Economic activity attributable to crop protection products

32 Pages·2017·0.51 MB·English

Economic activity attributable to
crop protection products
CropLife Australia
February 2018
Contents
Glossary i
Executive summary ii
1 Background 1
1.1 Crop protection products 1
1.2 Previous studies 3
2 Economic contribution of CPP 4
2.1 CPP industry linkages and relationships 4
2.2 Industry output 5
2.3 Where are the products used? 6
2.4 Sector economic contribution 7
3 Australian agricultural production attributable to CPP 9
3.1 The ‘island’ factor 9
3.2 The Australian crop mix 11
3.3 Value of CPP to Australian crop production 12
3.4 Results summary 15
4 Conclusion 16
References 17
Appendix A — Gianessi data 19
Appendix B — Economic contribution analysis 20
Limitation of our work 24
General use restriction 24
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Charts
Chart 1.1: Crop protection products in Australia 2
Chart 2.1: CPP industry linkages and relationships 4
Chart 2.2: Major market segmentation, 2015–16 6
Tables
Table 2.1: Sector output by type of product $m, 2015–16 6
Table 2.2 Economic contribution of CPP industry, 2015–16 7
Table 2.3: Indirect contribution of CPP industry, 2015–16 8
Table 3.1: The ‘island’ factor 10
Table 3.2: Crop production, Australia and the USA 11
Table 3.3: CPP contribution to value of field crops (broadacre) 12
Table 3.4: CPP contribution to value of vegetables 13
Table 3.5: CPP contribution to value of fruits and nuts 14
Table 3.6: CPP contribution to value of other crops 14
Table 3.7: CPP contribution to Australian crop production 15
Table A.1: Share of yield attributable to CPP (%) 19
Table B.1: Definitions of economic contribution estimates 20
Figures
Figure B.1 Economic activity accounting framework 21
Glossary
Acronym Full name
ABS Australian Bureau of Statistics
APVMA Australian Pesticides and Veterinary Medicines Authority
CPP Crop protection products, also known as pesticides or agrichemicals, which are applied
in both conventional and organic agricultural systems. Also includes chemicals such as
plant growth regulators.
FTE Full time equivalent
GDP Gross domestic product
GOS Gross operating surplus
USA United States of America
Economic activity attributable to crop protection products i
Executive summary
Deloitte Access Economics has been engaged by CropLife Australia to estimate the contribution of the
crop protection industry to the Australian economy, and the Australian agricultural output attributable to
the use of crop protection products (CPP). This report represents an update to a report released in 2013
by Deloitte Access Economics.
CPP include herbicides, fungicides and insecticides, which are widely used in many sectors of the
economy. For industry — particularly agriculture — it is a means of increasing the productivity of land.
Governments also use CPP to control invasive or non-native species on public land (such as roadsides
and in national parks). They are also widely used by households for backyard gardening and pest control,
in commercial buildings and maritime applications. That noted, this report focuses on the contribution
of the CPP industry to value added in the Australian economy (as an employer and purchaser of inputs
from other industries), and the contribution of CPP use to crop production. The value and importance of
CPP to public land and other environmental land managers has not been addressed in this report.
The approach used in this study is two-fold:
●●First, the direct and indirect economic contribution of the CPP industry to GDP and employment are
estimated.
●●Second, the share of crop production in Australia attributable to CPP is estimated. This utilises previous
work undertaken for the United States, with adjustments made to reflect differences in Australian
production systems.
Economic activity attributable to crop protection products
Chapter 2: Economic Chapter 3: Agricultural
contribution production attributable
of CPP industry to CPP use
Sector output ‘Island’ factor
Direct and indirect Australian crop mix
GDP Agricultural output
Employment
Economic contribution
The Australian CPP sector produced almost $2.9 billion in output in 2015–16, as measured at the factory
gate (APVMA, 2017). This output was associated with an economic contribution of $2.3 billion, which
consists of a direct economic contribution of $1 billion and indirect economic contribution of $1.3 billion
in sectors supplying the CPP industry with intermediate inputs. These direct and indirect contributions
are made up of the sector’s gross operating surplus and wages.
