01Impact of ICRISAT Research on Australian Agriculture (Economic Research Report no.1)

Brennan, J.P. and Bantilan, M.C.S. (1999) Impact of ICRISAT Research on Australian Agriculture, Report prepared for Australian Centre for International Agricultural Research, Economic Research Report No. 1, NSW Agriculture, Wagga Wagga.

Executive Summary 

The project, “Spillover impact of ICRISAT research on breeding programs and agricultural production in Australia”, was developed with the Australian Centre for International Agricultural Research (ACIAR), the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) and NSW Agriculture. The aim of the project is to investigate and document the impact of ICRISAT research on Australian agriculture.

The purpose of this report is not to question whether or not Australia should support ICRISAT. Australia’s support for the international agricultural research centres such as ICRISAT should be based on a number of factors including altruism and a desire for aid payments to be directed to improving the lot of producers and consumers in developing countries. The question of whether Australia receives some spillover benefits from that support is just one consideration, and any gains from spillovers should be seen as a bonus from overseas aid, rather than a rationale for the initial financial support.

The first task in the analysis was to identify the links between ICRISAT and the relevant Australian research programs for each of the mandate crops. The linkages differed for each crop, but there was good collaboration between the Australian programs and their ICRISAT counterparts. There was regular exchange between Australia and ICRISAT, and several Australians work at ICRISAT or have worked there in the past. In addition, a number of ICRISAT researchers have spent time visiting and working in Australia.

A large amount of ICRISAT material either has been used in the past or is being used at  present in Australian breeding programs. In addition, there had been some direct acquisitions and releases in Australia of Indian varieties, often made available via the ICRISAT germplasm exchange distribution system. However, despite these strong linkages, there was little evidence of any direct impact of ICRISAT research on Australian production to date. There appeared to be no varieties or hybrids in any of the crops that were being grown commercially in 1996 based on ICRISAT germplasm, although some of the crops had ICRISAT material with particular desirable characteristics in the advanced lines in the breeding programs.

Therefore, while it is likely that there will be future impacts, as some of these lines are released by breeders and grown by Australian farmers, there has been no direct impact on farms to date. The analysis, then, relied on being able to project future benefits for some of the crops.

While there were relatively strong links with ICRISAT for several of the mandate crops, only in sorghum and chickpeas were there both strong links and a substantial Australian industry to provide the necessary conditions for a significant benefit flowing back to Australia. For example, there had been an especially strong relationship in pigeonpeas, with ICRISAT materials being closely tested in Australia, and with a strong personal connection between the Australian and ICRISAT researchers. However, there is no significant pigeonpea industry in Australia, so that the strong research links were not translated into significant monetary benefits to Australia. On the other hand, for groundnut/peanut, while there is a small but significant industry in Australia, there has been no identifiable impact of ICRISAT material on the Australian program or the varieties being grown. A similar situation applied to millets, as there is minor production of millet in Australia, but no evidence that there had been any direct impact from ICRISAT on the materials being grown.

In addition, a significant part of resource management research at ICRISAT, such as physiological modelling, has relevance to Australia. However, it was not possible in this report to put an economic value on those areas of collaborative research.

As a result, the empirical analysis was restricted to the impact on sorghum and chickpea production. For the other crops, the size of any benefits identified would have been insignificant at this time. It is, of course, possible that in the future there will be some important identifiable impacts for the other mandate crops or from resource management research.

For sorghum, the most significant contribution from ICRISAT to Australian agriculture has been the introduction of improved midge resistance combined with desirable white grain and tan plant colour through material such as ICSV 745 and PM 13654. There are several advanced breeding lines that have the resistance and combination of characteristics incorporated from ICRISAT-derived materials in them. As a result, industry experts expect that hybrids with this resistance will be available to the growers in the near future, and that the resistance of such materials will have a significant economic impact on the sorghum industry. On the basis that such resistance is likely to increase yields by 5% in the 50% of the crop affected by midge each year, the expected gains to Australia in terms of yield are estimated at 2.5%. That translates to a cost reduction of $4.02 per tonne, or an annual cost saving of $4.69 million at recent average production levels.

For chickpeas, the impact of ICRISAT research is likely to be different in Western Australia (WA) from the rest of Australia. As a result, the WA impact is assessed separately in this analysis. In WA, two ICRISAT varieties, Heera and Sona, were released in July 1997. They are seen as having a significant impact on the chickpea industry in WA. They have significant levels of cold tolerance, and are expected to yield an average of 10% higher than alternative varieties that will be available over the next 5 years. At the same time, the area of chickpeas in WA is estimated to double to 100,000ha by 2002. In the other States, there are no such clearly identifiable benefits from the use of ICRISAT’s chickpea materials. However, material either developed from or incorporating ICRISAT background is prevalent throughout the breeding materials currently in use in Australia, and a weighted average of 42% of the breeding materials have ICRISAT background. On the basis of these figures, the future gains from improved chickpea varieties in the other States will have a strong impact from ICRISAT material. It is estimated that ICRISAT will contribute 2.1% of the expected 5.0% yield growth in the five years to 2002. That is equivalent to a cost reduction of $39.18 per tonne for WA and $8.78 per tonne for the rest of Australia, or an annual cost saving of $5.21 million for Australia at the expected production levels.

