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									            COMMONWEALTH OF AUSTRALIA



     Official Committee Hansard

                  SENATE
SELECT COMMITTEE ON AGRICULTURAL AND RELATED
                  INDUSTRIES


          Reference: Food production in Australia

           MONDAY, 12 OCTOBER 2009
                        CANBERRA




                  BY AUTHORITY OF THE SENATE
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                                    SENATE SELECT COMMITTEE ON
                              AGRICULTURAL AND RELATED INDUSTRIES
                                            Monday, 12 October 2009

Members: Senator Heffernan (Chair), Senator O’Brien (Deputy Chair), Senators Fisher, Milne, Nash and
Sterle
Participating members: Senators Abetz, Adams, Back, Barnett, Bernardi, Bilyk, Birmingham, Mark Bishop,
Boswell, Boyce, Brandis, Carol Brown, Bushby, Cameron, Cash, Colbeck, Jacinta Collins, Coonan, Cor-
mann, Crossin, Eggleston, Farrell, Feeney, Fielding, Fierravanti-Wells, Fifield, Forshaw, Furner, Humphries,
Hurley, Hutchins, Johnston, Joyce, Kroger, Lundy, Ian Macdonald, McEwen, McGauran, McLucas, Marshall,
Mason, Minchin, Moore, Parry, Payne, Polley, Pratt, Ronaldson, Ryan, Scullion, Siewert, Stephens, Troeth,
Trood, Williams, Wortley and Xenophon
Senators in attendance: Senators Back, Fisher, Heffernan, Nash and O’Brien
Terms of reference for the inquiry:
  To inquire into and report on:
  Food production in Australia and the question of how to produce food that is:
  a.    affordable to consumers;
  b.    viable for production by farmers; and
  c.    of sustainable impact on the environment
                                                                        WITNESSES
BELL, Professor Alan William, Acting Chief of Division, Food and Nutritional Sciences,
Commonwealth Scientific and Industrial Research Organisation .............................................................. 56
BURDON, Dr Jeremy, Chief, Plant Industry, Commonwealth Scientific and Industrial Research
Organisation..................................................................................................................................................... 56
CLARKE, Mr Sydney Ralph, Private capacity ............................................................................................ 19
CRIBB, Professor Julian Hillary James, Principal, Julian Cribb and Associates....................................... 2
DALY, Dr Joanne, Group Executive, Agribusiness, Commonwealth Scientific and Industrial
Research Organisation .................................................................................................................................... 56
GRIBBLE, Mr David, Private capacity......................................................................................................... 45
JONES, Mr Symon, Private capacity............................................................................................................. 45
KEATING, Dr Brian Anthony, Director, Sustainable Agriculture Flagship, Commonwealth
Scientific and Industrial Research Organisation .......................................................................................... 56
LEE, Dr Bruce Thomas, Director, Food Futures Flagship, Commonwealth Scientific and
Industrial Research Organisation .................................................................................................................. 56
MacFARLANE, Ms Tina, Private capacity................................................................................................... 30
MORELL, Dr Matthew, Theme Leader, Future Grains, Food Futures Flagship, Commonwealth
Scientific and Industrial Research Organisation .......................................................................................... 56
PRESTON, Dr Nigel, Theme Leader, Breed Engineering, Food Futures Flagship, Division of
Marine & Atmospheric Research, Commonwealth Scientific and Industrial Research
Organisation..................................................................................................................................................... 56
PRIDEAUX, Dr Chris, Acting Chief, Livestock Industries, Commonwealth Scientific and
Industrial Research Organisation .................................................................................................................. 56
Monday, 12 October 2009                   Senate—Select                                     ARI 1


Committee met at 9.35 am

   CHAIR (Senator Heffernan)—I declare open this hearing of the Senate Select Committee on
Agriculture and Related Industries. The committee is hearing evidence in relation to the current
inquiry into food production in Australia. I welcome you all here today. This is a public hearing
and a Hansard transcript of proceedings is being made. Before the committee starts taking
evidence, I remind all witnesses that in giving evidence to the committee they are protected by
parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on
account of evidence given to a committee. Such action may be treated by the Senate as a
contempt. It is also a contempt to give false or misleading evidence to a committee. The
committee prefers all evidence to be given in public, but under the Senate’s resolutions witnesses
have the right to request to be heard in private session. It is important that witnesses give the
committee notice that they intend to give evidence in camera. If a witness objects to answering a
question, the witness should state the ground upon which the objection is taken. The committee
will determine whether it will insist on an answer having regard to the ground which is claimed.
If the committee determines to insist on an answer, a witness may request that the answer be
given in camera. Such a request may, of course, be made at any other time.




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ARI 2                                       Senate—Select                     Monday, 12 October 2009




  [9.36 am]

CRIBB, Professor Julian Hillary James, Principal, Julian Cribb and Associates

   CHAIR—Welcome. If you would like to make an opening statement, we would be delighted
to hear it.

  Prof. Cribb—Thank you, Senator. I am a science writer. I run my own business in Canberra. I
have had a longstanding interest in the issue of agriculture and agricultural sustainability
throughout my career as a journalist.

   The opening statement I would like to make—I understand the committee is interested in the
nutrient issue in particular, on which I have submitted a paper to you—is a contextual opening
statement, if that is all right. First of all, as I am sure you are well aware, the world population is
going to be around 9.1 or 9.2 billion people by 2050, barring accidents, and food demand is
growing at about one per cent per annum on top of that population growth. So there is going to
be a requirement for roughly double the amount of food by the mid part of this century.

   The second issue is peak water. City demand is now outrunning irrigation demand worldwide.
Groundwater levels are falling in almost every country where water is used to produce food.
Five billion people will face water scarcity in 2050. According to the Australian Colin Chartres,
who is the director-general of IWMI, current estimates indicate that we will not have enough
water to feed ourselves in 25 years, by when the current food crisis may turn into a perpetual
crisis. That is the view of an expert.

   With regard to peak land, the global stock of good farmland is declining. Twenty-five per cent
of the world’s farmland is degraded to some degree or other. That is FAO data. We are losing
about one per cent per year. So project that into the future and you will see how much we may
have left. Urban land use is set to double. That is not only the footprint of the city itself but also
all the land in the catchment that it swallows up for recreation and other activities. Basically, it is
the world’s best farmland because cities are located in river valleys, by and large.

  With regard to peak nutrients, the world perhaps passed peak phosphorus in 1987. Peak gas,
which is the main source for producing nitrogen fertiliser, is expected to occur some time in this
decade. So fertiliser prices are likely to go up very sharply. More than half of all food produced
and three-quarters probably of all nutrients are currently being wasted. We discuss that in the
paper.

   The International Energy Agency says that we are heading for peak oil. As you know, half of
the world’s agricultural industry is entirely dependent on oil to keep the wheels of the tractors
turning. Fuel prices are going to go up quite savagely, obviously over the next 20 years or so. If
agriculture switches to farm produced biofuels, it will probably involve a penalty of about 10 per
cent in food output in order to sustain the actual agricultural activity. If, however, agriculture has
to supply the fuel for the trucks that carry the food to the cities, then you can expect roughly 30
per cent of agriculture may well be devoted to producing that fuel. So the need for an alternative
transport fuel for agriculture is extreme.

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Monday, 12 October 2009                    Senate—Select                                      ARI 3


   There is declining R&D. Practically ever since I have been an agricultural journalist, since the
early 1970s, the rate of agricultural research has been declining in every major country in the
world and internationally. There has not been a real increase in international agricultural research
funding since 1974, which is a very long time, and the world population was half what it is today
at that time. All the major countries that have invested so much in agricultural research have
been pulling back. Even countries such as China have reduced significantly the amount of
agricultural research that they are doing. So farmers worldwide are driving into a large
technology pothole, and that needs to be addressed.

  Twenty-nine per cent of the world’s fisheries are overexploited. FAO sees no prospect for
expanding the worldwide harvest of fish in volume terms. What this means is that all the
increasing demand for protein will be thrust on to land based agriculture. So if we cannot
produce another 100 million tonnes of fish out of the sea, we are going to have to get 100 million
tonnes of either fish or meat from land based animals, and that is going to take one billion tonnes
of grain and so on.

  Finally, we have climate change. The Hadley Centre, which has probably got the best model in
the business—it is in the UK—suggests that 40 to 50 per cent of the world will be in regular
drought by the end of the century. Certainly the climates are becoming much more erratic, and
we ourselves appear to be one of the early witnesses to the sorts of changes that are going on in
the climate. Yes, it will rain more in some countries, but not always where you want it to. The
general picture is for the large grain growing areas of the world to dry out, particularly critical
areas such as India, central Asia, China and so on. So all those things are coming together.

   Basically, I will sum up. The present challenge facing farmers of the world is to double food
output using less land, less water, less energy, fewer nutrients and with the prospect of less
technology to help them in the teeth of increasing drought. It is a very big ask. It suggests to me
at any rate that the present global agricultural system and global diet are not sustainable in the
long term. Thank you.

   CHAIR—Thank you. It would be fair to say, then, Professor, from the terms of reference of
this committee, which are how we produce food that is affordable to the consumer, that the
consumer will have to rejig their household budget more in the fridge than in the garage if we
are to have an environment that is sustainable and a farmer that is viable. It is a pretty daunting
question. I want to go to a couple of things before I throw to the committee members. Generally,
I tend to open when I talk about this by saying that, by 2050, 50 per cent of the world’s
population will be poor for water and a billion people will probably be unable to feed
themselves, if we go to a population of nine billion-odd. Thirty per cent of the productive land of
Asia will go out of production, and two-thirds of the world’s population will probably live there.
The food task will double. Something you did not mention is human displacement on the planet.
There could be over one billion people displaced who have to move somewhere else to live. In
your professional view, is there anything wrong with me saying that?

   Prof. Cribb—Not at all. I agree completely with that. My reading of the defence literature
from the US and the UK is that the defence establishments there are already anticipating tidal
movements of populations, in the hundreds of millions. They are anticipating conflicts on a
considerable scale resulting from those movements, prompted by famine, basically. They warn
of the possibility of nuclear war.

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   CHAIR—When Mick Keelty said probably two years ago when he was commissioner that
the greatest threat to Australia’s sovereignty was climate change, where he was referring to
human displacement, Australia did not really react to that. I got into a bit of trouble. Someone
wrote ‘Heffernan—Asian invasion’, or something. But it is a serious problem. On the scale of
the UN, it is hard to get your mind around it. My understanding, Professor, is that, regardless of
climate change, people are living off the great northern aquifer in China. People are in the
northern part of the southern continent of Africa. There is going to be huge human displacement
problems or feeding problems there. Have you got any idea that you can give the committee on
the problems of global displacement?

   Prof. Cribb—Yes. If we talk about the North China Plain, where 70 per cent of the water is
used to grow food, the top aquifer has gone and the bottom aquifer is supposed to be half empty.
It probably has about 15 years supply left. The rainfall which comes in from the monsoon from
the Bay of Bengal is declining. The last time this happened seriously was the 9th century, and it
brought down the Tang dynasty. It is estimated that about 400 million Chinese are dependent for
food on the North China Plain, so a loss of food production potential in that area would displace
a lot of people. Where they would go is not entirely clear. It depends on whether they anticipate
it and move out as economic migrants or whether they flee as refugees. There is no doubt about
it that China is very worried. It is building nine immense canals to bring water up from the south,
but the experts that I have spoken to tell me that those canals are only big enough to supply the
cities. They are not big enough to grow the food, so the food problem remains unresolved.
Undoubtedly a lot of those people would go north to Siberia. Siberia is an immense place. It has
the population of Australia. So that is one potential international stress point that you can
imagine if many Chinese decided to migrate north.

   Similarly, with the Indo-Gangetic Plain, the glaciers in the Himalayas, represent an enormous
bank of frozen water. They cause the 15 great rivers to flow all year around, meaning that
farmers can grow two crops of grain from those rivers. Those glaciers are melting very fast.
When they are all gone, and it is estimated that they will be gone by about 2020, the rivers may
themselves take on a seasonal pattern, flooding after the winter and then drying up at the end of
the summer and in autumn. So farmers will not be able to grow two crops. You might halve the
amount of production. The International Food Policy Research Institute had a paper out last
week. It predicted a 30 per cent decline in irrigated wheat production across the whole of Asia
and a 15 per cent decline in rice production under climate change. I think it is primarily thinking
about this issue of the loss of the water tower in the Himalaya.

   CHAIR—Obviously the CSIRO has said that by 2050 Australia will have no wheat to export
if it does not get off its backside. Certainly we have already received evidence which backs up
your declining research comments. The CSIRO is saying that the global protein task will not be
met with meat. It will be a fish task, which will have to be fish farming.

   Prof. Cribb—Yes. Fish farming is feasible. Fish are more attractive than feedlot cattle
because they eat only half the grain. It only takes seven kilos of grain to produce a kilo of fish
whereas it takes about 15 kilos of grain to produce a kilo of beef. So they are more efficient in
that sense; pardon the pun. They also cause considerable pollution. Wherever you have a fish
farm, you end up with a eutrophication problem, very often. If you are feeding your fish on other
fish, it takes five tonnes of fish to—



                          AGRICULTURAL AND RELATED INDUSTRIES
Monday, 12 October 2009                     Senate—Select                                       ARI 5


  CHAIR—No. We are well aware that that is a waste of time. But we could have this farming,
as the CSIRO described to us, at sea. I presume they will present on that this afternoon.

  Prof. Cribb—I will comment on that. I have believed for a long time that pastoralism is
something that Australia does very well. We have never tried pastoralism of the seas. We have
always gone for intensive methods. Intensive methods tend to have a lot of problems and they
are very expensive. But we could do extensive aquaculture in the seas, maybe not even with
nets.

 CHAIR—I suppose we should put it on the record that the volume of the sea compared to the
mass of the land is about 12 to one.

  Prof. Cribb—It is high.

  CHAIR—So there is 12 times as much sea as there is land above sea level, which is a fairly
big resource.

   Senator O’BRIEN—So how do you suggest we should provoke a human response to this
crisis that you foresee in terms of food production and a shortage of nutrients for food
production and pressures on land use and population pressures et cetera?

   Prof. Cribb—I think the first thing to do is to realise that it is a real problem. The world at
large does not realise this or they would be putting a lot more effort into solving it. I have written
a book, which will come out early next year. I am saying that this is the problem of our age. It is
more immediate than climate change. It is going to happen a lot faster than climate change.
Climate change is bound up with it, but the real impact of this is going to be on us within a
generation. We have about that long. It takes 25 years to get a bit of technology out of the
laboratory and onto a whole lot of farms. So we have only just got enough time to do something
about this. In the book, I am calling for a quadrupling in the international level of investment in
agricultural research and development.

  CHAIR—Hear, hear!

   Prof. Cribb—We are currently spending about $36 a year on agricultural research. If I could
contrast that, we are spending $1.5 trillion a year on weapons. Weapons presumably are intended
to prevent wars, or maybe to cause them. But if we invested more in agricultural science—I am
suggesting about $130 billion or $140 billion worldwide per year—we would have the capacity
to prevent wars. So this is actually a form of defence spending. It is an investment that every
wise country needs to make if we are to prevent the sort of population displacements and the
conflicts that arise from them that you yourself refer to, Senator.

  Senator O’BRIEN—So what are the solutions in India, Pakistan and South-East Asia—let us
ignore Africa for the moment; the problem is already there—and Nepal, where the water
problem, which appears to be caused by climate change, will become the most dramatic and the
quickest, from the sound of your submission, unless you have some other view?

  Prof. Cribb—I think they are going to need a great deal of help. First of all is the knowledge
that goes into producing food amongst all human beings. We need to give them all of this

                           AGRICULTURAL AND RELATED INDUSTRIES
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knowledge that we possibly can as quickly as possible so they can make the best use of it within
their own environment and their own cultural and climatic context. We need to free up the
floodgates. So not only do we need to generate more knowledge, we need to disseminate it a hell
of a lot better than we are at the moment. We are very good at agricultural science. We are rather
poor at disseminating it. That is the problem in Africa. It is not that there are not solutions to
Africa’s problems technically, but the dissemination of knowledge in Africa has not happened
because they have not had an Indian agricultural department or a Chinese agricultural
department to distribute that knowledge. So the distribution of knowledge has been a real
problem. I am hoping that the Gates Foundation and people like that will get on to this issue.
You have to get the knowledge to 1.9 billion farmers on how to farm more efficiently and more
effectively.

  That brings us to questions like nutrients and so on. Where are they going to come from when
the mineable supplies start to run low or become very expensive? We have to recycle the
nutrients. That is the only solution. The biggest nutrient mine in Australia is called Sydney. The
biggest nutrient mine in India is Mumbai.

  CHAIR—The human body.

   Prof. Cribb—Well, we are putting all of these nutrients—not just human waste but also 50
per cent of the food—in the garbage on the way to the human being. So we are wasting half the
world’s food at the moment. We actually waste enough food to feed three billion people
worldwide at the moment. There are one billion starving people in the world at the moment. So
technically this is an issue that can be solved. We have seen a lot of focus on this in Britain in the
last year or so—the waste of food and ways to curb it. But it seems to me that if we want to save
our water and save our land, we have to save the food. That is the most economical way to do it.

  I think you also referred to price. I have come to a conviction that farmers are paid for their
produce at a level that destroys the productive base of agriculture. Supermarkets worldwide,
perhaps unintentionally, go around the world seeking the cheapest supplier. This has an effect of
closing down agricultural production in a number of areas. As soon as the supermarket finds that
they can get cheaper beans or asparagus in Kenya or Chile or somewhere like that, that is where
they go. You can see it in your own supermarket.

  CHAIR—And Zimbabwe, which is starving.

  Prof. Cribb—Absolutely. There are all kinds of ironies to this. I am not criticising the
supermarkets because they are doing what their customers want, which is giving them the
cheapest possible food. But the food that we are buying at the moment is half the price of what
our parents paid for it. Back in the 1950s and 1960s, Australians spent about a quarter of their
household disposable income on food. Today they spend about 12 per cent to 14 per cent,
depending on where you are in the socioeconomic spectrum. So food has halved in price. That
cost has come out of the environment. That is what puts the pressure on farmers. When the cities
gobble up the good farming lands in the river bottoms, they push agriculture out into the
marginal country, where drought and things like that are more of a reality. So we have to change
the price signal that farmers get. Farmers have somehow got to be paid to look after the
environment.


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  CHAIR—Senator O’Brien is heavily involved in dairy. Have you got any reflections you
would like to make? Say it is 26 cents or thereabouts now and 20.8 cents if you do not sign a
contract. I just tested Senator O’Brien with milk over the weekend at a few supermarkets. It did
not seem to matter whether it was light milk. The cheapest milk seemed to be full cream milk.
But $2.99 a litre seemed to be the price in the plastic bottle in the supermarket, yet the dairy
farmer, as you say to make the point, is expected to do that for 26 cents.

  Prof. Cribb—I heard that they were moving dairy manufacturing to China, which seems
absurd to me. They are taking Australian milk to China and turning it into cheese and putting it
back into Australian supermarkets. Think of all the fossil fuels involved in that. So there are real
absurdities about the current world food distribution system.

  CHAIR—Who is planning to do that, by the way?

  Prof. Cribb—I heard that Nestle Corporation is considering that.

  Senator O’BRIEN—China are importing dairy cattle in a big way.

   Prof. Cribb—Yes. That is a feasible thing. They will also probably have to import more grain
to feed the dairy cattle. They are big grain importers as it is. It is another processing industry.

  Senator BACK—The importers are also traders. An awful lot of what they import does not
end up in China.

   Prof. Cribb—But the whole global food system is awry. As we know, one of the difficulties is
not having free trade in those sorts of things. If we had free trade, agriculture would naturally
gravitate to the most efficient producers. This would get us out of some of these problems. So I
think that would help. As I say, at the end of the day, the consumer has to pay for the
environmental damage that is caused by the production of food—the soil loss, the water and so
on.

  Senator O’BRIEN—Ironically, your thesis would give comfort to, for example, the EU in
their argument that they should subsidise food production to ensure that they have security of
supply.

   Prof. Cribb—The EU has one approach to the issue. I do not necessarily concur with it. But
their approach is that they will subsidise the farmer for looking after the environment. In other
words, they would pay the farmer a wage for looking after the environment. Then the farmer
would run their enterprise separately. That is one way of doing it. But it adds up to the same
thing.

  Senator O’BRIEN—But that is one argument they use. They use a variety of arguments to
justify export subsidies and production subsidies.

  Prof. Cribb—They have used arguments all—

 Senator O’BRIEN—But a substantial argument has been that at the end of the Second World
War we had to import food. We do not want to be in that position again. Therefore, we will not

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allow our agriculture sector to decline because others are more efficient producers at a lower
cost. Therefore, we will use tariffs, quotas and subsidies, which they do in a very big way, to
ensure continuity of production in the European Union. Your thesis would give some credence to
that as a valid national or group of nations strategy for internal food security.

   Prof. Cribb—Europe is not disconnected from the rest of the planet. It is part of it. Oxfam has
made a statement that the European policy destroys prices for other farmers around the world. It
promotes starvation, hunger and suffering in places like Africa. I put it to you that if the African
food production fails on a significant level, the first people to feel it are going to be the
Europeans. North Africa is one of the most threatened areas in the world with regard to its
agricultural future. The population is soaring there. Then you have sub-Saharan Africa and so on.
If hundreds of millions of people come out of Africa, and that is a possibility, an awful lot of
them are going to head straight for Europe. So the Europeans are going to have to think hard
about what the wise policy is. I suspect that they will have to invest heavily in African
agriculture to prevent that happening.

  CHAIR—Do you think the world is tuned into this?

  Prof. Cribb—No. I do not see any government in the world that is completely across this one.

  CHAIR—We are, by the way. I am.

  Prof. Cribb—Individuals, by all means. And people like Bill Gates, who do not come from
agriculture at all. But I do not see any government that is reacting as if this were a serious issue.

   Senator BACK—I want to pick up on Senator O’Brien’s comment on this, because it has
obviously been of great interest to me over the years. I happened to be in France last week. For
whatever reason, for the last 18 months to two years, the Sarkozy government has effectively left
the sugar beet industry out to dry based on the fact that they can now import sugar from Brazil.
Right throughout the areas we were, where I know from past experience sugar beet was the
predominant crop, there is absolutely no sugar beet being produced and all the big processing
facilities have closed up. Enormous areas of France were devoted to sugar beet production. It is a
bit hard to communicate, I suppose. I was asking what the impact has been. A lot of that land is
now just being put down to sorghum and corn. There is an absolute absence of animals. There is
the odd dairy animal. That is the first evidence I have seen where they may have actually started
to move away from that policy that we have all railed against for so long. Of course, it was
causing great antagonism with the farmers that we interacted with. Obviously they are fairly
introverted, as we know, and they do not mind getting on their tractors and boycotting French
cities. Can you talk a bit more about your proposal with regard to capturing and recycling
nutrients? Nothing have you said and nothing I read in the last few hours from your paper is
illogical to me. We can all see the direction. Can you tell me how you feel practically, on a mega
scale, we can actually capture and recycle nutrients?

  Prof. Cribb—The first thing to note, really, is that Australia is very nutrient poor. It is an old
eroded continent. We are using our soils a hundred times faster than nature makes them. That
means we are losing our nutrients. We were losing our nutrients long before human beings
arrived here. So we are at more at risk from this than some of the other countries that have good
nutrient reserves. It is a bit like oil. We do not have very many. We have some potential mines—

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Monday, 12 October 2009                    Senate—Select                                       ARI 9


Duchess and so on—but I do not think we have enough for the long haul. So we really have to
look at Sydney and Melbourne. Our cities are immense traps of water and nutrients. Huge
quantities of water and nutrients power through these places and we, generally speaking, chuck
them out to sea. So if we can trap even a part of that water and nutrients and recycle them back
into agriculture or other uses, we will stem the haemorrhage.

  The way I like to think about this is that if I described the modern nutritional system to my
grandfather or great-grandfather, they would have said it was utterly crazy. We are mining rock,
putting it on farms, producing all this food and then flushing it out to sea to the bottom of the
ocean never to be seen again. They put all the waste on the compost heap and the manure heap
and they forked it back onto the paddocks. They would regard that as a completely natural cycle.
The Chinese had night soil collection and things like that. Agriculture for the last 10,000 years
has been a reasonably sustainable closed loop system. Just in the last 50 years we have busted
that. We have to start recycling nutrients again. It is quite easy to do. There are all sorts of ways
that you can filter nutrients out of almost any waste stream. There is an enormous amount of
organic waste in cities, both foods and garden clippings and things like that, which could be
recomposted. You can either extract the elemental nutrients or you can produce soils or soil
additives and things like that. So we need to see this as an opportunity, not as a waste disposal
activity. It is a big industry that we could have here, if we wanted to.

  Senator BACK—And it is an area that Australia could take an international lead in, is it not?

   Prof. Cribb—Absolutely, because nobody is doing it properly. They are doing it on a small
scale in India and places like that. They are putting wetlands and things like that on the sewage
effluent and so forth. But nobody is actively saying to themselves, ‘How do we harvest the
nutrients?’ It is cheaper to harvest nutrients directly from our human waste stream than it is to
grind up rock, truck it thousands of miles and turn it into fertiliser.

  CHAIR—Give the politicians the courage, though, to do something about it, because most
politicians are only worried about the next election. You really have to turn the public on. To turn
the public on, you really have to make them aware of what the problem is. How the hell do we
do that?

  Prof. Cribb—Well, that is why I have written the book, Senator. The book is addressed to the
public worldwide. It is telling them that they are looking at a food problem for themselves and
their children that is not solvable with current technology and current behaviour. Both have to
change.

  Senator BACK—I want to pick up on that same theme. You have been involved, by
extension, in journalism all of your career. Why is it that Australians have such an antagonism to
the recycling of water? They tell me that water in the Thames from its point of origin to the
ocean goes through human beings seven times. We are the driest continent on earth. The Israelis
show us up in terms of water conservation and harvesting. Yet we saw evidence in Toowoomba
only however many months ago—

  Senator O’BRIEN—It is 10 times.




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   Senator BACK—It is 10 times, not seven. Sorry, I have been corrected. It is just remarkable
to me that on the driest continent on earth we must be immeasurably the most wasteful per capita
of water. How do we get that message across? Western Australia is just one example. I am sure it
is no worse than anywhere else. We just see evidence of it all the time. How do we convince the
population that we are effectively signing a warrant?

   Prof. Cribb—My crazy idea when I was working on a paper on this for ATSE, the Academy
of Technological Sciences and Engineering, was to invite the Prime Minister to drink his own
suitably treated, processed water and things like that. But I think it is an area where a bit of
leadership would not go astray. All cities in Australia are attempting some sort of recycling, but
it is very, very small. In most cities, it is two, three or four per cent; it is extremely low. I think
we just have to do it, actually, in spite of the moans and groans. I do not believe that the average
Australian will object to this. I believe the average Australian will accept it as being good for
them, as they accept a number of other prescriptions. But it has to be marketed. There have to be
people demonstrating the issue. They have to hear the people whose opinions they respect—the
leaders of society. I would like a campaign in which prominent Australians simply endorsed it
and were seen to be doing it—carrying flasks of recycled water around with them and drinking
from them.

  The membrane technology and so on is brilliant these days. It can screen out just about
everything. So the capacity to do it without any risk is very high. It is improving all the time.
There really are all sorts of very clever ways of harvesting waste water and making it suitable for
reuse, including potable reuse.

  Senator BACK—I have other questions, Mr Chairman, but I would be happy to come back,
because I know other senators will have questions.

