Following the money – where your DA dollars go

da-levies

The fabulous UDV infographic in the last post got me thinking about how the biggest chunk of farmer levy funds are spent – with Dairy Australia.

Just how much does an average farm pay for DA? I did some sums based on figures from the 2016 Australian Dairy In Focus report and, for the average Australian dairy farm producing 1,563,258 litres of milk, the annual DA levy came to $5,523.

Are we getting good value? I asked Dairy Australia some basic questions about what it does and where our money goes. After discussing it amongst themselves for a few weeks, the DA staff were most forthcoming. This is one of the longest posts ever likely to appear on Milk Maid Marian but it’s very useful. Thank you, DA!

1. What are the sources of DA’s funding?

For 2016/17:

Payments from levy payers:                                                               $32.0 million
Matching Federal Government funding for R&D projects:      $20.4 million
Other (Interest on reserves, royalties on IP)                                  $0.7 million

Total                                                                                                   $53.1 million

DA project expenditure is also able to leverage additional State & Federal Government funding by investing jointly in projects, this adds approximately $10 million a year.

2. What percentages of DA’s budget are accounted for by admin, R&D, extension, promotion, and reputation protection? (I’m imagining a pie chart here)

da-funding-sources

3. How does DA set its priorities?

DA follows a process each year to refresh its strategic priorities as part of its rolling three-year plan.

Each year, the starting point is to review the performance of existing/current projects and whether they are achieving what they set out to do. An environmental scan of the operating environment helps to identify any new risks or challenges the industry will need to address.

Once these two steps have been completed, then comes the key measure to the whole process – extensive consultation with representative bodies, Regional Development Programs (RDPs) and farmers. This provides a focus of effort and expenditure on those matters that are not only seen as important, but necessary for a profitable and sustainable sector. Out of this DA is able to clearly define its key investment priorities.

From here, budgets are set and project expenditures are revised to help complete the new plan. Once finalised the plan is presented to industry and Federal Government for ratification.

The underlying, big industry challenge is to profitably grow farm production to fully take advantage of regional potential over the next decade. The current plan retains its focus on building the foundations to support resilience and growth.

Our core priorities are clear and concise: making farm businesses more profitable and competitive; growing people skills and capability; and protecting and promoting our industry.

4. Can you offer a list of the main projects delivered over the last 3 years and those slated for 2017 in R&D, extension, promotion and reputation protection?

The main projects delivered over the last three years are as follows – many of which are ongoing:

  • Regional Development Programs – extension activities to fill the gap left by state governments, discussion groups (now 107 groups up from 80, nationally) and focus farms (a total of 12 nationally).
  • Herd Improvement – Good Bulls Guide, ABV’s, Breeding Indices
  • Dairy Bioscience, Forages – DairyBio (formerly Dairy Futures CRC), hybrid breeding, endophytes
  • Dairy Bioscience, Animal Improvement – DairyBio, tracking genetic progress, Feeding the genes
  • Integrated Feedbase R,D&E – Feeding Pastures for Profit
  • Animal Nutrition & Feed Systems – Feed planning and budgeting, cow nutrition manual, purchasing grain resources, feed additives resources
  • Forage Improvement – Fert$mart, perennial ryegrass management, TopFodder silage management, quality pasture silage booklet
  • Industry Education – NCDE, Young Dairy Network, Picasso Cows, Discover Dairy, Cows Create Careers
  • Attracting & Retaining People – the People in Dairy website and resources like the Employee Starter Kits (ESKi), Stepping Stones, Stepping Up/Stepping Back, Farm Safety Starter Kit
  • Marketing – Foods that Do Good (promoting dairy alongside fruit and vegetables to health professionals), Australian Grand Dairy Awards, Legendairy Capital

Projects underway for this financial year, some of which are ongoing from last year, include:

On-farm

  • Animal health and fertility – Raising awareness and adoption of new Cattle welfare standards (Animal Health & Welfare), improving herd fertility and supporting farmers to phase out calving induction (InCalf), improving mastitis management through new Milk Quality adviser training and better practices at drying off (Countdown), publishing a new edition of the calf rearing manual (Rearing Healthy Calves), improving dairy hygiene to reduce milk price penalties due to bacterial counts (Better Hygiene Better Milk)
  • Genetics and herd improvement – Data Gene (including a centralised data repository), DairyBio
  • Feedbase and animal nutrition – Forage Value Index, DairyBio
  • Farm business management – Dairy Base training, Taking Stock, Standard Chart of Accounts
  • Farm systems and modelling – Precision dairy, virtual fencing
  • Land, water and carbon – Fert$mart, More Profit from Nitrogen (cross sector), Waste to Revenue (cross sector), Phosphorous efficient pastures (cross sector), Stocktake of the Nutrient Loss to Water Risk for the Australian Dairy Industry, feed additives to reduce methane emissions (led by Canadian research institutions), Sustainable Pasture Systems under climate extremes, Profitable Dairying in a Carbon Constrained Future program (Australian Government funded), Cool Cows heat alert service and Cool Cows workshops, Smarter Irrigation for Profit (cross sector) and technical support for industry contributions to the design and implementation of the Murray Darling Basin Plan

Post-farmgate

  • International market support – China, Japan and South East Asia scholarship programs and in market programs across China, Japan, South East Asia and the Middle East
  • Manufacturing innovation and sustainability – Technology Transfer Scheme, Transfer Dairy Fund, Small Dairy Network, Dairy Manufacturers Sustainability Council, Dairy Industry Sustainability Framework
  • Marketing – Legendairy Capital, Foods That Do Good (for health professionals)

5. DA has explained that some programs have been trimmed or cut to meet the expected downturn in income this financial year. What are they?

