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Benefit cost analyses of selected investments

GRDC undertakes benefit cost analysis (BCA) to demonstrate the outcomes of its investments and adopt an ex-ante and ex-post approach to predicting and measuring impact. Ex-post analyses use the framework developed by the Council for Rural Research and Development Corporations (RDC).

Adoption rates are calculated using the ADOPT tool developed by the Farming Futures Cooperative Research Centre and updated by CSIRO with our support. We use a 25–30-year investment period. Net present value (NPV) is calculated as the present value of benefits less the present value of the investments. BC Ratio is calculated as the ratio of benefits to cost of the investment. The present value of investment (PVI) is calculated as the value of the investment 25 years from today discounted to the present.

The following benefit cost analyses are those relevant for 2019–20 against each objective in the 2018–23 Research, Development and Extensions Plan.

Objective 1 — Improve yield and yield stability

Project title: Hyper yielding cereals

Collaborators/partners: Foundation for Arable Research (FAR) Australia

Background: Despite favorable climatic conditions, grain production in Tasmania was falling short of the needs of the dairy industry, particularly as large national and multinational dairy companies looked to expand operations.

To reduce reliance on feed grain imports and transport subsidies, the corporation collaborated with FAR Australia, investing in the assessment of new germplasm and agronomic packages. These are targeted at optimising flowering windows and environmental adaptation to produce and demonstrate opportunities for significantly higher farm productivity.

The new varieties were combined with modified agronomic practices suited for the local environment to demonstrate the application of hyper yielding cereal principles—suitable cultivars alongside management techniques, which are suited for local conditions.

The project also identified profitable control strategies for Ramularia in barley.

The findings on nutrition will also play an important role in future investments, with inherent soil fertility delivered by the farming system being crucial for high yields, contrasting to the limitations of artificial fertilisers.

Year of commencement

2015

Year of completion

2020

Present value of investment (PVI)

$2.4m

Present value of benefits (PVB)

$13.0m

Net present value (NPV)

$10.6m

Benefit/cost ratio

5.3

Objectives

  • Increase yields of Tasmanian fodder crops from 4.4t/ha to 7t/ha negating the need for fodder imports
  • Identify specific cultivar management techniques to increase yield productivity
  • Increase the profitability of wheat and barley.

Outcomes

  • Identification of new germplasm and suitable management techniques has set new benchmarks for yield potentials of 16t/ha for wheat and 12t/ha for barley in Tasmania
  • New wheat and barley varieties commercialised which are higher yielding, more disease resistant and have improved grain quality
  • New barley disease identified with significant work towards profitable control strategies
  • Farmers given tools for ongoing success—higher yields require a greater understanding of repeatability (risk) and input economics to ensure long-lasting profitability gains
  • Success of project has resulted in further GRDC investments in the High Rainfall Zone.

Environmental benefits

  • Nutritional findings demonstrate the crucial role of farming systems and the limited role of artificial fertilisers.

Social benefits

  • Higher yields increase grain grower incomes with positive spillovers to regional communities.

Objective 1 — Improve yield and yield stability

Project title: Soil constraints

Collaborators/partners: Department of Primary Industries and Regional Development, Grain Industry Association of Western Australia (GIWA).

Background: When establishing the investment, GRDC assumptions were that soil acidity cost Australian agriculture more than $1.5 billion in lost productivity (Australian State of the Environment 2011). Furthermore, this loss was being carried by the Australian grains industry through lost yield and an inability to access crop species that are not tolerant to acid soils. In Western Australia, soil acidity was estimated to be costing growers $498 million per annum in lost productivity and contemporary soil pH surveys and analysis suggested that the situation could be worse, costing growers upwards of $1 billion in Western Australia.

Soil acidity can be managed through the application of agricultural lime. However, in order to invest in lime to manage soil acidity, growers need confidence in the likely economic and production responses in their situation.

The national soil acidity program and investigation of lime application rates have provided growers with greater confidence with respect to their use of agricultural lime to treat soil with low pH.

Through a greater understanding of their soil pH profile and of the benefits of managing soil pH, growers have been able to more effectively target their management practices. In particular, the application of sufficient lime to the right areas to achieve maximum effectiveness with increased yield and productive capacity.

Year of commencement

2013–14

Year of completion

2019–20

Present value of investment (PVI)

$2.7m

Present value of benefits (PVB)

$22.9m

Net present value (NPV)

$20.1m

Benefit/cost ratio

8.4

Objectives

  • Improve grower knowledge of their soil pH profile
  • Provide growers with greater confidence to manage soil acidity via suitable applications of lime
  • Increase yields on ameliorated soils.

Outcomes

  • Growers, advisors and industry have a greater understanding of the latest approaches to managing soil acidity
  • Cost effective liming strategies realised
  • Yield increases contributing to increased productive capacity of farms, and therefore profitability.

