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 again by Pat Guerin. Okay, some of the other structural challenges to the industry. What do you see out there? Pat Guerin 0:21 Our industry has a very, it's a small industry. And there's a large diversity of opinion. So it's quite difficult, quite challenging to get a consolidated view that can be taken to represent the view of the industry objectives like R&D focus points, for example, you go back to your industry to try and understand consensus of direction for something that is quite a small industry, it's a massive task to achieve that next step. That's a challenge. I mean, it flows through into your R&D world, for example, that plant breeding focus range might be from thin stems and green colour, right through to having very high levels of digestibility of fibre. There is a massive range of diversity in how to go about that. There's also quite a range in that follows through the process chain into the end marketplaces, on how different exporters market their products. Jon Paul Driver 1:30 That's one of our great challenges. I'm relatively new to the export world. My family's been exporting timothy since the 80s. But I've only done it the last three years exporting and it boggled my mind that three different exporters would come out and look at the exact same timothy stack, we have tarps, instead of sheds, and we pull the tarps up in the exact same spot and they take a flake from the exact same bale that the previous exporter cut a couple of strings on. And they gave me three different quality grades, and three different price points. That's a bastard system. Pat Guerin 1:30 So it's the same here. It's the same here. But if you think it through, each company has its procurement matrix. So whatever that is, and that varies massively there is there is no single standard in Australia, that controls that, you then parallel that or mirror that over the marketplace demands. The diversity in the marketplace, doesn't mirror the procurement grading matrix. Because there's a lot more diversity in that marketplace. They're never going to be exact matches. Jon Paul Driver 2:41 One of the best experiences that I've had as a hay grower, was having the Japanese buyer come out and look at the stack and take notes, right. And apparently, I'm the first grower to ever stop and ask the Japanese guy writing in Japanese and his English isn't super good. In through a translator, we had a wonderful conversation about what he was actually looking for in the product, and why my dryland timothy was particularly valuable to him. And to your point, he liked my hay, because it had a big, thick, heavy stem. And he has customers that like big, thick, heavy stems, because they process well and in ration mixers. Pat Guerin 3:24 I think similar scenario, it's often said, particularly by the people that have been in the industry for a long time, that it's the customer that's paying the bill that you've got to satisfy. From a commercial perspective, I understand that. I think our priority in R&D is changing its focus from that, to actually making sure that we are also equally or more deliberately focusing on the animal performance contribution value. Jon Paul Driver 3:54 I'm taking notes. Pat Guerin 3:56 I think about some of the ironies that you come across is typically in our industry, you would say physically, that you're looking for a thin stem, generally speaking, yes. So we are looking for and we ask our breeders to breed for a thin stem. So what does that mean ends up happening? Exactly like your alfalfa, the stem structure has to end up with more indigestible components in it so that it continues to stand erect. Jon Paul Driver 4:27 Yeah, you have to have woodier structures to prevent lodging, while at the same time, it's like wood versus steel, it has to get tougher and stronger as it gets smaller. Pat Guerin 4:40 So there's a conundrum going on. We're breeding for thinner stems. But the animal performance bit says that that's in the wrong direction, because we were increasing the indigestible component of it to prevent lodging. Absolutely. Whereas go back the other direction and say so, today for example, focus point, let's have a look at the stem wall thickness. Because in that stem wall thickness, we can get structure that doesn't need the lignin there. Jon Paul Driver 5:11 A different way to accomplish the same thing. But does that address the consumer, the end users? You're going to say yes, you're going to say that reducing the lignin answers the animal performance question. But what about the people that are used to buying thin stems instead of thick stems, there's an education component. Pat Guerin 5:31 Absolutely, the RD&E so the E bit has to include the end audience as well. So research, development, and education. Matter of fact, sometimes people like to emphasise that by saying that it's double E. RDⅇ education and extension. Jon Paul Driver 5:53 That may very well I'll make it into my talking points. Pat Guerin 5:57 I mean, I've done collaborative presentations over in countries like China and excetera, very particularly in the early days with the China market with the US Grains Council. Whilst in some perspective, you might think that there's competition for supply there from the different countries, the reality is that we're both trying to improve... contribute to the improvement of the animal productivity. Jon Paul Driver 6:25 That allows them to build out their industry, grow their industry and increase the size of the pie that everybody's trying to divvy up. And focus on the size of the pie instead of the size of the slices to start with. Pat Guerin 6:38 I like your description. Jon Paul Driver 6:40 It's only in the maturity of the market, that you have to fight over the size of the slice. When the pie is still growing, everybody wins. Pat Guerin 6:47 There's a long way to go. And of course, with the diversity of the marketplaces, the strategy there for the individual markets is going to be very different. Jon Paul Driver 6:57 Oh, absolutely. Pat Guerin 6:58 I mean, some, some markets are regulated, the supply and demand elasticity is going to be very different to other markets. Jon Paul Driver 7:05 I just heard you say an economic term, do you have a background in economics? Not everybody throws around elasticities and fewer people actually know what they mean. Your example is maybe Korea where they have import limits. Sure. They have a quota structure, tiered tariff structure. I'm not exactly sure what it