated in the MDB, to reassure
     irrigators that their situation is understood, and that all sides of politics are committed to addressing
     the serious problems in the Basin; and to assist with liaison between the stakeholders.
 ♦     Each region has a Horticulture Group or similar body, which should be represented on the Response
       Unit’s Reference Group, along with the other major agricultural industries, response agencies,
       service providers, Federal/State/Local governments, community representatives, etc.

2. (A) Immediate support in a revised EC Package that meets the need of intensive
     irrigated/water-dependant industries:
 ♦       Income support through Centrelink
       •     increased on-farm asset and off-farm income thresholds
       •     based on projected losses for the coming year
       •     which takes account of the asset value vested in plants, and the rateable value of irrigated land.
 ♦       Eligibility criteria for Interest Rate Subsidy revamped
       •     extended timeframe (up to10 years in some industries)
       •     raised off-farm assets threshold ($200,000 min.)
       •     removal of last 3 financial years’ income criteria
       •     assistance in working with State Governments to achieve consistency of eligibility criteria and
 ♦     Elimination of discrimination against mixed family holdings.
 ♦     Waiver on off-farm income, particularly in the case of permanent plantings (this may assist the
       farming family to maintain the farm until productivity recommences).
 ♦     Farm help (income support for workers)/Retention of key skilled workers for recovery phase.
 ♦     From State Governments – relief from fixed water charges OR assistance to water authorities to
       maintain delivery infrastructure.
DF Issue 8: 7 November 2007                                                     page 5

2. (B) Recovery Support Package to support viable farm enterprises, and ensure the long-term
         sustainability of the Basin and its communities; including:

♦    Structural Adjustment Package (Exit with Dignity) to assist industry restructure, including Farm
    • exit grants (min. $100,000);
    • can take up to (min.) $100,000 of assets (with consideration given to waiver of the Income Tax
    • relocation assistance if required;
    • expedition of elements already included in the PM’s National Plan for Water Security, such as:
         ο (voluntary) buy-back of water allocations (with consideration given to waiver of
             Capital Gains Tax);
         ο facilitation of timely transfer of temporary water allocations (particularly across State
         ο the timely introduction of permanent water trading arrangements;
         ο on-farm water infrastructure/water use efficiency improvements.

♦    Skills Recognition
    • waiver of the 65% Farmbis co-payment (for eligible growers) to allow for skills recognition of
       business owners/managers at Certificate IV, Diploma or Advanced Diploma level, Production
       Horticulture stream of the national Training Package, to provide saleable skills and qualifications
       (as well as some hope and enhanced self-esteem);
    • support in discussions with AFISC/RSA and DEST to allow for skills recognition for skilled
       employees at Certificate III level through the Skills Voucher program.
♦   Water to keep genetic materials (in research stations/industry breeding programs) alive.
♦    Replanting assistance (see Schedule 1, following)
    •  ensuring that the eligibility criteria are inclusive of lease holders, share farmers and land owners
       who had owned their land for 2 years or more;
    • plus (as the situation allows) water is available for production nurseries expected to supply huge
       quantities of plant materials in a short timeframe.
♦   Support for affected regional communities (particularly social support and cohesion; but also
    support for local governments’ ability to fund maintenance of regional infrastructure).

♦    Other Actions Required:
    • Ensure concise and timely information on water allocations is available.
    •   Develop a communications strategy to facilitate the flow of information to and from ‘grass roots’
        growers; eg
         ο Centrelink Rural Service Officer seconded to HAC to provide industry associations and
            growers with information on EC eligibility and provisions;
         ο awareness-raising/information dissemination sessions at the local level in each region
         ο face-to-face delivery of financial strategies and options;
         ο this is best facilitated through industry associations and the Industry Development Officer
         ο will require significant increases in Rural Financial Counsellor numbers.

♦   Ensure the survival of critical industry research and development programs in a time of lowered
    production/levies income.
♦   Ensure the survival of industry representative structures at the time when they are most needed to
    support their members.
         DF Issue 6: 7 November 2007                                                page 6

                                                                                                 Schedule 1

                       Replanting/Re-establishment Costs – by Industry*
    *NB The costs listed are indicative of an average cost for each industry, and can not take into account
    the many variables which may impact on actual costs (such as variety planted – if a lost variety is
    licenced, this may markedly impact on tree price; soil types; planting densities; region; price rises
    due to limited materials available at time of massed replanting; rises in water prices; etc.). Every
    effort has been made to estimate costs based on replanting using current standards of high-density,
    water efficient technologies.

Viticulture (wine, table and dried vine fruits)
Total estimated vine replanting cost is $20,000/ha, for all vine industries:
♦ 1,000-1,200 vines/ha, (approx. $9/per vine): $10,000;
♦ $10,000/ha for labour for on-farm planting and training of vines over 18 months;
♦ plus continued running costs, such as water, fertiliser and other chemicals, estimated at about
    $5,000/ha per annum to cover fixed costs – vines generally crop in year 3 or 4.

Total estimated cost:
♦ for replanting (ground preparation, tree, installation of irrigation systems): $20,000/ha.
♦ plus around $4,000/ha/year for training, pruning, water, fertiliser, pest/weed control and other or-
    chard activities - generally citrus crop in year 5.

Pome Fruit
Total estimated cost:
♦ for planting (approx $10/tree), installation of trellis and irrigation systems: $40,000/ha.
♦ plus around $4-$5,000/ha/year for training, pruning, water, fertiliser, pest/weed control and other
    orchard activities - generally apples crop in year 4 or 5, and pears later.

Total estimated cost:
♦ for trees, planting, installation of trellis and irrigation systems: $18,000/ha.
♦ around $4-5,000/ha/year for training, pruning, water, fertiliser, pest/weed control and other orchard
    activities - generally peaches crop in year three.

Total estimated cost:
♦ for planting (approx $15/tree), trellis & irrigation installation: $15,000
♦ around $6,000/ha/year for training, pruning, water, fertiliser, pest/weed control and other orchard
    activities - cherries generally crop in year 5.

Total estimated cost:
♦ including cost of tree removal, trees ($10/tree) and planting then the cost of replanting is somewhere
    around $5,500/ha;
♦ growing costs/overheads etc. of $3,00/ha per year for around 4 years for almonds & pistachios, and
    8 or 9 years for walnuts.

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