RIRDC Completed Projects in 2003-2004 & Research in Progress as at June 2004

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4.1 Global Competetiveness  - Completed Projects
PROJECT  No	PROJECT TITLE	RESEARCHER	PHONE	ORGANISATION
Domestic Impediments to Industry Performance
BLC-4A	Advancing the securitization of Australian agriculture	Dr. Terry Dwyer	(02) 6286 5900	Bob Lim & Company Ltd
AEC-3A	Evaluating logistics chain technology: Australian farmgate to port	Dr. Bob Hawkins	(02) 6273 1222	Access Economics Pty Ltd
ACI-10A	The 2002/03 drought: Part 1; a month by month review	Mr Mark Barber	(02) 6249 8055	ACIL Tasman Pty Ltd
Trade Policy Reform
IPL-1A	Why a WTO market access agreement matters to developing countries	Mr Peter Gallagher	(03) 9820 1653	Inquit Pty Ltd
Markets for Agricultural Products
UTS-7A	Impact of genetic engineering on consumer demand for milk, potatoes and potato crisps - extension to US-92A	Dr Kate Owen	(02) 9514 3783	University of Technology, Sydney
Policy and Institutional Analysis
AWT-1A	Economic effects of income tax-law on investments in Australian agriculture (with particular reference to new and emerging rural industries)	Dr. Alistair Watson	(03) 9370 7438	Alistair Watson
Communications
UMO-27A	Annual awards for excellence in agribusiness II	Dr Lawrie Dooley	(03) 9903 2757	Monash University


Domestic Impediments to Industry Performance

Project Title:	Advancing the securitisation of Australian agriculture
RIRDC Project No.:	BLC-4A
Researcher:	Dr. Terry Dwyer
Organisation:	Bob Lim & Company Ltd
Phone:	(02) 6286 5900
Fax:	(02) 6286 4981
Email:	Terry.Dwyer@anu.edu.au
Objectives	• This project will take forward RIRDC Project BLC-3A Efficient Equity and Credit Financing for the Rural Sector .  •  To research in greater depth securitisation for the rural sector and develop a model for take-up of securitisation across a range of Australian rural industries.
Background	An earlier RIRDC Research Report Efficient Equity and Credit Financing for the Rural Sector: New directions in rural and agribusiness finance (RIRDC Publication No 01/117) opened up the question of securitisation of Australian agriculture. It identified the need for further theoretical and technical research as a pre-requisite for commercialisation.
Research	The research involved literature review and extensive technical discussions with experts in the financial sector, regulatory agencies and at the farm level. A securitisation model was developed and refined.
Outcomes	A Hybrid Equity Contract was identified as the most appropriate securitisation instrument for Australian agriculture. Technical issues relevant to the design and commercialisation of the Hybrid Equity Contract are outlined.
Implications	The project confirms that securitisation of Australian agriculture would yield significant benefits to Australian agriculture. Commercialisation, which is the next step, is the responsibility of financial market players.
Publications	Dwyer, Dr T M, Lim, R K H, and Murphy, T (2004, 103pgs) Advancing the Securitisation of Australian Agriculture: Hybrid Equity RIRDC publication number R04/055, Canberra .  Dwyer, T M and Lim R K H; (2001, 112pgs) Efficient Equity and Credit Financing in the Rural Sector: New directions in rural and agribusiness fi nance, RIRDC publication number R01/117 , Canberra .