is, but it's something along those lines, that supports their rice growers, right. Pat Guerin 7:32 I think an investment for the future where we're going with the Australian Export fodder at present is health and wellbeing it's concepts like understanding the chemical residues in the product, the potential for mycotoxins in the product, presence of heavy metals, all in any of them are not indicators that Australia has significant issues in any of those areas, rather, giving the process chain confidence that products will contribute benefit to their health and well being. Jon Paul Driver 8:07 I love that the exporters in Australia, call it alfalfa. And Tim beats me over the head with lucerne all the time, and how I learned it in Germany, so I say it wrong. But in the alfalfa world, as we're talking about regenerative agriculture, and call it carbon smart farming, alfalfa is pretty favourable. In that world. It's a perennial crop so we're not doing annual tillage, we're maintaining soil structure, we have a deep root that's translocating carbon from the air down into the root structure. And we have a wonderful, wonderful story in the alfalfa world now acknowledging that I'm a timothy guy, and I have a plough and a disk, and I do all the bad things in the world. We have great stories that we can tell around our forage and I think there's opportunity to do that better. And I'm just guessing on your end that you have similar discussion topics. Pat Guerin 9:02 I think we're just starting that process. It's a long journey to go. It's certainly on the radar screen. I mean, one of the existing AgriFutures backed projects is about carbon footprinting and developing for the industry so that for the export fodder industry a model that we should be using, rather than let individuals in the industry go off and end up with a diversity of different models. Jon Paul Driver 9:28 Because that always works. We've talked through quite a few challenges. You've mentioned the focus on the animal performance, because that's the end use for the product you get you have to have the animal performance. Are there any other opportunities that we didn't talk about whether it's machinery, cultural practices? Pat Guerin 9:50 One of the largest contributors to lower gross margin for existing hay growers in Australia is weather damaged product and so any investment into that catchment, I think is a potential positive contributor. In our world, super conditioning has proven to be very beneficial. It reduces the distance that moisture inside the plant needs to move... travel to get out. So that bit has worked well. Jon Paul Driver 10:22 But we still talking about like a Massey double conditioner... Pat Guerin 10:26 And in our marketplace, grower, that would probably be the premium product a lot of growers have, your Massey. Jon Paul Driver 10:33 Twin Max with a double conditioner, yeah, razor bar. Pat Guerin 10:36 So the outcome of that is the windrow typically sits on the ground for six days, maybe 10 days, you know, that type of thing... still relies heavily on a temperature and humidity differential between the inside and external of the plant, there's a risk time there that we can continue to focus on as to how we can improve contribution value there. Jon Paul Driver 11:01 The way that I think about it, as I'm doing my budgets for the year, on my timothy, I actually go through and do a weighted average price. And I might say if, if I'm expecting a five tonne yield, I'm going to value two of those tonnes at a rained on price, and three of those tonnes at a high quality price. And that's how I come to my revenue projections. Is I factor in a loss right from the start. In my neck of the woods. The odds of having that timothy rained on are about two in five. Pat Guerin 11:38 I think of it as and it depends where you are in the catchment of course, but long term average, I think is about 10 or 15% weather damage that's got a fair range in it, but obvious weather damage to excessive you know, it's that's the opportunity. I think that if that disappeared, because we eliminated total weather damage, and 15% of grower returns are going to be significantly improved. One of the challenges, of course, is that it can be the total crop of the year. So an individual farmer might get negligible contribution one year cash flows mightn't be able to handle that type of diversity. Jon Paul Driver 12:16 Yeah, anything that you can do to shorten that dry down period is certainly beneficial. And you're thinking some more mechanical processing, like hay conditioners make a difference. The one thing that surprised me that I didn't see you're probably familiar with the Hay Bob style tedders. We use those a lot in timothy to mix and blend colours, but also to promote that airflow through a tall skinny windrow. And I just didn't I just don't see any of that. And I didn't see any of those machines in Australia. Pat Guerin 12:48 There's little bits of that developing, but the negative bit on that, so that you know I talked about the conundrum of thin stem versus animal contribution value. Well, similar in this circumstance, we're looking at the tedder rake can hasten the drying process, but it also increases the risk of losing colour. So that's the conundrum that that's been the reason that people haven't been more receptive to using teddering. I think as we refocus on animal performance based contribution value, that you'll see more inclination to use tedders and we're seeing that today. Jon Paul Driver 13:33 Now, I do want to draw the distinction between the tedders that spread the crop out across the ground, that do contribute to sun bleaching. Those are very common in the east coast of the US where the sun is dry and the ground is wet, and the air is wet. So they're trying to take advantage of the sun to expose and dry as much as humanly possible as fast as possible. Or in the West. The sun is dry, the air is dry, the ground is wet. So we and our timothy fields, we try to stand those windrows up and do tall, skinny windrows to promote airflow through the windrows. So our tedders don't spread the hay out. They just fluff the windrows up, promote that airflow through the windrows. I hope I left some of those seeds of ideas with growers as I toured around Southern New South Wales and Victoria and South Australia. Pat Guerin 14:28 Look, I think you're talking about an opportunity that I'm sure that we will explore. Jon Paul Driver 14:33 Pat, thank you again for being on the podcast. It's wonderful to have you back. Cheers.