Environmental benefits

  • Regular use of lime will save growers the cost associated with deep soil amelioration which will save the associated greenhouse gas emissions of deeper tillage
  • Soils will be more hygroscopic and allow greater water infiltration and provide higher long-term plant yields which will make nutrient use more efficient.

Social benefits

  • Growers will increase yield and therefore experience higher new returns per hectare improving farm financial and regional viability.

Objective 2 — Maintain and improve price

Project title: Increasing the competitiveness of oats for export

Collaborators/partners: Australian Export Grains Innovation Centre (AEGIC)

Background: Australia’s exports of oats to China has been increasing steadily over time, with growth averaging 32.0 per cent between 2007 and 2017. However, for Australia to remain a key trading partner and meet the needs of its Chinese consumers, the corporation established this investment with Australian Export Grains Innovation Centre (AEGIC) to better understand customer quality requirements.

Additionally, this project also provided Chinese consumers with a greater understanding of the quality and functionality of Australian oats. To do this, the performance of Australian oat varieties for innovative Asian oat foods was explored and benchmarked against Chinese oat varieties. The project developed new methods to produce novel oat products such as oat rice and oat noodles.

The outcomes of this investment will see the Australian oats industry well positioned to breed, grow and supply oats that meet China’s market requirements.

Year of commencement

2015

Year of completion

2018

Present value of investment (PVI)

$1.7m

Present value of benefits (PVB)

$20.7m

Net present value (NPV)

$19.0m

Benefit/cost ratio

12.3

Objectives

  • Improve understanding of Chinese consumer preferences of products containing oats
  • Investigate the performance of Australian oat varieties for innovative Asian oat foods
  • Maintain and improve Australia’s oat trade to China.

Outcomes

  • Australian oats have been tested in a wide variety of Asian oat foods as well as non-traditional oat foods such as noodles
  • Australian oat exports to China have increased in value during the period of the investment as consumer preferences have been better met
  • The value of oat processing in Australia has increased over the period of the investment.

Environmental

  • Increasing oat hectares provides a break from wheat and barley rotations.

Social

  • Frost has a major impact of crops and the inclusion of oats in a rotation provides two degrees of frost protection relative to barley and four degrees relative to wheat
  • Growers in frost prone regions are therefore better off when frost events occur when they include oats in rotations
  • The health benefits of oats are well known—increasing consumption of oats will help consumers to lower their cholesterol.

Objective 3 — Optimise input costs

Project title: National crown rot management program

Collaborators/partners: NSW Department of Primary Industries, Department of Jobs, Precincts and Regions, South Australian Research and Development Institute, Department of Primary Industries and Regional Development, University of Southern Queensland.

Background: Crown rot is an economically important disease of winter cereal crops across Australia, which was recently estimated to cost wheat growers $404 million annually (Murray and Brennan 2019). This national crown rot epidemiology and management program was a 6-year (2013–2019) collaborative project.

A national approach was adopted to ensure the development of regionally focused and proven management strategies to reduce yield and quality losses from this disease. At least 185 replicated field experiments were successfully conducted across all GRDC regions.

This project’s multi-faceted approach delivers new knowledge to growers on the potential economic impact of crown rot on commonly grown and newly released wheat and barley varieties. Additionally, robust integrated disease management (IDM) strategies that incorporate crop rotation, varietal selection and fungicide seed dressing were developed and provided to Australian grain growers to effectively manage the disease.

An improved rapid pre-planting test (PreDicta B) for growers to assess the risk of crown rot infection was also developed.

Year of commencement

2013–14

Year of completion

2019–20

Present value of investment (PVI)

$6.9m

Present value of benefits (PVB)

$67.8m

Net present value (NPV)

$60.9m

Benefit/cost ratio

9.85

Objectives

  • Provide new knowledge on epidemiology and potential economic losses from crown rot
  • Improve grower confidence to adopt proven management strategies and varieties with improved yield performance in the presence of crown rot infection in their area.

Outcomes

  • PreDicta B data show a reduction of 1.8 per cent in average crown rot levels to from 2018 to 2020. New investments are required to further reduce the impact of crown rot
  • Improved profit from reduced crown rot losses following adoption of improved IDM strategies developed in this investment
  • Reliability of PreDicta B improved to identify paddocks at risk of crown rot development.

Environmental benefits

  • Greater grower confidence to reduce tillage and retain stubble to derive benefits of decreased soil erosion and increased moisture retention through adoption of improved crown rot management strategies.

Social benefits

  • Less stress on growers and advisers through adoption of improved regionally proven IDM strategies developed within this project and provision of industry support through communication at GRDC Updates, field days and extension articles. Improved profits to grain growers assist in ensuring the viability of rural communities.

