Cherry Annual Investment Plan 2010/2011 Background The Cherry industry is primarily situated throughout Southern Australia, and

d is confined to areas with 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's cherry industry is spread over five states, with around 2,000 hectares of area under production. In New 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 near Melbourne, South Australia; the Mount Lofty Ranges and the Riverland area, Tasmania; the Huon and Derwent Valleys, near Hobart, and Western Australia; in the elevated southwest region. The main fresh eating cherry varieties in Australia are: Rons Seedling, Van, Stella, Bing, Lapins and Regina. Australian bred varieties Sir Don, Sir Tom and Dame Roma are still being evaluated and planted throughout the country. The major processing varieties are All Red, Napoleon and Florence. Cherries are available from October to February with most of the crop harvested during December and January. Fruit supplies are limited during the early and late parts of the season and availability and quality largely determine pricing. Cherry production has a degree of risk; product quality and availability can be affected by seasonal factors. Annual production has varied over past years due to varying climatic conditions and ranges from 8,000 to 10,000 tonnes. However, production has been increasing and is anticipated to be in excess of 13,000 tonnes in the next few years. The growth region for production will mainly be in Tasmania in the next few years with a strong focus on export for the Tasmanian crop. In 2005-06 the gross value of production from around 1.8 million trees was estimated at $98 million. Virtually all production in recent years has been sweet cherries for the fresh market. The processing cherry sector in Australia accounts for around 700 tonnes. The 2009/2010 year the crop yield is around 10,300 tonnes with the following tonnage per state: NSW 3,000 TAS 3,000 VIC 2,500 SA 1,400 WA 400 TOTAL 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 in South-East Asia. Prior to 2007, the major export destinations were Taiwan, Hong Kong and Singapore. Recent difficulties in maintaining market access to Taiwan from mainland states have seen a reduction in exports to Taiwan over the last 2 years. However Tasmania has now regained access for the 2009/10 season based on the recognition of its status as Fruit Fly Free. Other states 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 effective access is pending final US Government registration. Other new and expanding markets include Europe (late season window) and Japan. The increased production forecasted will require a substantial 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.

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 the next decade. New, superior varieties and the expectation of an expanding export market are among the reasons for this development. Many of the new plantings have occurred in areas that have: 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 or later. The Cherry IAC met in Melbourne on 4th March 2010 to consider recommendations for 2010/11 R&D and Marketing funded projects. The quantum of levy funds available to the Cherry industry has increased over previous years as a result of an increase in 2007 in the R&D levy from 1 cent/kg to 4 cents/kg. At this time a new marketing levy of 3cents/kg was also introduced which will allow for the development of an industry 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 Cherry Growers Association (CGA) during late May/June 2010. The aim of this review is to demonstrate the value of the current 7 cents/kg levy. The CGA will be recommending that the rate of 7 cents to continues 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 with estimates of up to 13,000 tonnes possible assuming ideal crop conditions. Drought and frost over last 2 years has held total crop size down. Forecast levy receipts are in line with the prior year as follows: R&D $360,000 Marketing $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 a recommendation to further develop the domestic market. The first step is to commence R & D projects aimed at gaining a greater understanding of cherry quality issues and improve retail knowledge through the National retail chains. Without additional export markets for fruit, especially during the peak December January period, the potentially larger crop size will become a major marketing issue for the domestic market. South Australia Research & Development Insitute (SARDI) is looking to cease its Cherry Breeding Program during 2011. The CGA is looking to continue this program and has entered into discussions with SARDI. HAL is working with the various stakeholders in this process to ensure that the intellectual property ownership is properly managed from the SARDI managed program to the new management structure. Strategic Priorities Listed below are the interim priorities identified as part of the initial review process. The major focus for the industry is market access / market development. The domestic market will given a higher priority for R&D and marketing projects for 2010/2011.

