 So, I'm here to address this question of, is the Black Sea sending Australian grain into the red? So, the Black Sea region comprises Ukraine, Russia and Kazakhstan. I'm going to concentrate on Ukraine as an indicator of what's happening in that broader Black Sea region. Age it will be releasing a report in April that outlines the situation in Ukraine and then in coming months we'll be releasing other reports on Russia and Kazakhstan. So a bit of background, the Black Sea region as many of you will know has rapidly emerged as a globally important exporter of grain and that has implications for Australia because we are a major exporter of grain, particularly wheat. And I've asked the question, how concerned should we be about those developments in the Black Sea region using Ukraine as an example? And then also to ask the question, well, so what? If they are a challenge, what should we be doing about it? So here's a map of where Ukraine is, Ukraine, the largest country in Europe, has the largest military base in Europe, which may be no surprise to you given what's happening in the east of Ukraine. So what makes Ukraine an internationally competitive force in grain export? Well, firstly it has a low cost of production, I'll go into that. It also has a low cost of its grain supply chain, it has favourable yields which underpin its low cost of production. It produces a range of crops which gives its farming systems biological resilience whereas in most of the wheat exporting regions of Australia, those farming systems are very wheat dominant and therefore lack the biological resilience. Before Ukraine it's also very close to major emerging markets in North Africa, the Middle East. What are Ukraine's natural advantages? Well, it has about a third of the world's resource of a rich black topsoil. It also has a favourable climate for crop production. It has nearby markets in North Africa, Europe and the Middle East. It also has very affordable labour. The per capita GDP of Ukraine is about 3,000 US dollars. In Australia we're sitting at about 60,000 US dollars so they have 120th of the per capita GDP wealth of Australia and that translates into very affordable cheap labour. And it's not just unskilled labour either, Ukraine has a historic commitment to education so many of its youth are very well educated albeit very low paid by international standards. Increasingly with the political change in Ukraine in recent years they've opened themselves up to foreign investment and that's allowed the inflow of modern crop technology and equipment. So what underpins the emerging competitive threat of Ukraine? It's certainly not that they are committing more land into wheat production. This chart looks at the areas allocated to growing wheat in Australia and Ukraine. Australia's been flat lining so has Ukraine with respect to the area allocated to growing wheat. The big difference is in the wheat yield trends. So you have the situation there where Australia is on a slight upward trajectory in its yield improvement and there was an interesting presentation by Steve Jeffries of the Australian Grain Technologies responsible for about 60% of the areas sown to modern wheat varieties in Australia. And they have shown that they are at a point where they are delivering now consistently high yielding wheat varieties but they're up against a country like Ukraine that is on a much steeper yield trajectory. And then when you look at what that yield trajectory translates into and the cost of labour, when you convert that into what does it mean in Australian dollar terms to grow a ton of grain, then you find that there are some pretty remarkable differences. So this is a chart that contains a lot of detail but it compares Canada and we did a report last year on Canada and we've updated those figures to 2015. We've similarly updated Australian figures and these are the most recent figures for Ukraine. What you find comparing those countries is that Canada has a very expensive supply chain cost. 37% of the port value of wheat is due to the cost of getting the wheat from the Canadian prairies which are about 1800 kilometres away from port. So a lot of the value of Canadian grain is due to the expense of moving that grain from farm to port. Canada has relative to Canada quite a respectable supply chain cost and about 30% of our grain value is due to the supply chain cost. However, when you look at the cost of farm production as well as supply chain costs you find that Ukraine is about $100 a ton cheaper than Australian grain. That's a huge difference and it's not just that they are more cost effective due to the nature of their farming systems and farm production but they also have cheaper supply chains. So their competitive force is a force that arises not only in the paddock but it also arises beyond the paddock. When we investigated Ukraine and had a look at its costings it wasn't just a desktop study we spent some time in Ukraine. We spent time visiting farm properties in Ukraine. This is one property we visited in southern Ukraine. The fellow in the centre there is Lawrence Richmond. He actually was the crop manager for Victoria's largest wheat producer