 Thank you, Lee, and welcome, everybody, to Outlook 2016. We'll be focusing on investment in agriculture over the next couple of days and the role of investment in underpinning future growth. And I think we'll be addressing some of the issues that were at the heart of the minister's comments this morning. We know improving productivity will be critical to the success of agriculture on world markets, and that's going to require investment, both on-farm and off-farm. We also know that there are increasingly diverse sources of capital and financing models available to agriculture, and that they're providing new opportunities for the sector. And to help explore some of those themes, we have a great lineup of domestic and international speakers, including bankers, institutional investors, and analysts, as well as producers from across the sector. What I want to do this morning is a bit of scene-setting for that discussion. I'll try to put some context around the scale and sources of investment in Australian agriculture and consider whether the corporate sector, in particular, is likely to become a more significant source of capital for Australian farms and whether that's likely to have implications for the traditional family farm. But firstly, I'll run through a medium-term outlook for commodities, which takes us out to 2020-21. Now, the details of the outlook are in the agricultural commodities publication that you would have received this morning, and they're going to be discussed by our analysts at sessions today and tomorrow. Economic growth is a key assumption that underpins the outlook, and we're forecasting a slow recovery in world growth over the medium term from 3.1% last year. That was the lowest level of growth since 2009. We expect a gradual strengthening to around 3.7% by 2019, and then coming back a little to about 3.5% by 2021. Lower oil prices will continue to support the global economy in the short term. On the upside, they have positive impacts on household demand and on business costs, but they're also straining the fiscal positions of some oil exporters and reducing investment in oil and gas extraction. In OECD countries, we're expecting that growth in the US will continue to strengthen in the short term, mainly on the back of consumer spending and some investment in housing and business. There's some support for growth in Europe from the lower value of the euro and accommodating monetary policy, as well as some export growth that's underpinned so far by demand from the US. In Japan, conditions remain weak. Growth last year was well under 1%. We expect that to increase a little, partly because of the fiscal stimulus package that comes into play this year, and also because the lower yen will increase demand for Japan's exports over the medium term. China will remain a driver of world economic growth over our outlook period, but we're assuming that growth will slow to less than 6% over the medium term. Even at that level, the absolute increase in demand in China is sufficient to drive output in other economies, and that will be especially important in the emerging economies of Asia. But downside risks in China around equity markets, the potential devaluation of the currency, and the ongoing economic reform program do add an element of fragility to the overall global outlook. In terms of the exchange rate, we assume the dollar will average 71 cents in 2015-16. It's been 72 cents up to this point, and that compares with an average of 84 cents last year, and it's been driven down largely by the terms of trade decline that's reflected weaker prices for energy and minerals commodities on world markets. We're assuming that the dollar will average about 71 cents again in 16-17, probably dipping below that in the early part of the year, and then start to strengthen slowly over the medium term to average around 74 cents by 2020-21. That's still below the 30-year average of 76 cents, and it's well below the 10-year average of around 89 cents. And it's that assumption about a slow appreciation that will have implications for the value of our commodity exports over the medium term. We're expecting the value of agricultural production to increase in 15-16 to about $59 billion. That compares with about $54 billion in 14-15. It's a positive story for crops. We've had increases in the volume of production on the back of good seasonal conditions in most areas, and that's offset falling prices because of generally abundant world supplies. And for livestock, high prices have offset a fall in the volume of production, as herd numbers have contracted over the past few years. We're expecting a similar value of agricultural production overall in real terms in 2016-17 if seasonal conditions remain favourable. The weaker dollar has increased average export prices in Australian dollar terms across the board, and we're forecasting a rise in farm export earnings to more than $45 billion in 15-16, and that compares with about $43.5 last year. Most of that increase in export earnings has come about because of the depreciation of the dollar. We're then forecasting export earnings to remain at around $45 billion in real terms in 16-17 as the assumed exchange rate effect weakens, and there's some softening in international prices. Some of the specific commodity movements we see over the next year are increases in the value of dairy products and sugar because of higher export volumes and higher world prices as demand firms. Export earnings for wool are also expected to increase as a result of limited growth in global supplies and moderate growth in demand. Lower export value is a forecast for beef following a decline in the national herd that's affected the volumes available for export, but prices are expected to remain high because of strong international demand and the relatively weak Australian dollar, and it's much the same story for lamb. In the case of wheat, we're forecasting a similar value of exports as higher volumes largely offset lower world