CHAIRMAN’S REPORT

This will be the last report from a Grower elected chairman of the Rice Marketing Board. As of the 1st January 2010 the Act requires that the Chairman of the RMB will come from the ranks of Independent Members of the Board. This change has been made to improve the governance of RMB, a position that the NSW government has been actively pursuing amongst its advisory and marketing boards.The other significant change at Board level this year has been the inclusion of an extra two Ministerial appointed Members. Nick Papallo is a Solicitor, notary public, Chair of the Minerals Ministerial Council and a member of the NSW Clean Coal Council. The other new Board member is Doug Hocking who joins the board following a distinguished career in the Executive of NSW DPI. Both these men have added skills, experience and expertise to the Board. For my part I have enjoyed my time as Chairman of the Board and I believe that decisions taken by the board during this period have reflected well for the industry as a whole.Some of the highlights of my time as chairman include,

• The successful negotiation of the extension of vesting, following the 2004 National Competition Council review of the Marketing of Primary Products Act, until January 2009.
• The further extension of vesting until 31st January 2012.
• The construction and commissioning of the 32,000 tonne shed 17 at Deniliquin. The last shed to be built by RMB.
• The Successful transition into a de regulated domestic rice market with the appointment of 4 domestic licence holders
• The appointment of the successful Sole and Exclusive Export Licence Holder. (Sunrice).
  • I would like at this point to commend the Sunrice Board and its Management on the exemplary way that they have conducted themselves as the holder of the Sole and Exclusive Export Licence.
  • Sunrice has managed a period of little to no rice production in Australia and yet with great foresight and courage, they have been able to defend their markets around the world.
  • It is unprecedented in Australian corporate history that a company that has had its supply of raw product cut by effectively 100%, to not only survive but to go on and post record profits.
  • SunRices continued success will ensure that when domestic production returns to normal Australian producers will still own their industry and their markets. A situation that they are very proud of. 

• The Sale of approximately $124 million of RMB sheds to AGS, at the request of the Rice Growers Association of Australia.
  • This sale ensured that growers remained the owners of the storage facilities that they had financed the construction of.
• The reduction in RMB debt from $124 million to effectively zero today.
• The repayment of $73 million of Grower Equity certificates from $110 Million in 2003 to $37 million in 2009.

Election

This year was an election year for the Grower members of the Board and as such I would like to make mention of the huge contribution that both Gerry Lawson and Gillian Kirkup have made to the Board. Gerry has been a Board member since 1985, in his time he has been chairman of the RMB and involved in a generation of success, challenge and change within the rice industry. Gerry is currently chairman of Sunrice and even though the NSW industry is in drought Sunrice has recently posted a record net profit of $76.8 million and a record group consolidated revenue of $902 million. Gillian Joined the Board at the 2005 election and has made a good contribution to the board especially in the area of corporate governance. I can report that only the required number of nominations was received by the NSW Electoral Commission for this election.  The nominations came from the three current Grower Members, therefore the Returning Officer declared the three nominees elected unopposed.Congratulation Gerry and Gillian and of course myself.

NSW Rice production

Production was once again severely impacted by the drought with only 65,232 tonnes produced. This is a far cry from the 1.7 million tonne crop in 2001 and even the drought impacted 5 year average for the period 2003 to 2008 of 412,000 tonnes. Let’s hope that the communities of the Riverina do not have to wait much longer for a return to some normal production. This year saw for the first time commercial rice production in the Lismore area of North Eastern NSW. Establishment of the crop was good and even after a dry period in January the crops had matured well, it was anticipated that a harvest of approximately 2500 tonnes was possible. Unfortunately just prior to harvest there was record breaking rain and floods in this area and the majority of the crop was downgraded to feed. None the less 403 tonnes of paddy was delivered as milling grade or seed. Despite the setbacks growers in this area have indicated a willingness to produce a crop again for the 2010 harvest. RMB has received requests from a further two potential Authorised Buyers from this area. This is evidence that the fledgling industry in the North is gaining momentum.