Project Title:	Evaluating logistics chain technology: Australian farmgate to port
RIRDC Project No.:	AEC-3A
Researcher:	Dr Bob Hawkins & Stephen Corcoran (Access Economics)  Graham Hooper and Richard Rawnsley (Maunsell Australia )
Organisation:	Access Economics Pty Ltd
Phone:	02 6273 1222 (Access Economics) 07 3858 6700 (Maunsell Australia )
Fax:	02 6273 1223 (Access Economics) 07 3858 6705 (Maunsell Australia )
Email:	Stephen.Corcoran@AccessEconomics.com.au Richard.Rawnsley@maunsell.com
Objectives	•  Investigating the state of play in areas such as internet-based systems, proprietary systems, industry structure, uptake and the role of Customs and Quarantine will enable Australia's rural containerised exporters to develop a clearer understanding, where possible, of where they stand relative to international benchmarks and best practice and what needs to be done to further enhance Australia's competitive advantage in the global market. It will also identify which stakeholders are best placed to facilitate the achievement of greater productivity through investment in technology.
Background	In today's global market, rural exporters require “world-best-practice” systems for transporting their product from farm gate to port. Given the often-large distances involved, the cost of this movement rivals the international shipping charge. As the freight and logistics industry changes through consolidation and privatisation, it is timely to evaluate the use of technology in the land-based export supply chain, to ensure it maximises Australia 's global competitiveness.
Research	Consultations were undertaken with major companies involved in each of the major containerised export commodities, transport operators, stevedores, port authorities and others involved in the supply chain. Key Commonwealth Government agencies involved in introducing new technology were also consulted. A Project Steering Group representing industry and government provided guidance during the project.
Outcomes	There are some examples of use of advanced technology. But in many agricultural export industries, use of computers, the internet and advanced applications is less advanced than in manufacturing or transport. Adopting technology is not the highest priority of firms in the logistics chain. Benefits are seen as accruing elsewhere.  It is useful to evaluate regularly the progress of, and impediments to, technology adoption in the logistics chain, and to benchmark the Australian use of technology against that of our export competitors.  Bodies such as the Australian Logistics Council can help highlight issues relating to technology, and coordinate the adoption of network dependent technologies within the logistics industry.  Australian exporters are well placed, relative to competitors in developing countries, to meet the increasing security requirements.
Implications	Lack of advanced communications infrastructure (such as high speed internet) in regional areas can impede uptake of technologies that would benefit the whole of the export supply chain. The potential for downstream benefits may justify government support for roll-out of regional communications infrastructure.  Government regulation and the requirements of government agencies are an important stimulus to technological innovation and uptake. Governments should assess the net benefit of proposed changes prior to their introduction, taking into account the impact on risks (e.g. of sabotage or systems failure). There needs to be adequate investment in back-up to critical elements of technological systems.
Publications	RIRDC publication to be advised.

Project Title:	The 2002/03 drought: Part 1; a month by month review
RIRDC Project No.:	ACI-10A
Researcher:	Mr Mark Barber
Organisation:	ACIL Tasman Pty Ltd
Phone:	(02) 6249 8055
Fax:	(02) 6249 7455
Email:	m.barber@aciltasman.com.au
Objectives	The aim of this research project is to reduce the impact and economic severity of drought on dry land farming by improving knowledge of the evolution and critical stages of droughts. Increased understanding of the way drought evolves and its progressive impact on farm businesses will improve the planning for and management of droughts by farmers and their advisors. Improved knowledge of the way droughts progress at regional state national levels will also assist in the development of government drought policy.
Background	Droughts are often measured by the aggregate impact. But droughts do not occur over-night, rather they become established over an extended period of time. The severity of a drought is determined by how farming businesses react.
Research	The research conducted to prepare this report used indicators of climate, production and prices to build a picture of the way the 2002-03 drought evolved. The agricultural area of each state that received less than the 30 th decile of rainfall for the month was used to indicate the spread of rainfall deficiency. The use of this indicator allowed a picture of the accumulation of drought affected areas, pinpointing critical periods in winter and late spring. International and domestic crop prospect reports were used as indicators of the cereal, oilseed and pulse crops while sale yard turnover and slaughter rates measure livestock productivity effects. The productivity effects were compared to the climate indicators for each state. Crop prices were compared to international markets to measure variations and demonstrate the impact of local supply and demand factors. Livestock prices were compared to historical prices to identify seasonal and drought induced trends.
Outcomes	For livestock producers, the main impact of the 2002-03 drought was a substantial increase in costs, not a dramatic reduction in productivity. Livestock gross prices were and remained historically high. High prices for a range of stock provided opportunities for producers to retain and feed rather than sell. It is clear from the sheep and cattle productivity indicators that many producers chose this option. The most dramatic reaction from the livestock industries to the drought was in March – June 2003 when, following reasonable autumn rain, livestock selling and slaughter rates contracted significantly. For cropping enterprises, the impact of the drought was not one of increased costs but reduced income. Production of crops during a drought is reduced with little or no management options to intervene. Grain yields were a fraction of average and large areas were not able to be sown. Grain prices reflected this, but were also underpinned by international supply and demand.
Implications	Climatically, the drought centred on winter and spring rainfall deficiencies in the eastern states, most significantly in the major winter cropping regions. The combination of an historically high crop area and the concentration of the rainfall deficiency in late autumn and late spring lay at the heart of the 2002 drought. The height of the drought, from a productivity perspective, was the peak of agricultural area experiencing rainfall below the 30th percentile in October 2002. The drought of 2002 was characterised by dramatic reduction in crop production and high livestock prices. The drought of 2002, while extensive and prolonged, provided opportunities for livestock producers
Publications	RIRDC publication to be advised.


