This week, Jon Paul Driver is joined by Pat Guerin in a special two-part episode to discuss some of the many opportunities in the Australian hay industry. The discussion covers the need for industry-wide standards, a shifting R&D focus towards animal performance, and tackling challenges like weather damage and drying processes. It also highlights the importance of collaborative growth in the export market.
Pat Guerin has a strong technical background in the hay industry. His career includes managing large hay export facilities in South Australia and Western Australia, and a background in agronomy and animal nutrition.
Episode Highlights:
- There are significant opportunities to increase the value from research and development investments.
- AgriFutures, the peak government body, oversees 16 different industries, managing their R&D strategic plans.
- R&D investments benefit the entire process chain, not just the grower or plant breeder.
- Over the past 10-20 years, there have been significant productivity increases in the grain sector, making hay less competitive in crop rotations.
- To achieve high yields and improve production quality, the hay growing system needs modification.
- Key components like optimising the plant’s response to light and cold are not inbred in the oat and hay varieties used in Australia.
- There is room to improve production quality in the oat and hay industry by incorporating traits like photoperiodism and vernalisation, which are currently lacking in Australian varieties.
- Focusing on these areas presents an opportunity to achieve higher yield values alongside better quality.
Bonus Episode
Subscribe to the Hay Matters Podcast to Listen to this special episode on Sunday, 26th May.
- Each export company in Australia has its own procurement matrix, lacking a single industry standard.
- R&D priority is shifting to focus more deliberately on the animal performance contribution value.
- There are ironies in the industry: breeding for some desired stem sizes can be counterproductive for animal performance, even when buyers are accustomed to a those sizes, for example.
- Due to these complexities, RD&EE (Research, Development, Education, and Extension) are crucial.
- While it may seem like there is competition for supply from different countries, the focus on animal productivity and growing the industry increases the overall market, benefiting everyone.
- In a growing market, everyone wins, whereas mature markets lead to competition over market share.
- Current investments in Australian export fodder focus on health and wellbeing for the future.
- Weather-damaged product is a major contributor to lower gross margins for hay growers in Australia. Investments in mitigating this issue can positively impact profitability.
- Conditioning the hay reduces the risk of rain damage by reducing drying time. Focusing on shortening the dry down period can significantly improve contribution value.
- Using a tedder rake can hasten the drying process but increases the risk of losing colour. This problem has made people hesitant to adopt teddering.
- US tedders don’t spread the hay out; they fluff the windrows to promote airflow through them.
Stay up to date and learn more about the industry with the Feed Central Hay Matters Podcast – your portal to the intricate world of hay, brought to life through real stories and expert analysis.
Jon Paul Driver 0:05
Welcome to the Feed Central Hay Matters podcast your go to source for all things hay related in Australia. I’m your host John Paul Driver, in today’s episode we’re joined by Pat Guerin with an introduction from Tim Ford. Tim, take it away.
Tim Ford 0:19
Welcome to the podcast, Pat. As always, it’s wonderful to see you and welcome to our podcast. Thanks Tim. Pat has a long career in the hay sector in South Australia predominantly. Pat will dig into this a little bit more later. I first met Pat, probably in 2002-2003, when he was manager of one of the large hay export factories here in South Australia, in more recent times has worked for Balco. And Pat has one of the strongest technical minds in our industry. Not only Pat, Pat’s very well versed in the agronomic side of the industry, but also has a unique skill set and he’s also versed in the animal nutrition side of our industry. So I’ll hand over to Jon Paul Driver and Pat Guerin, welcome, gentlemen, to our podcasts.
Jon Paul Driver 1:13
All right, Pat, you’re giving us an overview of your career. You said that you started with broadacre farming. Where was that at?
Pat Guerin 1:22
Sure. I’ve been in South Australia. My parents had a broadacre farm at Pinery. So that’s just that’s just north of Adelaide about 80 kilometres north of Adelaide and my wife’s family have a farming operation in Western Australia. So if you pinpoint Esperance and and Perth than about midpoint between those two, so about that distance is about 800 Ks, the farm is in the middle of that, and still today, I own that property. And my wife and I used to farm their broadacre farming some years ago.
Jon Paul Driver 1:56
Now, Tim mentioned your background in animal nutrition, and some more of the technical things. Did you start out as a nutritionist?
Pat Guerin 2:04
Sure, that was in the very early days when I studied at Adelaide University and went on to be in the tech team for one of the largest stock feed companies, Milling Industries, which today would have been owned by Ridley’s so that was my starting point. Yep.
Jon Paul Driver 2:22
And then how did you get into the hay export world.
Speaker 1 2:26
I moved to Milne Feeds in Western Australia, which is a stock feed company. And from there, I was involved there on a contract for a short term, I think that was a three year length, and then moved on to project managing the build of a stock feed pelleting operation north of Perth. At that stage, I became friends with Peter Mackie. And he was starting in the export fodder industry at that stage on quite a small scale. So we would brainstorm things. He loved what we did in the automation of the feed mill. And long story short that evolved in Peter Mackie funding the development of Gilmac. And the first venture there was the hay operation based in South Australia at Balaklava. And subsequent to that a larger national footprint. And still today, Gilmac would be the company that exports the largest volume from Australia.