  Senator NASH—Thanks for your submission, Professor, and for being here this morning.
One issue you have touched on this morning is this issue—I am not having a go at the
supermarkets—of the supermarkets procuring the cheapest. I was part of a forum a couple of
weeks ago discussing exactly this issue. How do we shift from the idea of competition delivering
the lowest price to the consumer being the be-all and end-all of everything to getting some
awareness that if we have not got a sustainable, profitable farming sector, we are going to be in
real trouble in terms of food security? How do we try to change that mindset?

   Prof. Cribb—We need to go and have a good talk with the supermarkets. The supermarkets
are open to market demand. They have a lot more organic produce now because they are getting
that demand from their customers and they see that it is in their business interests to put organic
produce on the shelves. If they start to see people demanding fairer prices for farmers and they
start to sense that there is consumer sympathy, they will be much more open to talking.

   I believe that a lot of the education of the consumer can be done by the supermarkets. As you
go through the checkout, there are a whole lot of glossy magazines and newspapers and things
like that containing information about food, most of it very bad for you, I might add. That
information could, in fact, be good for you. It could be about how to alter your diet to a much
more sustainable diet. I believe we are probably worldwide going to have to double the amount
of vegetables in the world’s diet and reduce meat and dairy and other things that are energy
intense in order to achieve this. I believe that that will lead to a better price for the livestock

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producer because it will lead to less intensive livestock production. I think there is a consumer
reaction starting to open up now against highly intensive livestock production. We see it in the
egg industry and we are starting to see it in other industries—pork and feedlot cattle and so forth.
I believe the future of the large livestock industries is in the pastoral country of the world for two
reasons. One is because that is where good, clean meat comes from. The second is because we
need to lock up carbon big time, and the rangelands are the biggest farmed, managed lands in the
world. So they represent a huge opportunity to lock up carbon, if we run them right.

   Senator NASH—In terms of our domestic production capacity—I think this issue of food
security is the absolute sleeper. Senator Heffernan has pointed out that this committee has a very
clear focus on it, but obviously the general population does not. How do we ensure that there is
sustainable domestic production capacity into the future when a number of the market
mechanisms around the would seem to be leading us to be a nation of importing on price, I
guess, in a lot of areas? When you have issues of quality assurance and security of supply with
imports, it seems that we need to have the most secure domestic production capacity that we
could possibly have. What do you see as the ways in which we can ensure our domestic
production?

   CHAIR—I will add to that. Some evidence we received in Brisbane, I think, was about the
role of community gardens. I would like to add what used to happen until we got too bloody
lazy. I used to milk a cow once. There is the resource of the backyard. There are tens of
thousands of backyards. A piece of land the size of this space here could feed the street.

  Prof. Cribb—I suppose gardening generally is a very fashion driven thing. I believe that once
home vegetable production and so on becomes more fashionable again—I think it goes in
cycles—it will happen. To be candid with you, I see the major—

  Senator FISHER—I am sure that governments would have to abandon backyard water
restrictions before that would happen.

  Senator NASH—Can we just go back to my initial question on the bigger domestic
production. If we could deal with that one first and then go to the garden issue, that would be
great.

   Prof. Cribb—How do we obtain security? I think unfortunately market mechanisms will not
deliver this. If one is talking about taking water away from farmers—the cities can afford to buy
water much more readily than farmers—this will necessarily lead to a reduction in agriculture
and an increase in imports, unless farmers are able to become very much more water efficient,
and they are already pretty water efficient. The second thing is land. We are currently putting
golf courses, racecourses, resorts and God knows what on our best farmland in the high rainfall
zones in Australia. You have seen what is happening with mines in the Gunnedah Basin and up
around Blackall and places like that. We are destroying our reliable agricultural potential in
Australia. It is time we started to think about this for the long haul. You cannot grow everything
in the back of Bourke because it is not going to be climatically reliable, so we may have to go
back to farming the Bega Valley and places that we are gradually turning into recreational
farming.




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  Senator NASH—I want to ask you a bigger question about domestic sustainability. Is there a
role for government, in your view? If so, what should government be doing to ensure that
sustainability of the farming sector domestically? Before I ask that, I have a question on that
prime agricultural land issue and the role of government. Should we be looking at zoning prime
agricultural land for primary production in the same way that we zone certain things in cities for
certain uses? Should we, as a government, be looking to zone prime agricultural land to retain it
for primary production purposes?

   Prof. Cribb—I know that we are opening up a Pandora’s box here. But my answer, in the
context of what is coming down globally in the next 50 years, is yes. Governments will have to
set aside prime agricultural land for food production because there will not be enough food
globally. That is a general statement applying to all governments. The same probably applies to
water. I would add that I really feel sorry for irrigation farmers at the moment. They are getting
hit to leg by drought and nobody seems to be on their side. The amount of science going into
making them more water use efficient or giving them alternative enterprises is pretty small. I
think we should be investing massively. It is our opportunity to be the first country in the world
to solve the problem of critical water shortage in agriculture. We have that opportunity, but we
will not do it without science. I think the irrigation CRC is closing down, or something like that.

  Senator NASH—Land and Water Australia.

   Prof. Cribb—Land and Water Australia got the axe, which has to be a not very intelligent
thing to do. It will have to be undone at some point. The CSIRO has reduced an awful lot of its
irrigation research, so CSIRO needs to be asked what on earth they are thinking of. The state
agriculture departments are all cutting back in this area. Irrigation farmers have been hung out to
dry, pardon my French, and I think we really need to do something for them in order to help
them make the transition to the high water efficiency agriculture that we need.

   Senator NASH—I have two more questions. I want to return to the sustainable farming sector
issue and the role of government. You mentioned before that if there were free trade, markets
would be evening out. But we are obviously not going to get to that point any time soon in terms
of free trade right across the world. Bearing in mind that we are not going to get to that point and
the free market approach we have had within this country, is there a role for government to
ensure sustainable domestic production? If there is, what should it be?

  Prof. Cribb—I think, as I indicated, there is a role for government in Australia. It is around
defence. It is around securing this country’s future long term. It is about recognising, as Senator
Heffernan suggested, that we might be receiving an awful lot more migrants than we have
bargained for—millions more than we have bargained more—and we may not have any control
over that. So we need to be doing two things—shoring up our own food production capacity and
exporting the knowledge to assist people to stay in situ where they are in their homes. So it is
both those things. Even though our cities occupy a very small part of the continent, they
nevertheless occupy or absorb a lot of the prime farmland with their recreational activities and
the water. So I think we have to start blowing the whistle on that. The word ‘development’
means destroying future food producing potential. That has to be understood now.

  Senator FISHER—Thanks, Professor. You talked earlier about food waste. You said that we
are wasting sufficient food to feed three billion people. Your submission talks about dumped

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nutrients potentially feeding a further six to 10 million people. Can you reconcile those two
figures?

   Prof. Cribb—The three billion is worldwide. That is all the food that is lost post harvest.
Some of that is very hard to retrieve, I might add. You always lose a few cabbages, you know.
There is also food loss in processing and nutrient loss in processing. The more processing there
is, the more nutrients you lose. Then there is the actual shops themselves. You have seen the
trucks with the stale bread out the back of the supermarket at night and what restaurants throw
away and what gets thrown away in the home. So I am saying that basically if we just solve the
problem for ourselves, we could probably feed a lot more people than we currently are. I am
certainly suggesting that we start recycling the nutrients, at the very least.

 Senator FISHER—So the six to 10 million people on page 17 of your submission is based on
Australia’s dumped nutrients, is it?

  Prof. Cribb—Yes. The submission really just looks at Australia.

 Senator FISHER—You outlined in your answer just then some of the causes as to why we
waste food. Can you give us any more detail?

   Prof. Cribb—Well, people do not think before they throw food away. There is a whole lot of
health legislation, which is there for very good reasons, but it has use-by dates. The use-by date
has a psychological impact on the consumer. Probably about 15 per cent of our food is thrown
away because of the use-by date factor. I am not saying do not have a use-by date, but I am
saying that we do need to rethink this unfortunate consequence of the health regulations we
have. When we throw our food away, we throw it into landfill, where it produces greenhouse
gases and toxic substances and all sorts of things. We could recycle it. The Dutch are pretty good
at recycling organic waste. All the organic waste we produce could in fact be recycled if we
wanted to do that. But it has not really been addressed as a serious question as yet.

  Senator FISHER—You talk in your submission and in your answer to Senator Back about
the public disdain for recycling water to drink yet we happily recycle cans et cetera. How do you
mean recycle the waste food? Are you talking about recycling it as food or as nutrients? How are
you talking about doing that? How would you deal with what you would expect would be an
increased disdain from the public to recycle food per se?

  Prof. Cribb—Well, I am not talking about literally recycling. Let me offer you three possible
pathways whereby you could recycle food. You could take all of the organic waste—this is like
garden waste, factory waste, the stuff that is nutrient rich—and you could turn it back. You could
compost it and you could use the compost to produce vegetables in the cities. I am not talking
about a back garden now. I am talking about on factory roofs. It is the green cities concept,
which you may be familiar with. It would be on the sides of buildings and the roofs of buildings,
underneath buildings and flyovers. There are all sorts of places you could indeed produce
vegetables, if you wished to do so. That is one way of recycling it. Another way—I believe this
will apply to the world’s mega cities as they get bigger and bigger and more and more at risk of a
food shortage—is you can turn the food into a bacterial, microbial, fungal or plant cell culture
and you can produce highly edible, nutritious substances. The food companies will add salt,
sugar, fat, dye and all the other ingredients and produce something that people will want to eat.

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But microbial protein or plant cell protein is perfectly edible. You can turn the nutrients from the
waste streams of the cities back into that. Third, you could simply harvest the nutrients, turn
them into fertiliser, and truck them back up the Wimmera. So there are a number of ways that
you can do this.

   Senator FISHER—You were talking about use-by dates on food. Ultimately, if any of this is
to come about, the public needs to come along and own the solutions. If we take your example of
use-by dates, the sniff-and-look test has largely gone out the window. We are dictated to by what
is written on a bit of packaging. How do you see the culture of Australians at the moment in
terms of ‘Can I or should I still eat that food?’ Are we any different from other developed
nations?

  Prof. Cribb—I suggest that the culture of Australians today is radically different from that of
their grandparents. Their grandparents would eat it if it were edible. It might have had a bit of
mould on it, you know.

  Senator FISHER—It might make it taste better.

  Prof. Cribb—That is what they would say. So I suspect we are a much more wasteful society
now than we were then. We have taken away people’s freedom of choice to a considerable
degree in this by hedging the whole thing with regulations. We have taken away the freedom of
choice of the supermarkets and the retailers as well to some degree. As I say, this was all done
for terribly good reasons. It was done to stop people dying of food poisoning. Regrettably, a few
people do die of food poisoning every year. But in a world that is short of food, it is starting to
seem less sensible if 15 per cent or thereabouts—that is the figure from the UK, as I recollect—
of your food is being thrown away for that reason. But there are all sorts of other reasons why
food is being wasted as well.

  Senator FISHER—Chair, do I have time for one more question?

  CHAIR—Be quick.

  Senator FISHER—It is a different subject. It is backyard water restrictions. How do you
view them in the context of the crisis that you see coming?

 Prof. Cribb—If you recycled 100 per cent of Sydney’s water or Melbourne’s water, you
would not have a problem.

  CHAIR—It would be 350 gigalitres per year in the three major outfalls in Sydney. If you
create a secondary water market, it fixes Sydney’s water problems for 40 years. That is the
answer. I want to go to a couple of things quickly and then we will go back around the table for
another shot. Have you given consideration to brown coal conversion for organic fertiliser,
which is coming up in Victoria, and obviously coal liquefaction for urea? Would it be fair to say,
as guidance to this committee and the rest of the world, that the proposition that we can use food
for fuel—I would usually say the BS word—in the long term is just not on?

  Prof. Cribb—Are you talking about biofuels?


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  CHAIR—Ethanol type grain for fuel. The world will not be able to afford the luxury of that,
will it?

   Prof. Cribb—Absolutely not. Not first generation biofuels. Possibly algae and second and
third generation.

  CHAIR—Downstream like the MBD type out of coal-fired power stations et cetera?

   Prof. Cribb—Even if you have an algae farm, you have to apply fertiliser, so the algae farm is
still competing against the food farmer for the fertiliser. That is going to drive up the price. In
other words, you are fertilising your four-wheel drive.

  CHAIR—Are you familiar with the brown coal conversion to organic fertiliser?

  Prof. Cribb—I have heard of it. I am not familiar with the detail of the process.

   CHAIR—It is about to be commercialised and it is going to be a huge alternative source of
fertilisers.

  Senator NASH—I have been a huge supporter of ethanol for many years now, as a lot of
people know. There is a social question. If a farmer can produce grain and get more money for
ethanol production, why should they have to produce it for food for the social good without any
kind of compensation or recompense, if you like?

  Prof. Cribb—I do not say that they should. But I suspect that as world food gets shorter and
shorter, the price will start to go up in spite of the supermarkets. A farmer, offered a choice
between selling, say, his sunflower oil for biodiesel or for salad dressing is going to sell it for
salad dressing every time because the market will tell him to do that. So I think that that will be
settled by the law of the market anyway.

  Senator NASH—It will correct itself.

   Prof. Cribb—But I think that is what will push us towards the second generation, those
lignocellulose biofuels and those sorts of things.

  Senator NASH—But we are doing no research in Australia whatsoever—

  Prof. Cribb—None.

  Senator NASH—on lignocellulose, which is appalling.

   Senator O’BRIEN—A project has just been announced, Senator Nash. We will come to that
another time. The issue of arable land and potential arable land intersects with the issue of
biodiversity and other pressures against the extension of agriculture into land that either is
utilised only for grazing and not more intensively or not utilised at all. What is your perspective
on that in the context of your thesis?



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   Prof. Cribb—Well, I also think this issue about paying farmers too little leads them to clear
larger areas of land in order to earn a living. So you destroy biodiversity by having cheap food at
the supermarket. It is not the fault of the farmer. The farmer is obedient to the market signal they
are getting from the consumer. The tendency to overclear country, whether it is here or in the
Amazon, is driven really by the price set in the supermarkets. That is why that needs to change.

  Senator O’BRIEN—Let me cut to the chase. In Tasmania, they are talking about more water
and more irrigated pasture, perhaps, for dairy or cropping. There is opposition from the Greens,
who suggest that we should not be utilising this land more intensively. They are spreading the
message of doom and gloom as, in my experience, they generally do. That is providing a
limitation on the expectation that here is an area where we have potentially a lot more water,
which we can use productively, instead of letting it run into the sea through short course rivers,
as exist there. How do we approach that?

  Prof. Cribb—As a rule, agricultural intensification—growing more food off a small area of
land—actually protects the environment because you are not clearing a huge area to grow low
yields. What you have to look at quite carefully is your impact on that surrounding land. This is
where, again, the Europeans have a point. The world’s farmers are caretakers for 40 per cent of
the world’s environment, and they are not recognised. That is a job they have got that they do not
get paid for, that nobody has paid any attention to. The farmers are the people who really do care
for the environment. They need some help, whether it is financial help or other help, from
society to do that. This is the Greening Australia model.

  Senator BACK—They need some recognition of that.

  CHAIR—Senator Back, have you got a final question?

  Senator BACK—I have. Very quickly, this is an observation. I met with apple producers
recently in the southwest of WA. They produce pink ladies, which, by definition, have only got a
certain amount of redness. The supermarket buyers are now knocking them down because they
say the market wants a certain amount of redness and, therefore, they are not producing that
redness and that they never aimed to. So in fact they are being knocked down on price.
Absolutely beautiful quality fruit is being thrown out and it now cannot be used for juicing either
because it is cheaper to bring in Chinese concentrate to produce apple juices. That is in support
of what you are saying. The supermarket buyers are completely distorting this process to the
extent that the apple producers will go out of production. I come from a place where CY
O’Connor had the vision 115 years ago to pump water to Kalgoorlie 365 miles away and, in so
doing, of course, open up the wheat belt for agriculture. Senator Fisher’s family have been
beneficiaries of that as well. What is the scope, do you believe, to do a proper economic
feasibility study to bring water down from the Ord given the fact that 17 times Adelaide’s annual
consumption of water goes straight past Kununurra to sea every year and the Ord in its present
form holds eight times that of Sydney Harbour? What do you think is the prospect for doing a
proper, balanced, unemotional, economic feasibility study into bringing water down and then
sending it both east and west?

  Prof. Cribb—Water is heavy stuff. It takes a lot of energy to pump. So you are going to drive
the climate by pumping water down.


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  Senator BACK—Plenty of sun.

   Prof. Cribb—Well, as long as you do it with solar pumps, that is okay. I am not sure whether
they have the capacity for those sorts of volumes. The balance I would be looking at is whether it
is better to bring the water down and grow in that climate or whether it is better to leave it where
it is and bring the produce down.

   Senator BACK—Well, I am sure there is a bit of both. But there is human consumption in the
cities. We are not going to move the population of Adelaide to the Ord, are we, when they run
out of water?

  Prof. Cribb—No. But I suspect that the major migrant populations that will flood into
Australia in the next 40 years will probably settle there. So you may end up with a much larger
population in the north than you bargained for.

  Senator BACK—I suspect we will.

  Prof. Cribb—So that might not be an issue. I do not know. People have built canals for 7,000
years now and they nearly always do not quite work out the way you intended.

  CHAIR—I will give a bit of a reflection. Kinhill did a study for the South Australian
government. It was 2½ times the cost of desal to transport water from the north. It is obviously
an economic issue. Some of the desert communities in the United States—it depends how much
money you want to spend—pay $500,000 per megalitre for their water.

  Senator BACK—But, of course, I make the point, without getting into an argument about it,
that had that been the view years ago—that water was only for the goldfields—people would
have overlooked what in fact has been the greatest benefit of that water pipeline, and that is the
wheat belt between Mundaring and Kalgoorlie. Therefore, it is not just the end or the apparent
end use. But, nevertheless, I am interested in your view.

  Prof. Cribb—I personally would rather see across Australia a backbone energy distribution
system. If you built these large direct current transmission lines, you could have solar, coal,
geothermal and everything feeding into it. If we had a huge DC line going from Port Hedland to
Hobart, putting the energy into all those communities would generate the growth. That would
make water available—

  Senator BACK—And on to Asia with that desal water.

  Prof. Cribb—As well, be it groundwater, desal or whatever.

  CHAIR—Thank you very much, Professor Cribb. We are out of time. We would love to have
you back. We could go on talking for two days.

  Prof. Cribb—There are a lot of topics.

  CHAIR—By the way, another issue related to the power for the corridor is that if they had not
discovered the methane resources, gas would have come eventually down from the north and

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that would have been a power corridor. Thank you very much for your evidence. We will now
suspend for 10 minutes.

                   Proceedings suspended from 10.35 am to 10.46 am




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CLARKE, Mr Sydney Ralph, Private capacity

   ACTING CHAIR (Senator O’Brien)—Welcome. I invite you to make a brief opening
statement, and then the committee will ask you questions.

   Mr Clarke—Thanks, Senator. You may have in front of you a document that is a resume of
my activities. That just gives you an idea of my involvement in the agricultural scene in the last
probably 40 years at least. I listened to the eloquent previous speaker and thought about what he
said whilst sitting in the back. My involvement, I suppose, has been related to not only the dairy
industry but also the concern and wellbeing of the land that we live on. The consequence of that
is that at one stage over four years I was the chairman of the Kyeamba Landcare group. We
believe we have done some great things there. The consequence of all that is that we have
attracted international attention. I seem to have an attraction like a fly to sticky paper on the
wall. It is very easy for politicians and overseas delegates to fly into Wagga. We are only eight
miles from the airport. We have had people visit from all over the globe. The last entity that
came was the minister for agriculture from Canada—I think his name was Morton—and his
delegation. They were interested to see what we have done with the land and how we have taken
care of it and what activities and achievements we have had from the remedial work we have put
into place. That is the salinity action that has taken place, especially at our place, and with the
local neighbours around. All the sowing down of permanent pastures—putting in tree lines, tree
lots and woodlots—has changed the landscape dramatically and dropped the water table from
two metres above the surface to a metre below the surface again. There are probably no visible
signs of any salt at this time. The consequence of that is that the Kyeamba Valley has exuded
most of the salinity or the salt into the Murrumbidgee. I think 12,000 tonnes came out of
Kyeamba. The Kyeamba Creek has not flowed for the last three years, so there is no way of
knowing just how much salt will actually stop until we get sufficient rains to start that creek
again.

   I came today to express an opinion on behalf of not only the dairy industry, I suppose, but also
myself and my family. I have four grown-up children. One is in genetics. The oldest daughter is
in England at the moment. She is an AI technician. The next boy is a veterinarian. The fourth one
is another girl. She is in Sydney at the moment, but she is about to have another baby. So that
gives us five grandkids in a little while, which is going to be good.

  The reason I am telling you about the family is I would not be here today without my wife.
She is my backbone and my backdrop. If I have to do these sorts of things, she is the one at
home doing the work. We do have a person that is there five days a week just to help with the
milking, but basically we do the whole lot ourselves. I am getting to the stage where we should
be taking it a bit less seriously and relax a bit more, but I think there is a lot of education to be
done. Just listening to the previous speaker, one of the things that I picked up was that the aspect
of education is paramount. Over time, I have been involved in teaching others about salinity and
in the education of the agricultural students that come my way from the CSU at Wagga, the
veterinarian students, the high school students and even the primary kids themselves. Unless we
impart this knowledge on to those children and those young adults and the older adults, we have
lost something. I guess, in a way, it is similar to what the indigenous people do with their folk;
they impart the knowledge from the elders. But I say to these young people, ‘This is what it is

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ARI 20                                      Senate—Select                     Monday, 12 October 2009


like in 2000. We do not know what it is going to be like in 2050, but at least here is the baton. It
is up to you now to run with that baton and take all this forward.’ So I suppose that is a bit of an
introduction.

  CHAIR—I thank you and thank Senator O’Brien for kicking off to keep us on time. I am
sorry Frank is not here today. How much rain do you get?

  Mr Clarke—It is raining now. It has just been. Just enough to knock us off, especially with
the silage, yesterday.

  CHAIR—Who do you supply milk to?

  Mr Clarke—We supply milk to Fonterra.

  CHAIR—Fonterra have indicated to this committee that they will appear at some point. We
have taken evidence, as you would be aware, in Tasmania. Certainly Senator O’Brien and others
have been keenly interested in that. It appears down there that it is a non-contest between people
who are market milk focused or are manufactured milk focused operating in the same market.
Some of them are being offered 20.8 cents if they do not sign up to a five-year undetermined
price contract for supply when there is no choice, especially on a place like King Island. Could
you describe to the committee your contractual arrangements and how they have altered and
what that has done to the economics of your dairy farm?

  Mr Clarke—That is a fairly long story, Bill. Probably from the beginning, Murrumbidgee
Dairy Products was owned as a cooperative. Even from the beginning, when the family first
arrived in Wagga in 1956, we were told not to supply milk to Wagga because there was no room
for that milk. Then they said, ‘Okay, you can supply all the cream.’ The milk turned into cream.
Little by little, the milk started to dribble in. But over time, I suppose, to cut a long story short,
the essence of the whole thing was that with the Murrumbidgee Dairy Products factory, the
shareholders sold off the factory, again to Bonlac. Consequently, Bonlac has been brought out by
Fonterra. Along the way, the original shareholders sold off their share worth, so there were no
shares left of such. I guess we have now entered into the age of Fonterra. Fonterra is an
organisation, I believe, which is set up in New Zealand and the like. The shareholders are over
there, not over here. We cannot be shareholders of Fonterra, so we do not attract a dividend. But
over time we have had the problems of deregulation.

   I will digress a little. With regard to regulation, I am not sitting here today saying, ‘Go back to
regulation’, but I think we will get to that point or another point like it later in the conversation.
On the regulation side of things, my wife and I started on our own from the family in 1988. We
were producing 600,000 litres of milk. I forget what our quota was at those points in time. Out of
that 600,000, we made a very good living. We did not have that many overheads. We had a debt
incurred from the division of the family. It was something like $400,000, but that was coped
with. Over time, as you know, deregulation hit in 2000. The price of milk that we were getting
was 54 cents a litre for quota milk in 1999 and 35 cents a litre for manufactured milk, which
apparently went into cream cheese and was exported to Japan. In 2000, with deregulation, it
went down to 28.5 straight up, bang. A lot of people said, ‘No, that’s enough.’ They took the
package and left. We decided to take it and wear it. We did that. Every year it just snuck up a
little by an increment of about one or two cents. In 2005, it was about 35 cents for all the milk

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Monday, 12 October 2009                     Senate—Select                                       ARI 21


you produced. At that point in time, we were up to about 900,000 litres of milk or probably a
million.

   We are currently doing 1.4 million. We have just been given a rise. At 29.4 cents a litre, it is
well below the cost of production. The cost of production is, in our minds, about 40 cents. There
is a DPI fellow independent who has done an assessment of four dairy farms in the whole local
area. The independent survey showed that the cost of production was 40.56 cents per litre. So
you can see we are well down on what we need to secure our investment.

   Probably right here and now, I can give you a graphic example of all that put together. My
father-in-law, Charlie Keyes, at the age of 92, has still got all his marbles and he could argue the
point with anybody in this room. He is quite an intelligent bloke. He was the collector of the
milk cans in the cans days. I rang him up the other day. I said, ‘Charlie, where’s your truck?’ he
said, ‘It’s out at Cootamundra. Why?’ I said, ‘You’d better go and get it.’ He put enough cans on
the floor and on the second deck to cart in about 1,000 to 1,100 gallons a day. That is what we
are producing now. One farmer is doing that right now, and that is us. He picked up from 17
farmers. I assume they must have had four or five kids in those days. Seventeen farmers made a
living out of that amount of milk yet one farmer cannot make a living out of that amount of milk
now. So we have picked up an efficiency gain, but, for heaven’s sake.

  CHAIR—So it would be fair to say that it is 29 cents. If you go to the supermarket, it is $2.90
for a litre. It is a great mystery.

   Mr Clarke—Mr Chairman, I got some figures off a vendor last night. He pays $1.37 from
Fonterra. That is what Fonterra sells to the vendor for. He sells it to the retailer for $1.63. That is
26 cents for picking it up on a platform and carting it to the Woolies or whatever. He does not
have to paddle through the mud and put up with crook cows and all the rest of it. So that is nice.
I do not begrudge him that. But in a regulated system, again, if we go back to think about it, not
to do anything about it, we had the housewife’s dollar. That was the equation. Today it is less
than a quarter. Why? Have we done something wrong? This is not worth it.

  Senator NASH—Mr Clarke, between the 29 cents that you are getting and the $1.37 that you
were just talking about then, do you have a view of where that goes?

   Mr Clarke—Well, it goes straight from Fonterra to the vendor and from the vendor to the
retailer.

  Senator NASH—So Fonterra is taking the gap between the 29 cents and the $1.37?

  Mr Clarke—No. They are taking the gap before it at the $1.37 mark. Just how much of that is
the cost of production or putting it into bottles or whatever?

  Senator O’BRIEN—Or transport.

  Senator NASH—That is what I am trying to ascertain. It may well have come out in
Tasmania. I apologise to the rest of the committee; I was not there. I am just trying to get my
head around how much of that is actual profit for the company and how much is their costs.


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  Mr Clarke—You would have to ask them that.

  Senator NASH—I am interested if you have any understanding of that.

   Mr Clarke—I personally had deliberations with Heather Stacy, who is the milk supply officer
in Melbourne, last year on behalf of our dairy farmers group. In those deliberations, the company
that came into question as an alternative was Dairy Farmers Co-op. She said to me, ‘We want to
stay in front of Dairy Farmers Co-op to give you a decent price.’ That is fair enough. We actually
got about 53 cents a litre average for the year. That is what it was going to be except on 22
January we got a letter from Fonterra saying, ‘As of May and June, your price will drop by 12
cents a litre.’ When I questioned that, not to Heather but to one of the supply officers themselves,
he said, ‘Better you take a price reduction now than a really big one later.’ Well, it was not a
joke. But they gave us a 12 cents reduction in May and June and they gave us 20 cents again in
July. So, call it what you like, but it was a hell of a drop from 53 cents.

