Our investment in RD&E is funded through an industry levy and matching Commonwealth contributions. In 2019–20, we invested $20.0 million in cotton RD&E throughout the industry supply chain. In 2020-21, our estimated cotton RD&E expenditure will be $18.7 million.

Revenue

Cotton levy revenue is collected either on cotton lint bales at the point of ginning or on the export of seed cotton. Cotton farmers pay a levy of $2.25 for each 227-kilogram bale of cotton lint, or for seed cotton a levy of $4.06 per tonne of exported seed cotton. Australian ginning and export of seed cotton occurs from March to September of each calendar year. Therefore, cotton levy revenue in any financial year is drawn from two consecutive cotton crops.

The Australian Government provides a contribution of up to 50 per cent of the cumulative total eligible expenditure on RD&E. The maximum contribution is generally capped at 0.5 per cent of a three-year rolling average of the gross value of production for the cotton industry.

The setting and collection of the industry levy is enabled by the Primary Industries (Excise) Levies Act 1999 and the Primary Industries Levies and Charges Collection Act 1991, respectively. The Australian Government’s matching contributions in 2019–20 were capped at the value of levies collected because it was lower than the 0.5 per cent of the three-year average gross value of production.

The following graph demonstrates the change in sources of revenue over the last six years. The proportion of grant revenue generated by partnerships with the Australian Government, RDCs and commercial enterprises has increased from five per cent of total revenue to 31 per cent of total revenue.

In 2019–20, the Australian Government’s Department of Agriculture, Water and the Environment contributed a total of $1.9 million in revenue to CRDC, via the Rural R&D for Profit program ($1.5 million), and the National Landcare Program’s Smart Farming Partnership initiative ($0.4 million). This revenue has also attracted additional grant revenue of $1.8 million from program partners, industry and cross-sectoral partners.

Expenditure and investment

Actual expenditure for 2019–20 was $20.043 million, which is $0.170 million below the budgeted expenditure of $20.213 million.

* ABARES estimate, Agricultural Commodities June 2020.
** Includes project refunds.

Cost Allocation Policy

CRDC has a Cost Allocation Policy for allocating direct and indirect costs to activities across its program. Expenditure in 2019–20 was allocated to the following activities:

Portfolio Budget Statement

The Commonwealth 2020-21 Portfolio Budget Statements were deferred to October 2020 due to the COVID-19 pandemic. Estimates for 2020-21 provided in this report are preliminary estimates only of CRDC’s outcomes, outputs, performance and financial position for 2020–21.

Outcomes and outputs 2019–20

CRDC has one Australian Government outcome: Adoption of innovation that leads to increased productivity, competitiveness and environmental sustainability through investment in research and development that benefits the Australian cotton industry and the wider community.

* Total cost is shown rather than total price because CRDC is primarily funded through industry levies rather than on the basis of the price of its outputs. Each research project and its funding contributes to the outcome. Total research expenditure for the outcome is calculated, with the remaining expenditure attributed to the outcome on a pro-rata basis.

Forecast revenue

Future revenue from levies and Commonwealth matching contributions are directly affected by cotton production. Commodity prices, water availability and water prices are significant factors in forthcoming cropping decisions. Below average storage levels of public irrigation dams serving the Australian cotton-growing regions, high water prices and the impact of COVID-19 on the apparel market are expected to result in below-average cotton production in 2020-21.

CRDC has budgeted for $10.733 million operating deficit for 2020-21. This reflects revenue of $7.998 million and expenditure of $18.731 million. Industry levy revenue and Commonwealth contributions will continue to be drawn from two crop seasons, 2019-20 and 2020-21.

Forecast expenditure

Budgeted expenditure for 2020-21 is $18.731 million, which is $1.312 million below the 2019-20 actual expenditure. The forecast expenditure for the next two years is budgeted at $18.381 million in 2021-22 and $11.592 million in 2022-23.

Forecast deficits

CRDC is a statutory body enabled by the PIRD Act with the rights of a body corporate, and has the right to retain surplus funds. However, as a corporate Commonwealth entity, CRDC may be required to seek approval from the Minister of Finance for a deficit in any year.