prices. As we look further ahead to 2021, we expect that the value of crop exports will be stable as higher volumes largely offset lower world prices. Short of significant drought or other unforeseeable impacts on production, we expect that world supplies will be plentiful, and that will put some downward pressure on crop prices over the medium term. And our forecast for the value of livestock exports is also for similar levels. Increasing turnoff as the herd expands and more competition in export markets is also likely to put some downward pressure on prices. On top of that, we're assuming that the exchange rate support that's boosted export earnings recently is unlikely to continue, and we're forecasting the real value of exports to remain relatively flat over the medium term. So as I said, speakers in our commodity sessions this afternoon and tomorrow are going to expand on those forecasts and look at some of the issues that will drive production and exports out to 2021. Now I want to look very quickly at farm performance and the current story is largely positive. Farm cash incomes at the national level are estimated to be the highest for more than 20 years at almost $180,000 a farm, and that's been quite a broadly spread geographically. Grains incomes have increased to a more than 20 year high because of increased winter crop production in most states, except Victoria, and higher prices for pulses and oil seeds. Beef industry incomes also rose sharply in 15, 16, they're double their 10 year average, and that's because of the increase in sale yard prices. Part of the increase in incomes in the beef sector has been achieved through reduction in the cattle herd as turn off increase to take advantage of those high prices. The reduction in the herd may have implications, of course, for incomes next year as herd rebuilding reduces the availability of cattle for sale. Dare is the only sector where farm incomes are projected to decline at the national level in 15, 16, and that's because of reductions in farm gate milk prices and slightly lower production in most states, and that's been compounded by increased expenditure on fodder in states where seasonal conditions have been poor. Looking at the medium term, there are a number of issues, domestic and international, that are going to have an impact on the commodity outlook and the prosperity of agriculture, and one of those might be water availability. Over the past few years, there've been reduced inflows to the Murray-Darling Basin and declining storage levels. As you can see here, water prices have increased substantially over the past 12 months. Even with average seasonal conditions over the next few years, we're unlikely to see storages increase significantly, and that will maintain pressure on water prices. There's been enormous change in the MDB recently with progress on water reform, including the implementation of the Basin plan and the development of the water market. We've seen significant shifts in the irrigation sector with expansion of some crops such as tree nuts and contraction of others such as grapes. To some extent, the relatively high storage volume since 2011 have masked the full effect of these changes, but the recent rise in prices is a reminder that managing our water resources effectively to balance environmental, economic, and social objectives remains as important as ever, and that's an issue that will be discussed in the water session tomorrow. Another issue that will affect commodity outlook is the international competition landscape, and that's changed positively as a result of the recent free trade agreements and the market access arrangements that we've negotiated, and we'll see the benefits of those flowing through for some time. But on the other hand, we're seeing potentially accelerated competition coming from other exporters into some of our key markets, and that includes a competition from Latin America. Brazil's a good example. Between 2000 and 2014, the value of Brazil's beef exports rose by about a factor of six, and that compares with about two and a half times for Australia. For Brazil, that's been the result of significant investment in the beef industry to reduce costs and boost productivity, as well as successful market access negotiations, including with China and the EU. Argentina's also likely to expand its exports to world markets following significant policy changes by the new government. Export taxes have been removed on grains and beef, quantitative restrictions on grains exports have been lifted, and the exchange rates depreciated by about 25% since the currency was floated. If those measures meet their objectives to stimulate investment in the sector and expand export growth, then competition in some of our export markets is likely to intensify. We've been working in A-Bears on Latin American supply issues over the past year, and Jamie Penn's going to be presenting the results of that in the global agriculture session tomorrow. If we're going to benefit from increasing global food demand, these issues highlight the need to keep our focus on improving productivity and expanding production to maintain our international presence over the medium to longer term. And to come back to our theme, that's going to require increased investment. We can expand production from existing land through productivity gains, or we can expand the land that's being farmed, for example, in the North, and all the development that that would entail. By investment in this context, I mean net increases in productive assets on the farm, for example, through the purchase of new machinery or breeding livestock or the development of land. I'm not speaking about purchases of additional land here as they simply transfer ownership without adding to the asset base. And I'm also not speaking about investment off the farm in infrastructure or processing or other parts of the supply chain. And the scale of investment on farm is significant. More than $2 billion is added on