  CHAIR—That is July this year?

  Mr Clarke—Yes.

  CHAIR—You will be pleased to know in July that when you got that big price drop, National
Foods sent out a letter to the people they were supplying to saying they would have to put the
price up because of the unprecedented demand and price rises in the system. That is quite an
embarrassment to National Foods. I presume when we hear from Fonterra we will have some
paperwork to see what they have been up to. It all points to the fact that consolidated retailing
and consolidated manufacturing is doing to the milk industry what happened to the wine
industry.

  Mr Clarke—But it is done with mirrors, though, Mr Chairman, because as of last night—I
put the phone down a few hours ago now—I was talking to the vendor association president. He
was saying that they got a letter in January to say that the milk price was going up because of the
increased costs of farmers and transport and so on. We got a letter on the 22nd saying it was
going to go down.

  CHAIR—Could we be supplied with that letter?

  Mr Clarke—I will ask him.

   Senator BACK—I think you have raised a whole series of very interesting questions. You
also heard some of the comments from Professor Julian Cribb. I would be most interested in
your view on just how we get this message out to the wider community about the looming crisis
in not only food but also water and what some of the actions might be.

   Mr Clarke—Senator, I am not quite sure whether you send out a message through a threat of
illness or a threat that we’ve got to get back to school and learn the three Rs again because we’ve
missed something along the way. The professor is quite right in saying that we are throwing
everything out the window we do not use. You educate people to think along those lines. I can
give you an example. In my case, when that salinity inquiry was on and I fronted up that day, my
wife was going to hospital for breast cancer. Thinking about that in hindsight, it is something

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Monday, 12 October 2009                    Senate—Select                                     ARI 23


that is quite unique and it can happen to you. Unfortunately, my wife had breast cancer. But she
is over it and she is well on the way to recovery, which is great. But when you sit down there
with your wife or your spouse and the doctor says, ‘You have breast cancer or cancer’,
something happens in the brain. It pulls the handbrake on.

  Senator BACK—It focuses the attention.

  Mr Clarke—And I have thought about it long and hard since. I really believe what the
professor is on about—and I spoke to him as he was going out the door—is that what we need to
consider is what we have done to the soils. What we have done to the soils has been past
management practice. We have been given the best advice by the experts. I believe that some of
that advice was not right. It is all right in hindsight. You can say, ‘Okay. That really wasn’t
kosher. We should have done it another way.’ I have been looking at it from the direction that if a
human person is crook, the product which is coming out of the cows or whatever has to be
crook. So it has to be what they are eating. So you get back to the soil.

   I believe that the soil has a terrific imbalance in it. There are the nutrient loads that he was
talking about. We are doing it right now with the CSU and the EH Graham Centre. I have
instigated a study and a survey with regard to putting nutrient loads from recycling our own
effluent, which we have been doing for the last 14 or 15 years. The nutrient loads in them are
quite incredible. We found this out only six months ago. The nitrogen levels are up to 1,500 parts
per million and the phosphorus is double the normal. Potassium is the same. And the salt levels
are very minimal. So we can apply that product if we need it. But rather than just go out willy-
nilly and throw it out, I need the scientists to come out and document the evidence. By
documenting the evidence, we will know whether we are doing good, bad or ugly. The only way
that we can do that is to study these things on farm.

  There are a lot of people who are starting to compost their own hay and silage material, which
has been thrown out and wasted. I am pushing up a lot of product which our cows accumulate
around the feeders. They crap all over the place. All that is just going to waste. So I am literally
pushing all that up and I am going to recycle all that and use it as a fertiliser. We have been
having tremendous results with using the fertiliser from the feedlot next door over time. At the
moment, we have a triticale crop this high. It is only because there is 500 tonnes of cow manure
under that 44 hectares. The nutrients in that are supplying the requirement for that crop. But,
hang on; what is it doing to the bacteria content of the soil? I believe it is actually feeding the
bacteria. If we think about putting more lime out, we are going to get a better balance in the
whole thing. I have my own thoughts about what we should do and can do, but I hope that the
CSU or the EH Graham Centre will come on board and deliver these findings.

   Senator BACK—It follows on, I guess, from the comment you were making about your
associate with milk transport. You are producing the equivalent of what 17 dairy farmers did in
the past. Therefore, the productivity per cow and productivity per dairy farmer has obviously
improved. Where is the next step in terms of increased production per cow? Is it in the soil, as
you have just explained? Is it in fewer farmers producing more milk and bigger milking
operations? Hopefully we will stay in milk production in this country. I do not know that we are
in my state of Western Australia. I think it is almost terminal—I do not know—regrettably. But
where is the next quantum leap? If you listen to Professor Cribb, we do need quantum leaps.



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   Mr Clarke—I do not think you can take our cows through a quantum leap in production. If I
wanted to, I could start milking them three times a day. The national average is something like
6,000 litres. We are knocking out about 8,500 litres per cow. We have individual cows doing 57
litres a day. You cannot push the boundaries too far. I do not believe in intensive farming. I may
again digress a little. With regard to that, our nutritionist that we have supplied to us, because we
use a product with vitamins and minerals, came up a couple of years ago when we had a decent
spring. She said, ‘Well, why don’t you milk more cows?’ I said, ‘We can’t sustain more cows.’
She came back three months later and understood why. But the important factor in that is that if
we had rushed off on that advice and bought another 150 cows, we were looking at least
$300,000 in the cows. You would have too many for the dairy infrastructure. If you knock it all
out with new refrigeration and high-tech gear with tagging and stuff, you are looking at at least
$1½ million. You could assume that the milk price will go up—it did one year—but here we are
next year and it is down to billyo. How can you convince the bank manager that you need to get
bigger when some of the bigger people now come from New Zealand?

  There was an incident recently at Narrandera. They were going to set up a 3,000 cow dairy.
But with the price being paid for milk at the moment, it is all over, red rover, and they have gone
home, even after spending huge amounts of money purchasing the property and putting some of
the infrastructure into place. So I do not believe getting bigger is getting better.

   I think we have to get a bit smarter. There are 9.3 billion litres of milk produced in Australia,
and 60 per cent of that goes export. I think if we concentrate on the public education and health
education aspect of the whole thing and we consider recycling the nutrients, it will get the
balance back in the soils. We can sell the concept to the general public that their health status is
going to go up. I say this to these vet students. They have been coming there for five years.
Although I have a son who is a vet and his wife is a vet, I say after half an hour’s talk with them,
‘I have a thing in life. I want to eliminate you blokes.’ If you stop and think about it, the
metabolic disorder of the cows only occurs because of the imbalances they pick up either in the
grain or on the paddock. If you can eliminate the calving paralysis, milk fevers or grass tetany,
goodbye the vets. And we are paying nearly $20,000 a year for these vitamins and minerals. For
heaven’s sake, if we can get the balance right, this is where the savings will come in. But we are
the ones that should pick up the savings, not the Fonterras and the Dairy Farmers Co-op. We are
pretty concerned about this whole shebang that they have put up recently, where they have said,
‘Okay, this is going to be your price for 2009-10 and you take it or leave it.’ Of course, a lot of
our blokes reacted, and rightly so.

   When I did some investigatory work into their actual sales, I found out that, say, three years
ago, 50 per cent of the milk that we produced of the 30 million litres that went into Wagga got
consumed in the Wagga area. It is down to 28 per cent. If you look at the 72, they have gone into
Sydney and 51 per cent gets consumed up there either in flavoured milk or yoghurts or cream
cheese and 15 per cent goes into Melbourne. Senator O’Brien spoke earlier about the transport
factor. I think this is what is cruelling them because I suspect they are going into parts unknown.
You have trucks going up and down the road like yo-yos. The only people making money are the
transporters.

  This would be a nice question to ask Fonterra, if I can perhaps flag it. As of last year, as I
spoke about earlier, the main competition was Dairy Farmers Co-op. This year, on the phone, I
said, ‘What about Dairy Farmers Co-op? They are paying their guys the same money they

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Monday, 12 October 2009                    Senate—Select                                      ARI 25


promised them and in fact they have three-year contracts.’ ‘Oh, but they are in a different
market.’ Hang on. When did the market change? 1 July? Or did Fonterra just move the Murray
up to the Murrumbidgee?

  CHAIR—So that is saying that they are still in the market milk and not manufactured milk?
They have not disaggregated it? It is aggregated?

  Mr Clarke—Yes.

  CHAIR—National Foods said 30 per cent of their production, which they buy at the global
price, which is the market price for the market milk. Thirty per cent of that, of course, is usually
profitable for them because it ends up in the supermarkets.

   Mr Clarke—Well, we do not get to see the balance sheets, so we do not know how their
organisation works. But if you are trying to run a factory from Melbourne or Wagga without a
manager, things are going to go awry. I know that there is milk coming up in Victoria to top up
literally the vats in there. We produce the Riverina Fresh. For heaven’s sake, if you are picking
up stuff that is four days old from some factory in God knows where and transporting it up and
dropping it on top of our milk, it all becomes four days or five days old. I was not aware of this
until just recently. The fellow last night told me the same story about topping up the vats. One of
our local fellows said, ‘I just went back to Dubbo and had a good drink of milk.’ I said, ‘You
did? That is Dairy Farmers Co-op up there.’ He said, ‘Yeah, I know. That stuff in Wagga is
rubbish.’ I got to thinking, ‘Why is it rubbish?’ If you put old milk into fresh milk, this is why it
is rubbish.

  CHAIR—Would you like to explain to the committee your understanding of the permeate
world—permeated, reconstituted milk? Some of the damage that I think is being done to branded
milk is a bit like branding a bloody hogget as a lamb. Black and Gold milk often is reconstituted
milk. I tried it out on a bloke yesterday in Sydney. I said, ‘Why are you buying that? This one
over here is a dollar cheaper.’ And he bought the cheaper one. When is milk milk? Should we be
doing something about branding?

   Mr Clarke—Milk is milk when it leaves the cow. What they do with it from there on literally
buggers it up. I went to a four-day course on animal, soil and human nutrition in Queensland
about two months ago. A bloke up there, Graeme Sait, said that the pasteurisation and
homogenisation is done just to get rid of the bugs. But you are also getting rid of the good bugs
as well. Homogenisation is because people are too lazy—they are his words, not mine—to shake
the bottle and get the cream through it. If you go to the supermarket and buy light milk, the
company has already taken the fat out to put it into cream cheese. You are getting the pig tucker.
So permeate, I would suspect, is the pig tucker getting recycled again. But that is my
interpretation of it, Bill.

  CHAIR—So do you think there ought to be a public awareness campaign? I had a guy ring
me the week before last. We were in Tasmania last week. He said that he picked up this bottle of
what he thought was cheaper milk in a supermarket. He took it home and it just did not taste like
milk. He kept the container for me. It is obviously one of these artificially built milks—the
permeate—that has come out of the manufacturing side back into the market side.


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   Mr Clarke—I guess most farmers are willing to say it, but you have to be careful with
litigation these days how you say it and where you say it. I think this is what puts the reserve on
you. It is okay to come in the house and say these things. But to actually go public and say these
things, you have to be a bit careful. And I think you have to be a bit smarter than that. That is
why I am pushing this track of soil health. If we go that way and educate the people as we go
and get the results I think we are going to get, we will have a product we can sell that we can
show is quality and enhances your health as well.

  CHAIR—So why do you think people pay for bottled water? It is $2.50 on Virgin airlines for
350 millilitres of water. If you take the bottle home, you can fill it 3,400 times at the tap. Why do
people do that and yet dairy farmers can only get 20-something cents a litre?

  Mr Clarke—Perhaps you can tell me.

  CHAIR—Is it just marketing?

   Mr Clarke—I think it is the fear thing. It has all been passed by legislation. The government
is looking after us. The health part of it is mickey mouse. If we drink it, we are going to be better
off. Like you say, you go and refill it in the tap.

  CHAIR—In the case of that one, 3,400 times for the price of the bottled water. It is amazing.

   Mr Clarke—I sat in the Sydney airport coming back from Maroochydore. I bought a
milkshake for $4.50. As it got called out, I turned around and she was filling up the glass. The
last bit in the container was thrown in the sink because it was too much for the glass and the
froth was coming out of the top. That was the solid milk going down the drain. So I sat there and
let it deteriorate to such a point where I calculated that there was this much milk left in the thing
and that would actually generate $28 worth of income, and we are getting 28 cents.

  Senator O’BRIEN—I am interested in your costs of production. I presume that built into
your calculations on cost of production are return on labour and return on capital?

   Mr Clarke—Not the total amount of costs. The return on labour, sure, and all the inputs, but
return on capital, no. What is left over is for the sideboard, so to speak. I should have brought the
docket with me. But the make-up of that is dependent on how much you have to supplement to
feed your cows. As you know, the drought has been on for six years and feed supplements have
been a premium. There is no grass growing in the paddock and there is nothing else for them to
eat. So literally the cost of production went up. It is still up there and the price of milk has gone
down. Somehow or other, we have to get the equation back the other way again.

   The frightening part about all this is the young people. My daughter is overseas working her
butt off over there. I would love her to come home and run the whole show so I could sort of
semi retire. But take into account the Vincent boys, whom Senator Bill knows. Matt rang me up
and said, ‘I think I will turn the cows out on the road.’ I said, ‘Don’t do that, Matt. We’ll just see
how we go with this for a while.’ Another fellow, Tim Malone from Tumut, just bought his
parents’ property. He is up for a million dollars. Never ever will he pay it back, so he had to cash
all the cows. These are the young blokes. These are the 30-year-olds. They are the ones that
should be taking over, not us 60-year-old blokes. So that is the frightening part about it. The

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average now is about 62 years of age for a farmer. When is the next generation going to come
out, or are we going to go to 70?

   Senator O’BRIEN—I was asking the question about the cost of production because we were
talking to Tasmanian dairy farmers last week. We got a couple of different figures. We got a
figure of about 40 cents a litre. We also got a figure of 28 cents a litre. Alan Davenport, I think,
was the witness who gave us that figure. He farms in north-eastern Tasmania. I think that was a
figure based on seasonal calving rather than year-round production. He estimated that the
marginal additional cost for year-round production was an additional five cents a litre. But that
did not include a return on capital. That is why I am asking you the question about the labour
component and return on capital component in your calculation. By my calculations, you
probably would not have been making any money in dairying for most of the last decade on
those costs.

   Mr Clarke—No. As I said, 10 years ago, we were doing 600,000. We are doing 1.4 million
now, and we are not making a living, whereas we made a living on 600,000. Another thing about
Tasmania and other places is that, as you say, some people seasonally milk. The requirement of
Fonterra is flatline production, which makes it harder again. It is year-round production. It is also
trying to maintain that flat line so you have no blip in the system when they have to ship milk
out to get rid of it at whatever price they can get rid of it. If we were lucky enough to have
everything under pasture and we just did it under pasture, our 8½ thousand litre average would
probably come back down to about a 6½ thousand litre average. So this is the difference in the
cost of production.

   Senator O’BRIEN—What is the marginal cost of that additional 2,000 litres if you have to do
it with expensive grain?

   Mr Clarke—It is not only the equation of the cost of getting the milk out; it is also looking
after your cows and animal health. You just cannot turn cattle out without buying feed for them
and so on.

  Senator O’BRIEN—Certainly not in the drought; that is right.

   Mr Clarke—Yes. So that all comes into the equation. We have found out over time that we do
not just cut our calves off and turn them out the back paddock somewhere and forget about them
until they are going to calve. If we keep on feeding them until eight months of age, which is an
input of two kilograms of grain a day, they are going to be skeletonised and they are going to be
runty things. Now they are coming in nearly fully grown cows at 2½ years old and they are
straight into top production. So there are a lot of equations to deliberate how you actually arrive
at a figure. In totality, you have to look at the farm. Again, as the professor said a while ago, we
are not only just producers of a product; we are custodians or stewards of the land as well.

   As I said earlier, I went to Tasmania and spoke about professional dairy farmers and farming
as a profession. We are all guilty in some form or fashion of doing it all wrong. We are situated
right on the side of the road. We get a lot of people pull up and have a look at the place. My wife
is very fussy about how the farm looks. She has grown flowers along the brick wall of the dairy
and that sort of thing to make it look more attractive not only for ourselves but for the public to
get an image that we are producing a product that is quite clean and green and healthy. So it

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takes a fair bit of effort. And then to try and be involved with the CMAs with regard to fencing
our waterways and putting in nutrient containment areas and waste management systems and the
like, it just does not happen overnight and it does not happen without a bit of money as well.

  ACTING CHAIR—I think Senator Nash has a question. I have one more.

  Senator NASH—Thanks very much, Mr Clarke. In this country, we would never wear an
employee going into a workplace and being told by the boss, ‘Well, you can keep your job, but
you are going to have to pay me to come to work.’ So why do you think there is not an outcry
over the fact that our dairy farmers are having to produce milk at below the cost of production?

   Mr Clarke—I think the outcry is there. You just cannot hear it. As I said, what is the average
age? Most of the guys are saying, ‘It will perhaps get better soon.’ But we are not whinging
cockies. We are not going to go out there and blatantly thump our chests and say, ‘We demand to
get better prices.’ It is just not in our make-up. Unfortunately or fortunately, I have been placed
in a position of facing the media. Even as I drove here, WIN TV was after me. I get exposed at
home through the same sort of thing. But I guess my background in the dairy industry has been
30 years as the local secretary of the dairy farmers association and all the consequences of that.
So I am probably in a good position to reply to some of the questions.

  Senator NASH—You do not have to be a rocket scientist to figure out that it is just not
sustainable for the industry to produce below the cost of production. I just want to take you back
to something you said earlier at the very beginning about addressing the issue of regulation in
some form or other later in the conversation, which I do not think we have really got around to.
Do you have a view on whether or not there should be some kind of government intervention or
some sort of regulation? What are your thoughts on that?

   Mr Clarke—I think government has to curb the amount of profits that supermarkets drain out
of the system. Farmers are not in a cooperative situation. They cannot demand a fairer share of
the housewife’s dollar. I think somehow or other the supermarkets have become a power unto
themselves. With due respect, they have got a lot of parliamentary people in their hip pockets.
They have got them convinced. I spoke to a fellow who was the Australian dairy farmers
president about Woolies and the like. I said, ‘The profits they are making are astronomical.’ He
said, ‘No. They are only making 2.6 per cent.’ That is a load of rubbish. It is a matter of how
they show their books to whoever wants to read them. So we need to try to get government
intervention. I am not saying go back to regulation. There should be some sort of recognition of
the effort that farmers put into producing a product. Certainly the price should not be below the
cost of production.

  Senator NASH—Finally, what do you think will happen to the industry? What do you think
will happen for consumers if the dairy industry in Australia simply is not sustainable?

   Mr Clarke—I think shrinkage will be one thing. Quality will be another thing. This product is
coming up on top of ours. We are very fussy with our bacteria and all the rest of it—how we
clean our milking machines. People are just not going to care. They are just going to milk the
cows. I wash every cow that comes into the bales. I get rid of the muck off it. If I do not like to
drink the milk with cow manure dripping off the cow’s tit, I should not think the customer would
like to drink it as well. But you see footage of people who want to help us. Recently we were

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Monday, 12 October 2009                   Senate—Select                                    ARI 29


exposed to it. The guy who was showing it said, ‘You should milk your cows in six minutes.’ A
57-litre cow is not going to milk in six minutes, for heaven’s sake. The video showed the guy on
a rotary. The cows came straight on, came straight up and he just whacked the cups on like that.
Blind Freddy could see the crap dripping off the cows’ tits. Not only that, if you stimulate a cow
by either washing her and drying her, she will let down the milk and she will milk a lot quicker.
It is more healthy for the cow. But just to whack the vacuum straight on those cows’ tits and
aggravate the cow, that is another health issue. There will be a mastitis issue. The consequence
of that will be a lack of quality in the milk.

  Senator NASH—Hypothetically, if we had to move to a greater importation of milk, as a
dairy farmer, with your knowledge of what happens in other countries, would you be happy that
the quality assurance would be there in the milk being brought in?

  Mr Clarke—I think as long as the people who apply the quality assurance go to the paddock
of origin and check that out and not wait until the product gets here.

  Senator NASH—There are all sorts of difficulties with that, are there not?

  Mr Clarke—There are.

  Senator NASH—Thanks, Mr Clarke.

  ACTING CHAIR—Thanks, Mr Clarke. We have used up the available time. There are more
questions we could ask. Thanks for coming.

  Mr Clarke—Thanks very much, Senator Bill and all of you, for coming today.

  Senator BACK—There is hope for your son as a vet, Mr Clarke. He might go into
parliament.




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[11.31 am]

MacFARLANE, Ms Tina, Private capacity

  ACTING CHAIR—Welcome. Do you wish to make an opening statement?

  Ms MacFarlane—I will, if I may.

  ACTING CHAIR—Certainly. Go right ahead. Then we will go to questions.

  Ms MacFarlane—I would like to briefly show you a map. This covers the water issues.

  ACTING CHAIR—We will see what we can see from here. You will have to stay close to the
microphone, because that is where your evidence will be recorded.

   Ms MacFarlane—This is to give you an idea so you know the area I am talking about. This is
up near Darwin. This is specifically Mataranka. Then we go down to Tennant Creek. This is just
so you get an idea. This is in red the Mataranka water allocation planning area. That is the actual
size. I just wanted to give you a concept of the size, because I am going to be talking about the
aquifer. The entire area is quite large. That is just so you are aware of everything in relation to it.
If you look at some of the smaller ones down here in the southern states, they are smaller water
control areas.

   As I have said, I am from Mataranka. We are currently going through the water allocation
planning process with the Northern Territory government. The process, we believe, up there is
being severely detrimental to future development. They are engaging in a lot of restrictions and a
lot of regulations. Licences have regulations which, from what I can gather, are unprecedented in
the rest of Australia. There is incorrect data, I believe, being presented to the hydrologists, which
is probably one of the major concerns. I have verification and evidence that show the reports
clearly have incorrect data. There are actual rainfall figures. They have Mataranka with less
rainfall than Larrimah, yet it is north. They have used all these figures to calculate the amount of
water that would be available for sustainable yield. They have also mentioned that, down at
Nookah—a mission in the early 1990s—the actual river stopped flowing. If you know the
history of Mataranka a little and the Roper River, you know that the mouth of the Roper River is
tidal. The mission moved from where it was to closer inland. They have based the fact that the
Roper River dried up on it. It says in one of the mission statements—it is just an old diary—that
the water was saline. One would expect saline water from a tidal river. So they are basing a lot of
this early data they are using to calibrate and calculate the amount of water available on no
scientific evidence. Three or four reports were written in the early 2000s with regard to
Mataranka.

   Our position is that they should be basing it from when the information is more accurate. That
is really from 1960 onwards. They have two automatic gauging stations—one at Larrimah and
one at Katherine. Mataranka has always been manual. Of course, people in wet seasons go on
holidays. I cannot imagine Jeannie Gunn recording the rainfall. So a lot of it has been synthetic. I
understand that it happens in a lot of cases. However, it is very hard to synthesise rainfall figures

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when you do not have a lot of actual data. It was not until 1960 when you got these two
automatic gauging stations to the north and south that the figures became more accurate. We
believe that they should be using those figures to calibrate the amount of water that is available.

  Where we are in Mataranka, a lot of our country has gone underwater, which indicates that the
water table has risen. We believe that salinisation is beginning there, yet they are restricting us
and saying, ‘There is not enough water to irrigate.’ Actually, 28,000 megs—that is why I showed
you that picture—in the entire region has been applied for for irrigation. They are indicating that
there is not enough water available. The catchment is eight million hectares. I am just giving the
context—the size and the amount of water.

   As you would know, as an agricultural person you need a reasonable amount of security and
certainty. We are very pro the water allocation plan. We are really keen to work in conjunction
with government, be it Labor, Liberal, independent or anyone, because we need to look after the
environment. However, I think they need to be conscious of not underestimating the amount that
is available. As I said, there is a lot of evidence indicating that there is a huge aquifer and there is
a lot of water. As producers, we just basically want certainty so we can plan. I think I indicated
that you have the letter in front of you. They are the main points. You have an example of the
licences.

  I have spoken to other state councils, including the Queensland Irrigators Council. I have
spoken to a lot of the interstate councils. A lot of this stuff is unprecedented. There is no real
reason. We have been to the government and said, ‘Why are you doing this given that there is
very little water?’ We are not overallocated up there. We are not really allocated at all. There is
not a problem, so they should be given the chance to develop our north because we are going to
be looking there for food production in the future. I think it is important.

   Another point is that this plan is only a 10-year plan. It sits over the top of you all the time. So
if there is any detriment or low rainfall, you can get cut back. Every farmer knows that. They are
more than happy for that to happen because they do not want to see their environment affected. I
have written to the government. I have been seeing them over the last six or eight months. I
wrote to the hydrologist and said, ‘I am very concerned about your figures.’ I offered them data.
We invited them down to our place. They are just doing as they wish and they are not listening. I
really think it will be detrimental to the whole of Australia, not just us as farmers but the whole
production in the north. That opening statement was probably longer than anyone wanted.

  ACTING CHAIR—That is fine. Thank you for that, Ms Macfarlane.

  Ms MacFarlane—We have extensive land and water management plans. When I met
someone here, I think they thought I would arrive in jeans and riding boots. You are aware there
are hydrology reports. We are serious about what we do. For us to have a viable enterprise, we
have to do it with the latest technology. We do not want to go broke. We want to use every bit of
technology that is available to us to ensure our enterprise is productive.

  ACTING CHAIR—Thank you for that.




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   Senator BACK—Thank you very much, Ms Macfarlane. For our understanding, you
mentioned eight million hectares in the catchment. How many hectares, roughly, are in the area
in question that you are talking about in terms of potentially or really in agriculture?

  Ms MacFarlane—This area?

  Senator BACK—The area that you highlighted, yes.

   Ms MacFarlane—The red part is 5,000 square kilometres. The other is 80,000 square
kilometres.

  Senator BACK—For our information, can you tell us how many agriculturalists? What would
you regard yourselves?

  Ms MacFarlane—There are nine applicants for the 28,000 megalitres.

  Senator BACK—Nine applicants?

  Ms MacFarlane—Yes.

  Senator BACK—In rough terms, what proportion of that 5,000 square kilometres would
those nine applicants be representing—10 per cent, five per cent, 90 per cent?

  Ms MacFarlane—I do not know.

  Senator BACK—I am just trying to get an idea of the scale.

  Ms MacFarlane—I do not know. Maybe 10. Around 10, I think. I cannot be accurate.

  Senator BACK—Are the balance pastoral properties?

   Ms MacFarlane—The others are Aboriginal land. They are actually setting aside for future
indigenous use, which we are supportive of as well, because there is land that is suitable for that.
That is to be set aside as well. They are a bit unsure how they are going to do it—whether they
are going to be looking at 10 per cent or 20 per cent of the actual amount of water available to go
to them for future development. They do not currently have any applications being put forward.
The rest is pastoral or Aboriginal land that is simply not suitable.

 Senator BACK—Amongst those nine, is there any irrigation activity going on at the
moment?

  Ms MacFarlane—Currently there is. There is approximately 800 hectares. We are currently
not irrigating. We are following due process and waiting for the allocation plan to come forward.
We lodged an application in 2004 for a water licence. That has not been processed yet.

  Senator BACK—You are not yet irrigating, but there is about 800 hectares?



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  Ms MacFarlane—There are other people who took the risk. They thought, ‘No.’ They
probably had a bit more financial backing. One was Timbercorp. They have about 50,000 or
60,000 mango trees there. Another fellow was from the west growing melons—Kane
Younghusband. They have about 300 hectares, I think, for watermelons.