Trade Policy Reform

Project Title:	Why a WTO market access agreement matters to developing countries
RIRDC Project No.:	IPL-1A
Researcher:	Mr Peter Gallagher
Organisation:	Inquit Pty Ltd
Phone:	(03) 9820 1653
Fax:	(03) 9820 1633
Email:	peter@inquit.com
Objectives	•  To support the National Farmers' Federation efforts at the International Federation of Agricultural Producers (and elsewhere) to generate greater support among developing country farm groups for an ambitious agreement on market access reforms as part of the Doha round of WTO trade negotiations.
Background	Developing country members of WTO – including several members of the Cairns Group of Agricultural Exporting Countries – have recently shown much more interest in securing the elimination of export subsidies in the Doha Round negotiations than in reforming access to markets. Because cutting tariffs on agricultural imports would implicate their own relatively high levels of agricultural protection they are less committed to this ‘pillar' of the planned reform of world agricultural trade. But global access reforms are crucial for Australian agricultural exporters; they hold the key to better world prices for our exports and in our trade-exposed domestic markets. Without the support of developing countries, it is unlikely that an ambitious market access reform agreement will be reached.
Research	The publication “Market Access Matters” brings together in a easily-read booklet format, pertinent research results from a variety of World Bank, IMF, Australian government (ABARE), WTO and UNCTAD research publications and presents them in a series of simplified charts and diagrams. The research results consist primarily of estimates of the levels of protection in different groups of markets (industrialized and developing), the direction and composition of agricultural trade flows and projections of the impact of different approaches to agricultural trade liberalization, contrasting the impacts of cutting export subsidies and reducing market access barriers.
Outcomes	I created a print version (a PDF file) and a presentation from the documentary materials for use by NFF and its commodity councils as required. It is a ‘stand alone' document, assuming little background knowledge of international trade in agriculture. In a first presentation for the NFF trade committee it was well received. The publication has also been praised by Australian negotiators as bringing together the key strands of the argument for the benefits to developing countries of cutting barriers to agricultural market access.
Implications	Australia has a strong tradition of collaboration between the national farm leadership and government in pursuit of national objectives in multilateral trade reform. This booklet is a useful piece of ‘collateral' in the joint objective of broadening the base of support for those objectives among other members of WTO.
Publications	Gallagher, P (2004, 20pgs) Why market access reforms matter RIRDC publication number R04/110 , Canberra .


