More to RDC results than figures can tell

It doesn't add up – RDC figures can't calculate real returns


Just how much bang for their agricultural research and marketing levy buck do farmers (and taxpayers) get, and how can it really be reported meaningfully?

Just how much bang for their agricultural research and marketing levy buck do farmers (and taxpayers) get, and how can it really be reported meaningfully?

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Dumbing down the benefits of agricultural research and marketing levies into simple profit and loss formulas is a recipe for headaches. Better explanation is needed.

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It's little wonder agriculture’s various peak research bodies find it awkward to report standardised dollar return figures on levy funds invested.

The quantification task is huge for such a diverse portfolio of industries and projects.

Direct comparisons between sectors are near impossible, say performance and evaluation specialists.

The task also gets more expensive as independent analysis gets more precise, yet annual performance results may still be rubbery because of complications such as weather, environments and different stakeholders’ ideas of “industry good”.

What makes sense as a good return on investment to farmers will also likely differ to the sort of feedback Canberra expects to quantify its financial commitment to a research and development corporation (RDC).

Subsequently, the distilled down reported return on investment (ROI) for every dollar of funding can vary markedly for different RDCs from about $3 for Australian Wool Innovation to double that for grain and meat bodies.  

Independent reviews showed for every dollar contributed by taxpayers and farmers to Australian Wool Innovation the average return to woolgrowers was $2.90. The  Grains Research and Development Corporation returned an average $6; Meat and Livestock Australia av hit $6.20, while Cotton Research and Development Corporation was $8.29.​  However, veracity of benchmarking data is questionable unless methodologies used are consistent and transparent to stakeholders.

Independent reviews showed for every dollar contributed by taxpayers and farmers to Australian Wool Innovation the average return to woolgrowers was $2.90. The Grains Research and Development Corporation returned an average $6; Meat and Livestock Australia av hit $6.20, while Cotton Research and Development Corporation was $8.29.​ However, veracity of benchmarking data is questionable unless methodologies used are consistent and transparent to stakeholders.

“You could spend 10 per cent of your whole operating budget working out how much ROI you’re really making, but that’s still not going to deliver a perfect answer given each RDC operates differently under its own different charter,” said agribusiness head at ACIL Allen, Jan Paul van Moort.

The leading independent economic policy and public affairs consultancy frequently reviews rural research performances and recommends levy efficiency strategies.

Better explanation needed

Mr van Moort said rather than worrying about a common ROI formula, the real challenge for RDCs was constantly communicating to levy payers what the goals were and what had been achieved.

“Distilling an agricultural research benefit cost analysis down to a simple profit and loss formula, as you do in commerce, is not something people have a lot of success in translating into language understood by farmers,” he said.

“The figures are important as hard evidence, but the value in the numbers is how they stack up this year against what you want to achieve,” he said.

Why they (RDCs) invest and the end result are the key factors levy payers and governments need to relate to, not so much how the results are achieved. - Jan Paul van Moort, ACIL Allen

“You must always read them in context, and explaining that context is very important.”

Mr van Moort said more than $600 million in agricultural research funds equated to “thousands and thousands” of individual projects.

Not only were they hard to quantify with a specific financial value in any one year, especially if projects ran over a decade or more, it was unlikely everybody in the industry would embrace all spending decisions all the time.

However, as RDCs were investing other people’s money it was vital they were responsible with it, and open to scrutiny. 

“Why they invest and the end result are the key factors levy payers and governments need to relate to, not so much how the results are achieved,” he said.

Major independent performance reviews every three to five years were also vital to identify where improvements could be made to research, such as consultation, deliberation and technical analysis.

At ground level, many producers see Australian Wool Innovation and Meat and Livestock Australia as promotion outfits, not so much research bodies, - Richard Clark, graingrower, former GRDC chairman

Former Rural RDC Council chairman and past Grains Research and Development Corporation chairman, Richard Clark, said uniform benchmarking research goals were a good idea, in theory, but not easily achieved across such varied areas of accountability.

What do farmers think

He said a fundamental accountability challenge for RDCs was their work generally looked to build up farm performance over five, 10 or 20 years, while invariably the agripolitical bodies and commodity councils charged with critiquing research spending priorities tended to represent current members’ immediate concerns, “not those who will be farming in 10-plus years”.

Northern NSW farmer and past chairman of the Research and Development Corporation Council, Richard Clark.

Northern NSW farmer and past chairman of the Research and Development Corporation Council, Richard Clark.

“Also, RDCs don’t tend to have the sort of sophisticated skills needed to deal with farm lobby organisations and various agripolitical agendas,” he said.

Historically RDCs had been more free to focus on their job as farmer organisations devoted time and effort to scrutinising statutory marketing boards and grain handling authorities.

As statutory bodies vanished and agricultural markets and farming activities changed, the RDCs had experienced more conflicting farm lobby sector views about their roles.

Confused about RDC roles

Mr Clark, who crops 1350 hectares on at northern NSW near North Star said further complicating any ROI evaluation debate was the separate marketing role various peak industry research organisations also fulfilled.

These combined responsibilities repeatedly confused levy payers about how funds were used.

“At ground level, many producers see Australian Wool Innovation and Meat and Livestock Australia as promotion outfits, not so much research bodies,” Mr Clark said.

“They are indeed different skill sets.

“Ideally, I think they probably should be separate.”

Mr Clark said levy payers demanding comparative ROI results for individual research projects should not overlook the fact that “at the end of the day you actually measuring the growth of a whole system”.

“Average returns on research into managing rhizobia bacteria to improve nitrogen fixation might only deliver a 20 cent a tonne yield increase, but it’s part of a bigger performance lifting drive.”

Attributing which costs delivered what returns was an opaque science, too – a bit like calculating the true ROI from converting your farm to zero tillage.

The answers evolved varied, and involved far more than simply being based on the cost of buying a direct drill planter, or a spray rig.

“I admire any efforts to hold research organisations accountable, but I don’t think we can objectively measure levy spending outcomes fairly across the board.

“I’d expect some smart outfit like McKinseys could develop a magic formula for ROI on levy funds if you really wanted to throw enough money at them, but the platform they’d probably use would be pretty similar as they’d use for the banking or manufacturing sectors.

“I’m not sure that’s what we really want.”

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