SUBMISSION BY THE AUSTRALIAN LIVESTOCK EXPORTERS’ COUNCIL TO THE

AGRICULTURAL COMPETITIVENESS WHITE PAPER

APRIL 2014

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Table of Contents 1. Introduction ........................................................................................................................................ 2

2. Economic Significance of Australia’s Livestock Export Industry ......................................................... 3

3. Upstream Impacts ............................................................................................................................... 6

3.1 Issue 2: Improving Farm Gate Returns .......................................................................................... 6

CASE STUDY 1: Livestock export impacts on the Western Australian Wool Industry ......................... 7

CRITICAL QUESTION: Will stopping the live trade increase the international competitiveness of

Australia’s meat processing sector? ................................................................................................... 7

3.2 Issue 5: Enhancing Agriculture’s Contribution to Regional Communities .................................... 9

CASE STUDY 2: Northern Australia Development and the Livestock Export Industry ......................... 9

CRITICAL QUESTION: Will shutting down the live export trade create jobs in Australia?................. 11

4. Downstream Impacts ........................................................................................................................ 12

4.1 Issue 1: Ensuring food security in Australia and Globally ........................................................... 12

CASE STUDY 3: Opportunities for the Livestock Export Industry in China ......................................... 12

CASE STUDY 4: Australian livestock export competitors ................................................................... 15

4.2 Improving Animal Welfare Globally ............................................................................................ 16

5. ALEC Priorities and Government Action ........................................................................................... 18

5.1 Issue 7: Removing ineffective regulations and reducing the cost of compliance ....................... 18

CASE STUDY 5: Charge out Rates for Live Export by Air Freight ....................................................... 19

5.2 Provide ongoing Policy Security for the livestock export industry ............................................. 20

5.3 Consistency, Transparency and Predictability of the Regulator ................................................. 21

5.4 Improving the competitiveness of inputs to the supply chain ................................................... 22

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1. Introduction

Australia’s livestock exporting industry is an important part of the Australian agricultural sector. Being internationally competitive is critical to the sector’s success. As the peak industry body

for the Australian livestock export industry, the Australian Livestock Exporters’ Council (ALEC) is

responsible for setting industry policy, providing strategic direction and representing its members at

all levels.

Our vision is for a livestock export sector that is a professional industry, delivering jobs, prosperity and

growth to Australia, with a strong future based on reliability and quality and ensuring good animal

welfare along the supply chain.

Our members include Australian Government licensed livestock exporters by sea and air of feeder,

slaughter and breeder sheep, cattle, goats, buffalos and camels. Our members account for more than

95% of Australia’s annual livestock exports. The Council’s membership also extends to other supply

chain participants including producers, registered premise operators, ship owners and other suppliers

to the trade.

ALEC welcomes the opportunity to provide comment on the Agricultural Competitiveness Issues Paper

and contribute to the development of long-term agricultural policies.

The Agricultural Competitiveness Issues Paper defines competitiveness as ‘the ability to efficiently use

our nation’s land, water, human and other resources to achieve sustainable improvement in the

standard of living for all Australians and growth in profit for our businesses’.

ALEC’s submission focusses on four key issues raised in the issues paper:

Issue 1 - Ensuring food security in Australia and Globally

Issue 2 - Improving farm gate returns

Issue 5 - Enhancing agriculture’s contribution to regional communities

Issue 7 - Reducing ineffective regulations

With specific consideration of the ‘upstream’ and ‘downstream’ influences of the livestock export

trade and the issues identified in the Agricultural Competitiveness Issues Paper, ALEC believes that

the livestock export industry has been, and will continue to be critical to Australia’s agricultural

competitiveness, the effects of which are beneficial to producers, communities and industries across

the country.

With this in mind, ALEC has identified priority areas for industry and government action to ensure that

the industry continues to play a critical role in contributing to the competitiveness of Australian

agriculture. These include;

Removing inefficient and costly regulation

Providing long term policy security for the livestock export industry

Consistency, transparency and predictability of the regulator

Improving the competitiveness of inputs in the supply chain

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2. Economic Significance of Australia’s Livestock Export Industry

Australia’s livestock export trade has been, and will continue to be a fundamental pillar of producer and rural prosperity in Australia. The livestock export trade provides an economically powerful alternative market to domestic processing, the effects of which, particularly on farm gate returns, benefit producers Australia wide.

In 2013, Australia exported 850,923 head of cattle valued at A$755 million FOB. 70% of the Australia’s cattle exports went to South East Asia including Indonesia, Vietnam, Malaysia and the Philippines. Indonesia is the largest market for Australian live cattle, taking 53% of cattle exported last year, valued at A$308 million FOB. Despite the Indonesian Government’s target of beef self-sufficiency, changes to Indonesian trade policy on livestock is expected to improve market access for Australian cattle. Live cattle exports to Indonesia are forecast to increase to 780,000 in 20141. An increase in livestock exports to Indonesia may, however, limit growth in other markets such as Vietnam and Malaysia.

Vietnam imported 66,951 head of Australian cattle last year, valued at A$54.5 million FOB which was an increase of 1897% on 2012 levels. Cattle exports to Malaysia also experienced strong growth in 2013, taking 47,620 head, an increase of 45% from 2012. In the Middle East, Israel is the largest market for Australian cattle. Export levels to Israel were up 96% from 2012 to 2013, valued at A$72.8 million FOB.

It is important to note that the livestock export trade to Egypt was voluntarily suspended by industry in May 2013. This trade suspension was lifted in March 2014. Cattle exports for key markets are shown in Table 1.