ID Code 1

Research Area Market Access/ Market Development Organization Structure Export Market Development Consumer Research Communications

Industry Objective/ Strategy Implement processes to open new export markets for Australian Cherries Develop effective industry organization structure and resources Develop a coordinated export market development program Conduct consumer research to use in development of Cherry marketing plan Develop a communications plan for Cherry industry Collect & collate relevant cherry industry market and production information within Australia and overseas Implement the components of the Cherry Industry Biosecurity Plan Implement most appropriate integrated pest & disease management (IPDM) practices Identify and communicate best practice production techniques (including integrated fruit production to enhance industry sustainability Identify and/ or develop growing systems, management practices, varieties and rootstocks that will produce fruit to meet consumer and industry needs Develop and implement strategies to inform/ train retailers in the varieties, handling, storage etc. of cherries

Description Removal of quarantine barriers Export market development Adequate industry management & resources Identify export market opportunities Develop coordinated export programs New Cherry industry marketing plan developed Breeding program priorities reviewed Coordinated communication of all relevant information to all industry sectors Provide a basis for industry planning and business decision making Industry preparedness for potential biosecurity incursions/management Minimize crop damage Market access / export market consumer requirements Communicate environmental stewardship to enhance industry environmental responsibility maximize productivity to ensure industry competitiveness in existing and new market opportunities Higher quality cherries presented to consumers Increased promotional opportunities

2 3

Industry Analysis

7 8

Biosecurity Entomology/ Pesticides Environment

10

Crop Production

11

Retailer Skills Development

CherryIndustryAlignmentbetweenIndustry,HAL&GovernmentPriorities

Market Access Organisation structure Export Market Development

Cherry 10/11 Annual Investment Plan (Levy + VC)

Spend %

National R&D Priorities

HAL Annual R&D Spend %

HAL Strategic Plan Four Investment Programs

Productivity + Value Market Access

12%

33%

Organisation Structure Export Market Development

16%

Chain Supply + Markets

6%

40%

DeliverNew Knowledge

Consumer Research
Consumer Research
5%

NRM

2%

Communications

10%

Communications
Industry Analysis
4%

Build ConsumerDemand Climate Variability 6%

Industry Analysis

Biosecurity Ento/ Pesticides

2%

1%

Biosecurity

4%

Biosecurity
Environment
2%

Enhance Industry Skills

Entomology/ Pesticides

Innovation Skills Crop Production Retailer Skills Development Other

42%

9%

Environment Crop Production

0%

DeliverOperational Excellence Technology 5%

0%

Retailer Skills

Other

Industry Annual Investment Plan 2010- 11 P&L Summary Cherry

Opening Industry Reserve 1 July 2010 Income Levy/ VC receipts Commonwealth matching grants -levies Interest Rolyalties and other Income Total Income Total Program Expenditure Levy Collection Costs HAL Corporate Cost Recovery - Levy Across industry Contribution - Levy/vc Total Expenditure Operating Surplus/(Deficit) for Year ended 30 June 2011 Estimated Closing reserves
Budget - R&D Levy 2010- 11 Budget - R&D VC 2010- 11 Budget - Marketing 2010- 11 Budget - Total 2010- 11

$342,623 $360,000 $392,899 $5,139 $758,039 $690,068 $37,352 $95,730 $10,193 $833,344 ($75,305) $267,318

$0 $298,064 $290,550 $588,614 $511,743 $69,358 $7,513 $588,614 $0 $0

$166,021 $270,000 $2,490 $272,490 $31,692 $3,139 $4,177 $39,008 $233,482 $399,503

$508,644 $928,064 $683,450 $7,630 $0 $1,619,143 $1,233,503 $40,491 $169,265 $17,707 $1,460,966 $158,177 $666,821

Cherry Program for 2010/11 - Project and Objective

Alignment with HAL Strategic Plan
H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H H

Cross RDC potential engagement Y/N X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X