The economic analysis also assesses the impact on Australia of ICRISAT’s research in the rest of the world, via an impact on prices. To the extent that ICRISAT’s research in the rest of the world has increased production, there will be a downward impact on price. Given finite supply and demand elasticities, any increase in production will mean a decline in price for the traded goods sector. Work at ICRISAT has led to development of estimates of the likely impact in future of ICRISAT’s research. The increases in the world’s production of chickpeas and sorghum are likely to have a downward impact on prices for the predominantly export-oriented sorghum and chickpeas industries in Australia.

On that basis, the Australian industry faced lower prices as a result of ICRISAT’s research, at the same time as they were experiencing yield gains. The economic analysis of those spillover impacts in an economic welfare framework revealed that the overall net effect for Australia was a reduction in benefits gained by producers. Australian sorghum producers will lose more through the lower prices than the benefits they gain from the higher yields, resulting in an overall loss of $0.55 million per year.

For chickpeas, Australian producers will also lose more from the price fall than they will gain from higher yields, with a resultant loss of $0.81 million per year. Overall, sorghum and chickpea producers will lose an average of $1.36 million per year. These losses occur because Australian producers are unable to make use of the productivity gains from ICRISAT research to the same extent as producers in the rest of the world, and hence cost reductions gained by other producers are larger than those gained by Australian producers. It should be noted that Australian producers are enjoying productivity gains from domestic research programs unrelated to ICRISAT that have not been considered in this project. No attempt has been made to assess whether Australian producers are becoming more or less efficient than producers in the rest of the world.

On the other hand, Australian consumers of those grains (that is, primarily the livestock sector) will make significant gains. Sorghum consumers will gain an average of $1.69 million per year, while for chickpeas the gains will average $1.19 million per year.

Overall, the net gain to Australia as a result of the overall research effort at ICRISAT averages $1.28 million per year, or an aggregate of $30.8 million (in 1996 dollars) over the period to 2022 (see Table). Approximately three-quarters of those gains are achieved in the sorghum industry, and one-quarter for chickpeas.

Summary of Benefits to Australia from ICRISAT Research

Crop Aggregate Benefit, 1999-2022a(million) Average Annual Benefit (million)
Sorghum 27.3 1.14
Chickpeas 9.1 0.38
Total 36.4 1.52
a: In 1996 Australian dollars, discounted at 8% per annum.

This study has produced significant findings at two levels. The first level has been the identification of anticipated spillover benefits in terms of cost reduction for producers in two of the ICRISAT mandate crops, namely sorghum and chickpeas. Those cost reductions are expected to result from yield increases attributable to germplasm developed at ICRISAT or collected by passing through ICRISAT and incorporated into genotypes that will be grown in Australia. The second level at which significant findings have emerged for the first time is in the incorporation of the price effects of international agricultural research for these crops. In these two industries, the price effects resulting from successful ICRISAT research were found to be significant. The lower prices for sorghum and chickpeas led to significant income reductions for Australian producers, and these were only partly offset by the increased yields. The gains for the Australian consumers of these grains (that is, the Australian livestock sector) from the lower prices were less than the losses from price effects for Australian producers, because the significance of exports meant that overseas consumers received many of the consumer benefits. Thus producers have incurred losses from the price effects because they have been unable to capture the benefits of ICRISAT research to the same extent as producers in the rest of the world. These findings have some important implications for Australian agriculture:

(a) International Centres such as ICRISAT remain a source of materials for potential yield gains for Australian crops, even those crops grown in systems and environments significantly different from those targeted by the international centres;

(b) Australian producers will be affected by the price implications of the successful research that is undertaken by the international centres such as ICRISAT, whether or not they take
advantage of the possible yield gains spilling over;

(c) Consumers, which for feed grains in developed countries means livestock industries, are likely to be significant benefactors of any research advances in the grains industries;

(d) Australia’s gains from international spillovers are likely to be greatest for those industries where there are significant links between Australian researchers and the researchers and programs being undertaken in the international research centres;

(e) Australian researchers need to maintain their vigilance over international agricultural research developments. Because of the contributions of the international centres, producers throughout the world are becoming more efficient and prices are falling. There is a need for a strong domestic research program, partly to maximise benefits from international spillovers, to ensure that Australian producers achieve gains similar to those of their competitors.

Recognition of these factors can assist in leading to better-informed decision-making for research resources, and is likely to lead to a more efficient and more cooperative research system worldwide. That improved system will deliver expected improvements in the efficiency of production and in the delivery of appropriate food cheaply to the consumers most in need of it.