  Senator BACK—Can you give me some indication anecdotally of what has been the history
of their irrigation activities, not their commercial activities?

  Ms MacFarlane—They only began irrigating in 2003 for the melons and then 2005 for the
mangos. They are using drip irrigation. They are slowly developing. I do not know where
Timbercorp is at after this. They did have a future section to expand a little more. That is nearly
the limit. There have been a few smaller mango growers, but they stopped producing when there
was a bit of an oversupply of mangos.

  Senator BACK—Sure. I guess the question I am getting at is: where is the pressure coming
on? It would appear as though they have not overused or abused the irrigation water.

  Ms MacFarlane—No. They have not.

  Senator BACK—I guess I am trying to get into the mind of the licensing authority. Where is
the problem that they are confronting? Does the licensing authority have expertise elsewhere in
the Northern Territory? Is there other irrigation area? I am sorry I do not know enough about the
Territory.

   Ms MacFarlane—They have just declared a Katherine plan. This is probably a real can of
worms. I believe because of the actual conditions and the licensing they are appealing their
allocation. Whether that suspends the Katherine water allocation plan or not, that was declared, I
think, in August, or it might have been early September. Currently there is a big melon grower
from down here. He did invest up there. He is very concerned. They are actually appealing their
licence. In doing that, because the water allocation plan was declared, there is only a limited
amount of water within a plan. If these people appeal, where are they going to get the water
from? I do not even really want to go there. I suppose it is painting a picture a little about what is
happening there. I think possibly at a federal level it needs to be looked at. My belief was all this
planning was to give a bit of consistency throughout Australia and probably a bit of certainty to
everyone as well. There is a wonderful resource up there. I have a lot of documentation saying
that our area, the Tindal aquifer, is one of the largest yielding, high quality aquifers in the
Northern Territory. It seems extraordinary that it is not being embraced for development.

  CHAIR—What does Mr Lancaster say?

  Ms MacFarlane—I cannot get an answer. We are saying, ‘Why is this happening?’ We have
had meeting after meeting. They are saying, ‘Well, it is not available.’ We are saying, ‘Here is
the data.’ My husband’s family was there in the 1940s on the Roper River. We have been on our
current place for 20 years. We are saying, ‘Come and visit us. We will show you.’ We are losing
country. The water table has risen about three metres in the last eight years and we are losing
country and productive grazing land because of that. I was just reading down here that some of
the options for your areas that are getting saline is to pump the groundwater out to reduce it.


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They are doing the opposite where we are. To my knowledge, there might be very minor surface
water licences for tourism. So there is no irrigation proposal.

   CHAIR—Pardon my interrupting. I apologise for being late. Having kicked off the northern
taskforce and then seen some of the people who are now on it who are no-can-do people, is there
a negative attitude? I went to see Clare Martin. She said, ‘Bill, we’ve got no priority to do these
things up here. We want to do a bit of development around the Douglas Daly. We’re not
interested in the Ord.’ Is that still the same attitude?

  Ms MacFarlane—It is terrible. They are very negative about it. As I said earlier—you were
not here, Senator—we are keen for this planning process. We are not objecting to it. I do not
want to be compared to other areas. It is quite unique because we are not using a lot of water and
there is very little water allocation. I am saying that we need to sensibly embrace it together and
move forward. With the plans, as you know, with legislation, there is going to be an ability to
reduce it if they have made an error.

  If you look at it in context, of 28,000 megalitres, we are talking 2,000 or 3,000 hectares of
developed land around the Mataranka region. As I said, that whole area is—

  CHAIR—So how did Kane Younghusband get on it? How did he get his—

  Ms MacFarlane—He took the risk. Where we put our application in in 2004, he took the risk.
He was told that we are going through a planning process. He wanted to get there and do it. But
then he probably—I certainly cannot speak for him—is in a position to go forward and do that.

  Senator NASH—So what is the risk?

  Ms MacFarlane—The risk is outlaying an irrigation set-up.

  Senator NASH—And then being told later that you—

 Ms MacFarlane—And then being told later you are not actually getting the allocation you
wanted.

  CHAIR—Well, the peanut company up there—

  Ms MacFarlane—They have taken the risk too.

  CHAIR—They actually wanted 30,000 megs before there had been any work done. They
have exactly the same risk on their hands now as Cubbie Station, which is that they have an
authorisation to take water but no licence.

   Ms MacFarlane—That is correct. I am not crying poor in saying this, but we are not in a
financial position. We do not have a couple of million dollars backing. We have to go and
borrow money from the bank. The banks are very reluctant to lend to you for an irrigation
development without a water licence.



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  Senator NASH—I want to clarify the situation regarding the ones that currently have. They
have an authorisation to take water to utilise the infrastructure they have already put in. But at
some point when this is all finalised, they may be told, ‘Well, sorry, no. You can’t have any
more?’

  Ms MacFarlane—They have been operating illegally for the last four or five years.

  Senator NASH—If they have been operating illegally, why has there not been some kind of
penalty? I am trying to understand the decision. If you are doing the right thing and others are
perhaps taking what you are saying is the illegal option, why have they not been held to account
for doing that?

  Ms MacFarlane—Because the Northern Territory has assured them. It was not declared a
water allocation plan area. A lot of the water planning process has been illegal for years around
Darwin. I can tell you that in nearly three-quarters of the Territory it is illegal to water. People
are using water. I do not know. This is obviously—

  CHAIR—They do not have a water plan.

  Senator NASH—So the government is choosing not to do anything about the water practices
being undertaken?

  Ms MacFarlane—I think in theory they were meant to have an allocation, even if you were
not in a planning area. That is my knowledge of the legislation.

  CHAIR—I think it would be fair to say that, three years ago, the Northern Territory
government Department of Water and the Environment was half a person. There was no
resource. The Chief Minister was not interested. But they put Lancaster on, who came from
down here, to try to sort out the problem. I have had many discussions with him. But there are
some pretty interesting concepts up there.

   Ms MacFarlane—What is a bit scary is the regulations. You have an example of the licence. I
am very concerned about having different security levels for groundwater. To my knowledge, it
is unprecedented in Australia. I have rung three different states and they said, no, it does not
happen there. But I cannot sit here categorically and say there is not. I cannot see the reason for
it, because if you are going to undertake development, you need a sense of security. If you have
development—say, the first 50 acres—you cover your costs. Then you need the ability to
develop the next 50 to make a profit. If you have only high security for the first 50 and low for
the second, it becomes a very risky assessment. So it is getting back to encouraging people to
develop it. I think farmers are getting a lot more professional. As I said, I held our water
management plan. A lot of people see the Territory as being a bit back in the dark ages, but it has
come an awful long way. You have to look at the farmers up there as professional now. I think,
unfortunately, we are being forgotten.

   Senator BACK—I want to get some understanding. You mentioned that those who are
irrigating are growing mangos and, I think, melons.

  Ms MacFarlane—Melons, yes.

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  Senator BACK—What else is either contemplated by you or others? What would they be
putting in, if this can be sorted out?

   Ms MacFarlane—Currently, we are proposing a rotation with peanuts, forage sorghum and
corn. We put in an application, but we wanted the flexibility to respond to market demand. That
was probably a concern in the regulations. It appears to me that if you have a development plan
like that and you have it for centre pivot and you think, ‘No, there is a big demand for tomatoes.
We can grow them up there in three years. It is more economical. I will use drip and outlay it’,
they are saying you virtually have to get permission from the water controller for what you—

  Senator NASH—What you are growing?

   Ms MacFarlane—What you are growing, because you are using a different form of
irrigation—say, from centre pivot to drip. This is what the Katherine people are so concerned
about. It is unheard of. As I said, we are for restrictions. We do not want people hoarding water
and sitting on water. If you do not use it, you lose it. We are happy with that concept. But we
need the flexibility and we need a timeframe. There needs to be a review in five years under the
national water scheme, I believe. Under our act, it says that it must—Senator Heffernan would
know—come in line with the water plans under the national initiative.

  CHAIR—At national level.

   Ms MacFarlane—It has to be five and then 10. We are not complaining about that. But the
restrictions and the regulations will make it so hard for us to develop. I saw one of the fellows in
Katherine the other day. He was very interested when I said I was coming down here. He said, ‘
If I had known.’ He just bought a place up there a couple of months ago before the licence was
issued, because they had a letter saying they were going to get a licence. The letter indicated they
were going to get high security with 2,000 megs. He got the licence back and it was half high,
half medium. This is what they are appealing—the process. He said, ‘I would not have gone
there. I simply wouldn’t have gone to the Territory.’ And he is a big grower and he is good. He is
going to get through it because he probably has the expertise and they are appealing. I believe
there could potentially be legal action over it. That is just a prime example, not his specific
situation. It is him saying, ‘I would never have gone there.’ So how are we going to attract
efficiency in production up there if we have all this regulation?

  CHAIR—How far off the science on the recharge are they? Obviously, it seems to me the
government is taking out insurance by uniquely having groundwater and high security licences.

   Ms MacFarlane—Well, unfortunately, Senator Heffernan, you were not here. I showed a
map. I cannot fathom it. Nobody can fathom it. The size of our recharge is about six times the
size of Katherine. Katherine has water allocations to 30,000. Mataranka has the same. Our
recharge is phenomenal. We are coming from the Barkly. We are coming from the Sturt Plateau.
We are coming from the north and we are coming from the Kakadu area. This is what it—

  CHAIR—But have they actually aged the water and plotted it and done the work?

  Ms MacFarlane—Well, this is questionable. They are saying that, yes, they have. We are
questioning the fact. They want to use 108 years of rainfall records. They have done a lot of

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synthesising of the records prior to 1950. We have approached them and said, ‘Why don’t you
use from 1950 to now? That’s 50 years. You have an automatic gauging station at Larrimah and
an automatic gauging station at Katherine.’ They are reasonably accurate. A gauging station
might slip up here and there, but they are regular gauging stations. We are saying to use that
because—I quoted a paper—some of the hydrology is based on Mataranka having a lower
rainfall than Larrimah yet Larrimah is 100 kilometres south of us. It is just logic. You do not
have to be a hydrologist. I am not. I am just saying we are on the ground and we know the area
and we know physically. They have a gauging station. The flood you would have seen on the
news in 1998. The gauging station has it as being the fourth lowest rainfall period and river flow
in 50 years, yet it was probably the biggest. It got washed away. We went down there. The whole
gauging station got washed away. But, on the BOM figures, it stayed there. They did not record
anything after that because it got washed away and none of the figures were uploaded.

   CHAIR—So the supporters of no production include a good bit of the government. Are the
fishermen and all those guys up your rivers anti development?

  Ms MacFarlane—No. We are talking 2,000 or 3,000 hectares. This is in the Mataranka area.
We are talking about a very small amount. We are talking about gaps between the areas as well,
such as between people. There are corridors for trees. It is a five- or 10-kilometre part. It is not
as though it is just—

  CHAIR—Well, Kane Younghusband bought off you, did he not?

  Ms MacFarlane—Yes, he did.

  CHAIR—And he has 2,800 acres there now?

  Ms MacFarlane—He has 1,000 and his brother has 800. He is currently growing 300 hectares
of melons.

  Senator BACK—I have a final question before I pass over to others. Presumably you have
been down the path of your own local member and the minister in this?

   Ms MacFarlane—Yes. I have had a meeting with our minister, Karl Hampton. He is situated
in Alice Springs. I tried to get a meeting with him, but that was logistically a bit difficult. I had
to come and see Senator Gary Gray because they were refusing to give us a meeting in Darwin.
That was one with Alice Anderson. She had a huge portfolio. I think she had been there for only
a reasonably short amount of time with that portfolio. I had a meeting with her. We had a
meeting for half an hour with our advisers. She came in for the last five minutes and just
verified. They were initially saying we had to have our production bores in before they would
give us a licence. We jumped up and down, and other people did too. But it was unprecedented.
That was just ridiculous. We could not get money from a bank without a water licence.

  Senator BACK—No. She did not mean monitoring boards, did she?

  Ms MacFarlane—No. They were going to ask for a production bore upfront. You had to put
the bore in before you could physically get a water licence. We went to her and we got that
overcome. We have also been asked to withdraw our licence. We had our application in in 2004.

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We have a letter asking us to formally withdraw our application because it cannot remain
pending. Currently, we are trying to talk to them. They said, ‘If you don’t withdraw it, our only
option may be to process it and give you zero water.’

  CHAIR—So who is ‘them’?

  Ms MacFarlane—Well, it is coming from Ian Lancaster, but the letter is coming from the
minister.

  Senator BACK—The Minister for Water Resources?

  Ms MacFarlane—This is Karl Hampton. This is what happened. Alice Anderson, you may be
aware, resigned. She left the Labor Party. It nearly forced us to an election a couple of months
ago. Karl Hampton, who only just got elected last year, came in as minister. He took her
portfolio. After two days, he signed off on the Katherine water allocation plan. This is the one
that this legal action may be affecting. We have had two meetings with him. He is our local
member as well. He is the fellow that is stationed at Alice Springs. I just do not think his head is
around it. He is a lovely bloke.

  CHAIR—I am sure it is not.

  Ms MacFarlane—He was chief adviser for Alice Anderson. She actually left when he
resigned. So you have basically Ian Lancaster running the show. That is the path he wants to
take.

  Senator BACK—He is the CEO, is he?

  Ms MacFarlane—He is the water controller. We are very concerned. As I said, I had a full
report. You may want to see it with the letters. We wrote a letter to him saying, ‘Look, we are
very concerned.’ This was months ago. We have tried the correct protocol all the way through,
saying, ‘The figures are incorrect. We have lived here. We know the Roper River has not dried
up. We know that we are losing country.’ We are physically there on the ground. We said, ‘Come
and have a look at it.’ The salinity problem is starting because we are getting more rainfall. We
get approximately 800 to 1,000 millimetres each year.

  CHAIR—So is that because they just do not have the resources to do the work?

  Ms MacFarlane—They do not want to, for some reason. It is a thermal spring. I do not know.

  CHAIR—Clare Martin did not want to. I do not know about this lot.

  Ms MacFarlane—I know. Well, I am saying it is probably worse now. There is a thermal
spring there. They keep referring back to it. However, none of the development is in close
proximity. It is a huge catchment and huge area and the producers willingly say, ‘Well, if there is
any effect, we are happy to have our licence reduced.’ It is only for 10 years. People will be
prepared, if they have that option, for 10 years. I know we would because in our hearts we know
there is probably five times the amount of water that will be used. It is getting wetter. The
hydrologists are saying they are not expecting a reduction in rainfall over the next 30 years. Our

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hands are tied. As I said, we have done everything we can. The last option was to come and
hopefully hear you guys, because it does affect future food production in the country. I know you
are federal and they are state, but really somebody, for the sake of Australia, has to address this
issue.

   Senator NASH—Thanks, Ms Macfarlane. I am interested in the issue about the requirement
to identify what you are going to grow in terms of putting in your request for the allocation. Am
I reading that correctly?

  Ms MacFarlane—We have to put a full 10-year development plan.

   Senator NASH—What is the rationale behind that? If you are using X amount of megs per
year, what is the rationale behind the government needing to know what you are going to grow
in terms of any impact on the water?

   Ms MacFarlane—Pass. I do not know. I spoke to the Queensland Irrigators Council and they
were absolutely gobsmacked, really. They said, ‘We’re doing that where there are problems and
we have strict water allocations.’ They just said it was unbelievable that they were trying to do
this. I do not have a problem with the plan. I think it helps with your planning from a producer’s
point of view and your financial situation. You really need to supply that to the bank. However,
you need the flexibility. If you look in your paper, you will see right at the end there is an actual
example of a licence. You will see each year they are telling you exactly how much you will use
and in what year.

  Senator BACK—Regardless of what the conditions are that year?

  Ms MacFarlane—Obviously. This is another thing. I do not want to get into this because I am
not a hydrologist. They are saying, ‘In low rainfall years, we may reduce your water licence.’
But it has not really been established for the low period, because it is underground water, from
when the rainfall goes into the aquifer to when it goes into the river. That is something else.

  Senator NASH—Extraordinary. Just in terms of the food production aspect, which you
mentioned before, from your property and the development, without using any figures—we
certainly do not need to know that—and your profitability, how would you see that investment
increasing your profitability, if you had the water to be able to use?

  Ms MacFarlane—About twentyfold. We initially bought the place from the Northern
Territory Land Corporation. It was always intended to be for agricultural use. Both myself and
my husband worked. We have slowly developed it. We have cleared country. Originally, it was
15,000 hectares. In terms of things up there, that is really not a lot to make a viable farm out of.

  CHAIR—It was freehold?

  Ms MacFarlane—Commercial with freehold, yes. For a commercial production. We have
both worked and had cattle there. All the money we have put into it was developing it for the
purpose of irrigating; it was for the development of irrigation production. We want to grow
grains. We have the cubing plant in Katherine. As I said, it will take as much as it can. It is just
expanding. We have markets 100 kilometres away. PCA have come up in the peanuts area, so

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there are obviously options there. This is the other thing where you need flexibility. You look at
opportunities and what is available. If there is a crash in peanuts—say we did undertake
peanuts—there are going to be other options. If the country is developed and is for irrigation,
you can put in an array of different crops.

  Senator NASH—Absolutely. Thank you.

  CHAIR—Obviously, we need to talk to Ian Lancaster, whom I have had many yarns to.

   Ms MacFarlane—I am certainly not one to say what you should or should not do. But our
experience has been, and I think you will find a lot of other farmers in Katherine have found—I
suppose I will say it publicly—that he does lie. They have even got letters in Katherine that they
were going to receive high security water, and then it got cut in half. This fellow based the
purchase of his property—and it was millions of dollars—on the high security water licence. We
have been at meetings where they have said everyone has withdrawn their applications, and he
has told that to the minister. We said they have not. We know they have not. Unfortunately, he is
a lovely person, Ian, and I have spoken to him on numerous occasions. However, that is why I
bought so much backing up data. He will say something. He will think, ‘Why is she worrying?’

  CHAIR—Are you tabling that, by the way?

   Ms MacFarlane—I have some additional stuff. I did have it initially to go to all the senators.
I have more detailed stuff here. I have quoted reports.

  CHAIR—Thank you very much.

   Ms MacFarlane—That is not the full amount. There is a full amount that I sent through—
about 50 pages. I have a bit more detail. You probably get people here coming and saying, ‘This,
this and this’, and you think, ‘Well, how do I know that they are telling the truth?’ As I said, I am
more than happy to photocopy a bit of what I had prepared to bring with me so that you do have
it in writing. There is a letter in writing. You will see that letter to NT agriculture actually asking
us to withdraw our applications.

   We also said, ‘What if we don’t?’ They said, ‘We couldn’t process it and because we are in an
allocation planning process, we will give you zero.’ We are sitting there very nervous. What do
we do? But the fact is that if they do not want to give us water and we have withdrawn our
application, we could get zero anyway. Then we have been advised to get legal advice. We have
not really done anything wrong. We put in a legitimate application. We have complied with
everything.

  CHAIR—Why do they want you to withdraw it?

   Ms MacFarlane—They are saying that, because the new legislation came in on 26 November
last year, it does not allow applications to stay pending. It actually referred to notices. Within 30
days of receiving an application, you must advertise it. What he is saying is because we have not
finished the planning process, we cannot advertise it. In effect, what it is doing is removing all
statutory rights. That is what they are basing this whole thing on. We are still negotiating. We are
saying, ‘Isn’t there any other way you can advertise it and then not actually give us a formal,

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sizeable amount of water until the planning process is complete so our applications can stay
within the system?’

  CHAIR—Who is your local federal member?

  Ms MacFarlane—I am not sure if it is Nigel or Warren Snowdon. I think it is Warren
Snowdon.

  CHAIR—Scullion is the senator.

  Ms MacFarlane—Sorry, Warren Snowdon.

  CHAIR—What does he say?

   Ms MacFarlane—He does not really want to talk to us. He is more worried about Aboriginal
affairs. I am not degrading that.

  CHAIR—So he has not taken an active interest, in other words?

  Ms MacFarlane—No. We are at loggerheads. Our fear is that they are going to be declaring.
They declared Katherine. I do not know what is going to happen with it. At Mataranka they are
looking at declaring in the next six months, so it is something that needs to be approached quite
quickly.

  CHAIR—Declared the planning?

  Ms MacFarlane—Yes. They declared. The minister signs off. How it is working in the
Territory is the minister just signs a bit of paper saying, ‘We’re declaring this water allocation
plan.’ They have been consulting with us 12 months.

  CHAIR—Is the plan based on science?

  Ms MacFarlane—They are saying it is. They are saying it is. I believe that there is as much
science as they probably will get in the interim, given our remoteness. However, we are saying
they should be basing it from 1960 to now, not from 1917.

  Senator NASH—This is what you were saying earlier?

  Ms MacFarlane—Yes. They are using the rainfall figures. They are saying, ‘It has been
greater rainfall.’ The fact is that there are 50 or 60 years of quite a bit more reliable data.

  CHAIR—After the CSIRO report the other day on the north, people like Stewart Blanche and
Flannery and those fellows said, ‘That’s it. We’ll shut the north down.’

  Ms MacFarlane—That is where this is flawed too. They have relied on these reports.




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  CHAIR—I am about to tell you that that report is seriously, seriously flawed in that it is old
data. All it is doing was gathering up what was on an old database, turning it into a desktop study
and putting out a paper which was absolute garbage.

  Ms MacFarlane—I want to tell you about one of the things they have based Mataranka on.
There was a report done by Jolly in 2002. It is based on the south. It is a hydrology report on the
south of the Roper River. That is what they are basing it on. So they have not taken the west or
the north into account.

   CHAIR—But they are even saying there is inadequate information to make a judgement. I
know there is because I have been going there for some years. The science is not done. The
difficulty is the Northern Territory government has not had the resources to put into the work.
We commissioned the CSIRO report, which is much like the Condamine-Balonne report, which
was a desktop study based on whatever was thrown in. They never left the office, for God’s sake,
to do the report. No-one left the office. There was no fieldwork.

  Ms MacFarlane—I guess what we are saying is we are there, we have suitable, sustainable
land, and there is a water resource below us. We are keen to get on with development. Let us get
on and do it and then you will be able to get some of your data. Start irrigating, because you
need the change in water levels to really start getting an accurate idea. We are there now. We
want to do it. We are happy to say, ‘There is an allocation plan. If it is really dry, we may cut it
back.’ That is probably what we are asking you. We would like to see the plan processed within
the next six months. We cannot stay there forever. How long is this going to take?

  CHAIR—What we would like to see is the science that backs the plan as well as the plan.

  Ms MacFarlane—Yes. We are happy for the later part of the data. There is no irrigation much
so they cannot. I have a document saying how you calculate the amount of water there. You need
the change in water level. You need rainfall and river flow. There is really no accurate data prior
to 1960 for rainfall and river flow, so we are saying, ‘Use that information because that is all
they’ve got and then you’ll be able to get your water levels. Let’s get on and do it.’

  CHAIR—Senator Fisher?

  Senator FISHER—No, thanks, Chair.

  Ms MacFarlane—Someone give me a hard time. I have been waiting. I do know a lot of it
and I am quite passionate about it. I am aware that it is very sensitive—water—and the
environment does have to be taken into account. We are not proposing for a minute to put any of
that at risk. All the clearing—people hate the word ‘clearing’—has been done or people already
have clearing permits for some of the clearing that has not been done. So that is not an issue
restricting the development of the irrigation. Currently the application is there for 28,000 meg.
All those areas are either cleared or there are clearing applications that have been approved and
they have proved that they are sustainable.

  CHAIR—It obviously works. Kane Younghusband is a really good example.

  Ms MacFarlane—Yes. It is very successful.

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  CHAIR—It has a million-dollar turnover.

  Ms MacFarlane—It is very successful. We have a resource there. We are on the highway. We
have power. It will help employment for people. It will empower even your indigenous people
because there will be opportunities there.

  CHAIR—How far from Elsey are you?

  Ms MacFarlane—About 30 kilometres. We are only about 5 kilometres from—

   CHAIR—I will give you an idea. When we went to Elsey, Elsey was run by the ILC at that
stage, and obviously the Northern Land Council had a bit to do. We went out and saw Kane
Younghusband’s set-up. I think it was 1,800 acres.

  Ms MacFarlane—Yes. He has 1,000 acres and his brother has 800.

   CHAIR—The shed looked familiar because it was from Dubbo. Then when we went to Elsey,
we said to the people there, ‘If a young indigenous person on Elsey through the fence wanted to
do what they were doing at Kane Younghusband’s, what would be the set-up in terms of tenure?’
That, of course, was a flawed part of the planning. I do not know what the Northern Land
Council have done about it. But if a young bloke took it on and he got run over by a tractor and
killed or something and his missus wanted to go back to Darwin or somewhere to live, they
would not allow whoever it was to transfer to sell the lease to someone else to continue the
business. It would have to be surrendered. I said to them, ‘Well, no bank will bank that deal.’ But
there is huge potential in your area for development.

   Ms MacFarlane—There is. As I said, we are keen. We are aware. We have engineers for
proposed bores. They are using the latest technology available. By the way, there is no flooding
in the Territory. You have sandy soils. There is no flood irrigation at all. It would all be sprinkler
or drip or whatever. We have engineers from down here. We go to seminars quite often looking
at water monitoring, so you are only putting on the water that the plant physically needs. We are
conscious of all that.

  CHAIR—You will be pleased to know that you have gone to the right place, though. As you
know, the dear old Lachlan is dead.

  Ms MacFarlane—I know.

 CHAIR—This lady comes from the Lachlan. Thank you very much for your evidence. I think
we might go to lunch.

  Ms MacFarlane—For any senator who would like to come out and see us up there, we would
love to have you out there to show you physically what is happening. I do not know. There has
been a bit of reluctance.

  CHAIR—We might take you up on the offer.

  Ms MacFarlane—We are happy and embrace anyone that would like to visit.

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  CHAIR—Well, I think it would be appropriate for the committee to go and have a look
anyhow. Thanks very much.

  Ms MacFarlane—I thank you very much for the time. I do apologise if my protocol was not
as good as it should have been.

  CHAIR—The reason I would embrace it if I were next door is that the Greens are trying to
shut the place down.

                    Proceedings suspended from 12.16 pm to 1.16 pm




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GRIBBLE, Mr David, Private capacity

JONES, Mr Symon, Private capacity

  Evidence was taken via teleconference—

   CHAIR—Welcome. If you would like to make an opening statement, we would be delighted
to hear you.

  Mr Jones—I would like to address this committee by saying that I am very concerned at the
price we are currently paid by the Fonterra company. It is not sustainable going forward. We are
currently paid $3.67 for a kilo of milk solids. This is around 27.8 cents. Our business is currently
losing money and it is of great concern to us.

  CHAIR—Any other opening comments?

  Mr Jones—That is all I have at this stage.

   Mr Gribble—As an opening statement, with the farming practices here, basically we have cut
back to compromise such things as fertiliser and dairy feed and are taking a loss of production to
maintain an even basis, to stop ourselves going backwards. We are actually feeding and clothing
ourselves at the moment on past savings. So the way we are headed at the moment with our
Fonterra payments, we are actually going into reverse. I will follow up later. I have a few ideas
that I will put forward. But, at the moment, I feel that if we can come to some arrangement
where we can get a bit more added value to our product, and comparing it with the New Zealand
side, we would probably make it only just sustainable. Recently, we experienced a 17 per cent
increase in world dairy prices. That has not been forthcoming to suppliers. Another thing I want
to point out is that even if we had some sort of outline or forecast and were kept informed as to
what Fonterra’s payment were going to be further down the track, at least people could plan how
to farm and try and hold their heads above water or, in a lot of cases, make a decision whether to
actually quit dairying and move on to some other maybe higher value crop, because that is where
people are at the moment.

