UWA Papers on Agricultural Extension and
Adoption and Diffusion of Innovations in Agriculture

The Changing Relationship Between Private- and
Public-Sector Agricultural Extension in Australia

Sally P. Marsh and David J. Pannell

Agricultural and Resource Economics, The University of W.A., Nedlands, 6907

Abstract

Agricultural extension services in Australia are undergoing dramatic and rapid change. This paper is a review of the main changes in state departments of agriculture and their relationships with a rapidly growing private-sector. We identify some positive aspects of the changes which are occurring but also a number of serious concerns. In some cases, new systems introduced in the quest for efficiency seem to have introduced a new, arguably greater, set of inefficiencies. Proponents of reform, while trying to achieve economic efficiencies through creation of market-like structures in institutions, have not adequately considered market failure due to the public-good characteristics of information and due to transaction costs. We are concerned about the de-emphasis of research within the public-sector agencies, especially because of its public-good character and possible efficiencies of size. Group-based extension has grown dramatically and it appears to have advantages but also a number of important issues that need to be addressed

Introduction

Agricultural extension services in Australia are undergoing dramatic and rapid change. State departments of agriculture and primary industries have been subject to a process of review and re-structuring that has affected the nature of the services they are prepared to provide and the ways that those services are provided. The changing agricultural extension environment in Australia reflects a world-wide trend towards the privatisation of agricultural extension services (Johnson et al, 1989; Rivera and Gustafson, 1991; Dancey, 1993). This trend appears to be related to factors such as the declining relative importance of agriculture in the economy and budget pressures on governments, as well as the increasing influence of economists’ theories and prescriptions within government.

Agricultural information is increasingly being perceived by policy makers as having ‘private-good’ characteristics. As farming has become more specialised, farmers are requiring more sophisticated and individually-tailored technical, management and marketing information. Information which is of value only within a local region, or especially on a single farm, lacks most or all of the public-good characteristics traditionally used by economists to justify government investment in agricultural extension. Without this justification, government investment may be economically inefficient, and Rivera (1996) refers to "the onslaught of conservative ideology emphasising efficiencies over welfare". This "onslaught" is associated with an ideological shift by governments to principles of ‘user-pays’ and accountability. However, while increased efficiency is often touted as the reason for privatising public-sector services, a desire for a reduction in government spending frequently lies behind this reasoning (Vanclay and Lawrence, 1995; Cary, 1996).

In the expressed desire to have a better (i.e. more relevant, more efficient, better targeted) extension service, governments have revitalised existing systems and, in some cases (e.g. New Zealand and The Netherlands), privatised public extension (Rivera, 1996). Policy changes made in the ‘revitalisation’of public-sector agencies have included decentralisation, instigation of cost-recovery mechanisms, cost-sharing, and participation of stakeholders in development of initiatives and in other decisions that affect them. The goals of the desired changes (in contemporary jargon) are illustrated in Figure 1.

Figure 1

The results of these policy initiatives have been increasing private-sector participation in the delivery of agricultural extension services. In countries where public-sector retrenchment is reasonably advanced, a multitude of alternative service providers and institutional arrangements has appeared (Carney, 1995). Farmer organisations, co-operatives and groups; seed, fertiliser and chemical companies; multi-national corporations; marketing boards; research and development corporations; cooperative research centres and university departments are some of the many public- and private-sector players in the new extension environment in Australia.

This paper reviews the restructuring of the state departments of agriculture and the increasing private-sector involvement in agricultural extension activities. We define agricultural extension broadly to include public and private-sector activities relating to technology transfer, education, attitude change, human resource development, and dissemination and collection of information. It includes off-farm as well as on-farm players in agricultural industries. The paper then goes on to discuss some of the issues we see emerging in the changed extension environment. In some cases, the new systems introduced in the quest for efficiency seem to have introduced a new, arguably greater, set of inefficiencies. Proponents of reform, while trying to achieve economic efficiencies through creation of market-like structures in institutions, have not adequately considered market failure due to the public-good characteristics of information and due to transaction costs.

Traditional Delivery of Agricultural Extension in Australia

The major providers of publicly funded agricultural extension have been the state departments of agriculture and primary industries. Australian agricultural extension has been characterised by an effective public sector with a strong emphasis on production-based technology transfer (Cary, 1993). Marketing and management advice has not been a large component of the extension from the public sector, being more the province of the private sector, particularly private farm management consultants.

This emphasis on production-based technology transfer has meant that there have been good links between research and extension personnel working within the state departments of agriculture. They were often housed in the same building, and researchers running field trials in country areas relied on the active participation of district advisory officers to oversee their trial work. For example, Marsh et al (1996) comment on the close working relationship of researchers, extension officers and farmers in planning and conducting field trials to overcome early problems with the seeding establishment of lupins in the eastern wheatbelt in Western Australia. Much public-sector extension has, of necessity, been ‘problem-centred’ (Cary, 1993).

