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Cherry Annual Investment Plan – 2010/ 2011  

BackgroundThe Cherry industry is primarily situated throughout Southern Australia, and is confined to areaswith cool to cold winters and warm, dry summers with well-drained soils. The Australian cherry

industry is small by world standards, accounting for less than 1% of world production. Australia'scherry industry is spread over five states, with around 2,000 hectares of area under production. InNew South Wales, Young is a key production area supported by the Orange and Bathurst areas.Other significant areas include Victoria; the Dandenong Ranges and Goulburn Valley nearMelbourne, South Australia; the Mount Lofty Ranges and the Riverland area, Tasmania; the Huonand Derwent Valley’s, near Hobart, and Western Australia; in the elevated southwest region.

The main fresh eating cherry varieties in Australia are: Ron’s Seedling, Van, Stella, Bing, Lapinsand Regina. Australian bred varieties Sir Don, Sir Tom and Dame Roma are still being evaluatedand planted throughout the country. The major processing varieties are All Red, Napoleon andFlorence.

Cherries are available from October to February with most of the crop harvested during Decemberand January. Fruit supplies are limited during the early and late parts of the season and availabilityand quality largely determine pricing. Cherry production has a degree of risk; product quality andavailability can be affected by seasonal factors.

 Annual production has varied over past years due to varying climatic conditions and ranges from8,000 to 10,000 tonnes. However, production has been increasing and is anticipated to be inexcess of 13,000 tonnes in the next few years. The growth region for production will mainly be inTasmania in the next few years with a strong focus on export for the Tasmanian crop. In 2005-06the gross value of production from around 1.8 million trees was estimated at $98 million. Virtuallyall production in recent years has been sweet cherries for the fresh market. The processing cherrysector in Australia accounts for around 700 tonnes. The 2009/2010 year the crop yield is around10,300 tonnes with the following tonnage per state:

NSW 3,000TAS 3,000  VIC 2,500SA 1,400WA 400TOTAL 10,300 Tonnes

In the mainland production, approximately 8 to 10% of the cherry crop is exported annually and in

Tasmania 25 to 30% of the cherry crop is exported per annum. The main export markets are inSouth-East Asia. Prior to 2007, the major export destinations were Taiwan, Hong Kong andSingapore. Recent difficulties in maintaining market access to Taiwan from mainland states haveseen a reduction in exports to Taiwan over the last 2 years. However Tasmania has now regainedaccess for the 2009/10 season based on the recognition of its status as ‘Fruit Fly Free’. Otherstates have received recognition of cold disinfestations as an effective export treatment and Australia has now been advised of new access to USA from the mainland states, although effectiveaccess is pending final US Government registration. Other new and expanding markets includeEurope (late season window) and Japan. The increased production forecasted will require asubstantial increase in exports in order to avoid over supply on the domestic market.

The Californian Cherry Association is increasingly exporting and promoting its products in Australia. Fresh cherry imports have been in excess of 1500 tonnes.

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There have been significant plantings over the past decade in New South Wales, Victoria, South Australia and especially Tasmania and Australian cherry production is expected to double over thenext decade. New, superior varieties and the expectation of an expanding export market areamong the reasons for this development. Many of the new plantings have occurred in areas thathave: more reliable water resources from irrigation, lower risk of hail and summer rain, suitable

well drained soils and climatic conditions that will extend the maturity season, either earlier orlater.

The Cherry IAC met in Melbourne on 4th March 2010 to consider recommendations for 2010/11R&D and Marketing funded projects.

The quantum of levy funds available to the Cherry industry has increased over previous years as aresult of an increase in 2007 in the R&D levy from 1 cent/kg to 4 cents/kg. At this time a newmarketing levy of 3cents/kg was also introduced which will allow for the development of anindustry marketing plan that includes domestic and export promotional programs.

  A review of the last levy increase will take place via a “levy road show” driven by the CherryGrowers Association (CGA) during late May/June 2010. The aim of this review is to demonstratethe value of the current 7 cents/kg levy. The CGA will be recommending that the rate of 7 cents tocontinues to be applied.

Previous levy receipts have been based on crop sizes of between 7,000 and 8,600 tonnes.However, with the increased plantings coming into bearing, an increased production of approximately 9000 tonnes is forecast for 2010-11. This is a fairly conservative forecast withestimates of up to 13,000 tonnes possible assuming ideal crop conditions. Drought and frost overlast 2 years has held total crop size down.