  CHAIR—Thank you very much. We had evidence this morning from another Fonterra
supplier—Sid Clarke. The ABC have reported him as saying that Fonterra is paying around
Wagga 42 per cent less for milk for the year starting in July. What sort of a cutback have you
blokes had?

   Mr Jones—It is very similar. It is between 42 and 50 per cent. If you put this into perspective,
we had an opening price of $3.46 for our business. Every business will vary. With the current
increase, it has taken our price to $3.67 for this farm. We have almost turned the tables back five
to six years. In 2002-03, we had a price of $3.46 before we had a price of $3.50 a kilo of milk
solids. I just do not understand how we could go back or turn the tables back so far in an
industry where we are continually being pressured by the rising costs of production. That alone
is telling us that this is not sustainable. Our business stands to lose $121,000 this year. If you
increase the milk price from $3.67 to $5, which I think is more sustainable, we will make a profit

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of around $40,000. The middle ground, I guess the break even for our business, would be
somewhere around $4.50 to $5. Even then, we are not making a fortune.

   The thing to bear in mind in all of this is that we are farming away our equity for us to survive
on a year in, year out basis. With a price that is anything less than $5, we will just continually
erode our equity. We cannot make improvements to infrastructure. We have reduced our staff.
We are pretty much putting most of the labour in ourselves—myself, working 100 hours a week
and the skeleton staff doing as much as we can afford to pay them. That is how it is for our
business. I have the budgets here in front of me. We have cut the budget as much as we can—
trimmed up our input costs. We are doing most of the work ourselves. I just do not see how this
business can be passed on to the next generation or how the younger generation would be
encouraged to go farming, particularly dairy farming, at this level or where the industry is at at
the moment.

   My concern is that Fonterra have not stepped up to the plate. As far as the future, we are not
aware. They have not made a statement around the milk price forecast and where it is heading.
They seem to be operating on a week in, week out basis. I do not think this is good enough for a
multinational company. I think they need to have some sort of budget process themselves and at
least inform their suppliers and the industry where we are heading—whether the price is likely to
increase or whether it is to stay as it is, and for how long.

   Mr Gribble—Just to reiterate from Symon, with the comparisons between Australia and New
Zealand, Fonterra New Zealand is 94 per cent reliant on the depressed overseas commodity
prices at the moment. In Australia, I understand through talking to Fonterra, 30 per cent is on the
whole milk product, which is a reasonably high value product. There is 30 per cent on other high
value products. The remainder is about 40 per cent on the milk powder prices, which are
governed by the overseas commodity price. The advantages over New Zealand would be your
lower transport costs. So overall Fonterra would be in a better position than Australia to pay out
to match, not better, New Zealand on those things alone. Their share value price at the moment is
$4.52.

   On speaking to Fonterra, they were very reluctant to come to the party on anything with an
increase. I presume they have not taken any staff or salary cuts themselves to help out.
Everything goes back down to the producer. They were expected to support a business and run at
a loss to keep Fonterra able to make a profit. No-one can operate a business like that.

   On the New Zealand side, their payout at the moment is $5.10. So they are getting $4.55.
Included in that they get what is called an added component price, which is 55 cents. It is a bit
like a dividend, but not really. Other than that, at the moment, they are being paid 28 cents above
us. So if you take the core, it is $4.55. With the conversion rate, it works out to very much what
we are getting here. But they are getting this added value component of 28 cents extra at the
moment and it will be up to 55 cents per kilogram of milk solids. They are on a share scheme
there, where they are compelled to buy shares. Out of those shares, for a unit like this, the cost of
borrowing to buy the shares would work out about $25,000. Your return on that for your 55 cents
added value component would work out about $42,000 on a typical unit like we have here. So
there is a win on it. It is certainly another area to look at. But a lot of farmers here may not want
to fork out to buy shares. It is just another option.



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   CHAIR—We might go to questions now. Fonterra, on 17 June this year, put out a press
release in which they said, according to Ms Stacy:

  There have not been returns in the domestic market to continue high prices.

I have not been to a supermarket where the price of milk has dropped. Have you?

  Mr Gribble—Nor have I.

  Mr Jones—No. In fact, the price remains steady, if not increased. The other thing that would
be worth asking Fonterra is why they, like National, are importing milk or ingredients from New
Zealand.

  CHAIR—Would you like to describe to the committee what you understand that to be?

   Mr Jones—I understand that they may import some higher value added ingredients—a high
whey protein or ingredients which they use that are too expensive to make here themselves. I am
not sure exactly what ingredients they are. However, if there is too much milk here, why would
we bring in anything to this country that we could not produce ourselves? You are right; milk is
not going down. Fonterra do have large exposure to the Australian national domestic market.
Sixty-six per cent, in fact, of what they produce is sold domestically in one form or another—
either liquid milk, cheese products or spreads. As a supplier, I would have thought that would
insulate us from the variations of the global export price. However, we are not seeing that being
passed on.

   CHAIR—Do you think part of the problem is they are blaming the market for doing you in
the ear? Of course, we all know it is as much to do with competing with places like China for
powdered milk and the subsidies of the US and the European Union. In the Australian domestic
market, do you think the monopoly power of Woolies and Coles has something to do with the
fact that the price of milk really has not moved for a long time? Obviously part of the solution to
this is for milk to be worth something. It ought to be in terms of cross-production and delivery.
At the present time, somewhere between $1.85 and $3 is the price of a litre of milk, depending
on where you go. Is there something wrong with the delivery system, or is it the monopolisation
of the market, with Coles and Woolies having 80 per cent of the packaged market and 55 per
cent of the unpackaged market? What do you reckon the problem is?

   Mr Jones—Well, you would certainly have to question the power of the supermarkets. I guess
it is the actual power they would have in saying, ‘Look, we can import milk cheaper than what
we can buy it for here.’ Maybe that is where the supermarket have the likes of Fonterra over a
barrel. However, given that milk is a perishable commodity, I would not have thought that there
would be a lot of weight in that argument. It has to be produced fresh and delivered fresh. Just
for the record, Fonterra suppliers pay, as a part of their costs or contribute as a part of their costs
to Fonterra, so many cents a litre per cartage and dilution. For the average supplier, it is about
3.6 to 4 cents a litre. That is about $40,000 on a million litres. We could buy our own prime
mover and cart our own milk. We produce around 1.8 to 9 million litres here. We are paying a
significant contribution towards the cartage and the cost of extracting water from that milk to
make it saleable to the public. If you multiply that out by every Fonterra supplier across the


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nation, that is a lot of money. So that is just one cost that we are sharing in that Fonterra does not
have to pay for.

  I question, around this pricing or around delivery, the cost of distribution. What happens to the
milk after it leaves the factory? I think there needs to be more control over that. We would like
some transparency around the cost of milk leaving the factory to arriving at the supermarket
door. If we are getting 26 cents a litre or so and it is being sold out at somewhere between $1.80
and $3 a litre, there is a hell of a margin that someone is getting that we are not. We only want a
small share. Ten cents a litre to us is going to make our business. It is going to turn our business
around from currently being unprofitable to being quite a viable unit. That is probably 30 per
cent down on what it was on the milk price last year, which was around $6.40 per kilo of milk
solids.

  CHAIR—I will interrupt because Senator Back is busting to ask some questions. Is one of the
problems, though, the labelling? We have had some press this week of budget beef, which is
really old cow, broken pizzle or bull or whatever you prefer, competing with non-budget veal or
whatever. People buy the meat because it is cheap. It is budget, even though it is broken mouth
cow. Do you think with milk, because of the use of permeate and, as it were, watered down milk,
that is taking the edge off the marketing of the higher grade milks—whole milks et cetera? Do
you think that that ought to be addressed with stricter labelling so that people know that when
they go and buy whatever it is, Black and Gold budget milk, it is actually reconstituted?

   Mr Jones—I guess there are two issues there. One is that the Black and Gold budget milk is
not a lot cheaper than the whole milk or the better quality milk. Secondly, it really needs looking
at. If you are watering down a commodity that there is already too much of, according to the
manufacturers, we need to stop that straight away. That does not need to happen.

   CHAIR—I notice that Fonterra and National Foods say they are not in collusion. But I notice
that there was a press release put out by National Foods in the middle of this winter—July or
June—which we referred to the other day. It was a letter to some of the people they supply their
milk to. It said, ‘Look, unfortunately, we are going to have to put the price of milk up because of
the demand and the price increases.’ At the same time, they were telling you guys down there to
sign up to a five-year agreement or they were going to bang you for 20.8 cents per litre, or
whatever it was, if you did not sign up. Then you get Fonterra, funnily enough, saying about the
same time, ‘Prices have returned. We are dropping the prices only by 20 per cent, not double
that.’ Ms Stacy said that there have not been the returns in the domestic market to continue high
prices. That sort of runs against what National Foods was trying to say, does it not?

   Mr Jones—There are not the returns. We have not seen the price of milk or any other value
added product come down in price in the supermarkets. In fact, it does not correspond with the
information that we received, where demand is increasing.

  Senator BACK—Gentlemen, I want to clarify a couple of points. I was trying to establish
what equivalent New Zealand dairy farmers are getting. If we stick with milk solids, the figure is
$5.10 per kilogram made up of $4.55 and a 55-cent bonus of some sort. Is that correct? It is
$5.10?

  Mr Gribble—Yes. An added value component makes up the 55 cents.

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  Senator BACK—With currency differences, that $5.10 is reasonable to put against your
$3.67?

  Mr Gribble—Yes. As you can see, there is more in it. But, saying that, you have to be a paid
up shareholder of Fonterra. All Fonterra suppliers in New Zealand as of now are required to be
paid up shareholders.

  Senator BACK—Against that $3.67 after 1 July, what was that equivalent figure prior to 1
July for you people?

  Mr Gribble—You might be able to fill me in on that, Symon.

  Mr Jones—Prior to 1 July, I cannot answer what the equivalent price was against New
Zealand.

  Senator BACK—No. Not against New Zealand. What were you being paid prior to 1 July?

  Mr Jones—At an average price?

  Senator BACK—What has it come down from?

  Mr Jones—It has come down from around $6.40.

  Senator BACK—In one jump?

  Mr Gribble—We have had near enough to a 50 per cent drop in price.

  Mr Jones—The price came down as of 1 March this year. It was the equivalent of a 50 per
cent decrease in our price as an average price across the season.

  Senator BACK—Elsewhere in Tasmania, is National Foods the only other company that
takes whole milk?

  Mr Gribble—Cadbury also operate in Tasmania.

  Senator BACK—At the moment, can you give us some idea what other milk producers are
getting from the companies that are buying from them in terms of price per kilogram of milk
solids?

  Mr Jones—It is all very much in line with Fonterra. As was alluded to earlier in the
conversation, there is very much some form of collusion. I am not sure whether it is collusion,
but the factories are very much paying in line with each other. There is no-one really going it
alone. The price we are getting at the moment is very similar to all other suppliers of other
companies other than the suppliers who still remain on contract with National Foods. They will
run their course at the end of the year. I think they finish in December. There are still some
suppliers who have their contracts. But, after that, there will be very little difference between the
price paid in individual companies here in Tasmania.


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  Senator BACK—Sorry to keep pressing with these questions, but I just need to understand it.
What would you say your costs of production are per litre or per kilogram, taking into account
the cost of capital of your properties as well? As a ballpark figure, is there some average figure
for Tasmanian dairy farmers that we can work on per kilogram or per litre?

   Mr Jones—I have my budgets here. Around 35 and 38 cents a litre would be break even. An
amount of 27.8 cents is what we are being paid for this farm. Again, every farm is different.
Their management style and their infrastructure, the region that they farm in, the soil types, the
conditions and the environment all vary. However, year in, year out, we make a $16,000 loss just
by putting in our variable costs without our overheads. So we are losing $121,000 here on this
farm at the current milk price. Again, that includes our financial arrangements. We have 65 per
cent equity here. For any dairy farmer who is serious about the industry, they would all be
carrying some debt. It affects the ability to grow. We need to bear in mind another point.
Fonterra and every other milk factory have encouraged growth for the last five to 10 years. They
have encouraged growth. There have been growth incentives. People have been under the
illusion that the factories have required significantly more milk than what they currently do and
have gone to extreme lengths to grow their businesses and invest in the necessary capital
infrastructure to do it. An example is buying the farm next door and investing in the latest high-
tech equipment and buying more cows. They are taking on a significant and substantial debt to
do this. They have been told, ‘We’ve got enough milk and we can’t pay you a sustainable price
for it.’

  Senator BACK—Yes. That point is coming through. I think Symon made the point that you
are actually obliged to pay four cents per litre equivalent for transporting the milk. Is that right?

  Mr Jones—It is around that price. That price includes cartage and it is called a dilution factor.
There is a cartage component and a dilution component, which we are told is the cost of
removing some of that water from the milk.

   Senator BACK—I was a fuel distributor in Tasmania not long ago. I wish I was getting four
cents a litre. The obvious signal that comes through is that the companies actually want a
significant proportion of you out of the market. If your cost of production is as you say it is—
between 35 and 36 cents—and you are getting 28 cents or 27.8 cents, clearly the signal from
someone like me is that they actually want a significant reduction in volume and this is their
method of saying so. Would you agree with that or not?

  Mr Gribble—It would appear that way. It could also be that they are just cashing in on the
global economic situation at the moment at our expense.

   Mr Jones—I tend to concur with Dave. Again, National Foods claim that they had too much
milk. Fonterra say they do not have enough and that there is demand. However, that demand is
not reflected in the price, which is rather ironic. Secondly, Fonterra Australia is certainly linked
to Fonterra New Zealand. Fonterra in New Zealand have a commitment to pay down a
significant amount of debt within a five-year period, I think. I sometimes wonder whether this is
just a way of capitalising on the big picture economic situation. It could be my cynical view.
However, I think there certainly needs to be a long hard look at the way the business is
structured.


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   Senator BACK—Yes. But they are businessmen themselves. They know very well if they
were trying to survive at a 70 per cent return on their cost of production—that is what you are
talking about; you are getting about 70 per cent back on what it is actually costing you—they
would not stay in business all that long. I just do not understand. Perhaps we will ask them when
we come to them.

  Senator O’BRIEN—I think it is fair to say, is it not, that whatever the price of the product
that Fonterra is getting has historically had an influence on the rate that they paid for milk in
Tasmania? Is that true?

  Mr Jones—Yes. That is true. It is directly linked to the price they receive.

  Senator O’BRIEN—So is there some proportion that you have been able to work out where
you can benchmark a movement in commodity prices and say, ‘Well, if we have accepted the
good when it is high, we’ll accept the bad when it is low, but here is how we work out the
benchmark?’

   Mr Jones—No. There is no real formula where we can work that out. Fonterra have formulas
where you could ask what the effect of a one cent increase is on the Australian dollar and the
effect that has on the farm gate milk price. They would be able to rattle that off. I cannot rattle
that off. It would be significant. We do try to plan ahead. What is surprising as a supplier is that
Fonterra, given the size of its international operation, could not have planned ahead to the extent
that it had no cash reserves to continue to pay a milk price that makes farming affordable. That is
surprising. Last November we were paid a 20-cent step-up and the following month it was
removed. That is the sort of stuff that is surprising. A company that has a reasonable handle on
the global economic situation and on its markets could pay a 20-cent step-up in November last
year and could remove it the very next month—’Sorry. We’ve made a mistake. We can’t afford
to pay you this?’ That was the beginning of the end, basically. From there on, the price
continually went down. That was, ‘Sorry, there will be a 30 per cent cut in February.’ From there
on it continued to fall. So we cannot really draw a link because we do not have access to those
signals. The real signal we have is the dollar. We do know that the dollar has a significant effect.
Economics is a funny thing.

  Senator O’BRIEN—That is right. How does an industry like the dairy industry deal with the
boom and bust of commodity prices given that you cannot tell the cows to stop producing milk
and you cannot make the grass grow when you need to buy grain and you cannot tell the bank
you will not be paying this month because the prices are low? I suppose that is a rhetorical
question. It indicates that there may be special circumstances for the dairy industry in terms of
the need for special market arrangements for it. Would that be a fair comment?

   Mr Jones—There is a lot of debate over deregulation and whether that market support, albeit
it was only a very small part of our income that had any support and it was directly related to the
liquid milk market in the domestic milk market, should have been removed. So the fallout from a
completely deregulated free market is what we are operating in now. It is coming back to bite us.
I think there is an argument for some fixed pricing or some pricing mechanism. However, I do
think the factories do need to be more responsible in how they distribute their income during
those high price boom years. As a cooperative, or as Fonterra have some form of cooperative
structure within their supply company, I think there is an obligation to pay farmers the highest

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price that they can possibly afford, particularly because every other company pays as much to
farmers. That is not so much in Tasmania, because we are very much a captive market in terms
of who we can supply. But on the mainland there is a lot of competition and a lot of competition
for supply between Murray Goulburn, Warrnambool Cheese and Butter and Fonterra. They are
therefore at risk of losing supply, particularly in those good years, if they cannot pay a
competitive price. It seems that it only ever takes two or three things for a supplier to change on
the mainland. We do not have that option, unfortunately. However, I think that is a dilemma in
those good years. But, in the tough years like this, the prices are very much the same so no-one
knows. The point I am trying to make is that this may be a lesson for them to manage their
income streams so they can pay a more reliable price on a year in, year out basis.

  Senator O’BRIEN—Would they not say, ‘Well, you as farmers have access to a range of
arrangements with your income and farm managed deposits where the good times allow you to
put money aside for the bad times?’

   Mr Jones—And that is true. So there is a responsibility on both sides here, yes. I just want to
make a point. Given that these milk companies have been encouraging growth, and in order to
do that they have paid a 50 cents per kilogram of milk solids growth incentive, a lot of farmers
have not put that money away. They have used that money and borrowed against their equity to
build their businesses. They have gone from 500 to 1,000 cows. Some farmers have gone further.
It is incredible, the growth and the investment in the dairy industry in Tasmania, all on the back
of a promise that ‘The dairy industry looks good. We need your milk.’ Those things are not being
used because people are putting money back into their businesses. So where does the
responsibility lie? We all do our homework and we all accept a fair share of the risk. We would
not be farming if we did not. However, for a part of that risk, taking some responsibility around
that risk, we do expect to be paid a price that will support the growth.

  Senator O’BRIEN—But that has never been reflected in the contracts, has it?

  Mr Jones—I am more or less saying that if we do not want an increase, we are going to
remove the growth incentive.

  Senator O’BRIEN—But none of that has been reflected in the contracts that have been
negotiated. I have had a bit to do with the dairy industry in Tasmania. It has generally been a
lower price in Tasmania than elsewhere on the mainland. That has been one of the complaints of
dairy farmers. But, in the last few years, the price has been enough to make dairy farmers that I
thought would never smile smile as they walk down the street. So farmers in the dairy industry
have never sought to build into their contracts some sort of floor price?

  Mr Jones—No. That is right. There has been talk about fixed pricing. I guess farmers have
tended to remember the one year in seven of the high prices and think, ‘Oh, yeah, it’s going to
improve’ or ‘It will improve and we know it will improve.’ However, you are right; it has always
been relatively low here based on the reflection that we have a lower cost of production. But that
does not stack up any more. Our seasons are too variable to have a lower cost of production.
Take this season, for example. It has been a disastrous start. But I will say in answer to that low
milk price that the costs have been a lot lower. What we are finding now is the costs are
increasing dramatically. We have had a 40 per cent increase in our hydro power bills over the last
three years, but our milk price has not gone up accordingly. That is only a percentage of our

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variable costs, but it is still an increase on the back of the high input. Generally what happens in
these higher priced years is the service industries cash in on it. So we see that fertiliser prices
and feed costs go up accordingly whereas in those other lower years I think generally the costs
have been a lot lower. But we are finding we are farming in different times, so we need a milk
price that is in line with the rising costs of production.

  Senator O’BRIEN—I would like to ask some more questions, but the Chairman is giving me
the nod that we are running out of time. Senator Nash has some questions. I welcome the
opportunity to chat about this further.

  Mr Jones—Thank you.

   Mr Gribble—I want to reiterate what Symon said. A lot of industry piggybacks on us. So you
are not actually getting the good times, because the consumables and everything goes up
accordingly. So that creams off a lot of profit that the dairy suppliers do make. That is very
closely related and piggybacks on to the milk price. All we are asking for is some transparency
from Fonterra.

  Senator O’BRIEN—Fair enough.

   Senator NASH—You mentioned before managing fluctuations. I think by and large farmers
are very good at managing those fluctuations. When it becomes an issue of fairness, it is a
different thing altogether. Having to be paid well below the cost of production, obviously you
cannot have a sustainable sector if that is going to be the case. Senator O’Brien mentioned
pricing mechanisms. I think he used the term ‘floor price’. Can I just have your view on the
possibility of that? More generally, if the free markets led to this situation, do you think there is
any way for it to be corrected without some form of government intervention?

  Mr Jones—The Commonwealth made a large contribution to removing any price support. I
guess there was quite a lot of red tape and bureaucracy around that stuff. I believe that if there
has been talk around the floor price, it can work. I think farmers today—as I said, I think it is a
completely different world with farming—need some certainty. I do not believe we can farm on
the highs and the lows that we have been used to. It would certainly give farmers the confidence
to go forward. It is a hard question around government intervention. I believe in times like this
government intervention would be fantastic. But does that mean we follow the US or we follow
the European Union? I think their situations are very different to Australia. I think there is a
whole heap more to this than just providing an answer over the phone. I would really love to
have a look at it. I reckon there is some merit. But where it should kick in is when the price
bottoms out, like it has now. I think it should remain in place until we start to see some
movement and some levelling out on the international market. I also believe that there needs to
be probably better monitoring and control around imports and exports and the balance of milk
products coming in and leaving the country.

  Mr Gribble—Or just a level playing field in that arena as well.

  Senator NASH—Do you have anything else you want to add to that, Mr Gribble?



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  Mr Gribble—No. Basically, as Symon was saying, we really need some stability in the
industry to weed out those troughs and highs. If there is any imported product coming into this
country, it needs to be managed on the same sort of field as the Australian products so there is a
level playing field there.

  CHAIR—Is it true that we have been bringing in either milk or some part of the reconstituted
milk from New Zealand to the Australian market?

  Mr Gribble—We have seen that in the paper. I do not know for sure. But it has been put to
press in the paper.

  Mr Jones—It is true that there is some form of product coming in from New Zealand.

  CHAIR—And that is being added to in some way the remake of milk here in a permeate type
operation?

  Mr Jones—That is right. I think it is a good question to put to Fonterra and to what
percentage of product that that is added to or sold into in terms of the brand—what brand it is
actually sold under. I cannot personally quantify what product or where it is actually sold, but I
do know that there is a percentage of product that comes in.

  Mr Gribble—Also mainland cheese products that are all from New Zealand as well.

  Mr Jones—Whether that is an arrangement through Fonterra being a part of the Fonterra New
Zealand company, I am not sure.

  CHAIR—What it could be is transfer of dividends, in a way, from an Australian operation to
a member based cooperative. It might be a fancy transfer of profit. What is proposed in the ETS
is doom and gloom for irrigated dairy farmers if they are included under the present
arrangements and New Zealand farmers are given the exemptions that are proposed. This might
become more standard practice. They would certainly have under those arrangements a clear
market advantage financially.

   Mr Gribble—Definitely so. If the said emissions trading scheme does affect this, it will
definitely put us on the back foot here in the way that it is formatted to come in. New Zealand at
the moment, as you have pointed out, have rebuked their emissions trading scheme and altered it
to a more workable solution to pastoral farming. It is being looked at more as a carbon sink and a
carbon source.

  Mr Jones—That is right. If you think we are doing it tough now, introduce an ETS and think
how hard it is going to be for us then.

  CHAIR—We will deal with that at another time. We are grateful for your contribution today. I
have this big long line of serious gentlemen here from the CSIRO who are waiting to be heard.
Thank you very much.

  Mr Jones—Thank you.


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Monday, 12 October 2009               Senate—Select             ARI 55


  Mr Gribble—Thank you for hearing us.




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[2.06 pm]

BELL, Professor Alan William, Acting Chief of Division, Food and Nutritional Sciences,
Commonwealth Scientific and Industrial Research Organisation

BURDON, Dr Jeremy, Chief, Plant Industry, Commonwealth Scientific and Industrial
Research Organisation

DALY, Dr Joanne, Group Executive, Agribusiness, Commonwealth Scientific and
Industrial Research Organisation

KEATING, Dr Brian Anthony, Director, Sustainable Agriculture Flagship, Commonwealth
Scientific and Industrial Research Organisation

LEE, Dr Bruce Thomas, Director, Food Futures Flagship, Commonwealth Scientific and
Industrial Research Organisation

MORELL, Dr Matthew, Theme Leader, Future Grains, Food Futures Flagship,
Commonwealth Scientific and Industrial Research Organisation

PRESTON, Dr Nigel, Theme Leader, Breed Engineering, Food Futures Flagship, Division
of Marine & Atmospheric Research, Commonwealth Scientific and Industrial Research
Organisation

PRIDEAUX, Dr Chris, Acting Chief, Livestock Industries, Commonwealth Scientific and
Industrial Research Organisation

   CHAIR—I welcome Dr Joanne Daly, group executive of CSIRO agribusiness, and other
officers of the CSIRO. We are eternally grateful for your appearance here today. Given the
evidence we have received of declining agricultural research and the global food task, it is pretty
important. I remind senators that the Senate has resolved that an officer of a department of the
Commonwealth or of a state shall not be asked to give opinions on matters of policy and shall be
given reasonable opportunity to refer questions asked of the officer to superior officers or to a
minister. This resolution prohibits only questions asking for opinions on matters of policy and
does not preclude questions asking for explanations of policies or factual questions about when
and how policies were adopted. Officers of the department are also reminded that any claim that
it would be contrary to the public interest to answer a question must be made by a minister and
should be accompanied by a statement setting out the basis of the claim. Would you like to make
an opening statement?

   Dr Daly—What I am going to do today is just give a brief overview. We have a couple of
slides on the setting for food security work that we are responding to as an organisation. I will
then give a very brief overview of what CSIRO is doing in response to the food security issues.
My colleagues will talk in more detail, as requested. We have allowed sufficient time, I hope, for
questions. Scientists do like to talk. I invite you, Chair, to intervene when necessary.


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  CHAIR—I will probably throw something.

   Dr Daly—Thanks very much. We are talking today about our response to food security as an
issue. Food security is quite an interesting issue. Most people tend to think of it as poor starving
people in Ethiopia or Somalia, but, in fact, food security has three aspects that are important,
including Australia. One is about making sure the world produces enough food for the
populations that we will have now and into the future. The second aspect of food security is to
make sure that food has adequate nutritional value. It is not enough just to produce enough
calories. We also need to make sure that food is nutritious and provides all the nutrition our body
needs. The third aspect of food security is, having produced enough food of the right kinds, we
need to make sure that people can access that food at the right price. Certainly all these issues
are relevant to Australia.

   The agricultural challenge facing us is significant. I am sure the committee is aware of this.
Between now and 2050, we will have to at least double food production internationally to meet
the rising demand for food not only because of rising population but also because as the middle
classes grow in many of the developing countries, such as India and China, there will be an
increased demand for calories. People eat more when they are more affluent and they also eat
higher value foods, such as protein food. It will actually require nothing less than a second green
revolution. But, unlike the green revolution that occurred in the 1960s, that was built on the back
of a great increase in fossil fuels. Of course, into the future, under all sorts of scenarios that have
been painted around the changing economic circumstances, we probably will not have the
opportunity to expand our uses of fossil fuels in order to build that next green revolution. We
also note here that Africa is yet to benefit from that first green revolution, so there are some
interesting challenges there for us.