Australia has also had a strong private-sector involvement in the delivery of agricultural information. A 1994 Australian Bureau of Agricultural and Resource Economics report indicated that 23 percent of farmers used farm consultancy services, with highest usage in Western Australia (greater than 25 percent of farmers) and lowest in Queensland and Victoria (lower than 10 percent). Private consultants belonging to the professional consultant organisations, the Australian Accredited Agricultural Consultants and the Australian Association of Agricultural Consultants (WA), now number over 450. Furthermore, in recent years rural resellers and distributors have been playing an increasing role in both the delivery of product-related and more general information through their employment of extension agronomists or other appropriate specialists (Prinsley et al, 1994). In some specific industries, private-sector consultants are the major extension providers. For example, of the 100 consultants employed in the cotton industry in New South Wales, only 4 are employed by New South Wales Agriculture (Sheldrake, 1996).

Despite this large private-sector involvement in agricultural extension, there is evidence of poor private-sector input into public-sector policy and research. Bedbrook (1995) surveyed 48 (out of 55) members of the Australian Association of Agricultural Consultants (WA) Inc. and reported that most perceived that they had very little input into Agriculture Western Australia (Agriculture WA) research and policy directions (see Table 1). Fifty seven percent said they had little or no input into Agriculture WA as to what research should be undertaken and the type of information they needed, although 96 percent thought it either important or extremely important that they have that type of input. Bridging this gap is a major challenge facing public- and private-sector players involved in agricultural research and extension.

Table 1. AAAC(WA) consultants' perception of formal links with Agriculture WA

^aThe formal link proposed was that AAAC(WA) could decide on consultants who would be the contacts for different specialist areas and circulate this list within Agriculture WA. These consultants could then be contacted from people within Agriculture WA for comment on research, would be acting on behalf of AAAC(WA), and would give their time free of charge.

Recent Changes in State Departments of Agriculture and Primary Industries

State Departments of Agriculture have all had a period of review and restructuring. In most states, cutbacks in allocable funding from state governments have put pressure on state departments of agriculture to review the services they provide (Watson, 1996). In general, the reviews have resulted in the policy directions outlined in Figure 1 being put into action. There has been an emphasis on ‘outcomes’, ‘partnerships with industry’ and ‘market-focussed’ priorities (Queensland Department of Primary Industries, 1996; Department of Natural Resources and Environment; 1996; Department of Agriculture Western Australia, 1995). In many cases the restructuring process is still underway, or only just completed, so it would be premature to judge the results too harshly. In addition, as noted by both Cary (1993) and Carney (1995), it seems that beyond the ideology of efficiency and the rhetoric of effectiveness and accountability, there are also political considerations that affect policy directions. In Western Australia, for example, the goal of regionalisation appears to have been for reasons other than benefit to agriculture, and the goal of lower government expenditure is probably only partly related to economic efficiency.

Changes that have been made to public-sector agricultural agencies in Australia follow a worldwide trend (Rivera, 1996) towards a policy of financial, structural and managerial decentralisation for public-sector agricultural agencies. Vanclay and Lawrence (1995) refer to extension as being in ‘a period of crisis’, brought on by pressures relating to finance, effectiveness, legitimation and theory, that extension agencies have responded to in a variety of ways. The following points illustrate some of the changes that have occurred in Australia during the restructuring process.

a) Industry partnerships

All state departments of agriculture are moving towards a ‘market-driven’ or ‘client-driven’ philosophy of service provision. That is, they have explicitly stated objectives of being reponsive to the expressed needs of their clients, and some are setting up formal links with industry to attempt to ensure that industry needs are met. For example, within Agriculture Western Australia there now exists a range of formalised ‘industry partnerships’ attached to the 10 ‘programs’. The Cereals Partnership Group, for example, consists of 4 farmers, 3 processors, 2 private consultants with marketing expertise, and the Agriculture WA program manager for the Cereals Program. These partnerships have a direct input into the strategic planning process to assess industry priorities, formulate the strategic plan and define the program operations. Similar formalised arrangements are being instigated in some, but not all, other states.

