Avo levy called into question

Between them, the three growers from south-west WA produce about 50 per cent of the State’s annual avocado crop while paying $500,000 to $900,000 in levies.

Jasper Farms director Neil Delroy says that amount is set to double given the three growers plan to expanding their orchid plantings beyond 900 hectares in the next few years.

He says the levy is effectively a tax imposed on their businesses that equates to $2000 per hectare per year.

Currently levies are charged at 7.5 cents per kilogram for domestic avocados and export sales and 1 cent per kilogram for processing avocados.

Mr Delroy’s operation is located in Busselton and Delroy Orchids, directed by his brother Russell Delroy, is situated in Pemberton.

The third leg of the lobbying trio, George Ipsen, has shares in three south-west entities - Mayfield Park Farms, West Pemberton Avocados and Southern Forest Avocados.

In a broad-ranging interview with Fairfax Agricultural Media, Mr Delroy said the three growers would be happy to forgo millions of dollars in matching government funding and go it alone on levy-spending activities, to help resolve inherent structural problems within the system.

He said he’s delivered the same no-nonsense message first hand to senior National Party MPs including Deputy-Prime Minister Warren Truss and Agriculture Minister Barnaby Joyce.

“We pay hundreds and thousands of dollars a year in levies and get virtually nothing back in return; it’s a disgrace,” he said.

Mr Delroy described the Research and Development Corporations that manage levy-spending activities, like horticulture, wine and grains, as “lazy monopolies” that lack market competition and lose focus on grower driven outcomes for marketing and research and development.

His template for analysing issues specific to the grains industry levy is based on the rationale promoted by WA farm consultant Paul McKenzie who has been an outspoken critic of the Grains Research and Development Corporation.

“The fundamental problem with the RDCs is they are lazy monopolies and there’s no competitive focus,” he said.

“The bottom line is we need choice.

“We’re not stupid and we understand research and don’t need a socialist, centralised bureaucracy living off our levy money telling us what to do.

“The RDCs were introduced in 1989 but the productivity gains we’ve made since then have plateaued because the system we have is diabolical.

“But we now have a once in a 25-year opportunity to make changes to the system and produce better outcomes.”

Mr Delroy was highly critical of Horticulture Australia Limited’s (HAL) role and how it intersects which his industry’s peak body, Avocados Australia, to make decisions on R&D and generic marketing spending.

According to its website, HAL invests about $100 million annually in programs designed to align with the strategic investment priorities of Australia’s horticulture industries and the Australian government’s priorities for rural RDCs.

HAL receives recommendations on investment from Industry Advisory Committees (IACs) which provide industry specific experience and expertise.

But Mr Delroy said the avocado industry’s IAC is “fundamentally flawed” because its members are elected democratically, according to designated regions, rather than appointed based on industry skill and expertise.

“I can’t see how the IAC can make important decisions on strategic R&D without researchers being in the tent,” he said.

Mr Delroy said he supported HAL maintaining a role overseeing levy-spending on R&D activities, so long as rigorous scrutiny was applied to prove projects had broad, cross-industry benefits, like pathogen research or biosecurity.

But he believes most of the levy money could be retained by the three growers to allocate towards research projects they determined, potentially partnering with other like-minded growers.

The same approach could be taken for generic marketing activities, if needed, he said.

Mr Delroy said if the government adopted a system that gave growers choice on whether they contributed levies to R&D projects managed by RDCs “there won’t be a rush to get out the door”.

But he said allowing choice and competition would ensure growers and industry realised greater benefits over time.

“We’re happy to continue funding HAL for projects that have cross-industry benefits – we don’t want to snatch our bag and go home – we want to take a rational approach,” he said.

“But the key message is - we need choice on how our levy monies are spent.

“We do not necessarily need a centralised communal socialistic style body to monopolistically administer our R&D and marketing monies.

“Many of us are quiet capable of organising R&D and marketing ourselves and we are quite happy to do so.

“We want the option to manage our monies ourselves and are happy to forego any government matching funds but the intellectual property we create in doing so should be ours.”

The growers’ report says recent industry reviews, initiated by previous Agriculture Minister Joe Ludwig, have supported their demands for change while highlighting structural flaws within the system.

The report said an independent review of HAL showed poor use of levy monies with 34 per cent being consumed in administration alone.

“RDC’s, like HAL, are in effect monopolies and have become bloated bureaucracies that are largely self-serving rather than outcomes focused because they have no competitive forces to sharpen their performance,” the report said.

A HAL spokesperson said the issues raised by the three avocado growers had been well and truly canvassed during recent government reviews into the industry’s levy system which the government had responded to.

HAL is now in the process of implementing recommendations from the inquiry which will turn it into a grower owned organisation.

The spokesperson said HAL would also be addressing the same key issues in its submission, that’s currently being compiled, to the Senate levy inquiry.

The Senate levy inquiry was sparked by lobbying from the nation’s biggest mushroom grower Costa, against the mushroom levy doubling in this year’s budget, while the Coalition says the inquiry meets an election commitment to review the system.

The Senate Rural and Regional Affairs and Transport Legislation Committee inquiry is scheduled to table its inquiry report by November 24 this year.

Submissions are currently scheduled to be received by October 20 while details of public meetings and witnesses to be called, are still being finalised.

A motion detailing the inquiry’s terms of reference was moved by NSW Liberal Senator Bill Heffernan and co-sponsored by NSW Liberal Democratic Party Senator David Leyonhjelm and WA Liberal Senator Linda Reynolds.

Senator Leyonhjelm achieved amendments to the terms of reference to add the terms “imposed” and an “imposition” in describing the use of industry levies and their governing systems.

Another addition called for the inquiry to look at “opportunities levy payers have to approve and reapprove the imposition of levies”.