Equity

Equity payments from the crop year 1998 totalling $9.6 million were paid in the year ended 30th June 2009. I am certain that the payment was well received by growers at that time as it appeared unlikely that there would be sufficient water for a significant crop at the 2009 harvest. This Chairman’s report is for the year ended 30th June 2009 and as such does not account for the Equity conversion that took place in July 2009. However as the financial year end and conversion took place almost simultaneously I think it is appropriate for some comment on the conversion to be made. In March 2009 Sunrice approached the board to ask whether it was possible to amend the rules of the Capital Equity Rollover Scheme in order that Equity certificate holders could redeem their equity early and whether that early redemption could be applied to purchase Sunrice B class shares. The Board was happy to facilitate this request provided All Equity certificate holders would be treated equitably and on the grounds that the Equity holders and the purchasers of Sunrice shares were predominantly one and the same.  Approximately 33% of equity holders took up the offer, representing 40% of total equity or $30,922,000.I believe that this level of conversion indicates a desire by growers to continue to ad capital to the industry, to the best of their ability, in this time of drought.

Crop

This year’s crop of 65,232 tonnes was an improvement on last years 19,297 tonnes. The forecast crop size of at the 2010 harvest of around 175,000 will give rice growers and their communities a much needed boost. Let’s hope that this increase in production is a herald for the return to future crop sizes in the order of 1 million tonnes. Hectares sown for the 2010 harvested have increased from 2,160 ha to 7,948 ha.It was pleasing to see DEWHA bring water allocation announcements forward in September to allow growers time to plant rice.  This action was surely recognition by David Harris and the Department that water and its use for production is vital to the farmers and communities in which we live.The three irrigation companies, namely, Murrumbidgee irrigation, Coleambally irrigation and Murray irrigation are to be commended for managing scarce water allocations in order to deliver the maximum quantity of mega litres through the wheel or flume or whatever method they are using. The increased allocation was a result of increased inflows throughout the year, lets hope it is a sign the drought is breaking and the rainfall events continue and increase so rice growers can get back to doing what they do best, growing rice.

Financial Report to 30 June 2008

I am pleased to announce that at year end RMB had a small surplus of $9,000. The board receives the majority of its income from Licence fees and it is very conscious of the need to keep its costs as low as possible. The Income from Authorised Buyers for the Financial Year ended 30 June 2009 (which included both fixed and variable fees) was $442,000 of which $200,000 is the Sole & Exclusive Export Licence.The total RMB expenses for the year ended 30 June 2009 were $359,000.Therefore the Board recovered this year’s expenses and last year’s under recovery of $74,000, reporting a small profit of $9,000 for the financial year 2008/2009.Cash on Hand at 30 June 2009 was $1.5m.

Drought

Rice seems to be the only broad acre irrigation sector that is suffering solely from the drought. I don’t want to be insensitive; of course there is no doubt that the drought is making life incredibly difficult for individual businesses in these other industry sectors. However Australia’s other major irrigated industries grapes, dairy, coarse grains, and cereals are all suffering more from lack of demand than lack of water.There is currently a World shortage of Medium Grain rice and record prices in the market place. Unfortunately with so little water to allocate the Australian rice grower is unable to produce a crop to help alleviate this world shortage. Rice is the base carbohydrate for the majority of people on the planet and demand for its production is increasing. It is imperative therefore that water be available for production of this the most basic foodstuff at a higher level of priority than it has been in the past. It is difficult to sustain any argument that allocates water for the production of produce that has an oversupplied market.The other unknown is what allocations will look like post drought and following the current focus on water buy backs by the Government. As the Water 4 Food movement is advocating the long term impacts of reducing water for food production need to be well understood by Government as the world population increases. Australia will likely have to produce more food in the future, a difficult task if resources such as water are removed from the production system.

Appreciation

Before I close I would like to thank my Board for the privilege that they have afforded me by supporting me as their chairman. My sincere thanks go to my Deputy Chairman, Robyn Clubb, for her support and contribution in all aspects of Board activity, and to my fellow Board Members for their dedication and commitment. The support of the Minister for State Development the Hon. Ian Macdonald MP, and his staff, State Members Tony Catanzariti MLC, Adrian Piccoli MP, John Williams MLA together with Federal Members Kay Hull MP and Sussan Ley MLC has been greatly appreciated. Thank you also to Dr Richard Sheldrake (Director General) and the rest of the team at NSW DPI who continually provide support for RMB.I would also like to commend Les Gordon as President, the Central Executive and the Staff of the Rice Growers Association of Australia for their tireless work for rice growers and their communities.In conclusion I would like to thank all growers for their support of the industry and for their overwhelming demonstration of unity and encouragement. Finally I would like to thank my wife Louise and my three sons Duncan, Alex and Oliver, all of whom have sacrificed some of their time and aspirations in order that I could indulge mine.NG Graham (Chairman)