b) Adoption of the funder-purchaser-provider model

Most state departments (NSW Agriculture is a notable exception) seem to be moving towards various interpretations of the funder-purchaser-provider model (FPP) as an organisational structure. The FPP model is based on the theoretical separation of, or distinction between, the ‘purchaser’ and ‘provider’ of services. The concept is to create a market in the provision of services, with the aim of achieving the efficiencies usually associated by economists with markets. The model allows for ‘activity-based’ accounting and its advocates see this as being essential to improve accountability. The implementation of the FPP system is being done in different ways, but for most state agencies it means being required to clearly separate and distinguish the agency’s role as a purchaser of services on behalf of the government from its possible role as provider of those services. Within Agriculture Western Australia, program managers ‘purchase’ services (e.g. research hours) for their specified program, which are ‘provided’ by personnel who can theoretically be employed from either within or outside Agriculture Western Australia. Staff can have their time ‘purchased’ by a number of different programs. Some or all of a staff member’s time may be ‘residual’, meaning that it does not meet the prioritised requirements of any particular program: that is, the staff cannot ‘provide’ required services. In the current transition phase there are many employees with significant ‘residual’ components of their time.

c) Out-sourcing

The adoption of the FPP model has enabled the agencies to engage in what is called ‘out-sourcing’, or the contracting out of services. Agricultural consultants and contract staff are now able to be employed to deliver required extension or research, if it is judged that they can do this more efficiently or effectively. This is already happening. Questions of efficiency aside, as Cary (1996) notes, a real benefit associated with outsourcing is that it attracts private-sector funds into areas that were previously the responsibility of the public sector.

d) Differing degrees of integration or separation of agency responsibilities

State departments of agriculture and primary industries have been restructured, with various degrees of integration or separation from Landcare/environmental state institutions, and various degrees of separation between research and extension. While Victoria, for example, has just one organisation, the Department of Natural Resources and Environment (DNRE), other agencies have kept natural resources or forestry outside the agriculture portfolio. In Tasmania, and until recently in South Australia, research is conducted in institutions (e.g. Tasmanian Institute of Agricultural Research) separate from those which conduct extension activities. Such separation appears to run the risk of researchers becoming remote from current farming problems and farmers’ perspectives. Other agencies have maintained their dual research/extension responsibilities, but have created extension specialists attached to specific programs.

e) Privatisation

The concept of ‘privatisation’ is used fairly loosely when applied to the restructuring of agricultural extension, and can include a variety of measures other than a full transfer of ownership of the agency to the private sector. These can include contracting out (‘out-sourcing’) delivery of the service to the private sector, as well as cost-recovery measures undertaken within the public-sector agency. To varying degrees, all state departments are moving towards adopting a ‘user pays’ philosophy. This is causing considerable tensions in the effort to cope with conflicting demands to ‘get the information out’ and to recover costs of information seen to have ‘private good’ characteristics. In Victoria, for example, ad hoc inquiries that are not directly related to funded projects are referred to private-sector information providers such as the Kondinin Group, Beefline, Grassline, etc. A general development is that the public sector is starting to charge for the delivery but not the information. Services such as Ag-Fax (available in most states) fit this category.

Most agencies are still grappling with how and on what basis to recover costs. Agriculture Victoria, for example, envisages three main categories of activity they will provide and which will have different funding commitments by the agency. ‘Public-good’ activities (e.g. exotic disease preparedness) will be 100 percent government funded. ‘Industry good’ activities (e.g. Target 10) are aiming for government funding commitments of only 50 percent. ‘Private good’ activities (e.g. contract research for a chemical company) will attract zero government funding. Tasmania has gone further towards privatisation than any other state. Prescribed rates are charged for one-to-one services at rates that the Tasmanian Department of Primary Industry and Fisheries considers comparable with those charged by private-sector providers.

f) A re-direction of extension activities

Government agencies are still very involved in extension, but the focus of their extension has changed somewhat. There has been a withdrawal from areas perceived to be adequately supplied or having the potential to be adequately supplied by the private sector, partly because of funding restrictions but also because of policy directives to address areas of public rather than private good. The growth of extension activities directed towards Landcare and human resource development reflects both the amount of funding for these activities that has become available through the National Landcare Program, and also a change in philosophy about the types of extension services needed by Australian farmers (Queenland DPI, 1990; Simpson, 1993).

There has also been a developing focus on group-based activities, although most agencies still claim (or concede, depending on their philosophy) that they will still be doing ‘some’ one-to-one extension. There has been a proliferation of groups focussing on both technology transfer issues (such as Target 10, Topcrop, Beefcheque, Right Rotations, etc.) and those dealing more with awareness and management/lifeskills education (such as Farm Management 500, Property Management Planning in all its guises, Landcare, best practice groups, etc.). The group focus of agricultural extension is only partly a response to agency cutbacks. It also represents a change in philosophical approach to extension; from the linear model of technology transfer to an appreciation of what has been termed the agricultural knowledge and information system or AKIS (Röling, 1988). The change embraces principles of adult learning, action learning and participative processes, typified by, for example, the Participative Action Management model (Chamala, 1995) and Local Best Practice groups (Vanclay and Lawrence, 1995; Clark et al, 1997).