  You will be familiar with this slide. It is really a distribution of where the greenhouse gas
emissions are in the globe. Agriculture represents 14 per cent of total emissions. Again, that is a
challenge that we must face as we try to expand food production and learn how to do that
without increasing that carbon footprint.

  Australia as a nation has responded to the global food challenge. There were recent
announcements in the last budget of an increase in funding for overseas work on food security,
including $100 million for Africa, which will be overseen by AusAID and ACIAR. They are the
two bodies that we work with to do agricultural research. There are three pillars for that work
both in terms of the support for international agricultural R&D and then creating the settings by
which that increase in productivity in those countries can be taken up and benefit delivered to the
people. CSIRO is heavily involved in this work. We do work internationally in agricultural
production both through ACIAR and through AusAID. One of the commentaries around
increasing food production in the world is that historically there has been a huge benefit to
developing countries of the kinds of agricultural research that has gone on in developed
countries. The spillover benefits have been reduced over recent decades because of the reduction
in agricultural research throughout the developed world. Part of our work here is to actually
ensure that we have sufficient work so spillover benefits continue in developing countries.

  To reiterate, the three areas of food security are that we have to produce a quantity of food, we
have to introduce the right quality and then provide access. CSIRO does research in all three of
these areas, although most of our research is focused on the first two around both increasing the

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quantity and the quality of the food. I note down below that food security is a lens in which you
can look at work. Not all the work we do is done because of food security, but a lot of the work
we do is relevant to food security. Something like $350 million to $400 million of work per
annum is done in CSIRO that is relevant to these broader issues of food security.

   If you think about food security, basically, there is a value chain. It starts with on-farm work
through to farming systems and into food manufacturing, nutrition and health. We research right
across the chains relevant to food security. On the on-farm work, we do significant work in
improving crops and timber and improving livestock. This is our basic breeding work. This is
where we do the work to increase productivity. I guess there has been some controversy in recent
years because we have seen changes in our portfolio of research in these areas as we have shifted
from some of the perhaps more traditional work that we have been doing into much more what I
would call more contemporary research areas. In order to get this big increase in productivity,
we are going to have to do some very new pieces of science using very new tools and
technologies.

  What we have been doing in our agricultural work is shifting our work in this area into much
more a genomics approach and a biotechnology approach and using ICT systems to integrate the
knowledge. We have a very large initiative in sustainable agriculture bringing together all the
work we do on farm around genetics in particular and integrating that with our knowledge
around the farming system, helping growers identify change management practices and giving
them underpinning science that will enable them to make choices into the future about what
kinds of farming systems they want to have in their land. This is particularly important over the
next 30 years as the climate shifts. Farmers will face some new challenges making choices about
what they grow wherever they live.

  Further down the chain, food manufacturing is also important. It is making sure that the food
that we produce on farm is actually picked up and delivered safely to the consumer and the
producer is providing new innovative products that have things like sustained shelf life and so
on. That is much more important in the highly urbanised community that we will have into the
future. Finally, we do work in health and nutrition. A lot of the burden of disease in Australia
increasingly is around lifestyle related diseases, of which food is either part of the problem or
part of the solution. We also do work in biosecurity, which underpins our work making sure that
the farming system work is sustainable.

  Senator NASH—What is zoonoses?

  Dr Daly—They are human diseases of animal origin. I think something like 70 per cent of
new diseases in humans in the last three decades have come from animals. They are things like
avian influenza, Hendra and so on, yes.

  Senator NASH—Thank you.

  Dr Daly—We also do work in fisheries, which is part of food security. CSIRO underpins its
work in food security by its scientific excellence. As I said, we spend between $350 and $400
million a year in areas of work that could be regarded as food security. We are ranking in the top
one per cent of world’s research institutions in 13 of the 22 research fields. The ones in red, the


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ones with a little dagger, are the areas that are highly relevant to food security. We are one of the
world’s leaders in these areas.

   In conclusion, food security is a new focus for CSIRO. It does build on our more traditional
areas, the approaches we have taken in agribusiness activity. If we pursue this new focus around
food security, it will not have immediate effects on the kinds of research we do, but I think it will
have longer term impacts on our investments, particularly the kinds of partners that we choose to
partner with. Where we partner internationally, it could well be partnering with people around
looking at ways of increasing food productivity. For example, we are currently exploring with
the Chinese Academy of Sciences the possibility for a new initiative around redeveloping the
architecture of plants, so we have different sizes and shapes of root systems or above plant
structures to actually increase the productivity of the plants.

   The amount of food we produce in Australia currently feeds about 60 million people plus in
the world. With a population of 20 million, we produce food for another 40 million people. But
our science that we do can feed far more. So the spillover benefits of us working internationally
to help with food biosecurity means we can feed far more than 60 million people. We can have
an impact on billions of people, rather than just tens of millions of people. That is all I want to
say.

  There are two short talks. One is about some of our plant based agricultural work and some of
our livestock work, which should give you a broad thrust about the basic work we do in those
two areas. Then there is a break for questions.

  CHAIR—Would you like to go to a further presentation or get some questions now?

  Dr Daly—It might be better to do the plant and the livestock ones to give you a good
overview of what we do.

  CHAIR—Away you go.

   Dr Burdon—I would like to give you a brief overview of what we see is a picture of the long-
term future of plant based agriculture and how it can contribute to the issues that are facing
Australia and the globe as a whole right now. I guess what I want to do first of all is point out
that, as a result of the major changes which are going on in plant science and, in fact, in
biological sciences as a whole, there is a tremendous fuelling of knowledge about the
fundamental mechanisms of how plants work. We are already using a lot of that information to
tackle major problems. I would just like to give you a couple of examples of that. First of all,
obviously in a country like ours, water availability is a very big issue for agriculture. I have an
example which I will show you of changing the transpiration efficiency. That is the rate at which
water is passed through a plant. It is having an impact on yield as a result of that. Another area
which I guess is particularly dear to my own heart because it is in my own area of expertise is
pathology, where there is a constant problem associated with new pathogen types, particularly
rusts, and how we are trying to tackle that ourselves.

  I will give you a very brief picture here of water use efficient wheats. This is an ongoing
program to continue to improve cereals in Australia. There is no golden one-off answer in this
area. Basically, this is an example of a tremendous interaction of basic science which came as a

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result of work by staff in CSIRO and staff at the ANU coming up with a novel way of viewing
things. As a consequence, we have been able to come up with a way of measuring the efficiency
of a plant to separate out two different types of carbon—carbon 12, which is the standard type of
carbon that floats around in the atmosphere, and carbon 13. In fact, if you can do that, you can
use that as a way of selecting for particular different types of wheat. This has been very
successful in generating new varieties which, under dry conditions, will yield at least 10 per cent
more. There are one or two varieties, one of which is Rees, which we have released into the
Australian agricultural system, which has that benefit.

  I will turn to the shifty enemies of the world. This is one that is fairly topical. I am sure you
have all heard of Ug99. This is a stem rust of wheat which appeared in Uganda in 1999. It is
capable of overcoming more than 80 per cent of the known resistance genes which are used in
wheat to control stem rust. It is something which is a very considerable threat in terms of
creating a famine situation in Australia. We have been able, though, as a result of new
approaches to preventing resistance genes, to come up with combinations which are giving
pretty effective and durable protection. That is protection that is long-lasting. Some of this is
very conventional plant breeding and some of it is plant breeding which is making use of new
molecular technologies.

   I will go on. The modern biology that is now coming forward, which is really an amalgam of
traditional approaches and gene technologies, really does open up a totally new way of viewing
plants and how they operate. In fact, I think it is fair to say that as we go forward in time, what
we can do in terms of understanding plants and then changing their architecture and structure to
make them more efficient in terms of fixing carbon, producing nutrients and so forth is almost
restrained only by our imagination rather than what we can do. The modern approach to biology
really is quite amazing. We have seen it in medicine and in areas where obviously there have
been a lot of resources go in. We are now starting to see it in plant and animal biology.

   I would like to give you a bit of a flavour for a couple of the areas where we are really making
a major push. Joanne mentioned that we are talking to groups in China around these sorts of
areas. We believe it is possible to overcome the yield plateau. I guess this is the issue that is
striking agriculture around the world. We have put a lot of effort in over a long period of time
into a very conventional agriculture. What we are seeing now is that the yield plateau or the
yield increases are starting to stall or flatten out. We need to come up with a new approach.
Through a major set of national and international interactions that are going on around the world,
we believe there are a couple of ways of tackling this and really creating a new green revolution.
The first of those components is to manipulate photosynthesis—that is, the process which fixes
carbon and generates sugars and so forth. There is partitioning in the plant architecture and the
way that plants basically operate. We believe that we can do this through a whole series of
different ways. Some of them are activities that are already underway—increasing crop biomass.
In other areas, there are attempts to make photosynthesis more efficient. There is a very big push
on with the support of the Gates Foundation. For example, at Eerie, they are trying to convert
rice from one particular type, a C3 plant, to a C4 plant. It is much more efficient at fixing carbon.
We believe that some of these technologies can also be built into wheat and generate a
significant increase. Obviously, reducing losses in the process is going to be very important.

  That is the above ground part of plants. Below ground, this is the area which really is how
plants interact with their soil environment. Therefore, it is a major area of importance in terms of

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plants and water use and drought and so forth. For a variety of reasons—and I guess it is fairly
obvious—it is very difficult to see what the plant is doing below the ground surface. Again,
modern technologies are producing a tremendous array of new techniques, including things like
taking plants down to the equivalent of doing a CAT scan on them and seeing exactly what is
going on, where water is being taken up and so forth. We believe, again, that understanding the
interactions occurring along this interface between the root and the soil itself and the micro
organisms which are present will allow us to make roots much more efficient and deeper so that
they can access water that is in the soil and generally increase yield as a consequence.

   That is one aspect that molecular and modern technologies can benefit us through, which are
directly to the benefit of humankind in terms of increasing food and so forth. However, the other
important thing is an increase in food. It is not just the only thing that is important. Quality is
important. My colleague Dr Lee and his team will be talking about that in a minute. I will leave
the quality and nutritional value to them. At the same time, there are real opportunities to
manipulate plants to help them to produce more efficiently industrial oils and feedstocks for the
pharmaceutical industries and animal industries and in a much more sustainable way than a lot
of activities which are currently based on mineral oil approaches.

   Going forward, there are tremendous opportunities available in plant based agriculture for the
future. It will be high science. It will be science which requires significant interactions on a
global scale because no individual country has all the expertise and skills that are needed. I think
it is a time when we really have the opportunity as a country to make a very significant
contribution to the major issues that are facing the globe. That is all I have to say, Senator.

  CHAIR—Thank you. Who is next?

  Dr Prideaux—Joanne has already touched briefly on the increasing demand for food globally.
Livestock is no different to any other food source. With the increasing global population, we will
see an increased demand for animal protein. That is also associated with increasing incomes. In
Asia, beef, pork, chicken and dairy consumption are predicted to rise between 30 and 55 per cent
by 2020. Australia exports a large proportion of its agriculture or livestock production. Sixty-
four per cent of beef production is exported and about 45 per cent of milk production this last
year, though that can go up to 60 per cent in good years. So is there an opportunity for
Australia’s livestock industries to meet this increasing demand? Obviously that demand is
increasing quite significantly on an annual basis. If we look at the ABARE estimates of
increasing productivity in the domestic industries, the beef industry increased by about 1.05 per
cent per annum over the last few years and dairy by about 1.2 per cent. So if we go along at our
current increase rates, we will be well short in the predicted increase in demand.

   So the challenge is to increase our total output to the Australian livestock industry sector
whilst meeting a number of challenges that are probably greater than what the industry has faced
in the past. We have increasing consumer awareness and demands around animal welfare, food
safety and product quality. I will touch on a few of these in more detail. With regard to the
environmental impact, addressing the triple bottom line of production. It is not just a case of
increasing production; we need to do that with a mind for the impact we are having on the
environment.




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  On climate change and variability, the industry faces challenges of temperature and water
availability and the new and broader spread of disease. We are already starting to see in Australia
new diseases emerging in the north. Bluetongue virus serotypes are starting to have a presence in
the north that were not present before. We are also seeing more cases of bovine ephemeral fever
in Queensland even sneaking down into New South Wales with climate change. Competing
demands for resources—land, water, infrastructure and human capital—are all challenges for the
industry going forward. Disease incursions are an old challenge for industry, but they are ever
present.

  So on increasing food quality, as Joanne has outlined, our portfolio has a heavy genomics
approach to addressing some of these challenges from a genomics perspective. In terms of food
quality, we are looking at eating experience. Consumers are becoming more demanding. They
want their eating experience to be of equivalent level each time or better. We are also looking at
nutrition in terms of both the basic nutritional value of the food and addressing other challenges,
such as obesity and health benefits. It just goes on in terms of what food quality now
encompasses. It is no longer a case of just safe from microbial contamination; it has a much
broader context.

   The genomes of all the major production animals are now available. Through CSIRO,
Australia is a major player in the bovine genome sequencing effort, which underpins a lot of our
efforts. The availability of the genomic information has provided some solutions, but it has
raised many other questions. We are now moving from what was the genomics era into the post
genomics era. I have put down the bottom here Pfizer Animal Health or animal genetics, which
is a key relationship for us. It gives us industries connection and a means of getting our science
out. We have had a longstanding relationship as a mechanism for commercialising outcomes.

  I will just touch on the genetics markers or genetic improvements. Probably the easiest and
quickest benefit of the genome revolution has been the genetic markers, or markers to help select
for traits of increased productivity or quality. CSIRO is the first science organisation to have
genetic markers for beef commercialised. The original markers were in marbling in 2000 and
tenderness in 2002. Meat traceability for food safety has also come on board. There is parentage,
so you know which is the sire and dame of your animal. We are now looking at net feed intake
and tick resistance. In terms of the barriers we are getting from our efforts, the first markers took
about five years from conceptualisation through to a product. The last ones took about 18
months. This timeframe is increasing constantly.

  Our current focus remains on commercial and production phenotypes. We are looking down
the track at markers outside what we may have considered the normal in the past in terms of
eating quality or product safety to traits associated with animal welfare and the environment. We
are looking at breeding sheep that do not require mulesing. So that is merinos to address the
welfare issue of mulesing. Maternal behaviour and the loss of the young represent a lot in the
system and a loss of productivity. We are looking at genetics markers for maternal behaviour and
moving into greenhouse gas production. Can we select animals with lower methane productions?
Brian will touch on some of the greenhouse gas work done in the livestock sector.

  Climate change and variability is not new to Australia’s livestock industries. The industries
were established on the import of northern European animals into the Australian climate. When
the First Fleet arrived, they brought with them a number of animals to set up systems. The need

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to adapt to different temperatures and different weather patterns is nothing new to the livestock
industries. I have included this photo of a Brahman that was probably an early move to adapt the
genetics of our livestock. Until the Brahman were introduced not that long ago, we used
European breeds that were better suited to climates in Europe. This has allowed a major shift in
the genetics of the Australian herds.

  So, looking forward, we need to address parasite and disease agents to adapt to climate
change; heat and drought tolerance for the extensive production systems as we see climate
variability increase; and easy care animals that require less human intervention in that the labour
force is becoming scarce and more spread. Anything we can do to reduce the need for on-farm
labour has a benefit as well.

  With regard to climate change and variability, livestock do play a role in greenhouse gas
production. About 18 per cent of total Australian production comes from ruminants, so there is a
role for looking at solutions to that. As I mentioned before, we are looking at genetic markers.
We have also looked at advanced reproduction technologies, which you will hear more about, to
speed up the dissemination of genetics of favourable traits across the north and to allow breeds
that may not be suitable in other terrains to survive.

   I will conclude with a picture of the wallaby. Wallabies, like cattle, graze and use roughage as
a source of energy. They produce relatively low levels of methane.

  CHAIR—Are you sure that is not a kangaroo?

  Dr Prideaux—According to the website, it is a wallaby, but I cannot guarantee it.

  Senator NASH—That is not a wallaby.

  CHAIR—Haven’t you learnt to spell ‘mulesing’ yet?

  Dr Prideaux—It ought to change. So we are looking at the wallaby as a source of how they
can produce energy from grass without producing the methane. We are looking at the foregut
population of the wallaby and seeing what we can learn in terms of the ruminant.

  Infectious diseases remains a challenge for Australia. A single outbreak of foot and mouth
disease is estimated to cost Australia $13 billion for a long-term outbreak. The Australian
Animal Health Laboratory down at Geelong is part of our livestock portfolio. It is geared
towards preventing the incursion of infectious diseases. We look at the impact of infectious
diseases on food security. This is the current recent outbreak of avian influenza across Asia. Asia
and this region are highly dependent on poultry for the production of chicken, meat and eggs, so
an outbreak of disease can have major impacts on food security in the region.

  We are looking at new tools for fighting disease. One of the methods we are looking at is the
generation of transgenic chickens that are resistant to avian influenza. This builds on technology
developed by planned industries that enables us to create transgenic animals that can knock out
any gene specifically. So we are producing transgenic chickens that can knock out the specific
genes of avian influenza.


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  We are also using this technology to produce chickens for welfare benefits. We have proof of
principle for generating a strain of chickens that only give rise to female chickens. In the egg
production industry, if you are a male chook and you are born in an egg production system, you
have a very short production lifespan. The production of a chicken line that has only females is a
suitable outcome for welfare reasons in that industry. But the question arises whether Australia is
ready for GMOs in their food supply.

   If we look at how Australia contributes to the global food security, we find, as I said, that we
do export a large percentage of our livestock. We are responsible for about one per cent of global
food production. We are responsible for about three per cent of food traded, even though we do
already trade a significant proportion of our food. For example, milk, with 40 to 60 per cent,
depending on the year, we are two per cent of world production and only 11 per cent of world
trade. So for Australia to address the challenge of food security in a global context, it becomes a
real challenge. Even if we doubled our production, our impact on providing food to the region
would be only minimal.

  Perhaps our biggest impact would be to export some of our science achievements to help
address challenges to the world. We look at our avian influenza resistant chickens as a
mechanism, perhaps, of addressing global food security. It provides Asia with a means of
addressing the threat of avian influenza in the region and therefore, underpins its food security
and its ability to feed itself rather than requires us to look at our ability to increase Australia’s
poultry export to provide poultry to Asia. I think that is probably where I will leave it. Thank
you.

  CHAIR—There has been a special request from Senator Back because he has to get on a
plane to go to Perth, I presume.

  Senator BACK—Queensland.

  CHAIR—Queensland. Could we have the next speaker, Dr Keating, before we go to
questions.

   Dr Keating—Thank you, Senator. My colleagues have already set the scene. The twin
challenges of our time are not only sustaining agricultural production but raising productivity to
meet food security challenges. The graph at the top of that slide, the light blue coloured area,
indicates the quality of food demand for the next 50 years. You can see that is a graph that looks
at food demand for about 500 years. You can see a very big peak in that graph. That gives some
idea of the challenge ahead. Of course, we are doing that at the same time as addressing the
greenhouse challenges. Agriculture globally and land clearing globally account for together
about one-third of global greenhouse emissions.

  Land is the key, of course, and the pressures we place on land. Our demands on it are as a
source of food and fibre, for water flows, for a home for, in Australia, our unique biodiversity
and, of course, increasingly looking to store carbon in our landscapes. So we are trying to get all
these things out from the one landscape. The same applies globally. So these challenges of
productivity and greenhouse abatement that we face here in Australia are not unique. Of course,
we have much to offer and much to learn from what happens elsewhere.


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  So there is an integration challenge in all this. No one field of science has the answer. We look
across all the dimensions of science—our soils, landscapes, crops, pasture and animals. Forests
are part of the picture, of course, as well, from the carbon point of view. And people and
economics, of course, come into it. We can intervene through genetics, technologies and
practices and policies. They are all part of the mix as well. So there is an important role for this
House in setting the context for these challenges.

  We have established a new flagship in CSIRO in recent months. It will be launched, I expect,
here in the next month. It is called the Sustainable Agriculture Flagship. Flagships are part of
CSIRO’s effort to focus on the big national priorities and to connect CSIRO’s capabilities across
the whole organisation and connect with partners elsewhere in Australia and internationally, for
that matter. My colleague Bruce Lee will talk next about the Food Futures Flagship. The
Sustainable Agriculture Flagship is complementary with this big aspirational goal of raising
agricultural productivity by 50 per cent but halving the emissions of carbon and greenhouse
gases from our agricultural land use.

  I have six slides here that give you a very quick illustration. I will not dwell on any of them
other than give you a feel for the sorts of work that is going on. There is more efficient nutrient
and water use. Water use in a country like Australia is central to raising productivity. CSIRO has
a big body of work active in this area that is out there delivering some quite useful products right
now both at the farm level right down to dealing with variation within farm paddocks. They
cover management practice right through to the genetic technologies that my colleague Dr
Burdon was discussing earlier. Perhaps we might move on.

   Reducing methane emissions from livestock is another big area of focus for us. There is a
whole range of approaches, everything from frontier science around what happens in an animal’s
rumen and the manipulation of those processes right through to landscape scale activity in terms
of raising and improving animal diets and storing carbon in the extensive rangelands of northern
Australia. It all comes together. The northern beef industry is a very important industry in terms
of Australian agricultural activity. It is a significant source of exports globally. It is also a
significant source of greenhouse gas emissions for agriculture in Australia. We are starting to
build under this new flagship an integrated program tackling these issues. We do not think it is
all doom and gloom. We think there are possibilities. We think the aim of the game will be
global best practice in emissions from livestock—that is, methane per unit of meat production.
There are good reasons to believe that Australia can head towards global best practice in that
area. We do not, for instance, have to put livestock in heated sheds in winter in Europe, for
instance. But it does require us to improve productivity off those northern grazing lands and
improve diets. We can get a win-win through increasing the off-take rates and getting the
emissions per unit product down.

  Building for carbon is another big focus of our new flagship. We coordinate the national soil
carbon program for the Department of Agriculture, Fisheries and Forestry. We are very actively
working on the management options, the productivity benefits and the potential rates of
sequestration in soils. Most important, I think, is rapid and cost effective measurement
techniques. There is a related area around biochar and how that fits into the mix. I am going
through this quickly on account of the time. I am happy to follow up on any of these issues or
send the committee any more detail on any of these areas of activity.



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  The fourth area is really perhaps what we might think of as more traditional sustainability
research. It is about keeping soils healthy and keeping our great ecosystems healthy. My
colleague talked about the frontier of science that sits at the root-soil interface. That is a very
active area. The new science that Dr Burdon referred to is certainly opening up new possibilities
there. But there is also new systems science at the landscape level. Technologies like BT cotton
require quite a shift in the view of the ecosystem. That little photo shows the mixing of plants
that are quite attractive to heliothis. It is mixing them into the system so that the BT genetic
resistance is maintained. It is treating the system by understanding the full ecosystem function
and ensuring that those technologies are maintained for the future.

   Another important area on a different scale but going along that value chain that Joanne Daly
referred to upfront is linking consumers to the production chain. Ultimately, unless we have
these signals for environmental performance flowing right down the production chain on to the
supermarket shelves, we are never really going to get true sustainability signals flowing through
the system. I think this is becoming more than a question of differentiation. It is increasingly
becoming a market access issue. It is already happening. Australian companies and Australian
food suppliers into Europe are being asked to demonstrate their sustainability criteria and
produce their water footprints and their greenhouse gas footprints. There is a very important role
for good science to provide some credibility and some verification of this sort of environmental
footprinting.

   Finally, as my colleagues have already flagged, Australian farmers feed a significant body of
people in the world. Australian science can contribute to even more. We are very active in
partnering with groups like AusAID and ACIAR in connecting our science not only into the
developing world, where Australia does have a fair bit to offer because of some features of our
semiarid, subtropical and tropical experience, but also parts of the world that we can learn a lot
from as well. China is an example where we can learn as much from them as they can from us.
That is a really quick snapshot of the new flagship. I am happy to follow up at some other time
with more details. Thank you.

  CHAIR—Thank you. We might go to questions and start with you, Senator Back, before we
proceed with the rest.

  Senator BACK—I do not have any questions, Mr Chairman. Thank you for that.

 CHAIR—Fourteen per cent of emissions are from agriculture globally and 18 per cent are in
Australia. Is that about it?

   Dr Keating—Direct agricultural emissions in Australia are about 16 per cent of national
emissions. There is a land use change and forestry component, which I think currently is running
at a net emission of about six per cent of national emissions. Neither of those components
includes, if you like, downstream energy use—electricity, transport, fuels and those sorts of
things.

  CHAIR—So in terms of agricultural animal emissions, what are we talking about?

   Dr Keating—On agricultural animal emissions for Australia from methane I would put a
figure of about 10 or 11 per cent.

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  Senator NASH—How do you measure that?

  Dr Keating—That is based on the national greenhouse gas inventory. So that is not my figure.
That is the Australian government’s figure.

  CHAIR—Where do you think they got their figure?

   Dr Keating—Their figure is based on the methodologies which are under the national
greenhouse gas inventory. They are methodologies that are built up from the animal census on
the one hand and predictive relationships between types of animals, regions in Australia and the
likely methane emissions from those animals.

  CHAIR—That is very vague talk. This is not your problem, by the way. This is our problem.
We had 210 million sheep a few years ago and now we have 70 million, perhaps. We have fallen
below 28 million cattle. We have whatever the percentage is of animal emissions. That is based
on someone’s modelling somewhere. How could we be confident that that is true given the
diversity, shall I say, of what goes down an animal’s neck? Do you know what I mean?

   Dr Keating—Yes, I do, Senator. That is an active area of research. One of the slides I showed
which I did not explain has some examples of the data that CSIRO has been collecting on that.
On the bottom right-hand corner of this slide, Senators, there is a graph. It is a bit hard to see, but
we can give you the printout. That graph is some real data that colleagues in CSIRO in the
division that Chris is leading have measured. It is methane emissions measured directly from
animals in northern Australia for a whole range of animal diets. That relationship is an important
element of the national greenhouse gas inventory. That is an example of CSIRO testing those
relationships.

  CHAIR—How do they do that? Do they follow them around with a bag or something?

  Dr Prideaux—They are contained chambers. The animals are put in there, allowed to
acclimatise and then fed a diet. That contained chamber has various devices connected to it to
measure the methane that is produced.

  CHAIR—Would that not be flawed for a start because not only what you eat determines what
you fart and belch but also what you do—your activity? If you are sitting on your ring in a
chamber just munching away at baked beans, the—

  Dr Prideaux—The results are expressed per kilogram of beef production. Yes, you are right;
they will also consume more food to compensate for the amount of exercise they are doing. They
are estimates, no doubt. Not each animal will be the same, and different environments—

   CHAIR—All right. So in the vagary of the science—and all human endeavour in all sciences
is vague—what is the vagary that have you built in to get these conclusions?

  Dr Prideaux—The vagary?

  CHAIR—What percentage of guesswork have you allowed?


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   Dr Prideaux—The error bars on this? I could not tell you the error range on these, but they
are done on a group of animals and compared between animals. There is additional technology
to try to get a handle on what you are talking about using—

   CHAIR—That is the laboratory. You lock them up and feed them buffalo grass or whatever.
Then you put them out in the paddock. I come from the bush. They talk about saltbush lamb.
Saltbush mutton is very good mutton, but the last thing in the paddock the sheep wants to eat is
the saltbush. They prefer grasses and other things. So how do you then determine, given this is
pretty serious—this is a very serious prospect for agriculture—what the animal is actually eating
in the paddock?

   Dr Prideaux—This is a series of experiments. The first one here has demonstrated that there
is an impact on diet and the type of plant eaten on the level of methane produced. So I think that
is a good step forward. The next technology we are looking at is to use lasers across a field to
capture and measure the amount of methane produced on that field.

  Senator NASH—How expensive is that?