 Internally, DA has reduced its workforce by about 10% and reduced overhead costs by ~15%. Efforts have been made to preserve core internal programs (RD&E) but most programs have experienced some cuts.

The larger changes have been:

  • Post-farm-gate R&D and educational initiative expenditure has been cut by $3 million per annum.
  • Mass market advertising (TV based advertising) has been cut by $2.5 million per annum.

6. How much has DA spent on post-farmgate R&D over the last three years? Why are farmers’ funds on post-farmgate R&D? How will this change?

Post Farm Gate R&D – Manufacturing Budget

2014/15 – $3,157,500 (DIAL)

2015/16 – $1,293,800 (DIAL)

2016/17 – $414,000 (Supporting Manufacturing Innovation & Sustainability)

Up until the past year, our main investment in post farmgate R&D was core funding for DIAL to produce cultures for cheese companies and also undertake post farm pre-competitive R&D to help companies move up the value chain and improve the return for farmers via milk price.

DIAL was established in 2008 and since that time we were contributing about $3 million/year and most of the processors (MG, Bega, Lion, Parmalat, WCB) were contributing proportional amounts, as were commercial investors so that DIAL had an annual budget of about $7-10m/ year. DIAL also undertook a number of projects to help companies improve operating efficiencies in their factories.

Over the past 2-3 years DA has been scaling back its investment due to a number of factors. 1) with the reduction of co-ops over time, being able to demonstrate to farmers the value of levy dollars into DIAL became more difficult 2) a number of the processing companies had developed strategic alliances and partnerships with overseas R and D organisations or global dairy companies who had very large R and D capability. So the value proposition for DIAL came into question.

After a thorough review it was decided to wind up DIAL. The cultures business was sold to a commercial company already producing cultures and all the remaining IP from DIAL has now been shifted to DA and we will continue to assist processing companies adopt the existing IP.

Following the decision to wind-up DIAL, the strategic direction of the investment as well as the level of investment has changed dramatically. DA’s strategy in this area is now a more targeted post farm gate investment approach focused on technologies ready for adoption rather than idea inception.

We are looking to take commercially mature technologies or practices and see them through to implementation in an Australian context so that our processors and farmers see the value sooner rather than later.

Ultimately it will aim to increase the profitability of the Australian dairy industry by ensuring that our supply chain is keeping pace with global developments in dairy production innovation.

Key focus points of the current Supporting Manufacturing Innovation & Sustainability program:

·         Accelerating technology uptake into the Australian dairy processing sector by supporting commercially-relevant technology assessment and assisting processors to access larger buckets of available government funding sources

·         Enhancing the sustainability of the dairy processing sector by supporting the processors to both track and make progress against industry targets to reduce GHG emissions intensity, consumptive water intensity and waste to landfill. Each of these environmental targets are coupled with clear commercial drivers in that energy, water and waste disposal costs are increasing at a rate which requires rapid industry respond in order to maintain any sort of international advantage in terms of cost of production.

·         Ensuring that the value of current and previous DA research is realized for the benefit of Australian dairy farmers

As part of this new program, Dairy Australia has already completed three pilot-scale technology transfer projects that investigate the economic feasibility of innovative technologies designed to:

a) provide a non-thermal, low energy process to extend the shelf-life of dairy products as well as improve pathways for value addition to whey;

b) enhance the recovery of clean-in-place chemicals and reduce environmental discharge; and

c) optimise spray dryer control and reduce energy use.

Post Farm Gate R&D – Health and Nutrition Research and Science Budget

The Budget has progressively been rolled back in the last few years but is now dominated by the Fractures Trial Commitments.  This funding will continue to contract over the forward estimates as the fractures trial comes to completion.

2014/15 – $584,000

2015/16 – $430,000

2016/17 – $495,000

DA invests in Human Health and Nutrition Research to ensure that dairy nutrition science is strong enough to support industry communication activities designed to improve consumers’, key influencers’ and policy makers’ confidence in dairy foods while highlighting evidence of the benefits of dairy. 

This research has been vital in helping industry to counter the anti-dairy sentiment and fad diets (eg: Paleo) using the most up to date science.  This research also provides real opportunities to enhance the health and nutrition benefits of dairy in the diet with a view to increasing consumer demand for dairy (eg: Fractures Trial working to provide strong scientific evidence that dairy foods help to reduce the risk of fractures in adults).

7. What are the alternatives for farmers to provide DA with feedback?

Aside from contacting DA by phone and email, many of our staff, board directors and RDP extension people are often out in the regions on farm or at various industry events and forums so there are plenty of informal opportunities to approach us face to face.

Farmers are able to provide us with feedback via our stakeholder tracking survey which contacts about 600 farmers twice a year. Farmers are asked directly about their satisfaction with levy investment, what’s working and not working and ideas/advice on how to meet the needs and expectations of farmers.

Also, every three to five years, the Federal Government requires an independent performance review of DA. This process collects feedback from stakeholders about DA’s effectiveness, efficiency, and achieved value for money and return on investment to the industry. Workshops are held in all dairy regions for all levy payers to attend or farmers can email a submission to the agency conducting the review.

Farmers can contact their RDP directly or attend organised events, workshops and local discussion groups. Farmers are also encouraged to join local or industry boards and committees (such as their local RDP).

Or there is also the Australian Dairy Farmers (ADF) and the state dairy farmer organisations which farmers can contact or join to provide feedback which will then be given to DA.

***Agri-political activities or lobbying on behalf of dairy farmers is led by the state dairy farmer organisations – UDV, TFGA, SADA, Dairy Connect, NSW Farmers, QDO and WA Farmers, who are members of the national body, the ADF.