L/VC 1 1 1 1 CY09005 CY09006 CY09030 CY10015 Facilitating counter season research opportunities for the cherry industry Improving cold treatment for disinfesting cherries for QFF Cherry Export Manual Market Access Visits Improving Market Access R and D for the Australian Horticultural Industries Improving China Market Access for Australian horticultural products Southern Hemisphere Export Market Intelligence Better understanding native & blue banded bees for pollination of almond, apple, pear, cherry, vegetables & strawberry Molecular test for larval pest fruit fly species Cherry 10/11 Partnership Agreement Cherry 10/11 Partnership Agreement Combined Fruit Growers Tasmania and Cherry Growers Australia Industry Development Officer Cherrynet - Improving stem retention in sweet cherries to meet quality specifications Export-Import Market Intelligence Maintaining market access and improving quality of Australian cherries Driving Demand Growth through Understanding Consumer Purchase Behaviour (Retail Scan & Homescan Analysis) Improved Communication within the Victorian Cherry Industry 41st Annual Cherry Growers of Australia Conference - 2010 Fruit Growers Tasmaina Tour Marketing your Fruit Growing Business Workshop Communications and Engagement Project Cherry Industry Annual Report AFFCO World Class Workshop 2011 AFFCO well informed cherry and summerfruit supply chain application Industry project return on investment evaluation Protecting pollination for the Australian horticultural industry Stage 2 Tasmanian Pest Incursion Monitoring Ecology and preharvest control of fruit flies for systems approaches to market access for fruit fly host commodities Improving European earwig management in pome and cherry orchards through the use of pheromones Investigating and overcoming negative effects of global warming on cherry dormancy Developing high quality Australian sweet cherries for export and domestic markets Improving marketable yield of premium quality cherries Security for sweet cherry yield and quality Cherry Breeding Program Late Maturity work on Sir Don Supermarket Category Management Retail Handling Training Package L/VC L L L L L L L L L L L/VC VC L L l VC VC L L L L VC VC L L L L L VC L L L/VC L L L L

$ $9,170 $42,311 $4,103 $25,000 $19,774 $2,500 $833 $3,000 $9,600 $21,015 $76,276 $72,000 $71,000 $6,000 $31,347 $67,808 $24,710 $10,000 $15,100 $22,350 $25,000 $4,371 $19,000 $40,899 $10,000 $20,000 $969 $2,220 $13,787 $27,000

$ $45,848 $92,311 $20,513 $25,000 $98,870 $2,500 $2,500 $5,738 $36,000 $20,847 $91,531 $360,000 $195,000 $12,000 $41,797 $135,614 $40,000 $100,000 $22,350 $25,000 $4,371 $19,000 $138,035 $10,000 $80,000 $4,846 $5,550 $55,147 $76,000

1 MT06020 1 MT09021 1 MT09081 1 1 2 2 MT10009 MT10014 CY10900 CY10910

2 MT07058 3 CY08003 3 MT10022 4 CY10012 4 5 5 5 5 5 5 5 MT10017 CY09000 CY09017 CY09032 CY10009 CY10013 CY10800 MT10020

6 CY08005 6 CY10006 7 MT09026 8 MT07015 8 MT08036 8 MT09006 9 CY09012 10 CY07000 10 CY09002 10 CY10002 10 CY10014 10 CY10016 11 CY08019 11 CY09019 R&D Total

$64,961 $272,364 $50,000 $150,000 $373,403 $763,742 $30,000 $30,000 $10,000 $10,000 $75,000 $75,000 $20,000 $20,000 $1,320,506 $3,087,474

Triple bottom line perspective* L L L L M L L M L L L L L L M L M M L M M L L L L M L L L L L L L L L L L

Levy/Voluntary Contribution

10/11 $ Budget Endorsed

LOP $ Endorsed

Project Title

Objective

Project

CY10900 Cherry Partnership Agreement 2009-12 CY10910 Cherry Partnership Agreement 2009-12 Consultation Marketing Total
2 2

MK Levy MK Levy

$6,335 $25,357 $31,692

$6,335 $25,357 $31,692

Objective1: Market Access/ Development Objective2: Organization Structure Objective3: Export Market Development Objective4: Consumer Research Objective 5:Communications Objective 6: Industry Analysis Objective 7: Biosecurity Objective 8: Entomology/ Pesticides Objective 9: Environment Objective 10: Crop Production Objective 11: Retailer Skills Development Objective 12: Other R&D & Marketing 2010/11 Total *Triple bottom line perspective (Environment, Economic & Social/Community) H = High addresses all 3 M = Medium addresses 2 L = Low addresses 1
P&L total spend differs to program listing total spend, due to timing.

$116,290 $200,983 $77,000 $99,155 $120,531 $50,899 $20,000 $16,976 $27,000 $528,364 $95,000 $0 $1,352,198

9% 15% 6% 7% 9% 4% 1% 1% 2% 39% 7% 0% 100%