  Dr Prideaux—It is not prohibitive but it is not cheap. The biggest cost is in the investment of
obviously buying the laser system. Brian may have a better idea on this. It is in the tens of
thousands. It is not in the hundreds of thousands.

  CHAIR—But this is in a controlled environment, I take it.

  Dr Prideaux—No. This is in the field.

   CHAIR—So I shift the cattle, because I have weaned the calves from their mothers, out on
the buffalo grass into the lucerne flat, which will give different bowel behaviour. How do you
figure all that?

  Dr Prideaux—All we can do is take measurements under the different systems and look at
them in comparisons.

 CHAIR—But is this not why the US have said, ‘Well, all right?’ So that is the problem on
measuring the emissions. Then in agriculture you say—

   Dr Keating—Senator, our focus here is about how you find opportunities to get off that line
to get on to lower emissions. You might not be able to see it there, but there are a few points that
are off that line. There is a very wide range of materials that are on the general—

  CHAIR—But that is on the emitting side. Everyone belches. You do your best, given the
vagary of science and the peculiarity of animal behaviour—whether they run, jump, skip or
hop—as to what happens to their stomach behaviour. You say, whatever the figure is, the
contribution of agriculture to emissions—

  Dr Keating—Animal methane in Australia is about 10 or 11 per cent of the national
greenhouse footprint.


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   CHAIR—Does that allow for the credit side of what the animal has done—that he took the
lucerne when it was in flower or the lucerne when it was seeded or the lucerne when it was only
that high and growing like blazes or an oat crop before it had started to run up? How do you
allow, to offset those emissions, for the liability of agriculture against the unmeasurable credit
side?

  Dr Keating—Senator, I think you are referring here to the opportunities for agriculture to
build up carbon.

  CHAIR—In your assumptions, they are 14 per cent. Animals do that. Do you then say that
agriculture is this big?

  Dr Keating—Senator, these are not my assumptions.

  CHAIR—We learnt the other day with KPMG what you can do with assumptions in expert
reports, especially if you have them on the payroll. How do we get a net debt for agriculture?

  Dr Keating—The net debt for agriculture is made up of the direct emissions, and the livestock
methane is one of those. Another relates to fertiliser use; that is nitrous oxide from fertilisers.
And potential changes in things like soil carbon come in. The current position in Australia on
soil carbon is that the pluses and minuses are balanced out. There is no net change on soil carbon
currently. So the current inventory figures are net. They are a best estimate.

  CHAIR—But if you have a mob of fat lambs and you start off the ewes in a paddock of
kangaroo grass, which has a deep rooted capacity to put a bit of carbon into the soil, how do you
come up with a credit for the amount of belching that the ewe was doing while she was eating
the kangaroo grass or spear grass or some of those native grasses? Then you mark the lambs and
move them into, perhaps increasingly less, an annual pasture of clover or something. With
weather events, us cockies are moving more to permanent, perennial pastures. Then you put
them on an oat crop while the oats are there before it runs up. Then you finish them on lucerne.
How do you work out what has happened?

  Dr Keating—I think you are referring to the whole system.

   CHAIR—I am referring to the so-called PR thing. There was a launch next door of another
political party’s ETS policy this morning. But they had not thought through agriculture. I am
thinking through agriculture. Is it fair enough to say that we do not know enough about it yet?
Under what we have signed up to globally, it was an unintended consequence that agriculture
actually cannot, under the Kyoto protocol, accumulate credits other than for trees. But is there
not a lot of accumulation of credits that we do not give credit for?

  Dr Keating—Senator, it is certainly fair enough to say it is complex. The accumulation of
credits, if you like, in terms of soil carbon—

   CHAIR—Unearned credits. This is just a dear old merino sheep either on the grassy plain that
is five miles out of Hay or, if you go out 25 miles, a saltbush plain. If you get the right season,
which we have not had since 1993, it fills up with clover.


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   Dr Keating—The best and most robust assumption at this point in time for the Australian land
surface from a soil carbon point of view is that those parts of the landscape that are building up
carbon are balanced by those parts that are losing it. That is why Australia does not account for
soil carbon under its Kyoto obligations. If the question is whether you can in some
circumstances identify a situation where soil carbon could be built up and could you find some
means of accounting for that, I think our science would suggest you can.

  CHAIR—I am a wool classer and a welder—pretty dumb. I am trying to figure out whether at
the end of the day unearned credits in the extensive Australian landscape for agriculture and for
animals—sheep and cattle, mainly—would actually contra themselves without us even having a
calculator?

  Dr Keating—Whether they would actually?

  CHAIR—Contra. Whether the unearned and, by the way, unavailable credits would actually
contra the debits.

  Dr Keating—That would depend on the management practices that were adopted.

   CHAIR—With great respect to everyone, this is horrendously fictional. I can take you out to
One Tree Plain, which was Australia’s best merino growing country. In a normal season, you
would get a ewe to three acres and safely one to five. It is all dead. It has died. The whole bloody
show has died. On my place, I can take you to two paddocks on the river. Ten thousand acres of
dead gum trees were in the prime of their lives. How do we figure what my livestock are doing
against the background of what the landscape is doing in any meaningful way? Every place is
different. If a thunderstorm goes through there, you have a different set of plant behaviour and
animal behaviour to the bit that missed the thunderstorm.

  Dr Keating—I think these are the reasons why Australia assumes the no net change in soil
carbon currently for its Kyoto counting. That is the current position.

  CHAIR—I am sorry to do this to you. CSIRO, like the Qantas tail with the kangaroo, is very
important to Australia. It is very important to us bushies. We were pretty disappointed to see you
were doing some work for Centrelink. We thought you might have been better off focusing on
what we are talking about. Do not ask me why you are doing Centrelink work. We really need an
answer because 80 per cent of Australia’s population thinks somehow that we are the dirty
workers, as it were, in the environment. At the same time, when they go to Woolies and Coles,
they expect everything to be there.

  Dr Keating—Yes.

   CHAIR—It would not be an unsafe position to take, would it, that we just adopt what the rest
of the world is proposing to do—that is, with the unintended downstream consequences of
Kyoto, you would not be doing the argument a lot of damage if you just said, ‘Well, we think it
is contra. We think that the emissions is contra by the credits that are unavailable/’ If that is
getting into policy, please ignore the question.



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   Dr Keating—Senator, you refer to the policy. What CSIRO is doing now is pulling out all
stops on things like the measurement opportunities for soil carbon and the ways we can get the
costs down and the confidence up so that those in the rural communities—those landowners—
who want to pursue soil carbon credits, as we call them in this context, have the option to do so.
We say building up soil carbon is not easy. It can be done. Farmers do it. Farming also runs
down soil carbon. So there are challenges here.

   CHAIR—I had better let you off the hook and give someone else a crack. What I would like
to do later is talk about the role of patents for genes in the global food task scenario and the cost.
I will put it on notice. For instance, I was closely involved with some of the development work
on HIV. You can manage HIV these days. Merck Sharp and Dohme had a lot of that work
patented. As we heard this morning from Julian Cribb, we have to get our research into the Third
World countries so that we all feed ourselves, given the global food task and the prospect of nine
billion people. Is there an obligation on the people who have the keys to the vault, as it were, of
research to not absolutely commercialise for maximum profit through the gene licensing or
whatever? You can talk about that later if you want.

   Senator O’BRIEN—I am interested in some of the work on productivity that you have been
describing, be it increased yield through better utilisation of the water or better utilisation of the
carbon. Can you give me some sort of idea of the amount that you are putting towards those
tasks? You have talked about general budget numbers, but give us some idea of how much is
being put towards those sort of agronomic outcomes, if I can put it that way.

 Dr Daly—No. But I can take it on notice and get back to you on that. It is quite significant.
We do tend to focus our work down that end.

  Dr Burdon—In plant industry, Senator, if I take into account not only appropriation resources
but money that we would spend on behalf of collaborators, like, for example, the GRDC, if we
work with them and other people in cereals as a whole, we would spend somewhere in the order
of $30 to $35 million a year. That covers not only the water use efficiency but all our activities in
the genetic side.

 Senator O’BRIEN—How would you assess that investment against productivity outcomes?
What have you done? Can you give us some idea of how you would measure—

  Dr Burdon—Where does that end up?

  Senator O’BRIEN—Yes.

   Dr Burdon—I guess there are a couple of issues there. One of them is that there is always a
lag between the investment of resources into science activities—as you could imagine, some of
this is fairly blue sky—and the actual time when that is delivered in a variety, for example. The
standard now in wheat varieties—for example, the prebreeding followed by the breeding and
selection phase—takes normally in the order of 10 years. So there is a long lag phase that goes
on. Part of the issue, obviously, is also the uptake process. For example, if I look at something
like Rees, a variety which we released in 2003, it does have a 10 per cent yield benefit under dry
conditions.


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  Senator O’BRIEN—We have had plenty of those.

   Dr Burdon—We have had plenty of those. It is under dry conditions but not drought
conditions. You cannot get plants to grow if there is no water at all under any circumstances.
That is now becoming in certain parts of the industry quite widely used. But there is a tendency
in most farming communities for a relatively slow uptake of new varieties. I would say that the
cotton industry is probably one of the fastest. The varieties turn over fairly rapidly because of the
very significant shift and increase in yields there. So a variety in the cotton industry has a
lifespan of about five years.

  In the cereals industry, in wheat, the speed at which they have been taken up is improving
dramatically. Only a few years ago, you could still find wheat varieties that had been released 25
or 30 years ago being delivered to silos. When that happens, the trouble is that they are
representing where science and plant breeding was 25 or 30 years ago. It has not picked up any
of the benefits since then. So it is a complicated and fairly drawn-out process. But we do believe
that, if we look at the total impacts we have in terms of the delivery of traits to breeders and the
actual uptake of those, the money is wisely invested.

   Senator O’BRIEN—That is what is expected. A lot of people would say that, and you would
say that, would you not? I am not disagreeing that that is true. Has anyone done any work that
might be able to assess the value just to Australian agriculture of the productivity improvements
attributable to the scientific work that you have been talking about?

   Dr Burdon—Both CSIRO and the GRDC do a series of benefit-cost analyses looking at the
returns that have come from investments in particular programs. The GRDC has been doing that
across its entire portfolio. We could certainly look to some of that information for you, Senator. I
do not have it at the top of my fingertips.

  Dr Daly—I think the GRDC’s work suggests that in general R&D has contributed about 50
per cent of the gains in productivity.

  Dr Keating—Yes. Without the technical innovation over the last 40 years, we would not have
an agriculture because of the cost-price squeeze that agriculture has been under. So the two to
four per cent gains per year in total productivity is what has kept Australian agriculture in
business. You can ascribe that to all sorts of things, R&D being one major part. There is the
innovation of farmers, the restructuring in farm businesses and all sorts of other things as well.

  CHAIR—To assist Senator O’Brien, we did have a presentation which said that by 2050 if we
do not up ourselves with the research, Australia will have no wheat to export.

  Dr Keating—I think I know that work. It is probably from Dr Howden at CSIRO.

  CHAIR—Yes. So the logic behind that would help to answer it.

   Dr Keating—I know a little of the logic behind that. I am not sure if it is the work that Dr
Howden has been quoted on recently in the press. That is one extreme scenario. But the work is
illustrating a combination of climate change with possibly some reductions in rainfall and
productivity. With the growth of the Australian domestic market, with the Australian

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population—a 60 per cent increase by 2050—and the growth of the livestock feeding business in
Australia, all those things together, I think Dr Howden’s work suggested that there was a risk
that in 2050 we would not have wheat to export. I think that is the work you are referring to.

  CHAIR—We are already there with rice, but that is not because of research. It is because of
water.

  Senator O’BRIEN—Well, that is true, although the ricegrowers would argue that they have
increased productivity. Crop to water ratios have improved significantly. Nevertheless, if you
have not got any water, you cannot grow any rice, which is another issue. I am told there is some
work being done on cooler climate options. For example, in my state of Tasmania, if we got a lot
more water storage, there might be options, if it were economically viable, to grow rice there.

  Dr Keating—I am not familiar with that, Senator.

  Senator O’BRIEN—The Ricegrowers’ Association was mentioning that. That is why I
thought CSIRO might know all about it, but apparently not.

 Dr Keating—No. I know there are people trying to grow rice in the Tweed Valley at the
moment, not far from where I live.

  CHAIR—That is dryland rice.

  Dr Keating—Yes. That is right.

  CHAIR—That is a new generation of work, yes.

  Senator O’BRIEN—Are we going to go on with the presentations and come back to
questions?

   CHAIR—I thought maybe what we would do—I would take advice—is just have a couple of
questions from this end of the table. We were then due to have a little break so people could have
a cup of tea and all us old men could go to the toilet. Then we would come back. Is that all right?

   Senator FISHER—With regard to the discussion about methane emissions, leaving aside the
methane that is contributed by an animal over its lifecycle, what analysis has been done of the
lifecycle of the methane itself as an emission versus other emissions? Has that been fed into the
evaluation of methane as a detrimental emission?

   Dr Keating—Thank you, Senator. I will answer that. We do not have the atmospheric
expertise here today that could give you a definitive response on that. The work I am aware of is
the more general analyses of the, if you like, life of methane in the atmosphere in the upper
levels of the atmosphere and its effectiveness in influencing the greenhouse effect, if you like.
That is global work so I really cannot add anything other than that. I think the current
assumptions on the greenhouse warming potential of methane is that it is a factor of 23 times
more effective in terms of greenhouse warming compared with CO2. But the methane does not
live forever in the atmosphere. It breaks down.


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  Senator FISHER—For how long does it live?

  Dr Keating—There are proportions of it being broken down continually. I think, if you like,
the mean residence—this is something I would really need to check—is in the order of 40 to 80
years. It is of that order, Senator. But we are straying to the edges of my technical expertise here.

  Senator FISHER—I appreciate that, Dr Keating. What analysis has been done by CSIRO or
globally of the period during which other emissions break down over time, to the extent that
some of them do at all? Feed that back into the equation about the alleged damage that methane
production is doing to the climate.

  Dr Keating—I really think I need to take that on notice in terms of getting the atmospheric
scientists who do that sort of work to assist in answering that because I do not have the specifics.

  Dr Daly—There has been a lot of work done.

   Senator FISHER—So the work has been done. Has that been fed back, then, by CSIRO into
qualitative and quantitative analyses of one sort of emission versus another and the detrimental
effects thereof?

  Dr Keating—Senator, my understanding is that globally and within Australia the best science
of the life of different gases in the atmosphere is factored into, if you like, atmospheric warming
calculations. But, once again, we do not have the expertise here today to answer that with
authority.

  Senator FISHER—Can you take that question on notice? If nothing else, can you point us to
the information sources? I would appreciate an attempt to answer the guts of the question.

  Dr Daly—I will give just a short answer. I have been told it is documented in the IPCC report,
which CSIRO scientists were part of. It is actually global research, and we are part of that global
research.

  Senator FISHER—Thank you. There is a separate area of questioning, if I may, Chair. How
do you want to work it?

  CHAIR—I have neglected Dr Bruce Lee. I am sure he is feeling out of it at this stage. We are
coming to you. We have accidentally not heard from you in this bit now.

  Senator FISHER—Well, I am happy to ask now, if that is appropriate. You tell me, Chair.
The CSIRO total wellbeing diet talks about high protein and lots of meat. I now understand that a
recent CSIRO publication, the CSIRO home energy saving handbook, talks about high
carbohydrate, healthy heart and vegetarian diets, supposedly because they all combine healthy
eating patterns with lower greenhouse gas impacts. Can you explain, from a CSIRO perspective,
what would have appeared to be the wisdom of the wellbeing diet versus the current advocacy of
high carbs and more vegetable matter?

  Dr Daly—The energy book was actually looking at the greenhouse gas footprint from a
variety of diets. The Total wellbeing diet is a specific book written around a dietary pattern,

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which is a protein plus diet. It is not necessarily specifically a high meat diet. It is a protein plus
diet in which much of the protein is coming from meat from a variety of sources. It is a diet
specifically directed at people who have central obesity—people who are very large, carry a lot
of their weight in the middle of their abdomens—

  CHAIR—That is not you, Senator Fisher.

  Dr Daly—That diet is a particular dietary pattern which has significant benefits for people
with weight distribution like that. So we have a whole variety of diets. We have a healthy heart
book and other dietary patterns that are designed to target specific people in the population.

  Senator FISHER—I understand that part of the total wellbeing diet was funded by the likes
of the dairy industry and the meat industry. To what extent has the private sector or moneys
collected therefrom funded the home energy saving handbook?

   Dr Daly—I do not know, Senator. I would have to check on that. My gut view is nothing. I
think it was an internal book written under appropriations and things like that.

  Senator FISHER—Can you check that, please?

  Dr Daly—I can check that. Yes, I will.

   Senator FISHER—Thank you. I understand that that handbook also includes a graph
displaying the relative greenhouse gases for various diets. It claims that the vegetarian option
produces not much more than half the carbon footprint of the CSIRO total wellbeing diet. That
may well be so, but on what basis has that been assessed? You might want to take that on notice,
given the time. Even if it be so, and noting, Dr Daly, your comment that the total wellbeing diet
is higher protein, much of which is from meat, even if that analysis were so—

  CHAIR—Can I wind you up, Senator Fisher?

  Senator FISHER—This is my question.

  CHAIR—But this is estimates work.

  Senator FISHER—Well, maybe not. Is it not a rather extreme analogy to compare an
arguably largely vegetarian and grain diet with an arguably largely meat and protein and indeed
meat diet to come up with, ‘Hey, you can halve your carbon footprint by going vego?’

   Dr Daly—Well, the book does not say that, for a start. Secondly, the total wellbeing diet is not
a high meat diet. If you look at the amount of meat that you would consume on that diet, it is
within the Australian dietary guidelines. It is actually what the average Australian eats per week
anyway. So it is a diet in which you lower your calories by taking out a lot of the fat and a lot of
the simple sugars and maintain the protein and maintain the complex carbohydrates and take out
the alcohol. So it is in relative terms. What we are pointing out, though, is factually observing
what the carbon footprint is of different diets. We are not advocating one diet over the other at
all. We are just pointing out factually what the carbon footprint is.


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  Senator FISHER—I have one further question, Chair.

  CHAIR—No.

  Senator FISHER—Does the publication itself justify the empirics of the graphs? If not—

  Dr Daly—No. Because it is a general publication directed at the broader public. It is not
meant to be a scientific publication. The information that sits behind those graphs has been
drawn from the published literature.

  Senator FISHER—Thank you.

  CHAIR—You can have a further crack at that in estimates, Senator Fisher. Senator Fisher has
the most unusual diet.

   Senator NASH—I do not have a very unusual diet at all. I am a little intrigued by this whole
discussion around the agricultural emissions. My understanding was that some of the difficulty
including agriculture was indeed that—the difficulty in measuring the emissions from
agriculture. Yet today we are getting a very specific figure on how that has all been done. But
that is probably a matter for us to take up in estimates rather than here. It is certainly intriguing. I
want to go back to the broader issue of food security. Thank you, Dr Daly, for your introductory
session. It was very useful. We were discussing earlier in the day that food security is an issue
that really is not on the radar of people. Obviously, you are doing some tremendous work behind
the scenes on this. One question is how we raise the profile of food security as an important
issue. Second, Dr Daly, you mentioned the importance of people being able to access food at the
right price. How do you balance that out with making sure that the farming sector is profitable
enough to be sustainable?

   Dr Daly—They are quite general questions. I think in terms of raising the profile of food
security it is quite interesting because my own experience is that its profile is rising all the time.
The problem for us is that it is becoming so modish, fashionable, that everything gets lumped
under it. I do not think it is the science that needs to promote the issue of food security. I think it
is a broader community awareness of the issue, not only in Australia but globally. The second
issue is, again, beyond the science. We can provide farmers with options and solutions to
increasing their productivity. There are broader factors at play that determine the price points for
that.

   Senator NASH—It is just that you made a comment about the importance of having the
affordable price. That has consequences.

  Dr Daly—Yes. More globally, it is an issue in terms of food production. We produce a lot of
food in the world, but it is not necessarily accessible by the poorest people in the world. I think
that is an issue.

  Senator NASH—That is the broader context. Could you take two questions on notice? You
mentioned the figure of $350 million to $400 million spent on the research itself. Would it be
possible to break down for the committee how that manifests itself? Rather than giving us just a
lump sum figure, what areas does that apply to? Could you also take on notice for the committee

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the processes by which you communicate your information? I know some of this will be on the
website, but it will be useful for the committee. What are the processes by which you
communicate the information you have through all of your research? What are the processes for
collaboration on farm with farmers? You have all this wonderful expertise. If I am Joe Blow
farmer, which I am, how do we actually access the expertise that you have? Could you take that
on notice and provide that for the committee.

  Dr Daly—I will make one comment, though. Increasingly, we do most of our fieldwork on
commercial farms. So we work with the farming community directly.

   CHAIR—Thank you very much. We will break for a cup of tea. There are steak sandwiches
and things here on the table. After you have had your steak sandwich, I would like to talk at
some stage about fish versus meat for global protein and about what it means to have a
terminator gene in the gene world.

                       Proceedings suspended from 3.31 pm to 3.47 pm

  CHAIR—We will start with Dr Bruce Lee.

  Dr Lee—I also have a response to your question about the patents. I am the director of the
Food Futures Flagship, which is a flagship that has been running for just under six years in
CSIRO. As Joanne Daly pointed out, we work across the value chain. It is very important for us,
in terms of the projects that are going on within the Food Futures Flagship where we are
addressing things such as nutrition and quality—value added products—that we understand the
entire value chain. You can have an impact down on the farm, but for that product that you are
delivering to the consumer, you have to understand all of the processes within that value chain.
Just listed on that slide are some of the different capabilities that we draw on in terms of bringing
some of the projects through.

  One of the important things that has been a pillar stone of the flagships is having a goal. So
each of the flagships has a goal. Listed on that slide is the goal of the Food Futures Flagship,
which is to add $3 billion annually to the Australian agrifood sector by the application of frontier
technologies to high potential industries. We are doing that essentially in four themes. You will
hear from Matthew Morell, who is the theme leader of the future grains theme. He will give
some examples there. Then Nigel Preston will talk about the work we are doing in aquaculture
and some of the work in beef. I will describe just briefly some of the work we are doing in
design, food and biomaterials and quality biosensors.

   This is a busy slide. On the left-hand side, you can see those different colours, which are 11
divisions of CSIRO. Across the top of the slide are the themes and the streams and the projects,
if you like, that the flagship deals with. This side just really demonstrates that each of those
projects draws on capability from a number of divisions of CSIRO. We also draw extensively on
capability from outside CSIRO both nationally and internationally, where we do not have the
capability within CSIRO. I will give an example of that a little later.

  I mentioned that it is important that we understand the entire value chain. This is just an
example of the future grains. We need to understand inputs down at the farm, but then
importantly what happens all the way through to the consumer at the bottom of the slide and

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understanding how the consumer, for example, will react both in the Australian market to a novel
product or in international markets where we export some of those products. On that slide, you
can see just some of the collaborators that we have in the future grains area.

   So one of its main thrusts of the theme of design, food and biomaterials is to value add to
waste streams. These waste streams could be from the viticulture industry or they could be from
the grains industry, for example. We do a lot of what we call bioseparations. This is not around
discovery of new bioactives. It is around separating bioactives, or value added products, out of
waste streams. We also work on what we call rehydratable systems—proteins. In the food
industry, when you dehydrate proteins and then add water, there is often a lot of wastage because
it is very difficult to predict how much water to add back into those proteins to form a solution.
So we are working out algorithms together with ANSTO to understand what happens at the
molecular level.

  We have some work going on on natural structuring to impact on taste, particularly to lower
salt, lower sugar and lower the fat content of foods. Here are a couple of achievements out of
that theme. We have been doing, as I mentioned, separation technology. We have worked
together with Monash University to develop the molecular imprint of polymers. That is a form of
separation technology. The importance of this technology is that it is largely solvent free. So you
can effect the separation of these bioactive compounds using water, essentially, or a slight
change in PH without reverting to the use of solvents that can damage the environment. So that
technology is important in that we can now separate out molecules such as resveratrol, for
example, out of grapes. We are in the process of scaling that up to a commercial scale. We have
been able to lower the level of salt that still gives the consumer the same sensory experience. We
are working on bringing that into product. So that is a lab experiment that is going into a
product.

  In the quality biosensors, this is where biology meets physics. Essentially, what we are doing
there is taking the ability of insects to sense chemical compounds from large distances and then
putting that at the front end of an instrument. There is a lot of gene cloning work involved here
in cloning out the olfactory receptor systems of inspects. We want to be able to make an
instrument that you can take into the field and measure in real time the compounds that are
important in viticulture, in winemaking, so that we can optimise those. You could optimise the
level of the particular volatile through an irrigation regime. Knowing that and being able to
measure that in real time is important.

   We talked earlier a little about quantification. We have quantified the value of all the projects
in the flagship at market maturity. In 2020, not risk adjusted, the value of the portfolio is about
$11 billion. If we adjust that back for risk, the portfolio is at around $4 billion. Many of those do
have attributes. For example, in the future wheat, there is a $3 billion value attributed there. We
are working largely in wheat, but that can be applied in other crops, such as rice and maize, some
of the attributes that my colleague Matthew Morell will talk about. Thank you.

  Dr Lee—You raised a question about the role of patents and genes in global agriculture and
the obligations. The CSIRO is acutely aware that that is an important issue for us. In many of our
collaborations and in our licensing agreements that we do with third parties, we carve out
provisions in the agreements for the deployment of technologies to less developed countries. We
make our partners acutely aware of that as well. We also need to be aware that in many of those

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less developed countries there are not adequate patent systems in place today. So it is not so
much a question of patent law but it is more around the technology and the deployment of the
technology and whether there are laws and regulations in those countries that allow the
deployment to take place.

  CHAIR—This is an interesting question for the human race to answer. If CSIRO has a patent
and you sell the licence to someone in Africa and they claim to have the franchise for an area
which you would go into for the benefit of Zimbabwe or somewhere that cannot feed itself,
under the arrangements that you have, would you have the capacity legally to overcome those
people who might claim to have the licence for that region of the world, even based in Hong
Kong or Amsterdam?

  Dr Lee—We generally would not patent in Africa anyway. So in the particular scenario you
described, we would not have patents applied for in the continent of Africa except for South
Africa.

   CHAIR—Well, let us just say there is somewhere else in the world where you would. It might
be India or China. There are 400 million people on that great northern aquifer in China who are
in serious trouble with food. Do you have the capacity and do you think it is sensible to, as a
contribution to world wellbeing, walk away from licence fees for gene patents?

  Dr Lee—We can walk away. It is very difficult to collect a licence fee in the territory where
there is not a patent applied for in the first place. So in the scenario where you produce a
particular plant variety, there are many technologies involved in the production of that plant
variety. One patentholder may hold one of the key patents, but another patentholder, like CSIRO,
can hold another key piece of the technology. So we can influence how that technology is
deployed in a certain territory.

   CHAIR—So in terms of the doubling of the global food task and 30 per cent of the
productive land going out of production, do we have an obligation—that includes the CSIRO—
to overcome the legal and financial hurdles of providing modern technologies for plants for what
would be seen to be under the IPPC scenario a billion people by 2050 unable to feed
themselves? Do you think the world generally gets it? Do you think the bankers and the lawyers
are going to be too greedy? CSIRO could have a big role to play in all of this.

  Dr Lee—That is a difficult question to answer. I think through the actions that CSIRO is
taking currently we are fulfilling some of those obligations. We do deploy our technology into
those developing countries.

  CHAIR—It is a great opportunity for, shall I say, leadership. Thank you for the answer to that
question.

  Dr Lee—We might have a slight change in agenda and have Nigel Preston before Matthew
because Nigel has a plane to catch.