In terms of employment, the CPP sector contributes 9,225 full time equivalent (FTE) employees, which
consists of 1,725 directly in the CPP manufacturing sector and 7,500 in the sectors that supply inputs
to the CPP sector. The primary industries contributing employment include: Professional, Scientific and
Technical Services; Wholesale Trade; and Road Transport.
ii Economic activity attributable to crop protection products
As illustrated in the following diagram, there are many economic linkages between the CPP sector, its
upstream supply sectors, the distributors of CPP, the users of CPP and the downstream sectors that
process the output from the users of CPP.
CPP industry linkages and relationships
Supply sectors CPP manufacturing Transport, storage Users of CPP Processing
and distribution
Products Agricultural sector
Raw materials/
Retail/wholesale
imports
• Crop/broadacre Meat
• Pasture/hay processing/
Transport maDnoumfaecstutirci n g Export • Viticulture abattoirs
• Orchards
• Horticulture
• Turf
Imported Third party • Other agri. Milling
Regulators actives contractors/
spray contractors
Government and
recreation sector
Other agri.
output
Agronomists/
• National and processing
Other inputs expert advice
state parks/
drumMUSTER forestry
ChemClear® • Local
government Exports
Equipment
roadsides,
sporting fields,
golf courses.
Processing, packaging
Sectors that supply and supply of products.
inputs, regulate or Product stewardship Distribution and
provide transport (collect and recycle used services sectors that
services to the CPP containers and safely use and provide advice Activity related to
industry and related collect and dispose of on the application of Sectors that use downstream processing
downstream sectors unwanted chemicals) CPPs and apply CPPs agricultural ouput
Agricultural production attributable to CPP
The total value of Australian crop production attributable to CPP is estimated as the sum of the attributable
value of production for field crops (broadacre), vegetables, fruits and nuts and other crops (mostly forage
crops). The output attributable to CPP is based on current farming practices, and assumes that all other
necessary production inputs (sufficient water, nutrients, etc.) are available. The analysis does not consider
the impact if all CPP suddenly become unavailable, which would necessitate significant changes to farming
practices (and likely involve significant changes in crop mix and land use).
It is estimated that $20.6 billion of Australian agricultural output in 2015–16 was attributable to the use
of CPP, or 73% of the total value of crop production in that year. Over half of this contribution is from
fungicides, reflecting their significant contribution to the value of production of vegetables, fruits and
nuts. This estimate includes the contribution to organic crop production, because chemicals used by
organic producers, derived from naturally occurring substances, are crop protection products produced
by the industry.
The value of crop production attributable to CPP use is different in kind to the contribution that the CPP
industry makes to value added (i.e. its contribution to GDP). However, there is a level of value added
associated with this amount of crop production. For each dollar of agricultural output, the direct plus
indirect value added associated with that dollar is $0.87.1 This means that the $20.6 billion of agricultural
output that can be attributed to CPP use is associated with an economic contribution of $18.0 billion
(consisting of gross operating surplus and wages in the crop production industry and businesses they
purchase inputs from).
1 This is a weighted average based on which input-output product classification category the crop categories used in this fall
into. 23% of crop production is classified as falling within industry 0101 (Sheep, Grains, Beef and DairyCattle) and 77% as
falling with industry 0103 (Other Agriculture).
Economic activity attributable to crop protection products iii
While this study does not consider or compare the private or broader benefits and costs of CPP use,
or estimate the economic impacts that would occur if CPP products became unavailable and farming
practices had to be modified, the results do indicate that CPP use makes a significant contribution to
agricultural production in Australia, which would be greatly reduced if CPP were not to be used.
Economic activity attributable to crop protection products
Chapter 2 Chapter 3
Economic c ontribution Agricultural production
of CPP sector attributable to CPP use

DIRECT INDIRECT

Through CCP Through
manufacturing upstream linkages
$28.2 billion
$1.0 billion $1.3 billion
Total crop production in Australia
value added value added
$2.3 billion value added 73% of total value of crop production
attributable to CPP use
1,725 7,500
$20.6 billion
FTE workers FTE workers
Australian agricultural output
9,225
FTE workers attributable to use of CPP
iv Economic activity attributable to crop protection products
1 Background
Deloitte Access Economics was engaged by CropLife Australia to estimate the contribution of the crop
protection products (CPP) industry to the Australian economy, and the Australian agricultural output
attributable to the use of CPP. This report is an update of a similar piece of work that Deloitte Access
Economics produced for CropLife Australia in 2013.