Jon Paul Driver 2:26
Let’s steer over towards our topic for the day of R&D structures. Because Australia has a very unique structure that supports industry research. I absolutely love this because we’re struggling mightily in the States.
Speaker 1 3:38
So I look at it from… and I live in that world. But I look at it that we’ve still got massive opportunities to get more value out of research and development investments.
Jon Paul Driver 3:50
Let’s talk about some of the organisational bodies that exist. What are those bodies in Australia and just assume that I know nothing.
Speaker 1 4:00
AgriFutures is the peak body. It’s a government division. And it looks after the R&D investments for emerging industries. So in principle, small industries and the export fodder industry fits under that banner. There’s I think something like 16 different industries that are covered under the AgriFutures banner. So they basically project manage the R,D&E strategic plan for the industry. In parallel with that, one of the reasons that we fit into that, we being the export fodder industry, fit into that mantle is because we have a mandatory levy that’s based on all tonnes exported from the country contribute the AgriFutures body or the advisory section for the export fodder industry looks after that investment. At present, it’s based on 50 cents a tonne for every tonne of fodder that’s exported with about 1.2-1.4 million tonnes of fodder being exported at present.
Jon Paul Driver 5:08
Gives you a half a million dollars a year to play with.
Pat Guerin 5:10
Yeah, Aussie dollars well, it’s probably 600-700k by two now, that’s crude extension. But the government contribution is typically… there’s a model there that’s got a lot of detail about it, but it’s typically representing topping that up another 100%. So 600k becomes 1.2 million K per annum. That’s not including the likes of endpoint royalty that come out of things like plant variety release systems. And in Australia, we we have the ability or the right to be able to collect levies for 20 years from the point of release until the 20 year period lapses. So there becomes a bit of a revenue stream that can feed back into that plant breeding process.
Jon Paul Driver 6:00
So you’re talking about intellectual property rights on the plant breeding, and we have that same structure in the states. Who owns that IP?
Pat Guerin 6:08
It varies. So it depends on who’s been involved in that process. For example, if it was plant varieties that came out of a AgriFutures funded project, then there would be the plant breeder would be involved. And that’s typically a government institution. But at present, the primary plant breeder for oat fodder industry is Intergrain. And Intergrain is a is a privatised company, it does have ownership of Western Australian Department of Agriculture and GRDC. So the key peak body for the broadacre cropping systems.
Jon Paul Driver 6:41
So there’s some self funding mechanisms there, too. On the AgriFutures side.
Speaker 1 6:46
The owners of the IP will be determined by who’s contributed to that process. And they’ll have each… there’ll be a predetermined share of that endpoint royalty contribution. So it might be for example, if the plant breeding was done under the timeframe that AgriFutures were the principal funder, then they might be 50% owners of that IP.
Jon Paul Driver 7:09
Okay, that makes sense.
Pat Guerin 7:10
Therefore, they end up with 50% of the endpoint royalty that’s collected.
Jon Paul Driver 7:15
What’s the collection point for that endpoint royalty?
Pat Guerin 7:18
That’s actually based on when it’s exported?
Jon Paul Driver 7:21
So all of this is based around the export?
Pat Guerin 7:23
That’s right. Yes. I mean, there are other systems to capture domestically traded product use product that’s, you know, a small component.
Jon Paul Driver 7:33
I was just thinking about some of that rained on 2022 hay that had 150 mils of rain, that probably didn’t get exported.
Pat Guerin 7:42
Some of it didn’t. But a lot of it did actually get exported, and still is being exported today.
Jon Paul Driver 7:47
Did that affect the revenue streams for all of this R&D?
Pat Guerin 7:52
No, because so long as the volume is similar, the revenue is based on tonnes exported. So it’s reasonably stable. I mean, it’s linked into the industry showing a steady growth curve. So therefore, the revenue stream potentially is paralleling with that.
Jon Paul Driver 8:09
Can you take me through the incentives of the producers and the breeders in these systems that perpetuate it, the growers get a benefit, and then the breeders also get a benefit out of it, or else they wouldn’t be doing the breeding?
Pat Guerin 8:24
I think the thing I’d like to first emphasise is that the levy is on the exporter. And one of the reasons behind that is so that R&D investments can be in the whole process chain. So it’s not specifically to the benefit of the grower or indirectly to the plant breeder, it is actually investment that could be used at any stage of that process change. That is an important distinction. Now, as an example of that, is that in the earlier days, so go back 10 years ago, all of that investment was feeding back into the plant breeding programme, I’m referring to a time where before it was actually mandatory levy. So the level of collection then was much smaller. And all of that investment was going into the plant breeding programme for oat fodder. Okay, fast forward to today. The snapshot today is that investment is being transitioned from the grower perspective, the plant breeding perspective, to the other end of the process chain, to better understand what the key drivers are that predominates the contribution value of our fodder.
Jon Paul Driver 9:38
Help me understand that better.