Forecast levy receipts are in line with the prior year as follows:R&D $360,000Marketing $270,000

Major Issues and Risk Market access continues to be vitally important to the Cherry industry with the re-establishment of access to Taiwan and market access to China developing. From the recent IAC meetings there is arecommendation to further develop the domestic market. The first step is to commence R & Dprojects aimed at gaining a greater understanding of cherry quality issues and improve retailknowledge through the National retail chains. Without additional export markets for fruit,especially during the peak December – January period, the potentially larger crop size will becomea major marketing issue for the domestic market.

South Australia Research & Development Insitute (SARDI) is looking to cease its Cherry BreedingProgram during 2011. The CGA is looking to continue this program and has entered intodiscussions with SARDI. HAL is working with the various stakeholders in this process to ensurethat the intellectual property ownership is properly managed from the SARDI managed program tothe new management structure.

Strategic PrioritiesListed below are the interim priorities identified as part of the initial review process. The majorfocus for the industry is market access / market development. The domestic market will given ahigher priority for R&D and marketing projects for 2010/2011.

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Market Access 12%

Organisation Structure 16%

Export Market

Development6%

Consumer Research 5%

Communications10%

Industry Analysis 4%

Cherry Industry ‐ Alignment between Industry, HAL & Government Priorit

Productivity + Value

Chain Supply + Markets

NRM

Climate Variability

33

40

2%

6%

Cherry 10/11Annual InvestmentPlan (Levy + VC)

Spend%

National R&DPriorities

HAL AR&D Sp

Market Access

Organisationstructure

Export MarketDevelopment

Consumer Research

Communications

Industry Analysis Biosecurity 2%

Ento/ Pesticides 1%

Environment 2%

Crop Production 42%

Retailer Skills

Development0%

Other 0%

Productivity + Value

Chain Supply + Markets

NRM

Climate Variability

Biosecurity

Innovation Skills

Technology

33

40

2%

6%

4

9%

5%

Cherry 10/11Annual InvestmentPlan (Levy + VC)

Spend%

National R&DPriorities

HAL AR&D Sp

Market Access

Organisationstructure

Export MarketDevelopment

Consumer Research

Environment

Communications

Entomology/Pesticides

Biosecurity

Industry Analysis

Other

Retailer Skills

Crop Production

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Budget - R&D Levy Budget - R&D VC Budget - Marketing Budget - Total

2010- 11 2010- 11 2010- 11 2010- 11

Opening Industry Reserve 1 July 2010 $342,623 $0 $166,021 $508,644

IncomeLevy/ VC receipts $360,000 $298,064 $270,000 $928,064Commonwealth matching grants -levies $392,899 $290,550 $683,450Interest $5,139 $2,490 $7,630

Rolyalties and other Income $0Total Income $758,039 $588,614 $272,490 $1,619,143

Total Program Expenditure $690,068 $511,743 $31,692 $1,233,503

Levy Collection Costs $37,352 $3,139 $40,491HAL Corporate Cost Recovery - Levy $95,730 $69,358 $4,177 $169,265  Across industry Contribution - Levy/vc $10,193 $7,513 $17,7Total Expenditure $833,344 $588,614 $39,008 $1,460,966

($75,305) $0 $233,482 $158,177

$267,318 $0 $399,503 $666,821

Industry Annual Investment Plan 2010- 11 P&L Summary

Cherry

Operating Surplus/(Deficit) for Year ended 3 0

June 2011

Estimated Closing reserves

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   O   b   j  e  c   t   i  v  e

   P  r  o   j  e  c   t

   P  r  o   j  e  c   t   T   i   t   l  e

   L  e  v  y   /   V  o   l  u  n   t  a  r  y   C  o  n   t  r   i   b  u   t   i  o  n

   1   0   /   1   1   $   B  u   d  g

  e   t   E  n   d  o  r  s  e   d

   L   O   P   $   E  n   d  o  r  s  e

   d

   C  r  o  s  s   R   D   C  p  o   t  e  n   t   i  a   l  e  n  g  a  g  e  m  e  n   t

   T  r   i  p   l  e   b  o   t   t  o  m    l   i  n

  e  p  e  r  s  p  e  c   t   i  v  e   *

   A   l   i  g  n  m  e  n   t  w   i   t   h   H   A   L   S   t  r  a   t  e  g   i  c   P   l  a  n

L/ VC $ $ Y/ N

1 CY09005

Facilitating counter season research opportunities for the cherry

industry L/VC $9,170 $45,848 X L H

1 CY09006 Improving cold treatment for disinfesting cherries for QFF L $42,311 $92,311 X L H

1 CY09030 Cherry Export Manual L $4,103 $20,513 X L H

1 CY10015 Market Access Visits L $25,000 $25,000 X L H

1 MT06020

Improving Market Access R and D for the Australian

Horticultural Industries L $19,774 $98,870 X M H

1 MT09021

Improving China Market Access for Australian horticultural

products L $2,500 $2,500 X L H1 MT09081 Southern Hemisphere Export Market Intelligence L $833 $2,500 X L H