CPP include herbicides, fungicides and insecticides, which are widely used in many sectors of the
economy. For industry — particularly agriculture — it is a means of increasing the productivity of land.
Governments also use CPP to control invasive or non-native species on public land (such as roadsides
and in national parks). They are also widely used by households for backyard gardening and pest control,
in commercial buildings and maritime applications. That noted, this report focuses on the contribution
of CPP in these agricultural and government uses, excluding use in households, buildings and maritime
applications.
The scope of CPP is broad, and includes chemical products that are naturally occurring as well as
chemicals which are synthetic. That is, the chemicals derived from naturally occurring substances, as
used by the organic agriculture sector, are included as CPP.
This report presents estimates of the CPP industry’s economic contribution and of the share of
agricultural output attributable to the use of CPP. This study is not a cost-benefit analysis and does not
consider or compare the relative magnitudes of costs in relation to the benefits; for example, costs to
the environment and potential health implications of theiruse.
The CPP industry’s economic contribution (the amount of value added involved in the production and
sale of CPP) is a different concept to the amount of agricultural output that is attributable to the use of
CPP. As such, the estimates of each of these (set out in Chapters 2 and 3, respectively) cannot be added
together.
1.1 Crop protection products
Crop protection products include natural and synthetic chemicals used to control insects, diseases
and weeds in food crops and plants. The three main groups that contribute to this part of the chemical
industry are herbicides, fungicides and insecticides, contributing a total of 85% of product sales for the
2015–16 financial year (APVMA, 2017). Crop protection products in varying forms have improved the
efficiency of the agriculture sector for over 150 years (Rhoades, 1963).
In Australia, agricultural chemicals are controlled by the Australian Pesticides and Veterinary Medicines
Authority (APVMA) up until the point of final retail sale. This includes pre-market risk assessment,
approval and registration of products as well as defining the content of labels describing instructions
for safe and responsible use. States and territories control the use of products after this point including
creating and administering rules for access to products, training and licensing of users, as well as any
additional requirements for use such as record keeping or other restrictions.
As more products have been registered in recent years, the value of the CPP sales has continued to
grow, highlighting the agricultural sector’s acceptance of new chemical innovation, as shown in Chart
1.1. In the 2015–16 financial year, almost $2.9 billion was spent on over 8,900 registered crop protection
products.
Economic activity attributable to crop protection products 1
Chart 1.1: Crop protection products in Australia
Source: APVMA, 2017
These products can be classified in to four broad categories:
●●Herbicides — products intended to prevent or reduce the growth of weeds.
These can be either:
–●selective (chemicals which kill weeds specifically without harming crops); or
–●non-selective (chemicals which stop the growth of plants indiscriminately).
●●Insecticides — chemicals which aim to control insects in plants and crops.
●●Fungicides — products whose purpose is to prevent or manage fungal diseases in plants.
●●Other — includes other pesticides (such as miticide, molluscicide, vertebrate poison) as well as
chemical agents (adjuvants and surfactants).
Key reasons for use of CPP include:
●●to decrease and control pests and diseases;
●●to reduce the need for crops and plants to compete with weeds and other invasive plants;
●●to increase the yield of crops or protect biodiversity; and
●●to protect and maintain infrastructure such as buildings and roads through pest or weed control.
For this report, APVMA data on ‘agricultural (pesticides) product sales’ are used as indicative of CPP
industry revenue. This includes all of the major categories of products used in crop production, as well
as some products that may not be used in crop production (for example, ‘household insecticides’, ‘pool
products/algicide’) but these make up a small share of total sales (see Table 2.1). The total value of
agricultural (pesticide) product sales is used in the calculation of the economic contribution of the CPP
industry because of the close links in the production and sale of all of those products, and the fact that
the industry exists, by and large, to service the crop production sector.
2 Economic activity attributable to crop protection products
1.2 Previous studies
Although crop protection products are well established worldwide, there is limited research on their
economic contribution. This section details a few key studies.
The most comprehensive study undertaken to date is Mark Goodwin Consulting’s 2011 report
The Contribution of Crop Protection Products to the United States Economy. The Goodwin study was
commissioned by CropLife America, and it details the value of selected crops which is attributable to
CPP.