Objective 3 — Optimise input costs

Project title: Analysis of canola disease investments

Collaborators/partners: University of Melbourne, NSW Department of Primary Industries, University of Western Australia

Background: Canola has the potential to deliver farming system benefits across all regions of Australia, except for northern NSW and Queensland; however, disease can make canola unprofitable relative to other crops. Canola can be infected by a number of pathogens in Australia that cause root rot, leaf diseases and crown to stem infections. Their presence and severity are dependent on plant susceptibility, presence of the pathogen and favourable climatic conditions.

Historical evidence indicates significant yield and profit loss from these diseases due to poor plant growth and increased input costs to manage the disease.

The corporation has invested in a range of initiatives—from pre-breeding and identifying genetic markers for disease resistance through to management techniques and surveillance programs suited for regional conditions—to minimise yield losses and optimise input costs.

Year of commencement

2011–12

Year of completion

2019–20

Present value of investment (PVI)

$13.8m

Present value of benefits (PVB)

$78.5m

Net present value (NPV)

$64.7m

Benefit/cost ratio

5.7

Objectives

  • Identify markers for various canola diseases including blackleg and sclerotinia, white leaf spot, Alternaria leaf spot, downy mildew and powdery mildew
  • Identify yield enhancing traits
  • Identify suitable canola varieties for particular regions to reduce the incidence of disease
  • Develop disease resistant marker traits for breeding.

Outcomes

  • Improved variety selection with new genes identified for inclusion in future varieties
  • Growers provided with better management options to reduce the incidence and severity of disease impacts.
  • More than 40 per cent of growers and agronomist using GRDC e-application management tools to control blackleg and sclerotinia
  • More than $64m returned to growers through increased yields and avoided blackleg losses following in-season, regional warnings and management advice
  • Addressed potential trade barrier issues by demonstrating pod infection and crown canker development are not related.

Environmental benefits

  • Improved varietal selection and better knowledge of disease control measures has led to more appropriate fungicide applications
  • New disease management options have also reduced the reliance on chemical control measures
  • Rates of disease resistance in higher rainfall regions and therefore the reduction in fungicide benefit may occur in more than one season.

Social benefits

  • Minimising the effects of canola disease increases yields and hectares, thereby contributes to reducing risks and increasing profits. Higher profits have positive social benefits for regional communities.

Objective 3 — Optimise input costs

Project title: Russian wheat aphid (RWA)

Collaborators/partners: University of Western Australia, South Australian Department of Research and Development, CESAR Pty Ltd. Peratco Pty Ltd. AgCommunicators Pty Ltd. Reconstruct Consulting, Janine Vitou, Murdoch University, CRC for National Plant Biosecurity.

Background: Russian wheat aphid (Diuraphis noxia) is one of the world’s most economically important pests of wheat, barley and other cereal grains. RWA causes losses through direct feeding and damage caused by the injection of toxins.

GRDC continually invests in preparedness activities including pre-breeding, emergency response plans and emergency permits. Following the incursion of RWA in 2016, we invested in several initiatives. Through collaboration with breeders and researchers, we investigated the biotype of aphid found in Australia and evaluated the susceptibility of current commercial wheat and barley varieties to this biotype.

We also investigated genetic, chemical and biological control options to minimise the economic impact of RWA infestations in Australia. These investigations lead to the delivery of an integrated pest management framework for growers for the sustainable control (or management) of RWA.

Year of commencement

2008

Year of completion

June 2018

Present value of investment (PVI)

$41.4m

Present value of benefits (PVB)

$126.8m

Net present value (NPV)

$85.4m

Benefit/cost ratio

3

Objectives

  • Understand the behaviour and impact of RWA under Australian climatic conditions and on Australian cereal varieties, based on Australian biotype identification
  • Deliver preliminary chemical and biological control options to facilitate the development of an integrated pest management framework for sustainable control of RWA that maintains grower profitability
  • Make RWA resistant cereal germplasm available to breeders
  • Identify knowledge gaps and research, development and extension needs to inform future investment.

Outcomes

  • Australian biotype identified, alongside research into the ecology and biology of RWA under Australian conditions
  • Scientific evidence generated to appropriate control measures and minimise the economic impact
  • Data generated to support chemical use permits issued by the Australian Pesticides and Veterinary Medicines Authority (APVMA)
  • Delivered a comprehensive best practice management guide for growers and adviser: ‘Russian Wheat Aphid: Tactics for Tight Future Control’ based on generated scientific data on management application rates and techniques
  • Developed molecular markers for various cereal genes conferring resistance against RWA
  • Identified germplasm containing key genes offering broad resistance to RWA and introgressed these into some Australian wheat and barley varieties
  • Made more than 300 lines available to Australian breeding companies
  • Surveillance program in place via iMapPESTS: Sentinel Surveillance for Agriculture research initiative.

Environmental benefits

  • Improved knowledge of chemical application rates combined with biological controls lead to better environmental outcomes in managing RWA.

Social benefits

  • Reduced risk of economic losses with positive spillovers to regional communities.