WORD 598 KB - Department of State Growth

Sector summary 2014
Food and agriculture - poppy
The trade and investment sectors contained in the sector summary series have been compiled from Australian and
New Zealand Standard Industry Classification (ANZSIC) classes using a value chain approach. This means that
industry classes from ANZSIC have been grouped together to provide estimates of the size of the particular trade
and investment sector.
Coverage: the growing, harvesting and processing of poppy material in Tasmania for sale into the global narcotic
manufacturing sector.
Key indicators
Regional employment
Percentage of Tasmanian total
The above statistics have been represented to the nearest
whole number.
Key statistics at a glance
Gross farm gate value
Employment (b)
Change from
five years ago
Per cent of
Per cent of
1 070
(a) Industry consultation with Poppy Growers Association and Tasmanian Alkaloids, GlaxoSmithKline and TPI Enterprises.
(b) Poppy industry consultation 2013. Employment estimates do not include all producers and should be considered as conservative estimates only.
Summary of sector
The Tasmanian poppy industry was established in Tasmania in the 1960s and has grown into a significant industry
for the state. In 2012-13 around 23 000 hectares of poppy crop was grown by 850 farmers across Tasmania.
The industry is worth approximately $290 million in total (farm gate and factory gate)1. Poppies are an important
rotation crop for the state’s cropping sector and it is reported that over 800 farmers grow poppies as a part of
their mixed-farming enterprises2. It is estimated that poppies produced in Tasmania result in production of
approximately half a billion dollars’ worth of pharmaceuticals.
The world’s poppy market is regulated under the 1961 Single Convention on Narcotic Drugs. The convention
seeks to balance the supply of licit narcotic products with demand. As a signatory to the convention, Australia is
obliged to manage the production and supply of poppies to ensure their security and avoid oversupply into the
world market.
About 82 per cent of the morphine and 96 per cent of thebaine manufactured worldwide were obtained from
poppy straw, while the rest was extracted from opium. Australia, France, Spain and Turkey continued to be the
main producer countries in 2011, together accounting for about 88 per cent of global production of poppy straw
rich in morphine. Australia, France and Spain were the main producers of poppy straw rich in thebaine, together
accounting for about 98 per cent of global production. India remains the only licit supplier of opium to the world
Industry consultation 2013
Poppy Advisory and Control Board at www.justice.tas.gov.au/poppy/the_industry/poppy_in_tasmania last modified 15 July 2013
International Narcotics Control Board Technical Report Part Two: Comments on the Reported Statistics on Narcotic Drugs 2012, page 21
Tasmania is of
largest producer of licit narcotic material in the world. The state produces morphine, codeine and
oripavine poppies. Tasmania is the only Australian state licensed to grow poppies for the commercial production
of alkaloid-based pharmaceuticals. Processing takes place in Tasmania and Victoria. Tasmania’s cool temperate
climate, quality soils, reliable irrigation water and established production and processing capabilities provide a
competitive advantage in the production of high-quality poppy crops. The state’s sound regulatory structures for
the production and management of this narcotic product also provide for a secure and well-managed supply
system. Crops are grown in the North, North West and North East, extending to the Midlands, the Central
Highlands and the Derwent Valley with potential to develop areas in the Southern Midlands.
Tasmania grows a range of high-yielding poppies that are processed into a wide variety of alkaloid-based
pharmaceutical products, many of which are used for pain relief or as cough suppressants. The industry’s
development has been led by processor research and development into poppy varieties suitable for Tasmanian
conditions that deliver a high-quality product. The three processors with a presence in Tasmania are Tasmanian
Alkaloids, GlaxoSmithKline (which has processing facilities in Port Fairy Victoria) and TPI Enterprises Ltd.
Farmers grow poppies under contract for the three processors, who are licenced by the Tasmanian and
Australian Governments to produce set volumes each year. These licenced volumes are based on their sales
contracts and existing world supplies, and are governed by the International Narcotics Control Board (INCB).
Contract growers are supported by Poppy Growers Tasmania (the state’s peak poppy grower organisation,
representing around 85 per cent of all growers) and the Tasmanian Farmers and Graziers Association. Around
800 growers are licenced to grow poppies in Tasmania.
The sector is entering a period of change and adjustment, which offers new challenges and opportunities.
Constraints and opportunities
Risks facing the Tasmanian poppy industry are centred on continuing productivity and quality gains, and
growing capability in Tasmania while enabling processors to manage their supply risks and achieve ongoing
productivity improvements.
As demand for poppy product has grown, an increasing number of countries have commenced
production, introducing greater competition into the market. Some changes to the operation of the
Australian poppy industry will be needed, to improve its global competitiveness in light of processors
seeking to expand their operations into mainland states and other countries.
Demand for poppy crops varies by season, demand for narcotic products and any existing stockpiles.
A significant concern of processors is that their customers see high levels of risk in relying heavily on one
location for the production of raw material. The security-of-supply risk is more significant for thebaine
products than morphine and other alkaloids, due to Tasmania’s dominance of the market. Some industry
stakeholders argue that increased flexibility as to where they can access raw material will help to secure
Tasmania’s position as the world’s leading poppy producer. Some processors are taking steps to gain
access to other jurisdictions in Australia to grow commercial quantities of poppies.