An extension philosophy cognisant of the AKIS emphasises and values the knowledge possessed by and flowing between all the players in the agricultural industry: farmers, departments of agriculture, consultants, agribusiness, rural communities, etc. With this emphasis, it is appropriate that farmers should have more control over the information that they need and want and how it should be delivered. Groups are seen as the more appropriate medium to work in under this ‘demand-pull’ (as opposed to ‘science-push’) model of extension, with the extension officer often playing a role of facilitator.

g) Pain

The restructuring process has not been without pain, and adverse reactions have been evident from sources both internal to and external from the agencies. In an article identifying the characteristics of sustainable institutions, Gustafson (1994) stresses the importance of internal support for changes. Although his analysis is based on changed extension organisations in third world countries, it is clear that the impacts of changes on the views, motivation and morale of internal personnel are important. This concern does appear to have been pushed aside in the climate of rapid change in Australia. Gustafson (1994: 127) states that, "regardless of the advantages of the new arrangements, what they replace and how the changes are implemented can create considerable problems".

The restructuring process does seem to have caused some degree of staff uncertainty within the agencies. When talking to agency staff it is common to hear complaints of ‘low staff morale’. There has been a loss of both research and extension expertise. In Western Australia, for example, the changes have resulted in a situation where there is currently much more extension expertise in the private sector than the public sector. This may mean that extension activities will increasingly be out-sourced to the private sector. Of more concern, is the loss of top researchers to areas other than the agriculture industry. This has been of concern to the Research and Development Corporations who perceive that the re-structuring process has resulted in the loss to the industry of considerable intellectual capital ‘owned’ by the government and farmers.

Concurrent Developments in the Private Sector

The private sector has not been slow to grasp the opportunities that have arisen. A general observation is that it is growing rapidly and taking an increasing responsibility for service delivery of extension messages. Formalised partnerships between agribusiness and public-sector organisations and quasi-public-sector organisations are becoming common (e.g. The Grain Pool of W.A. and SBS Rural Iama, the Australian Wheat Board and seed merchandisers). As a result of these developments, the private sector is taking a bigger role in agricultural research and extension and getting a bigger input into policy and research priorities. Both these developments have previously been identified as being desirable (Prinsley et al, 1994).

a) A bigger role in agricultural research and extension

As the principles of the funder-purchaser-provider model are implemented and out-sourcing of activities becomes possible within the public-sector agencies, the use of private consultants to deliver government funded research and extension programs is increasing. Most agency ‘strategic documents’ make clear that they envisage the private sector playing a greater role in the delivery of many services previously the responsibility of the public sector. A general vision for the future of extension services in Australia is "for much greater involvement of the private sector, and for the public extension service to work hand-in-hand with agribusiness" (Sheldrake, 1996: 4).

Private consultants in Victoria and New South Wales are already running Farm Management 500 groups and Property Management Planning (PMP) groups. In Western Australia, private consultants are involved in the planning that is going into the setting up of that State’s version of Topcrop. They will certainly be delivering some of the extension component of the program. This seems certain to happen in all states, as the principle of out-sourcing is applied.

The private sector is also starting to do some of the trial work that was previously done by state departments of agriculture. For example: Primary Industries and Resources South Australia (PIRSA) has ‘purchased’ the services of a private consultant to run trials at the Hart demonstration sites at Clare; and the Cooperative Research Centre for Legumes in Mediterranean Agriculture (CLIMA) is running trials in conjunction with the Birchip Cropping Demonstration Sites (a group owned and run by farmers). Fertiliser and chemical companies have conducted considerable trial work for many years, and public-sector agencies are generally pulling out of these research areas.

Research and Development Corporations are actively courting private-sector research. At the Annual Conference of the Australian Accredited Agricultural Consultnats (AAAC) held in Canberra in August 1996, consultants were urged by the R & D corporations to apply for research funds. The Grains Research and Development Corporation (GRDC), for example, saw a major opportunity for consultants to play a role under their new emphasis of commissioning and negotiating research. They saw consultants as having an advantage under the new emphasis because they were used to doing jobs for an outcome rather than a salary. They also perceive consultants as having better links to farmers, especially ‘leading’ farmers, and so being capable of ‘better-targeted’ research. GRDC also wants to harness the power of input suppliers and is encouraging extension provision in the grain industry through their networks.

Input suppliers are increasingly becoming involved with a broader range of activities: selling inputs, providing extension and marketing the final product. They are moving towards providing a total farm service. The change in services provided by agribusiness reflects a desire by both parties (i.e. business and farmers) to find ways of minimising risks in the increasingly market-oriented and deregulated agricultural industry. The new services include access to advice and up-to-date information, guaranteed delivery of products of a specified quality and fixed product prices.