Pat Guerin 9:40
Okay, so our investment is basically in the animal performance end of the chain so that we’re focusing on there. What are the key aspects of our cereal fodder that are most contributing to the value from an animal performance perspective?
Jon Paul Driver 9:59
You’re talking about things like fibre digestibility nutrient content, and pulling those apart, the geeky economist in me goes to a hedonic pricing model, because the price of the thing is all of the components combined. And you can kind of pull some of those values out, right.
Pat Guerin 10:16
And the detail we’re driving that to is identifying different potentially digestible fractions of fibre for example, within the plant. In your alfalfa world, for example, you predominantly have two fractions, you’ve got a stem fraction, and the leaf fraction, there’s quite a difference in those two extremes, and not too much in the middle, joining the two together, whereas in a cereal fodder world, you’ve got the fibre fraction varies, and typically it is top to bottom of the plant or bottom to the top of the plant. And then you’ve got leaf fractions in there contributing on top of that. So you actually have quite a different product. It’s fibre is ranging into digestibility from top to bottom, if you know what I mean. So it’s not two fractions, there are multi fractions in there. And the other bit where we’ve got significant investment going on in the animal performance world, is what else is in our cereal fodders. Aside from the fibre fraction, in your alfalfa world, you’ve clearly got the crude protein fraction that adds value there. So what is it that makes up a significant amount of the cereal hay fraction, and at present, you’d put it under non fibre, carbs, carbohydrates fraction, but in there, there’s a lot of detail that we’re breaking out to understand specifically, how that interfaces with contribution value to the dairy cow.
Jon Paul Driver 11:44
And in simpler terms, we’re talking about the various types of sugars that are contained within that plant, and then how they’re metabolised or how that converts to milk, that thought process, right?
Pat Guerin 11:55
That’s right. Following on from that, how that interfaces with different diets. So you know, you can put the same forage into different diets and get very different performance outcomes. So how does that all interface together?
Jon Paul Driver 12:08
What are some of the challenges with the current state of the R&D?
Pat Guerin 12:12
In Australia, we’ve seen very significant gains in productivity within the grain industry. So one of the challenges that we’re faced with, the old adage was that grain yield was about half of the biomass yield of a hay crop. So a cereal hay crop, if it was typically five tonne to the hectare, then a wheat or barley grain crop would be correspondingly, would be producing two and a half tonne. The reality today is that we see grain yields that exceed well and truly five tonne to the hectare. We’ve seen in recent years, and I’m now talking, you know, probably the last 10-20 years significant increases in the productivity of the grain sector.
Jon Paul Driver 12:56
And that makes hay less competitive in crop rotations.
Speaker 1 13:00
Absolutely, absolutely. And some of the driver there is that perception of how we achieved the contributing value in our forage is to grow it on sections of the crop rotation that don’t return high gross margin levels to the grower e.g. put it into the least fertile paddock that you’ve got available, put it in last rather than early in your seeding program so that you can throttle the the yield potential of the crop. Factors like that are very directly contributing to negative gross margin or lower levels of gross margin not necessarily a loss situation but lower levels.
Jon Paul Driver 13:42
Right. And it’s all about relativity, right? Because producers are… growers are looking at as an economist, I’m obligated to ask the question, what’s the next best option? That’s what the grower is always asking themselves is what’s the next best option? Exactly? Yep. I’m just pulling up some of the work that I’ve done in the States. And we have very similar problems. In the US we have really good hay data, and it’s a perfect place to start an argument. It’s never the exact right answer. Just full disclosure. We have 100 years of yield data, the US Department of Agriculture started keeping records in 1922. And from 1922 to today, corn yields have increased by about 1200%. Now that’s the largest crop in the US is corn. Alfalfa, well, all hays somewhere around our wheat production and number three or number four, it kind of varies year to year. There’s three states that have lower alfalfa yields now than 100 years ago, and it’s the exact same problem. Correspondingly, the US loses 1,728 acres of hay ground every single day.
Pat Guerin 15:02
So our focus has been, in very recent times, actually spin that whole concept around. So we’re going to target the maximising the gross margin of the grower, and as a result of that work through, what’s the end product that we’ve achieved? Or potentially will achieve? And how do we need to manipulate or modify the system, the growing system to continue to achieve those high yields, but improve the quality of production concepts like photoperiodism, and vernalisation of your plant types, the varieties that we use in the oat and hay industry in Australia don’t have either of those characteristics inbred into them. So an opportunity for us is to focus on areas like that, as an example of may being able to achieve higher yield values in parallel with higher quality.
And I lied to you; corn yields in some states in the US have increased 1500% While alfalfa and well Arizona in particular has doubled its yield since 1922.
Unknown Speaker 16:16
So it is the same story
Jon Paul Driver 16:19
It’s the exact same problem. And there are states where the yields are lower than 100 years ago, and it boggles my mind that that’s a possibility. I do like your thought, though, and I’m going to take this and use it that it’s about the system. Yep, that’s right. That’s right. This has been wonderful. I’ve learned so much and I hope that the growers have a better understanding of the industry now. hat I really want to say thank you for your time. Cheers.
Pat Guerin 16:45
Thanks, Jon.