1 MT10009

Better understanding native & blue banded bees for pollination

of almond, apple, pear, cherry, vegetables & strawberry L $3,000 $5,738 X M H

1 MT10014 Molecular test for larval pest fruit fly species L $9,600 $36,000 X L H

2 CY10900 Cherry 10/11 Partnership Agreement L $21,015 $20,847 X L H

2 CY10910 Cherry 10/11 Partnership Agreement L $76,276 $91,531 X L H

2 MT07058

Combined Fruit Growers Tasmania and Cherry Growers Australia

Industry Development Officer L/VC $72,000 $360,000 X L H

3 CY08003

Cherrynet - Improving stem retention in sweet cherries to meet

quality specifications  VC $71,000 $195,000 X L H

3 MT10022 Export-Import Market Intelligence L $6,000 $12,000 X L H

4 CY10012

Maintaining market access and improving quality of Australian

cherries L $31,347 $41,797 X M H

4 MT10017

Driving Demand Growth through Understanding Consumer

Purchase Behaviour (Retail Scan & Homescan Analysis) l $67,808 $135,614 X L H

5 CY09000 Improved Communication within the Victorian Cherry Industry  VC $24,710 $40,000 X M H

5 CY09017 41st Annual Cherry Growers of Australia Conference - 2010  VC $10,000 $100,000 X M H

5 CY09032 Fruit Growers Tasmaina Tour L $15,100 X L H

5 CY10009 Marketing your Fruit Growing Business Workshop L $22,350 $22,350 X M H

5 CY10013 Communications and Engagement Project L $25,000 $25,000 X M H

5 CY10800 Cherry Industry Annual Report L $4,371 $4,371 X L H

5 MT10020  AFFCO World Class Workshop 2011  VC $19,000 $19,000 X L H

6 CY08005

 AFFCO well informed cherry and summerfruit supply chain

application  VC $40,899 $138,035 X L H

6 CY10006 Industry project return on investment evaluation L $10,000 $10,000 X L H

7 MT09026

Protecting pollination for the Australian horticultural industry

Stage 2 L $20,000 $80,000 X M H

8 MT07015 Tasmanian Pest Incursion Monitoring L $969 $4,846 X L H

8 MT08036

Ecology and preharvest control of fruit flies for systems

approaches to market access for fruit fly host commodities L $2,220 $5,550 X L H

8 MT09006Improving European earwig management in pome and cherryorchards through the use of pheromones L $13,787 $55,147 X L H

9 CY09012

Investigating and overcoming negative effects of global

warming on cherry dormancy  VC $27,000 $76,000 X L H

10 CY07000

Developing high quality Australian sweet cherries for export and

domestic markets L $64,961 $272,364 X L H

10 CY09002 Improving marketable yield of premium quality cherries L $50,000 $150,000 X L H

10 CY10002 Security for sweet cherry yield and quality L/VC $373,403 $763,742 X L H

10 CY10014 Cherry Breeding Program L $30,000 $30,000 X L H

10 CY10016 Late Maturity work on Sir Don L $10,000 $10,000 X L H

11 CY08019 Supermarket Category Management L $75,000 $75,000 X L H

11 CY09019 Retail Handling Training Package L $20,000 $20,000 X L H

$1,320,506 $3,087,474

Cherry Program for 2010/ 11 - Project and Objective

R&D Total

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2 CY10900 Cherry Partnership Agreement 2009-12 MK Levy $6,335 $6,335

2 CY10910 Cherry Partnership Agreement 2009-12 – Consultation MK Levy $25,357 $25,357

$31,692 $31,692

$116,290 9%

$200,983 15%

$77,000 6%

$99,155 7%

$120,531 9%

$50,899 4%

$20,000 1%$16,976 1%

$27,000 2%

$528,364 39%

$95,000 7%

$0 0%

$1,352,198 100%

P&L total spend differs to program lis ting total spend, due to timing.

Marketing Total

Objective1: Market Access/ Development

Objective2: Organization Structure

Objective3: Export Market Development

Objective4: Consumer Research

Objective 11: Retailer Skills Development

Objective 12: Other

R&D & Marketing 2010/ 11 Total

*Triple bottom line perspective (Environment, Economic & Social/Community)

Objective 5:Communications

Objective 6: Industry Analysis

Objective 7: BiosecurityObjective 8: Entomology/ Pesticides

Objective 9: Environment

Objective 10: Crop Production

H = High addresses all 3

M = Medium addresses 2

L = Low addresses 1