There has also been an increase in farmer participation in research and extension (e.g. Birchip Cropping Group, Southern Farming Systems) and information reselling (e.g. Kondinin Group). Groups of farmers such as these are working with a huge range of institutions and individuals from both sectors, and are attracting sizeable funds from R & D corporations and other corporate sponsors. Cary (1993) noted that:

with the development of human and infrastructure resources, better educated, smaller groups of homogeneous and geographically concentrated farmers are likely to be better integrated with both public and private institutional knowledge systems and have more extensive linkages with the non-rural business sector. (Cary, 1993: 345).

Groups such as the Birchip group (with their active linkages with departments of agriculture, cooperative research centres, universities, private consultants, banks, chemical, fertiliser and seed companies, and the surrounding rural community) illustrate that this is indeed happening.

In some states, farmer organisations are playing an important role in the implementation of nationally funded programs. For example, the Victorian Farmers’ Federation (VFF) is coordinating that state’s version of PMP known as Farmsmart, and the Agricultural Bureaus in South Australia are heavily involved in the implementation of SA’s Topcrop and Right Rotations programs. Producer and community groups have initiated and organised their own Research Expos (e.g. groups at Jerramungup, WA and Birchip, Victoria). At the inaugural 1996 Expo at Birchip, the group obtained the participation of scientists and consultants from Cooperative Research Centres, universities, R & D corporations and the State Department of Agriculture, as well as private consultants and agribusiness.

There is anecdotal evidence that state departments of agriculture are working well with the private sector, particularly at the on-farm level. In Victoria, for example, DNRE field extension officers reported that the Topcrop program pulls extension officers from the public and private sectors together. "We view input supplier agronomists as an extension of the Swan Hill office. We run cooperative field days with different organisers at different times. None of the organisations can be considered the leader." Agriculture Western Australia’s Agmemos (district-office-level agency publications to farmers) publish the names of people who could be alternative sources of advice. The Tasmanian Department of Primary Industry and Fisheries (DPIF) is working closely with selected private-sector agents on priority extension issues such as Worm Plan and Reduction of Pesticides in Wool.

b) A bigger input to policy and research priorities

The new emphasis of the state departments on industry partnerships means that the private sector (both farmers and agribusiness) will have more influence on public-sector policy direction. Industry and regional working groups are, in many cases, in their early formative stages and it is too early to gauge their effectiveness, but at least the structures are being put in place. R & D corporations are also working towards getting more farmer and industry input into their operations by their ‘regional team’ approach to assessing priorities.

Because of government commitment to industry partnerships, well-organised farmer groups are well placed to play a role in the development of new initiatives. The Agricultural Bureaus in South Australia initiated the AgSA 2000 project, which is investigating the use of computer and communications technologies for improved information access by primary producers and agribusiness. The National Farmers’ Federation has been conducting a major initiative, the Farmwide OnLine project, to assess the suitability of Australia’s rural telecommunications network to supply farmers with affordable and useful Internet capability.

Public-sector agencies have become aware of their changing client base by conducting target group analyses. As a result of this, public-sector research organisations have (in some cases) seen the need to target the private sector and are responding. For example: Agriculture Western Australia conducts a three day ‘crop technical update’ in February that specifically targets consultants and agribusiness; CLIMA actively sought involvement with the Birchip group as they were judged to be an active research and extension medium who could provide valuable feedback to CLIMA researchers (Maling, 1997). By conducting target group analyses, public-sector agencies are recognising that there will necessarily have to be diverse extension systems to meet disparate needs (Rivera, 1996). Identifying these specific needs is a challenge to public-sector providers.

Issues Arising from these Changes

a) Questions regarding research capability and information flows

The loss of expertise in extension and especially research from the public sector following state department restructures is likely to have far-reaching repercussions. R & D corporations, for the reasons already canvassed, are actively seeking private-sector research. In addition, funding bodies are questioning the infrastructure costs and ‘in-kind’ contribution estimates of state departments of agriculture, universities and the CSIRO. It seems likely that this will result (at least in the short term) in a drop in the percentage of farmer-levied research funds going to public-sector research agencies. It is possible that there will be a serious loss of top researchers out of agriculture to overseas or other industries.

The public sector, however, is still responsible for a great deal of the generation of new information. For example, Bedbrook’s (1995) survey found that Agriculture WA is an important information source to AAAC(WA) consultants. These consultants were concerned that cutbacks and losses from state departments would have impacts on information flows to extension providers. Similarly, private consultants working in New South Wales considered that they were heavily dependent on information from New South Wales Agriculture, and expressed concern about the loss of public-sector agronomists in that State.

