The competitiveness of the Australian livestock export industry

The livestock export sector can be considered to be the supermodel of Australian agriculture. The sector is constantly beset by welfare concerns, its creatures consistently considered to be underweight, and its place in decent society frequently questioned. Yet despite this, the industry continues to prosper, and livestock exports were worth over $1.3 billion in 2014. AFI is conducting research into the competitiveness of the Australian livestock export sector and its place within the agricultural economy. The report will cover global trends in livestock exports, and attempt to identify determinants of overseas demand and supply. It will assess the role of the sector in the livestock industries by examining issues such as the impact of livestock exports on livestock production, feedlotting and processing capacity, livestock transport and shipping capacity, and trends in livestock prices.

The live export industry has been the subject of a number of economic studies in recent times, particularly regarding its interaction with the meat processing sector and the livestock value chain. To an extent, live exports mean decreased throughput for the processing sector, although this is very much dependent on the origin of the livestock being exported. Previous economic modelling of the relative value of live exports has frequently focused on cost-benefit analyses between these two turn-off options, assuming that livestock producers can choose one or the other – which is often not the case.

Drivers of live export supply versus processor supply remain a crucial element in assessing the overall ‘competitiveness’ of the industry. The competitive advantage of live cattle exports in northern rangeland regions is significant. As too is the managerial flexibility available to Western Australian mixed enterprise farmers as a consequence of the live sheep export market. Nationally, 10.6% of cattle and 6.7% of sheep disposals were supplied to live exporters in 2014. These ratios vary dramatically in response to the disparate enterprise options and operating constraints between geographic regions. The report includes several case studies highlighting the incentives and strategies dictating on-farm turn-off decisions.

Analyses of the value of the Australian livestock export sector also commonly presume that Australia is in a position to pick and choose which international markets it supplies. This may have been the case in the past when Australia dominated global live sheep exports, but it is certainly no longer the case. The steady decline in the Australian sheep population since the collapse of the reserve price scheme for wool in 1991 has limited Australian live sheep exports at a time when global demand has been increasing. As a result, European nations have recently emerged as major suppliers of live sheep into Africa and the Middle East. This is despite the fact 95% of live sheep exports from Australia are destined for that region. In 2009, live sheep exports from Romania and Spain to Africa and the Middle East were worth less than US$8 million, however by 2014 they were worth US$247 million. By comparison, the value of Australian live sheep exports that year was US$201 million.

The research involves a close examination of international demand for livestock exports. Livestock export markets tend to be characterised by either poor cold-chain and refrigeration infrastructure, or a cultural preference for fresh meat sourced from wet markets. Increasing urbanisation, the rise of domestic and retail refrigeration and growing acceptance of overseas halal certified products complicates the demand side of the equation.

The relatively small number of markets which harbour a strong preference for live exports leaves the industry highly exposed to the vagaries of individual markets. Indonesia is the prime example. The quarterly import quota was cut from 250,000 to 50,000 head between the 2015 July and September quarters. New markets are being sought to mitigate this risk and provide greater stability to producers. There has been recent success in developing markets in Vietnam. In 2014, exports of live feeder cattle to Vietnam were worth US$165 million, which amounted to 19% of live feeder cattle exports. This was up from $1.8 million in 2012. The ability to diversify markets will be an important factor of future competitiveness.

The Australian livestock export sector faces significant challenges in the years ahead. As ever it walks a delicate balance between animal welfare concerns (both real and perceived), the need to respond to the volatile consumer demands and government policy changes occurring in developing nation markets, and remaining a competitive option for Australian livestock producers. Despite these pressures, preliminary findings suggest that the livestock export sector can and should remain a competitive and growing segment of Australian livestock industries.

Image:  Wellard