The quality of land used to grow poppies, as well as farmer practices, has a direct impact on the quality,
productivity and sustainability of poppy crops in Tasmania, as well as the state’s international reputation
as a quality supplier of raw product. Tasmanian farmers need to deliver ongoing productivity
improvements to maintain their position in the industry. Additionally, it is important that Tasmanian
farmers maintain other cropping options to ensure that sufficient crop rotation timetables are maintained.
The farming sector is being asked to improve its production practices, in some cases, to increase yield
and consistency of supply. As Tasmania is a relatively high-cost production area, it must maintain high
levels of productivity. High input, freight and power costs all impact on the profitability of the sector, and
the of
Australian dollar has also affected industry profitability, particularly as all poppy material is
traded in US dollars.
Expansion of production into areas outside Tasmania would significantly change the structure of the
poppy industry in the state and introduce a range of challenges. Any shift in operation of the industry in
Australia would need to be cognisant of the country’s international convention obligations and ensure
that the International Narcotics Control Board and the United States (as the world’s largest customer for
these products) were supportive.
While there are risks associated with changing the operating structure of the poppy industry in Australia,
any attempts to prevent processors from introducing supply-risk-management practices might push them
to invest in processing capability in other, more accommodating jurisdictions.
Other states of Australia have shown interest in growing poppies. Trials are underway in Victoria and
other areas but commercial crops have not been produced.
The Tasmanian Government is working with the Tasmania poppy industry to identify a balance between
enabling strong business outcomes for its three processors, while ensuring as much investment and
production as possible is retained in Tasmania.
The world market for licit narcotic products is growing and experiencing a step change in scale and
The Tasmanian poppy industry is a world leader in terms of production, research and development, and
yields. Tasmania has access to poppy varieties that deliver high levels of alkaloid of varying types, which
has given it a significant advantage over other production areas.
Farmers have long-term experience in growing and managin poppy crops, and supporting processors to
build the Tasmanian poppy industry over the past 40 years.
Tasmania is a proven growing area and offers a safe, secure and well-regulated environment in which to
produce and process poppies.
Ongoing investment in poppy varieties and production techniques for Tasmanian conditions ensures the
state has good opportunities to continue to be an important poppy production region.
Processors have suggested that there are significant productivity gains still to be made in a number of
production regions. Processors have indicated their confidence in Tasmania through investment in
infrastructure on the island, the most recent example being Tasmanian Alkaloids commencement of a
$21 million upgrade of its processing facility in Westbury. Continued investment, expansion and
development in Tasmania by the state’s three processors is likely, but must be supported by increased
quality, consistency and yield to offset the state’s relatively-high cost of production.
The Tasmanian and Federal Government’s provision of $220 million toward developing irrigation
infrastructure in Tasmania has increased primary producer’s access to reliable water resources, and will
open up new areas to cropping and horticulture opportunities where soil quality and other growing
conditions allow. While many poppy growers are highly-skilled and efficient, many will benefit from skills
training in the use of irrigation, as the state’s irrigation development program brings reliable supplies of
irrigation water to previously dry-land farming districts.
A key consideration in expanding the poppy industry is the processors’ capacity to access land via their
growing contracts with farmers. Growers consider a number of factors that influence how much land they
make available for poppy production, including:
the price for crops
the availability of land
o sector
the availability of rotation crops that fit with poppy production
Summary of
o production support from processors and quality of plant material
the relationship with processors and reliability of contracts.
Examining and understanding the reasons why farmers choose to grow poppy crops will assist the sector
in opening up as much suitable cropping land as possible, and a better understanding of the amount of land
actually available for production.
The industry and government will work together to deliver an environment that supports ongoing
investment into the Tasmanian poppy industry, while ensuring adherence to the requirements and intent
of the Single Convention on Narcotic Drugs.
Strategy summary
Industry strategy
Individual poppy processors have varying priorities for the development of their business, and their strategic
priorities vary as a result. At times, these strategic actions are in contrast to the priorities of the growers and
their representative bodies. However, the processing and growing sectors have increasingly recognised the
advantages of working collaboratively on issues of shared importance.
Processors are continuing to invest in poppy processing capability in Tasmania. Tasmanian Alkaloids made
a $21 million investment to improve its factory efficiencies in 2013.
Poppy grower groups and processors agree that additional improvements can be made to the poppy
production and processing performance of the sector in Tasmania. Processors intend to continue to
conduct research, development and extension in poppy production and processing practices in Tasmania.
Poppy Growers Tasmania and the Tasmanian Farmers and Graziers Association agree that the primary
production sector needs to implement productivity improvements in some cases and are looking to
support growers in achieving this.
Government strategy
The Tasmanian Government, through its Cultivating Prosperity: A 2050 Vision for Agriculture policy, is putting
the State's primary industries on the path to achieving a ten-fold increase in the value of the sector by 2050.
The Tasmanian Government has been working with industry stakeholders to establish a policy framework to
guide decision making around the poppy industry in Tasmania.
The Tasmanian Government will continue to support industry activities that enhance the productivity and
competitiveness of the state’s poppy growers and will implement the actions agreed to in industry
The Tasmanian Government will continue to engage with its interstate and national counterparts to
advocate for a strong and sustainable Tasmanian poppy industry into the future.
The Tasmanian Government commissioned a review of Tasmania’s poppy industry regulation, with a view
to ensuring its operation is effective and efficient in the modern industry environment. The
recommendations of the review were accepted with some alteration and a policy position on
management of the industry is being considered by government.