Markets for Agricultural Products

Project Title:	Impact of genetic engineering on consumer demand for milk, potatoes and potato crisps - extension to US-92A
RIRDC Project No.:	UTS-7A
Researcher:	Dr Kate Owen
Organisation:	University of Technology, Sydney
Phone:	(02) 9514 3783
Fax:	(02) 9514 3535
Email:	kowen@smartchat.net.au
Objectives	The objective of project US-92A has been to provide producers and government with behavioural and economic indicators that will enable them to assess the dynamics of consumers demand for GM products and to identify programs and actions that may increase public confidence in the handling and safety of GM products. As well, the report from the project is to provide future researchers with a guide to rigorous methods and modelling techniques that have not been widely used in the examination of demand for agricultural/horticultural products in Australia .  The current project adds to these contributions by undertaking basic research to explore the merits of a relatively new technique that has the potential to considerably enhance the information available to industry bodies on the potential impact of consumers' behaviour. The research will also contribute to the knowledge of an embryonic body of research into advanced modelling techniques for market research.
Background	The continuing uncertainty over consumer acceptance of GM foods has placed producers in a dilemma given the real benefits presented by adoption of gene technology. As a consequence, most industries have chosen to avoid pursuing commercialisation of GM crops, instead, preferring to adopt a “wait and see” strategy. In following such a strategy they face the risk of losing markets to other countries. Improved understanding of consumer responses to genetically modified products is necessary to assist producers to better assess the relative import of these conflicting risks.
Research	The research is divided into two stages. The first stage comprised a workshop of stakeholders and a survey of 120 consumers to assess their concerns over the introduction of GM foods. The second stage employed the stated preference method and discrete choice modelling with latent segment analysis to evaluate demand responses of 1008 consumers to three products: milk, potatoes and crisps. A small pilot survey of 48 retailers was also conducted to assess congruence with consumers.
Outcomes	Results from Stage 1 indicated a low level of concern over GM foods relative to other prevalent concerns in the community and food safety issues, but reaction was negative and strong when a problem is presented, regardless of prior level of concern. The type of product and modification influenced respondent acceptance of products with increased purchases for tangible benefits. There was low awareness of the specific bodies responsible for regulating the production and sale of GM foods with the burden of responsibility falling on an undefined “Government” or Departments of Health.  Stage 2 results indicated consumers required 27, 40 and 60 per cent discounts to purchase a GM form of milk, crisps, or potatoes that had no tangible benefit. This reduced to 12 per cent for milk and to 33 and 51 for crisps and potatoes with low fat absorption. However, these consumers only represented between 20 to 34 per cent of the samples. Substantial discounts were required by remaining respondents and one segment would only purchase organic products. Negative publicity caused a substantial increase in the discount required to purchase milk but not for potatoes or crisps. Potatoes were the only food type affected by positive information with a strong decrease in WTP to avoid GM and WTP for a GM free potato.
Implications	The discounts required to induce purchase of GM foods is likely to render commercialisation of many GM foods unviable in the short term given the current costs of complying with regulation of GM crops and the improbability of extracting price premiums for genetic modifications carrying a tangible benefit. Risk management strategies that have immediate and unambiguous responses are likely to minimise potentially substantial reactions to negative publicity. However, producers can expect to experience higher demand responses when foods have a tangible benefit.
Publications	RIRDC publication to be advised.


