final report Project code: L. GEN. 1709 Prepared by: Russell Barnett Australian Venture Consultants Pty Ltd Date published: August 2017 PUBLISHED BY Meat and Livestock Australia Limited PO Box 1961 NORTH SYDNEY NSW 2059 Development of a New/Revised Commercialisation Strategy and Delivery Plan for BREEDPLAN Meat & Livestock Australia acknowledges the matching funds provided by the Australian Government to support the research and development detailed in this publication. This publication is published by Meat & Livestock Australia Limited ABN 39 081 678 364 (MLA). Care is taken to ensure the accuracy of the information contained in this publication. However MLA cannot accept responsibility for the accuracy or completeness of the information or opinions contained in the publication. You should make your own enquiries before making decisions concerning your interests. Reproduction in whole or in part of this publication is prohibited without prior written consent of MLA. L. GEN. 1709– Development of a New/Revised Commercialisation Strategy and Delivery Plan for BREEDPLAN Abstract The value chain that delivers BREEDPLAN products and services to Australian beef cattle seed-stock and commercial producers has been operating for over three decades. This value chain has achieved reasonably high levels of market penetration, particularly in some of the major breeds. However, in recent years, key stakeholders in BREEDPLAN have raised concerns that penetration of BREEDPLAN across the industry is plateauing or even declining in some key breeds, is not being used with adequate rigour by many users, is becoming increasingly expensive, service quality is decreasing and new product innovation is too slow. The net result of this being that a less than optimal rate of genetic gain is being achieved across the Australian beef cattle production sector. While these concerns are by no means held universally, they are considered to be of adequate importance for the owners of the core BREEDPLAN intellectual property to instigate a review of the framework though which that intellectual property has been commercialised and the value chain that delivers BREEDPLAN to market. This review has considered previous reviews and market research pertaining to BREEDPLAN and the markets it serves, market penetration data and data pertaining to BREEDPLAN usage at an individual breed sector level, various perceptions toward aspects of BREEDPLAN that are held by different stakeholders, the alignment of participants in the BREEDPLAN value chain, and has modelled the economics of the BREEDPLAN value chain. This review recommends the adoption of a more strategic approach to managing the existing BREEDPLAN value chain based on a series of collaborative initiatives designed to re-invigorate the BREEDPLAN value chain, ensuring that optimal rates of market penetration of BREEDPLAN are achieved and that it is used by the industry such that the rate of genetic gain across commercially important traits is maximised. Page 2 of 194 L. GEN. 1709– Development of a New/Revised Commercialisation Strategy and Delivery Plan for BREEDPLAN Executive summary Background The beef cattle industry is a very important component of the wider Australian agricultural industry. Approximately 60 percent of all Australian farming enterprises run some cattle and in 2015-16 the gross value of Australian cattle and calf production was $14.3 billion, accounting for approximately 50 percent of the total value of Australian livestock industries. The Australian cattle herd can be broadly segmented according to a northern (or tropical) sector that is based primarily on a range of tropical breeds and composites, and a southern sector which is based primarily on British and European breeds, with the national herd split approximately equally across these sectors. The shift in consumer diets in emerging economies toward animal produce is expected to drive growth in demand for Australian beef from regional emerging economies, particularly the People’s Republic of China (PRC) for the foreseeable future. The Australian beef industry’s ability to remain competitive in these markets is entirely a function of continued productivity improvement in the form of decreased operating costs and improved product quality attributes that are valued by customers. The average cost of production in the Australian beef industry is lower than that of European and Asian producers, comparable to CIS and African producers, but significantly higher than North, Central and South American producers. The Australian beef industry’s major cost disadvantage is labour, which accounts for approximately twice the portion of total beef production costs as the global average. Labour costs are unlikely to substantially decline in Australia. Therefore, productivity gains must be achieved through other means such that the beef industry’s multifactor productivity outweighs, or at least mitigates, any productivity penalty associated with Australia’s high labour costs. To this end, industry has made a number of investments, primarily through MLA, in initiatives designed to improve productivity, product quality and supply chain effectiveness, as well as to promote Australian beef in key global markets. Among these initiatives is BREEDPLAN, a beef cattle genetics database, quantitative genetics model and on-farm decision support tool that has and continues to make a significant contribution to informing and de-risking breeding decisions made by seed-stock and commercial producers in the Australian beef cattle industry Purpose of this review BREEDPLAN has been available to the Australian beef cattle industry for over three decades. It is widely used and has made a significant contribution to genetic improvement across the Australian beef cattle industry. However, in recent times stakeholders have raised concerns with respect escalating costs, declining quality of service and slow and selective innovation projects, collectively contributing to slowing rates of adoption and less rigorous use of BREEDPLAN by current users of the service. Combined with a view that there is a growing unregistered sector that under the current value chain that delivers BREEDPLAN to market faces challenges with respect to accessing BREEDPLAN, has led to concern among the owners of the BREEDPLAN core analytical software, that BREEDPLAN is not delivering an optimal rate of growth in genetic gain across the Australian beef cattle industry. The purpose of this project is to prepare a revised or new commercialisation plan for BREEDPLAN that ensures that it is a sustainable enterprise, continues to facilitate an optimal rate of genetic gain by Page 3 of 194 L. GEN. 1709– Development of a New/Revised Commercialisation Strategy and Delivery Plan for BREEDPLAN adequately meeting the service expectations of the industry it serves and is compliant with Meat and Livestock Australia’s (MLA) statutory and contractual responsibilities with respect to the use of Commonwealth Government and levy-payer funds. BREEDPLAN and the BREEDPLAN value chain BREEDPLAN uses a statistical model known as Best Linear Unbiased Prediction (BLUP) to generate a statistical estimate of genetic value of individual animals in the form of Estimated Breeding Values (EBVs) or production goal oriented indices that represent a collection of EBVs. Primarily, BREEDPLAN allows producers to compare animals within their own herd or across animals from other herds that are registered with the breed association to which they are a member. There is also some limited data on which unregistered animals can be assessed. Also EBVs are only available if sufficient data is available for each particular breed and even where adequate data exists, the accuracy of the EBV will be affected by the volume and range of information that is available to calculate the EBV. As a statistical measure, EBVs have variable confidence intervals and as such an accuracy measure is provided with each EBV, which is a function of the amount of data on which an EBV has been determined. The net effect of this is that BREEDPLAN evaluations pertaining to breeds, that by virtue of having a larger number of animals submitting data to BREEDPLAN (typically the larger breeds that are more extensive users of BREEDPLAN), tend to produce more stable EBVs. While differences in datasets are to some extent handled by accuracy thresholds for publication of EBVs, different breeds do not automatically get the same set of trait EBVs. The core BREEDPLAN analytical software is owned by Meat and Livestock Australia (MLA) (51 percent), University of New England (UNE) (24.5 percent) and New South Wales Department of Primary Industry (NSWDPI) (24.5 percent). The world-wide exclusive rights to commercialise this software have been granted to the Agricultural Business Research Institute (ABRI), a company limited by guarantee and 100 percent owned by UNE. One of the prescribed objectives of the licensing agreement between the owners of BREEDPLAN and ABRI is to commercialise and distribute the BREEDPLAN software for the purpose of maximising the rate of genetic progress toward breeding objectives that are relevant to industry. ABRI then delivers BREEDPLAN (and a suite of associated and complementary products and support and training services) to the Australian beef cattle seed-stock and commercial producer market primarily through distribution arrangements with individual breed associations. The relationship between the participants in the BREEDPLAN value-chain are defined by a