average every year to the assets of the farm sector. This shows the average investment by broadacre and dairy farms over the past 25 years. It's closely related to profitability, and it's also highly correlated with the size of the farm. Large farms, or those that have receipts of a million dollars or more, are making the majority of investments. These farms account for about 10% of the farm population, and they contribute around 50% of total investment. Although there's no hard data, we're seeing reports of an increasing number of transactions in Australia by corporate investors, private equity firms, funds managers, sovereign wealth funds. And that's led to debate about the future of the traditional family farm. But information from our farm survey shows that the sources of investment in Australian agriculture have been very stable over a long period. Around 60 to 70% of investment has been provided directly by the owners of family farms. Debt fundings accounted for about 14%, and the remaining roughly 20% is other forms of equity. We can't break that equity category down any further, but it includes investment by family members other than the owner and their spouse, and through company structures that are used by the family farm. If you remove those, it means that investment by the genuinely corporate sector is significantly less than the 20% included in that category. And the relatively constant share of those categories over time suggests there's been little transfer of farm assets from families to corporate investors, despite all the reports of corporate acquisitions. Suggest instead that farms have mostly been traded between corporate entities rather than from families to corporates. Increasing corporate investment in agriculture has the potential to bring some significant advantages. Their threshold investment levels tends to be high and investment is focused on large farms where we know that rates of return are better on average. Their access to capital can increase the capacity to invest in technology to drive productivity, and their capital backers are sometimes willing to take risks that family farms can't afford. And that can be important in the establishment of new industries or new regions. Cotton's a past example of that, and development of Northern Australia might be another. The corporate sector can provide new operating models. For example, the greater reliance on hired labour and leased land can provide easier access to farming for a younger generation. Aggregation of farmland by corporates could also provide an exit strategy for older farmers or help in succession planning. And there's often a focus on skills development to take advantage of technology on farms and to build better business practices. So a reasonable question might be why aren't we seeing more corporate activity? And the answer might lie in the rates of return being achieved by corporate investment in agriculture. In general, operating returns for the best-performing farms have been relatively stable over the past 20 years. Capital growth's been more volatile, but total returns have been quite strong. Last year, we showed that returns to investment in commercial scale farm businesses in Australia were competitive with investments in other asset classes and that they were commensurate with their risk profile. Returns vary by sector and by region, but there's also a difference in performance between family farms and the corporates. If you're looking at broad acre and dairy, except in the case of beef, family farm structures have outperformed the corporate sector in terms of operating returns, and that's especially the case in cropping. The beef results probably reflect the greater exposure of corporate farms to Northern Australia, where the average farm is much larger than in the South. And those differences between family farms and corporates are similar in Canada and the US. It's not just an Australian story. It's been this way for a long time, and it's one of the main reasons that family farms continue to dominate agricultural industries around the world. And it's the reason that we don't expect to see corporate agriculture transform the family farm model in Australia any time soon. For the corporates, there's probably something to think about why these rates of return are lower than family farms. It may be that the incentives for managers of farms to contain costs, invest in productivity improvements and manage risks aren't as sharp as they are for owners with direct equity in their farms. And overheads are probably lower for family farms. They don't tend to run large offices or maintain investor relations to the same extent. They can defer wage costs when returns are low, and they probably have lower staff turnover and recruitment costs. And some corporate investors may have longer-term objectives, such as food security, in the case of sovereign wealth funds, that reduce the imperative to maximize their short-term returns. And we'll hear more in the next session this morning about the strategies that different types of corporate investors are taking to manage their exposure to Australian agriculture. I've only touched on a couple of issues that will drive the outlook for agriculture. There are obviously many others, both within and beyond the control of farm businesses. The immediate outlook is reasonably stable, but the medium to longer-term will require a focus on improving productivity to grow our position in world markets in the face of increasing competition. Capturing the benefits of innovation will be critical, as will ensuring efficiency along the whole supply chain, managing our natural resource base sustainably, and maintaining the resilience of our farm businesses and communities as they manage multiple risks. These are just some of the topics that will be on the table today and tomorrow, so I hope you have the time to consider them and enjoy the discussions they'll generate. Thank you, and welcome again to Outlook 2016. Thank you.