   Dr Preston—I am responsible for one of the four things in the Food Futures Flagship. This
thing is about future animal breeds and nutrition. Why we are here today is because Australia
needs to secure its own food supply, contribute to the food supply of the region that we are in

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and be competitive in global food markets. So the animal based food industries have a major role
to play in meeting this challenge. Represented on that first slide were both cattle and fish. I hope
I am able to answer Senator Heffernan’s question as we go through.

  One of the key points for us here as a nation is that for our beef and dairy—the animal protein
that we supply from the land—we export up to 70 per cent of it. That is about a $7½ billion
industry. Food futures aims to increase the value of both those industries by doing what the
CSIRO has done pretty well over many years—to deliver science solutions to that sector. By
contrast to that, 70 per cent of the seafood that we eat in Australia is imported. So that is a fairly
serious deficit. The flagship aims to increase the value of Australia’s aquaculture industries by
$1 billion through the application of advanced genetics and leading edge nutrition. If we are able
to do that, if we can assist in removing this deficit and becoming self-sufficient in our own
seafood and contributing to exports of the region, we will have achieved our goals.

   This is a landscape that Australians have become used to over the last 200 or 300 years
anyway. I will only touch on one example for this. This is a shot of a northern beef herd. So there
is a fair proportion of the 28 million cattle represented out there. So the northern beef herd is
about half of that. Chris Prideaux pointed out that this is a relatively recent introduction. Those
Brahmans are pretty tough up there and they can survive. They have more tick resistance. But
we do know that to add value to that herd through artificial insemination—if you were to
hybridise those Brahmans with the European breeds, the Angus or the Hereford—you could add
considerable value to that herd. We know that those hybrids are able to survive quite well in
those harsh tropical conditions.

  CHAIR—Brangus sort of cattle?

   Dr Preston—Brangus, yes, or Brereford—whatever the equivalent is. The problem is: how do
you artificially inseminate nine million female Brahmans running around in those conditions?
The idea we came up with was: what if you could have the Brahman boys running around in
their natural environment doing their natural mating but with Aberdeen Angus semen in their
testes? The technology, which we have already done and delivered proof of concept for in sheep,
is delivering teste cell transfer sheep. We did that shortly before Christmas last year. In principle,
it is quite simple. You will take the spermatic antic stem cells from the donor Aberdeen Angus
and culture those up. We are using ultrasound to deliver it into young Brahman bulls so that
when they grow up, their stem cells have been replaced with the donor Aberdeen Angus and they
can go through the process of natural mating and produce the hybrid calves, which are shown
out on the right of the slide.

   We have over the last five months got to the stage where the young Brahmans have been
injected with the Aberdeen Angus stem cells. They are happily feeding out in a paddock at
Armidale growing up ready to mate in about eight months. We will then know if we can deliver
that proof of concept. So that is just one example of what we are trying to do and what Australia
has done in advanced genetics—keep ahead of the game. It will not have escaped you that that is
also a way to deliver particular genetics very quickly. For example—Dr Prideaux talked about
it—if you were able to find those cattle that had better than average or lower than average
methane and you wanted to get those genetics through the herd, this is a method that could
deliver it.



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   I now want to turn to the blue bit of the planet and that deficit. We are in a region that is Asia
that produces only five per cent of global aquaculture production. This year, for the first year, 50
per cent of seafood consumption around the world will come from farmed seafood rather than
wild harvest. So the rest of the world, for many reasons, has moved from wild harvest fisheries
to aquaculture.

  We have had a very slow and conservative start to that in Australia for, again, a number of
appropriate reasons. So we are currently less than a billion-dollar industry and less than one per
cent of that global production. But there is a very significant opportunity to grow the industry.
But we have to do that in a way that leaves no ecological footprint. That has enforced upon this
emerging industry production practices whereby they have closed systems that recirculate the
water and recapture the nutrients. So if you are not putting nutrients out, including having
operated along the GBR for 20 years with no adverse environmental impact, the opportunity to
increase the area and production is quite significant.

   In fact, more than seven years ago, CSIRO did an analysis of what that potential might be. The
area from Ballina in New South Wales right around to Perth on the other side is some 770
million hectares. Of that, we set some constraints. To have land based pond aquaculture close to
the ocean, we set a whole lot of constraints. It could not possibly impact on mangroves or
wetlands or any other area of ecological concern. It had to be a certain distance from urban areas
et cetera. That 770 million hectares boils down to about 13 million. Using those broad scale
constraints, there is about 1.7 million hectares of land adjacent to the marine environment
suitable for doing these activities roughly evenly distributed between Queensland, the Northern
Territory and WA, given that the main focus is on tropical species—barramundi, prawns et
cetera. So the industry currently occupies about 1,000 hectares, which is a tiny fraction of that,
producing about 4,000 metric tonnes. It is about a $60 million industry. The industry itself has a
very conservative target. It is saying, ‘Well, let’s maybe go to 5,000 hectares’, which will
produce 25,000 tonnes, about the same amount as our entire prawn trawl industry. I should say
that the FAO has recently voted that as one of the best managed fisheries in the world. So we do
wild harvest fishery as well as anybody in the world, but we cannot get any more. So if we are
going to continue to eat seafood—we do not have to; we could eat other things—and it is a very
good source of protein, we are going to have to farm it like the rest of the world.

  So that broad scale mapping basically shows that we have done the whole coast. That is
obviously the gulf. We have gone into all of these regions to show which areas are potentially
suitable and which are not. We have also done a fine scale study to prove how effective that
broad scale mapping can be. Another critical point is that, again, because of the fundamental
research that CSIRO and our colleagues did, all prawn farms in Australia have to have treatment
systems and recirculate their water and have the strictest discharge limits for nutrient sediment of
any country in the world.

   Aquaculture is also often criticised for using wild harvest fishmeal—it is grind up—to feed
fish. Fortunately, we found a solution to that as well. We have been able to develop a technique
that bioconverts high volumes of low value waste from the terrestrial plant agriculture industry.
So with any wheat waste, sugar waste, ground up lupin hulls, we can successfully bioconvert
that into high value proteins and oils which, when we feed to prawns, gives not only as good
results as wild harvest fishmeal but better results.



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   At the same time, we have been breeding our native aquaculture stocks. Aquaculture is late in
the piece. We really have been moving from farming wild animals to domestication and selective
breeding. Because of that we have been able to have quite spectacular results. This is not what
we are going to achieve. What we have achieved on the left is farm prawns. This is the average
tonnage that farmers get using the progeny from wild harvest food stock. Our selected bred
stocks, which are now in their eighth generation, are giving 12.8 tonnes per hectare. That wild
best is the best ever achieved with a progeny of wild food stock. So the difference between the
best ever achieved from the wild and from our domesticated stocks is a 60 per cent increase in
harvest yields. And we are only very early days on. We are not at the plateau that Jeremy
described for plants et cetera. We are still at that accelerating phase. So we think we can easily
go from 12.8 tonnes to 15 tonnes per hectare with selected breeding. With the impacts we are
having with our novel aquafeed, we feel we can easily get to 20 tonnes per hectare. So within a
decade going from five tonnes a hectare to 20 tonnes a hectare is what we will achieve.

   To sum up, in terms of what we are doing within CSIRO food futures, we are continuing to
provide world leading research and industry partnership to achieve that stepped change in
production and value of Australian livestock and aquaculture, which is what we need to do. We
are using that novel livestock breeding technology for both domestic and export markets.
Obviously that technology we have talked about in terms of genetic improvement could be used
in many other countries. That is locally produced and globally relevant. Finally, there is locally
produced seafood grown in drought proof environments. There is an issue about fresh water in
Australia, of course, but there is no issue with saltwater. We have buckets of it. We can now use
ecological feeds and production systems. So it is really at a time in our history when we need to
have a serious look at the blue bit that surrounds us.

  CHAIR—Hear, hear!

   Dr Preston—There are a couple of other advantages there. We have already taken some of
those genetic skills that were acquired through livestock research with spectacular results in
terms of selective breeding. The fish have short lifecycles so they are easy to adapt. You can do it
more quickly. In the face of environmental change or climate change, you have a greater chance
or a greater number of generations to adapt these stocks, which are already in a drought proof
environment.

  In terms of your question, Senator, the world has a protein shortage. There is close to a billion
people who have not got enough protein at all. To me, it is not a question of either/or. We have to
increase the sustainable production of animal protein, whether we do it on the land or we do it in
the water. Thank you.

  CHAIR—Thank you very much, indeed.

   Senator O’BRIEN—As Dr Preston has to leave early, I want to ask about the cost
effectiveness of the bioconversion feed.

  CHAIR—What time have you got to go?

 Dr Preston—I have time after. I do not want to take from Matthew or Alan’s time. We can
wait. I have a cab at half past.

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  Dr Daly—Do you want to answer the question now?

  Senator O’BRIEN—How cost effective is this new alternative feed for fishmeal?

  Dr Preston—The current price of wild harvest fishmeal hovers between $1 and $2 a kilo. We
can produce this stuff for about 50 cents.

  Senator O’BRIEN—And conversion rate?

  Dr Preston—So what it takes for—

  Senator O’BRIEN—Another fish.

  Dr Preston—The conversion rate of feeding this to fish?

  Senator O’BRIEN—Yes.

  Dr Preston—That is no different. So the feed conversion efficiency is similar.

  Senator O’BRIEN—So it is a massive winner?

  Dr Preston—It is, yes.

  Senator O’BRIEN—And the take-up rate, or is it too early?

   Dr Preston—Just starting. It is really at the commercialisation phase. We wanted to have the
first opportunity in Australia, so we are in the process of partnering with the only Australian
aquafeed company, which probably gives it away. There is only one Australian owned one. We
are pretty positive about having a good outcome there.

  CHAIR—Just to put this into context—someone can correct me—is it 10 or 15 times the
mass of the sea as compared to the land above sea level? I want to get an idea of the enormity of
the resource of the sea. Is it 10 or 15 times?

  Dr Preston—It is 70 per cent of the flat surface. I do not want to go into the volume figures.

  CHAIR—It is the mass that I am after. I think it is 10 times, for easy work.

  Dr Preston—There is a lot more saltwater than there is dry land, yes.

  CHAIR—So the fish farming protein task contribution would be generally at sea?

   Dr Preston—No. The two ways that seafood is farmed is in ponds on land or in cages or rafts
in the sea. Most of what the world currently produces is in ponds on land—either marine or fresh
water. Obviously fresh water for Australia is not the way to go. And then there is open water—
cage culture—which we also do extremely well in Australia. But there are other issues with that.



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  CHAIR—So if you were to predict the future, where will it be—in the sea or on the land?

  Dr Preston—In Australia?

  CHAIR—Yes.

   Dr Preston—I think the greatest opportunity is in land based pond aquaculture. But there are
significant opportunities for sustainable growth in cage near shore and off shore.

  CHAIR—We had better continue, then.

   Dr Morell—I am responsible for our future grains research program within the Food Futures
Flagship. I am going to talk about a program of work where what we are trying to do is to
overcome competitive pressures in international markets. Our grains industry faces significant
competition from not only established competitors, such as the US, for example, and Canada but
also increasingly emerging producers in the subcontinent and the former Soviet Union countries.
One of the ways that we are doing this is building in quality attributes that meet the needs of our
ageing population. So we are using quality as a differentiator and a value addition route.

   The first part of that, then, is around addressing our population wide health needs. We touched
on this earlier. Grains are a very powerful delivery mechanism for improving public health. We
have a significant problem in Australia with about 18 per cent of Australians having a long-term
cardiovascular problem. We have 4½ thousand colorectal cancer deaths and around 12,000 new
cases a year. We have eight per cent of Australians with type II diabetes. We have significant
issues with overweight and obesity. All of these issues are addressable from changing our diet
and lifestyle.

  We want to do this, but, as we touched on earlier, we need to do this in a way that is profitable
and sustainable for our producers. So while we are focused on those quality differentiators, we
have touched on the fact that we need to provide farmers and the producers with advantages to
make this development sustainable. So I will be talking a little about reducing nitrogen fertiliser
usage and yield.

  I will run through a number of examples of this. The first example is BARLEYmax. This is a
type of barley that we have developed which has considerably high dietary fibre levels—around
twice the dietary fibre. It provides a differentiated form of fibre called resistant starch, which has
proven benefits in terms of bowel health. It has around half the glycaemic load. You can see
BARLEYmax there compared to traditional sources of cereals. We are very pleased that this has
been released in a product in August this year and has been very well accepted by consumers. So
we have achieved about threefold the sales that were predicted.

  Senator NASH—Can you tell us what the figures are on the side?

   Dr Morell—That has dropped off the side. That is the percentage of the grain. This is proving
that consumers are very interested in diet and nutrition benefits. We are also mindful that barley
is really quite a small crop. From a direct human use benefit perspective, wheat is the main
game. We have been building in the same type of technology for high resistant starch and fibre
into wheat. This shows that we are able to make a very acceptable product from the use of this

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technology. We are currently working to demonstrate that in large animals. We have finished
initial studies in rats showing improvements in bowel health. It has the potential to reduce
disease of the colon and the low glycaemic index again.

   A third example in terms of using the genomics type technology is to differentiate our oils.
What we are concerned with here is that, as most people are aware, there are significant
differences between saturated and polyunsaturated oils in terms of health benefits. We have
focused here on producing what we call the long chain omega 3 oils. They are known as EPA
and DHA. These are normally sourced either from fish or algal production, but there are
limitations in terms of the ability to supply these oils in the future. Yet they are very important
for cardiovascular health.

  CHAIR—Is that the chia thing?

  Dr Morell—Sorry?

  CHAIR—Is that a thing called chia?

  Dr Morell—There are a number of plant sources of what we call short chain omega 3. They
have limited health benefits. But this is really a critical thing for consumers to understand. It is
only when you go to these long chain omega 3 that you get the significant heart health benefits.
Flax is another example where you have the short chain omega 3.

   What we have done here is to use gene technology to transfer these genes from micro algae. It
is actually the micro algae in the ocean that make these omega 3 oils. They are then accumulated
by fish and come through to us in the food chain. We are short-circuiting that by producing
canola plants that produce these omega 3 oils directly.

   So they are three examples of the end product. I will move on quickly. As we have talked
about before, there are issues around reducing the availability of arable land and the importance
of fertiliser to maintain production. I think it is less well understood that fertilisers are very
expensive in terms of greenhouse gas emissions through the Haber process, which is used to
create nitrogenous fertilisers. There are also significant issues with nitrification and leaching.
One of the key projects that we have in the flagship is to work with the Australian Centre for
Plant Functional Genomics in Adelaide and the US biotechs to transfer genes for nitrogen use
efficiency into wheat and barley. The objective there is to be able to gain a benefit from that
technology in two ways—either to use less nitrogen fertiliser and achieve the same yield or
achieve higher yields with the same level of nitrogen. So that is an important program moving
forward.

  We have also been very conscious that when you look at historical productivity trends—this is
in terms of yield of the Australian wheat crop—we do about a two per cent increase in
productivity per year. About one per cent of that is in direct genetic gain for yield. The other per
cent or so is from improved management practices. In order to meet some of the targets that we
have in terms of food production to meet the food security challenges, we really believe that we
need a stepped change.



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   This slide gives you a snapshot of one very exciting technology that we have developed using
the RNA technology that was developed in the plant industry by suppressing the activity of a
single gene in wheat. In extensive trialling of glasshouse trials, we have seen an approximately
20 per cent increase in yield. We have, of course, patented this technology and believe it is a
world first in opening up a whole new area of science in improving yield in wheat with
application in the future to other crops. We are just moving through into extensive field trials and
it is looking very promising.

   So overall our vision there is to combine genetics to deliver health outcomes for consumers
and improve yield and input use efficiency for the farmer to create an overall package of
differentiation and value and profitability for the grains industry.

 Senator NASH—I want to ask one quick question before you move on. You just said that the
BARLEYmax has been commercially released?

   Dr Morell—That is right. In August this year. The first application is a breakfast cereal. That
is being produced by a company in Melbourne, Popina Foods. It has gone into national release in
supermarkets.

  Senator NASH—And what is the cost per kilo for the seed?

   Dr Morell—The cost per kilo for the seed, I think, is really a commercially sensitive number.
I can tell you that the price of a packet is $5.98. It is very competitive.

  Senator NASH—That does not answer my question, but I understand your position.

  CHAIR—This is a grain in the cereal packet?

  Dr Morell—And it has been rolled and flaked and turned into a breakfast cereal.

  CHAIR—So if you ran into it out at Young or somewhere, what is the variety of barley?

  Dr Morell—It has been produced in a closed loop production system. The company
Austgrains is producing it. It is not released as a standard barley, but it is produced under that
closed loop system.

  CHAIR—Is it intended to be kept in a closed loop system?

 Dr Morell—That is the business model when we are starting off. As Bruce explained, our
model is to link up between the producer here, the processor and ultimately the retail food
manufacturer.

  Senator NASH—So has the producer invested along the way? How did that particular
company get chosen?

  CHAIR—Was it a contractor or an equity partner?



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  Dr Morell—The grower is a contractor to what we call the logistics manager, who is the grain
accumulator.

 CHAIR—So is not what you have just described one of the global problems of the future,
where you want to maximise the thing by being vertically integrated and isolated so it is a
monopoly or a cartel?

   Dr Morell—You have to get some traction through to the marketplace to get market pull for
this technology. So that is how it is starting off. Over time that model will evolve.

  CHAIR—If it is as good as you say, would it be for the benefit of mankind? I do not know
whether you have produced 1,000 tonnes, 10,000 tonnes or two tonnes. Surely the quicker it gets
out there, the better. There would be some commercial costs to be recovered. You have to pay for
the CSIRO golf days and all that sort of thing out of it. But at some stage of the game, would it
become just like every other barley?

   Dr Morell—Ultimately it will become much more widely grown and accessible. The problem
with a new technology, though, is that the leap of faith to pay for the production of the grain and
take that risk of taking it through to the marketplace has to be recovered in some way. So there is
a strongly commercial model at the beginning.

  Senator NASH—So how much taxpayer funding goes into the commercial benefit for the
entity at the end?

  Dr Lee—We would prefer to take that on notice, if we could.

  Senator NASH—If you could, that would be good, because it is curious. I understand the
reasons why, but we are talking about the fact that the global population is going to increase
exponentially and we have to increase food production capacity. It is about what we are going to
do with that when you have this closed loop of great benefit that taxpayer funding has gone into.
Could you take that on notice and explain more fully for the committee how that process works,
because that is quite curious?

  Dr Lee—What I can say is that we do get a licence fee for the technology at both the
production and retail ends. That can then be reinvested into strategic science. So it is a closed
loop, if you like, in terms of the research as well.

  Senator NASH—And that covers the cost of the taxpayer dollar going in, or is it—

 Dr Lee—It will eventually, yes. If the product is as successful as all the indications are at the
moment, yes, it will.

  Senator NASH—Perhaps you can take that on notice and expand it for the committee.

 Senator O’BRIEN—And is gene transfer going to be as controversial as other genetic
modification?

  Dr Lee—Well, this particular product is not GM. It is a naturally—

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  Senator O’BRIEN—That might be. You were talking about gene transfers. How do you see
the controversy surrounding GM affecting that?

  Dr Lee—We are acutely aware of that. Part of the programs that we have actually has a
consumer component in them. Within the food and nutritional science division in Adelaide we
have a number of psychologists that work to understand how consumers both here in Australia
and in overseas markets will react to these new technologies, to these new traits, so that we can
understand the issues that they may have with them and address them upfront rather than putting
the technology on to the market and then addressing them.

  Dr Daly—Chair, do you want to hear the last presentation? I know time is short.

  CHAIR—Yes.

   Prof. Bell—I am conscious that we are over time. I am going to go quickly. My division
works predominantly post farm gate. A little of the food safety work extends into primary
production, but by and large we are beyond the farm gate all the way through to consumer
nutrition, health and satisfaction. Bruce just alluded to some of the work our scientists do that
contributes to the substantiation of health claims along the lines of the work that Matthew just
talked about.

  Today I want to focus on one aspect of the science that we do, and that is in food processing,
engineering and science. Many of the big drivers that Joanne began talking about and others
have alluded to can be enhanced or progressed, not exclusively, through food manufacturing.
Remember that this is our biggest manufacturing industry in Australia. It accounts for 20 per
cent of all manufacturing capacity. Some of the key drivers are listed here. Again, we have heard
about a number of them, particularly health and environment. There are questions about price.
One aspect that has not been explicitly discussed today is food safety, which I have said here is
something that we cannot compromise on.

   I want to give you a couple of examples of how we have been able to, I think, not only
improve opportunities for ensuring food safety but also enhance consumer acceptability of our
processed products. We continue to work in somewhat traditional food processes that mainly
rely on some aspect of heating to preserve foods. But more and more we are focusing on
innovative processes that are largely not dependent on heat. There is some very high science
involved here that transfers over to the physical sciences—multiphysics modelling to get away
from traditional trial and error experimentation. A couple of examples are here. The first one is
very much focused on food safety. There are two technologies here that I do not pretend to
understand a lot about myself that have been quite successful at ensuring microbiological safety
in our foods. We do not need to understand the detail of the graph. In one of the legend boxes
there are some flattened names of some of the nastier food borne pathogens. Each line there
represents the growth pattern or reduction of growth pattern of these when they are subjected to
what we call cool plasma treatment, which is a non-thermal disruptive technology. The bottom
line of that graph shows that these are at least as effective, if not more effective, at essentially
sterilising or pasteurising as heat. This is important because many of the higher attributes of
foods are destroyed or partly destroyed by heating, including some of the health promoting
bioactives that are contained in food.


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   Another good news story here is enhancing the consumer appeal of, in this case, a quite
traditional product—apple juice. This technology has been applied to a number of different
products, including seafood, as Nigel talked about. We are focusing here on apple juice. This is
one of Joanne Daly’s favourite products. I hope I do not speak out of turn here. I like this
example because it is an example of how CSIRO has worked with an SME in this case that was
only launched a few months ago in Melbourne. It is called Preshafood. It produces this very
high-end fruit juice using this novel high pressure technology that does not involve heating. It
produces a fruit drink that has quite unusual appeal. For example, they sell different varieties of
apple juice where you can tell whether it is granny smith juice or—

  Dr Daly—Pink lady.

  Prof. Bell—pink lady. You like pink lady. I remember that. So what are the outcomes of this?
Last month, this tiny SME beat out the Pepsis and Cokes and some of the other mega beverage
companies around the world in an international competition in Germany. The two gentlemen
there on the left are Andrew Gibb, who is the CEO of this company, and my colleague from
CSIRO, Dr Lyndon Kurth, who just happened to be in Germany at the time on holiday. He went
along to see this quite wonderful result.

   Again, I reiterate that through food manufacturing and applying new science to the technology
of processing, we can enhance and add to many of the outcomes that my colleagues have talked
about today. I have not talked particularly about sustainable processing, but that is an emerging
field that we feel is an important part of the value chain—the opportunity to do our work in a
more environmentally efficient and sustainable way. Some of that work is being done by
colleagues in Brian Keating’s flagship. Thank you.

  CHAIR—Senator Fisher?

  Senator FISHER—No, thanks, Chair.

  Senator O’BRIEN—That was a very interesting brief presentation. Is there more available?
Are there websites that we can go to to get information?

  Prof. Bell—Yes. Absolutely.

   Senator O’BRIEN—Probably the quickest way that we can get to some of that information is
if you give us some of the links to it. It is important for the purpose of whatever report we write
out of this inquiry that we have access to a broad range of information and answers to questions
that we do not have time to put.

  Prof. Bell—I can certainly do that, Senator.

  Senator O’BRIEN—Thank you.

  CHAIR—In terms of the conundrum, shall I say, of the food task and the viability of farmers,
which is what we are looking at—we are very grateful for the presence of CSIRO today—there
are simple things, like what you do about milk that is 20 cents at the farm gate that is $3 a litre in
the supermarket. Has anyone in the CSIRO plotted a more efficient path from the farm gate to

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the supermarket? It seems an incredible journey. Say as an average that at the present time it is
30 cents a litre.

  Prof. Bell—We have applied some of our capability in food chain analysis. I think you had a
submission from a former colleague of ours last year some time, who was an expert in this field.

  CHAIR—Yes.

  Prof. Bell—It is not an area that I am personally knowledgeable about. I am not a food
scientist. I am not giving you an answer. I do not know whether anyone watched Landline
yesterday. There was a British expert, Professor Fearne, from Kent University who has been the
so-called thinker in residence in South Australia for this past 12 months. He is an international
expert in this area. He had some very interesting things to say about what he sees as a very
uneven and in some ways quite dismal analysis of the Australian approach to food chain issues.
There are some great positive examples, but they are, according to him, the exception rather than
the rule.

  CHAIR—It just amazes me that an Australian rack of lamb in Canada is cheaper than it is
here.

  Prof. Bell—Yet lamb has been one of our success stories, really, in terms of producers
responding to consumer signals and producing a product now that is way better than it was 20
years ago. The industry has been more or less successful, I think.

  CHAIR—Even though this little committee has declined a bit in numbers, we are very
grateful that you have not declined much through all of this. Is there anything else that you could
assist us with? Our terms of reference are how the hell we produce food that is affordable from a
sustainable environment and a viable farmer. Are there other things that we ought to know about
that the CSIRO knows about and we do not know about?

  Dr Daly—I think the answer probably is lots but, off the top of our heads, I think we have
given you a fair flavour.

  CHAIR—Well, we would love to hear if you have other things that you think could assist this
committee and you could send us material et cetera. I think until the planet figures out the
problem with the food task, and it is coming up quickly, it will be a scary statistic on China with
that northern aquifer problem.

   Senator O’BRIEN—The reason I asked the question earlier about how much value the
investment is delivering is one of the things we need to deal with in our report is the value of
research. We need to amplify what the investment has delivered so far and refer to the potential
and some of the actuals that you are talking about. Dr Preston’s information on that fish feed
issue will be a fabulous boost to profitability and, therefore, productivity of our aquaculture
sector. One of the things that people have said limits the sustainability of the sector is being
addressed in one fell swoop. So those sorts of issues are issues we need to be able to address
with some authority. We need to get as much information as we can on issues such as that
because they, in the interests of Australian science, need to be fleshed out and put to the public
and government to drive the impetus of further investment.

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   Dr Daly—Senator, there is good data, I think, for the agricultural sector in the value of R&D
in the broad, not necessarily attributed to individual research institutions. In fact, I think the data
for agriculture are much better than for other sectors. Dr Burdon referred earlier to the GRDC
work showing that, of the increase in total factor productivity in Australia over the last decades,
half of that is due to the contribution of R&D and the other half from other factors. So there
certainly are statistics around to give support to the ongoing need for, and benefit from,
investment in R&D in this area.

  Prof. Bell—Another statistic, of course, is the multiplier. What do you get back for every
dollar you have spent on R&D? There is lots of data on that.

  Senator O’BRIEN—I think it would be useful if you assist us with information on that for
the purpose of any reports.

  CHAIR—Because everyone from the University of Western Sydney to God knows who has
said that we have got to get up to pace on research. To do that, as Senator O’Brien would know,
you have to give politicians the courage to make the decision. So that includes organisations
such as yours. I think, as I recall, a guy from the western suburbs said that we really need to
model some of our department of agriculture stuff here on the USDA, which has a wider ambit
of capacity than we do. I would be interested to get the details of that barley thing and the long
omega 3 work. I would be grateful if you could send that along.

  Dr Morell—Yes. Will do.

 CHAIR—Finally, on behalf of the committee, the parliament and the secretariat, I thank the
CSIRO, one of our great flagships in Australia. Thank you.

  Dr Daly—Thank you, Chair.

  CHAIR—We shall adjourn.

                                Committee adjourned at 4.45 pm




                           AGRICULTURAL AND RELATED INDUSTRIES

								
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