The study adopted a three-stage methodology. For each crop identified, Goodwin Consulting:
1 determined the proportion of crop value attributable to herbicides,insecticides and fungicides, using
previous studies published by the Crop Protection Research Institute2;
2 determined the total value of the crop by state; and
3 determined the total economic value attributable to agrochemical use by multiplying (1) and (2).
Aggregating, Goodwin concludes that that the direct contribution of crop protection products to the
US economy is $81.8 billion, with flow-on benefits amounting to $166.5 billion across 20 industries, and
approximately 1 million jobs across the country.
This study was followed by a similar report from, Cultivating a vibrant Canadian economy, published by
CropLife Canada in 2011. This report considered the contributions of crop protection products as well as
plant biotechnology.
After evaluating several potential methodologies, the Canadian report quantifies the contribution of
agrochemicals by comparing yields between conventional and organic crops. It then calculates the value
of crops attributable to crop protection products as the difference in yields multiplied by the price of
crops.
The report concludes that, for the most commonly grown crops in Canada, the value generated by
the increased yields associated with the use of agrochemicals and plant biotechnology is almost
CA$8 billion.3
In Australia, the AECgroup published a report on the Economic Impact of State and Local Government
Expenditure on Weed and Pest Animal Management in Queensland in 2002. The report conducted a
cost benefit analysis of state and local government spending on a set of pest and weed management
initiatives. One of the initiatives examined was the eradication of Siam Weed. The study found that every
$1 spent on this program (including spraying, maintenance and border protection costs) resulted in
between $9.90 and $26.80 of benefit.
A Deloitte Access Economics study from 2013 based on the methodology of the CropLife America
report, adjusted appropriately for the Australian context, estimated that $17.6 billion of Australian crop
production could be attributed to the use of CPP.
This report follows the methodology used in the 2013 Deloitte Access Economics study, which is detailed
further in the following chapters.
2 Gianessi L and Regier N, 2006; Gianessi L and Regier N, 2005; Gianessi, 2009.
3 Including 16 field crops, 29 vegetable crops, 13 fruit crops and potatoes.
Economic activity attributable to crop protection products 3
2 Economic contribution of
CPP
This section outlines the economic contribution the CPP industry. This includes the direct economic
contribution of the CPP industry and the indirect contribution associated with its purchases of
intermediate inputs, as illustrated in Chart 2.1.
2.1 CPP industry linkages and relationships
The supply sectors include the third-party contractors like spray contractors and the agronomists
that service the sector and help to optimise farm practices. It is noted that there are several types
of agronomists. Some are employed by CPP companies (distribution agronomists), hence have their
costs embedded in the retail cost of CPP as employees of chemical resellers. Private agronomists, on
the other hand, independently generate revenue (over and above sales of CPP) through their work as
consultants. These agronomists potentially add tens of million dollars per year, on top of the agronomist
value included in CPP industry revenue, through their other work in areas such as crop nutrition and
marketing. The value that private agronomists generate is not part of the analysis in this chapter.
Chart 2.1: CPP industry linkages and relationships
Supply sectors CPP manufacturing Transport, storage Users of CPP Processing
and distribution
Products Agricultural
Raw materials/
Retail/wholesale sector
imports
• Crop/broadacre Meat
• Pasture/hay processing/
Transport maDnoumfaecstutirci ng Export • Viticulture abattoirs
• Orchards
• Horticulture
• Turf
Third party Milling
Imported • Other agri.
contractors/
Regulators actives
spray contractors
Government and
recreation sector
Other agri.
output
Agronomists/
• National and processing
Other inputs expert advice
drumMUSTER state parks/
ChemClear® forestry
• Local
government Exports
Equipment
roadsides,
sporting fields,
golf courses.
Processing, packaging
Sectors that supply and supply of products.
inputs, regulate or Product stewardship Distribution and
provide transport (collect and recycle used services sectors that
services to the CPP containers and safely use and provide advice Activity related to
industry and related collect and dispose of on the application of Sectors that use downstream processing
downstream sectors unwanted chemicals) CPPs and apply CPPs agricultural ouput
4 Economic activity attributable to crop protection products