about a decade ago. He's now moved to Ukraine and manages some very large grain farms in southern Ukraine and he was able to give us a great level of information and detail about costings and the nature of crop production in Ukraine and it's based on his personal experience of several years. And no surprise that the productivity of Ukrainian production also outstrips that in Australia. So we are again, as Lisa was mentioning, Australia has experienced low rates of productivity improvement in recent years. So why, given that information, why isn't even more wheat being grown in Ukraine? Well fortunately for us it's as I said at the start Ukraine is able to grow many crops and no surprise that farmers choose to grow those crops which on a gross margins basis on a return basis offer them the greatest advantage and that's in recent years clearly been in corn, soybeans and sunflower. So most of Ukrainian crop production is switching into corn, soybeans and sunflower. Wheat has been pretty stable as I showed you before the area allocated to wheat is pretty stable. What's happening is there is a change in the spatial distribution of wheat in Ukraine. So this chart shows areas that are in decline when it comes to the area of wheat and areas that are subject to growth. So in the red coloured areas over a 15 year period there's been more than a 2% decline in wheat production. So wheat production is shifting into the southern areas. The southern areas have lower rainfall, they are lower yielding, they are slightly poorer soils. So that's good news for Australia that the wheat production is moving away from really high yielding areas into lower yielding areas. The bad news is that it means that wheat production is increasingly being centred in areas closer to port. So wheat is being grown in regions where they have a supply chain cost advantage. What's emerging in central Ukraine is corn, soybean type belt. The other issue about the competitiveness of Ukrainian grain is that some people think Ukrainian grain is hugely inferior. It's just feed wheat so we don't need to worry about it. Within about 4 to 8 weeks of last year's harvest I was able to obtain data from a reputable third party. So this chart is based on 525 samples of wheat across all the major oblasts in Ukraine. So if I'm a buyer of wheat in Ukraine just a few weeks after harvest I can get information on exactly where wheat of different quality is located. I can't generate that map in Australia. So in terms of servicing buyers we may say Ukraine is almost in developing country status but I can tell you it's internet service in its regions and its provision of grain quality information exceeds that available in Australia. The implications for us is that a lot of the wheat that is being exported in recent years fortunately for us has been mostly in North Africa and the Middle East. The concern though is that what's happened in more recent years is that grain has been spreading into our south-east Asian markets and that trend has continued. So even this year in the marketing season to date Ukraine has exported 2.6 million tonnes of grain to Asia at the same period last year it was only 1.5 million tonnes. So this trend of moving wheat into our Asian markets is continuing. The issue for Ukraine is that it's still in economic transition. It's subject to huge corruption. It's subject to political uncertainty. There's conflict still in the east of the country. So there's a lot of impediments facing Ukraine. So briefly what are the implications of those trends for Australian wheat exporters? The good news is that Ukrainian wheat exporters are currently a modest threat in our key markets but they have the potential to be a very great threat. If they ever switch land out of corn, soybeans and sunflower into more wheat if they further invest in their supply chain infrastructure I haven't mentioned so far but there is huge potential for Ukraine to invest in barge transport and if they do that that will further lower their supply chain costs. So the fundamental point here is that we actually do have time to prepare for this challenge. And this last slide is what do I believe are our needed actions? Well probably the italic font is the more meaningful points here. We need to be forewarned if we're going to be forearmed. So we need to know what's unfolding in the Black Sea, what's unfolding in Argentina because if we're not aware of those developments we can't meaningfully prepare and react. One of the things that we do need to do is we know that Asian markets are going to be crucial to the success of the wheat industry in Australia over the next two decades. We need to know what it is about our wheats that our Asian customers like and we need to provide more of that. So we need to get intelligence about what are the characteristics of Australian wheat and the most desired that people are prepared to pay for and then bring that information back to our plant breeders and marketers. And we need to use this window of opportunity very carefully. If we don't use this window of opportunity carefully and prepare for these competitive threats then we end up deserving our Australian grains industry.