The ability of the private sector to replace public-sector research capability is very doubtful. It will at least require a substantial transition period. At the 1996 AAAC Conference in Canberra, consultants indicated to GRDC (in response to calls for more private-sector research) that they felt under-resourced compared to public-sector institutions to undertake large research projects. There is already substantial research capability in the private sector in some areas where the public sector has also had significant involvement (e.g. fertiliser and spray development and management) but other issues arise when these areas are totally in the hands of the private sector. These include issues of quality control, fragmentation of information and the availability of information.

Research conducted at major public-sector institutions is subject to a regime of peer review that is valuable in ensuring the validity of procedures and reasoning. There are justifiable concerns that private-sector research is not subject to the same type of critical review. It is often argued in defence that agribusiness has its professional integrity and reputation to maintain and is unlikely to make unwarranted recommendations. Some commentators also argue that extending the choice available to farmers (resulting from multiple and even conflicting information sources) is useful as it enables farmers to choose the information (or product) best suited to their needs (Schwarz, 1994).

Experience from overseas suggests that fragmentation of information flows can occur as agricultural research and extension is privatised (Harter & Hass, 1992; Walker, 1993, Schwartz, 1994). There is evidence that this is occurring in Australia as an increasing amount of agricultural research is conducted for private clients, with results either unavailable for more general use or, alternatively, having a charge attached to their wider dissemination. It is possible that this will lead to greater duplication of research and a failure to recognise that individual research topics often contribute to overall areas of knowledge. A large responsibility is rapidly developing for the R & D corporations to document, disseminate and make easily retrievable results from the research that is being conducted with their funds by a myriad of public- and private-sector players.

Concerns are being voiced about the availability of information as more research is conducted by the private sector and public-sector research providers are encouraged to establish and protect intellectual property rights. The possible reduction in the free exchange of scientific knowledge between private-sector organisations has the potential to reduce the efficiency of private-sector research (Lindner, 1993). Additionally, further concerns about information availability are being voiced as public-sector institutions target information specifically to some sections of the private sector (McKenzie, 1996). Although access to this information is not prohibited to anyone else, avenues for learning about it can be effectively restricted because of the in-house nature of its dissemination.

A further issue for governments pursuing policies that encourage the privatisation of research and extension is that "once supply is placed in the hands of those with primarily commercial objectives, the scope for on-going direct political intervention is substantially reduced" (Carney, 1995: 524). Commercial companies to not necessarily have to respond to political priorities, whereas public agencies can be required to do so. This consequence of privatisation is already being noticed in New Zealand, where the government has needed to re-introduce ‘facilitation’ programs in support of key government programs (Walker, 1995).

b) Questions about the sustainability and efficiency of the new arrangements

In a study of 24 third world agricultural extension programs, Gustafson (1994) identified a framework involving both internal and external factors that described institutional sustainability. One of his conclusions was that there needs to be a sustainability trade-off between institutional complexity (which is not good for sustainability) and stakeholder support (which is necessary for sustainability but contributes to complexity). There are indications that the new institutional arrangements being put into practice are complex, and the transaction costs involved are considerable and uncosted.

It is apparent that there has been a rapid escalation of transaction costs in the new institutional arrangements. This is most obvious in the internal operation of FPP systems, with substantially greater effort and energy needing to be devoted to administrative tasks to keep the new system operative. It also arises in the relationships between public and private sectors. For example, if researchers are now more reliant on the private sector for practical feedback about their research, obtaining the feedback clearly involves greater costs than previously. Indeed the costs borne by the private sector in providing this feedback may mean that they are unwilling to do so without a clear perception that they (or at least their clients) will benefit.

The formation of industry advisory boards at regional and state levels adds to the complexity of decision making. A large potential cost of participation is the upfront financial, time and opportunity costs to the agency and stakeholders of identifying and engaging with each other (Rivera, 1996). This is particularly a problem for non-salaried private-sector stakeholders. There is anecdotal evidence from private consultants in Australia to indicate that this has at various times been a problem when they have been developing integrated programs with public-sector agencies.

Out-sourcing, or the contracting out of services, also has the potential to create large transaction costs, in addition to other inefficiencies. This is particularly so with regard to the monitoring and evaluation of large national programs. Private-sector delivery is perceived as efficient but can suffer from inefficiencies that occur because of vested interests when funding allocation occurs at a higher heirarchical level than the administration and monitoring of service delivery (Cary, 1996). Lindner (1993) also points out that the relative efficiencies of public- and private-sector services is a very under-researched area. Hone (1991), for example, makes the point that services that can be charged for need not necessarily be more efficiently provided by the private sector because the public sector may possess potential advantages by being able to link extension provision with established regulatory and research activities. Schwartz (1994) points out that there are inherent difficulties in comparing the performance of the public and private sectors in extension because of differing objectives and circumstances.