Policy and Institutional Analysis

Project Title:	Economic effects of income tax-law on investments in Australian agriculture (with particular reference to new and emerging rural industries)
RIRDC Project No.:	AWT-1A
Researcher:	Dr. Alistair Watson
Organisation:	Alistair Watson
Phone:	(03) 9370 7438
Fax:	(03) 9326 1218
Email:	aswatson@bigpond.net.au
Objectives	•  Improved understanding of the way taxation affects the growth of new agricultural industries, the economic efficiency and equity implications of recent tax law changes and their likely impact on new agricultural industries.  •  Development of ideas concerning taxation policy for agriculture.
Background	An earlier report to RIRDC – The Impact of Tax Driven Financial Investment on New Industry Development by Tracey Bramwell and Peter Chudleigh, RIRDC Publication No. 00/14, February 2000 – described the impact of tax driven investment on the development of new industries. That report found that managed investment schemes (MIS) had resulted in significant investment streams to new/specialised rural industries. However, the performance of MIS was poor. Independently, the Australian Taxation Office (ATO) and Australian Securities Investment Commission (ASIC) has taken steps to change the regulatory environment for MIS. Controversy over these changes led to a Senate Inquiry. Following the Ralph Report on business taxation of 1999, changes were made to the deductibility of losses by farm businesses with other sources of income (Division 35 of the Income Tax Assessment Act).
Research	The research was a mixture of theoretical analysis, empirical desk research and extensive contacts with those in the MIS industry. The two unifying theoretical themes of the research were traditional ideas about the economic effects of allowance or non-allowance of deductibility of taxation losses for projects of long duration and modern developments in the theory of information. The idea of asymmetric information whereby information is unevenly held on either side of the transaction is a powerful tool in understanding adverse aspects of MIS. Nevertheless, there are advantages in pooled investments like MIS and deductibility of losses to reduce the risks of investment in new industries.
Outcomes	Greater knowledge of the way regulation of information flows could improve the performance of projects. Suggestion of better ways the industry providing investment advice could be regulated. There is a need for government institutions to create the foundations for a competitive market rather than trying to solve the problem through administrative procedures. There are also information problems relating to the implications of Division 35. Nevertheless, our analysis and that of others suggests that existing rules are arbitrary and inequitable and create special difficulties for investors in novel agricultural industries.
Implications	The project has shown that the defects of MIS can be reduced by improved regulation provided the regulation is based on ideas drawn from economists' understanding of the nature and uses of economic information. Current procedures may be inhibiting the dissemination of information and hence competition in markets for MIS. Policy makers should also consider the way limited opportunities for taxpayers to defer tax create an increased market for MIS.
Publications	RIRDC publication to be advised.


Communications

Project Title:	Annual awards for excellence in agribusiness II
RIRDC Project No.:	UMO-27A
Researcher:	Dr Lawrie Dooley
Organisation:	Monash University
Phone:	(03) 9903 2757
Fax:	(03) 9903 2718
Email:	lawrence.dooley@buseco.monash.edu.au
Objectives	•  Award sponsorship provides RIRDC with an opportunity to present their corporate image to the Agribusiness industry. By supporting this prestigious event, RIRDC is able to show its commitment to promoting excellence in the Australian Agribusiness industry.
Background	In 1996 the Faculty of Business and Economics, Monash University combined with Rabobank Australia Group, part of the international Dutch food and agribusiness bank, Rabobank to present the Agribusiness Awards for Excellence. Initially five award categories were established and sponsorship was obtained from another three organisations including RIRDC. The awards were the first national awards in agribusiness in Australia .
Research	Members of the business community are invited to nominate organisations or individuals for awards in the various categories. We currently have a mailing list of 6,000 companies and conduct mass marketing via advertisements in selected media. Telemarketing is conducted to invite companies to consider applying for the awards. Leads for applicants are obtained from sponsors and articles of interest collected from BRW, Financial Review, The Age and The Australian newspapers.
Outcomes	This year Monash University is proud to present the 9 th Annual Agribusiness Awards for Excellence. There are now eight award categories with sponsorship from business, professional associations and government organizations. Last year the awards dinner was attended by over 300 senior executives, government representatives and academics. Previous winners of the RIRDC value adding award include Meadow Lea Foods for Golden Canola, Manildra Group, Darling Downs Bacon, Lenards for value added chicken products, Harvest Freshcuts, Medihoney and Two Dogs International. Details of winners are on the website www.agribis.net.
Implications	The awards provide sponsors with an opportunity to promote their corporate image and show support for the Australian Agribusiness industry. The Gala dinner and awards presentation provide individuals in the industry with an opportunity to network and interchange ideas. Sponsors can promote their corporate values to the Agribusiness industry.
Publications	Over the past eight year's the RIRDC “Agribusiness Value Adding Award” has received recognition in publications such as the Financial Review, Australian Farm Journal, Rural Business, Food Australia, The Age, Beef Improvement News, Australian Institute of Agricultural Science and Technology, (AIAST) and The Australian . Details of all winners are on the website www.agribis.net.






Last updated: August 2004
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