Additionally, there is a potential for problems and inefficiencies to be created when private-sector organisational structures are placed on public-sector organisations subject to political responsibilities. Kingwell (1994) has explored the consequences of public-sector agencies being forced into more business-orientated managerial frameworks, and concludes that because of political influence and the economic nature of the services produced, the model of managerialism is deficient when applied to public-sector agencies. As noted by Carney (1995: 523):

It should … be acknowledged that governments are by no means exclusively dedicated to the pursuit of efficiency or even accountability and effectiveness, whatever the rhetoric may be. They are also interested in generating and maintaining political support.

c) Questions about the public-good nature of agricultural information and market failure

The perception that much agricultural information has a private-good nature is a relatively new development. The perception of agricultural information as a public good, and hence subject to market failure, has provided the prime argument in policy debates since the 1960s for the continued provision of government extension services. The increasing industrialisation of agriculture has resulted in, amongst other things, a questioning of the public-good nature of much agricultural information, with a consequent emphasis on the potential for commercial provision of these services.

However, even with the provision of services clearly deemed to be private goods, market failure can still occur. Carney (1995) provides an overview of situations where markets either produce sub-optimal results (e.g. in the presence of monopolies, because of externalities or ignorance), or fail to develop at all (e.g. because of inadequate infrastructure, incomplete supporting markets or unconducive regulatory environments).

The potential for market failure is further enhanced because, whereas some information can be clearly seen as a private good (e.g. specific veterinary advice), other information is clearly a public good (e.g. large-catchment hydrology information). Watson et al (1992) and others point out that there is a lot of indistinct ground in the middle. Agricultural information often does not fit neatly into unchanging public/private good categories. It can depend on the time and the specific situation. As Hubbard (1995: 30) states:

Separation of private and public components of goods and services can be complex and uncertain. It may depend on a variety of local circumstances and shifts in prices and expectations, which determine whether the private sector supplies the service adequately or not.

Furthermore, it can be argued that it is socially desirable to provide agricultural information as if it were a public good (Vanclay and Lawrence, 1995). Reasons put forward to support this position include issues related to social equity.

d) Questions about extension methodology and direction

Changes in extension ideology have resulted in a move away from linear ‘top-down’ approaches from scientists to farmers, to extension methodologies that emphasise information flows, adult learning and participation by stakeholders. Increased use of farmer groups for agricultural extension has been one major change associated with this new paradigm. However, this greater commitment to group-based extension has occurred largely because of a perceived need to move away from traditional extension, rather than any evaluation of the effectiveness of the new models to deliver more desirable outcomes (Woods et al, 1993; Vanclay and Lawrence, 1995).

From all accounts, groups are proving to be, for the most part, an effective means of extension. As could be expected, some work more effectively than others. The group approach, however, could face a number of developing problems. The number of groups that farmers can, and often need to, participate in is growing rapidly. The group approach is becoming the major method that R & D corporations are using to disseminate the results of research that is being conducted with their funds by an increasing number of private sector-sector organisations. For farmers this means a plethora of groups, often with high participation costs and possibly a low pay-off, or at least one that is potentially difficult to determine. The problems faced by members of groups are those of participation costs, conflicting objectives, raised expectations, and the co-opting of groups by the powerful and articulate.

Groups are also contributing to the fragmentation of knowledge. Enormous amounts of farmer knowledge are being generated, but generally there is poor documentation, collation and dissemination in a wider framework beyond the group. Information flow beyond groups is, on the whole, lacking. This is one of the problems faced by the Landcare program, where farmer groups often work on problems in comparative isolation, with the assistance of relatively inexperienced project officers. The inexperience of many public-sector extension personnel working in public-good areas of extension is a consequence of the loss of experienced personnel to the private sector during the restructuring process.

There is also the potential for conflicting objectives and interests to develop between farmers and R & D corporations as to how groups are to be used. There is anecdotal evidence that this is already occurring. For example, both GRDC and Meat Research Corporation are very particular about the goals and aims of Topcrop and Prograze groups respectively. Groups are required to operate under the guidelines outlined to obtain funding. There is some conceptual difficulty in coming to terms with an extension philosophy that espouses to be ‘farmer-driven’, but only within the confines of imposed ‘top-down’ goals. This could eventually prove a problem for funders as groups opt out in order to control their own directions.

The concept of ‘farmer-driven’ group-based extension, in itself, raises further issues. Vanclay and Lawrence (1995) point out that it relies on farmer awareness of their own problems and that, with a truly ‘bottom-up’ philosophy, farmers must be free to make mistakes. They go on to state that:

Reliance on farmers’ local knowledge to solve problems that are new to their experience, such as many environmental problems, is unlikely to be successful. … While it is possible that many traditional problems may be solved with new extension methods, new problems, particularly environmental problems, may be best dealt with through a combination of new and traditional extension. The cost implications of this may not appeal to state governments which are in the process of dismantling the older forms of extension. (Vanclay and Lawrence, 1995: 125-126)

There currently exists a theoretical tension as to whether extension should be ‘person-focused’ or ‘technology-focused’, and a developing emphasis on the former. There is a tendency to treat the two (‘farmers’-needs pull’ versus ‘science-push’) as mutually exclusive (Cary, 1993). Indeed a logical consequence of the increased involvement by producers in extension is the perceived need to address issues other than technology transfer. This is well-documented in developing countries where human capital development is an essential part of extension programs with rural people’s groups (e.g. Bebbington et al, 1994).

This tension has spawned an increasing emphasis in extension on the development of human capital resources. The Meat Research Corporation is currently sponsoring workshops which focus on human capital development, where farmers are facilitated through such topics as defining lifestyle goals and recognising their own best methods of learning. Those involved speak highly of their value, but the commitment of R & D funds to programs of this nature should be questioned. As stated by Cary (1993: 344):

Except in cases of special disadvantage, it is more difficult to argue for government support for agricultural adult education in an environment of free, universal primary and secondary education and charging for other forms of technical adult education.

Conclusions

This paper addresses a number of concerns with regard to the changing balance between public- and private-sector extension provision.

We are concerned about the de-emphasis of research within the public-sector agencies, especially because of its public-good character and possible efficiencies of size. Unlike the growth in private-sector extension that is occurring, a rapid growth in private-sector research is not evident. The problem is worsened by the lack of processes to obtain private-sector feedback to public-sector researchers. As the private sector takes more responsibility for production-oriented extension delivery, it will be more important to obtain their input into research priorities. Barriers to obtaining this input, such as the costs to the private sector of engaging with the public sector, will need to be addressed. We believe this issue is vital, as even the best extension cannot compensate for irrelevant or ineffective research.

We have expressed concerns about both the availability and dissemination of information. Availability of information is being restricted by the push for intellectual propery rights and the increasingly competitive nature of research. Dissemination of information is being affected by the number of competing research and information providers, which contribute to a perception (and possibly a reality) of information overload among clients.

We have argued that much agricultural information still does have public-good characteristics, and that market failure can occur even with services clearly deemed to be private goods. This is supported by overseas experience, which indicates that areas of market failure are a reality as extension services are privatised. Associated with this concern is the potential for reduced government control of research and extension direction in a privatised environment. If agricultural extension is to become dependent on commercial priorities then there will certainly be examples where the directions pursued are not economically efficient from the point of view of society as a whole, or are contrary to other goals related to social welfare or the environment.

It is apparent that there has been a rapid escalation of transaction costs in the new institutional arrangements. Some of the increase in transaction costs is attributable to increased monitoring and evaluation to meet increased requirements for accountability. Some is due to the need for more complex systems of participation in order to achieve wide support from stakeholders. Some is due to administrative systems being poorly designed and/or implemented. We believe that it is important that agencies make efforts to minimise transaction costs and that they should not seek to maximise accountability or stakeholder support without regard to the costs of doing so. Furthermore, we question the appropriateness of applying private-sector managerial models to the public service.

However, it is also evident that there are positive aspects associated with the changes that have occurred. There has been an increase in private-sector involvement in agricultural research and extension. This has resulted in an increase in both formal and informal links between all the participants in the agricultural industry. This has occurred for a variety of reasons, including necessity and an actively pursued strategy. The rapid increase in private-sector extension would indicate that there has been a degree of crowding out in this area.

Group-based extension, done well, appears to have many advantages because of its emphasis on adult learning principles and encouragement of producer ‘ownership’ of both problems and solutions. There are, however, a number of important issues that need to be addressed, especially relating to (a) its effectiveness in all situations, (b) its sustainability and (c) its ability to involve all who need to be involved. These concerns aside, group-based extension processes are encouraging the growth of powerful and knowledgeable farmer groups with the potential to have an effective influence on agricultural research and policy.

Acknowledgments

We gratefully acknowledge the funding support of the Rural Industries Research and Development Corporation. Many people involved in public- and private-sector agriculture extension spoke openly with the authors and we thank them for their contribution, particularly participants in an RIRDC-sponsored workshop held at the Australian National University on September 17-18 1997. Finally, thanks are due to three anonymous referrees and the Editor for helpful comments on an earlier draft of the paper.

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Citation: Marsh, S.P. and Pannell, D.J. (1997). The changing relationship between private and public sector agricultural extension in Australia. Paper presented at the 41^st Annual Conference of the Australian Agricultural and Resource Economics Society, Gold Coast, Queensland, Jan 22-24 1997.

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