Table 1: Cattle Export Statistics for 2012 Calendar Year; 11/12 Financial Year; 12/13 Financial Year; 2013

Calendar Year; 2014 & 2014/15 Forecasts

CATTLE 2012 Cal

Year 11/12

FY 12/13

FY % trade

11/12 FY

% trade 12/13

Actual Calendar

2013

FYTD - Feb

2013/14

Forecast FY

2013/14 Forecast Cal 2014

Forecast FY

2014/15

China 55,912 58,853 59,123 9% 9% 66,530 47,946 60,000 65,000 70,000

Egypt 32,800 32,089 15,300 5% 2% 0 0 15,000 40,000 80,000

Indonesia 278,767 376,148 271,200 55% 43% 452,239 335,492 650,000 780,000 850,000

Iran ** 0 0 0 0% 0% 0 0 0 5,000 6,000

Israel 50,087 60,494 67,224 9% 11% 98,320 79,491 102,000 105,000 109,000

Japan 11,281 14,920 11,178 2% 2% 13,639 8,105 12,500 14,000 15,000

Jordan 0 600 9,000 0% 1% 11,900 2,900 7,500 8,500 10,500

Kazakhstan 2,129 2,197 2,213 0% 0% 4,931 4,847 9,000 10,500 11,000

Libya ** 6,900 0 6,900 0% 1% 0 0 0 5,000 50,000

Malaysia 32,781 19,963 38,548 3% 6% 47,534 32,297 54,000 57,000 60,000

Mauritius 8,825 5,164 5,461 1% 1% 2,000 2,000 3,000 4,000 5,000

Pakistan 5,156 2,785 8,327 0% 1% 11,059 5,763 11,000 12,000 13,000

Philippines 32,268 23,903 36,978 3% 6% 19,412 9,362 11,000 12,000 15,000

Qatar 3,123 1,518 2,768 0% 0% 1,150 650 800 1,000 2,000

Thailand ** 8 46 8 0% 0% 208 208 500 20,000 25,000

Turkey ** 46,342 37,432 35,609 5% 6% 9,977 0 0 20,000 25,000

UAE 200 400 111 0% 0% 1,338 1,767 2,500 2,750 3,000

Vietnam 3,353 1,441 15,903 0% 3% 66,953 84,249 107,000 112,000 116,000

** Forecasts subject to market access as markets are currently closed

Figures from Meat and Livestock Australia and LiveCorp, 2014

1 Meat and Livestock Australia and Livecorp 2014

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Australia exported 1,973,418 head of sheep in 2013, valued at A$172 million FOB. 98% of sheep

exported from Australia last year went to the Middle East. Kuwait was the largest market in 2013,

taking 876,004 head, up 24% on 2012 levels. Qatar and Jordan were also large markets for Australian

sheep last year taking 560,762 head valued at A$49.7 million FOB and 287,792 head valued at A$26.6

million FOB respectively.

Table 2 provides an overview of Australian sheep export statistics for key markets in 2012 and 2013

as well as forecasts for export levels in 2014. Markets not represented in Table 2 which imported

Australian sheep in 2012 and/or 2013 include; Argentina, Brazil, Chile, Mauritius, New Zealand,

Norfolk Island, Philippines, South Africa, Thailand and the USA.

Table 2: Sheep Export Statistics for 2012 Calendar Year; 11/12 Financial Year; 12/13 Financial Year;

2013 Calendar Year; 2014 & 2014/15 Forecasts

SHEEP 2012 Cal

Year 11/12 FY 12/13 FY

% trade 11/12

FY

% trade 12/13

Actual Cal

2013

FYTD - Feb

2013/14

Forecast FY

2013/14 Forecast Cal

2014 Forecast FY

2014/15

Bahrain 249,741 386,941 62,250 15% 3% 0 75,000 280,000 400,000

China 0 127 0% 0% 3,472 3,345 5,000 5,250 5,500

Egypt 0 0 0 0% 0 0 50,000 100,000

Iran ** 0 0 0 0% 0% 0 0 100,000 300,000

Israel 64,007 69,200 74,088 3% 4% 54,164 34,283 60,000 70,000 80,000

Jordan 327,960 348,467 343,894 14% 17% 287,792 148,208 200,000 300,000 370,000

Kuwait 706,644 901,486 693,265 35% 34% 876,004 628,571 880,000 930,000 950,000

Libya ** 0 0% 0% 0 0 40,000 50,000

Malaysia 18,864 16,728 24,371 1% 1% 27,969 18,009 30,000 30,000 35,000

Oman 19,892 32,025 35,368 1% 2% 58,476 49,000 80,000 85,000 90,000

Qatar 531,894 456,436 588,078 18% 29% 560,762 342,897 480,000 550,000 580,000

Saudi Arabia ** 69,000 69,000 0% 3% 0 0 0

Singapore 3,933 6,404 3,778 0% 0% 4,772 4,304 6,800 7,200 7,500

Turkey ** 245,147 292,598 125,067 11% 6% 120 0 250,000 300,000

UAE 33,211 44,139 37,500 2% 2% 99,795 95,795 130,000 165,000 170,000

** Forecasts subject to market access as markets are currently closed

Figures from Meat and Livestock Australia and LiveCorp, 2014

In 2013, Australia exported a total of 75,107 goats, 98% of which were exported by air. Goat exports

in 2013 was valued at A$8 million FOB and reflected a 21% increase on export levels in the previous

year. The largest market for Australia goats in 2013 was Malaysia, taking 55,398 head or 74% of goats

exported from Australia. This was a 6% decrease on 2012 levels.

Trade statistics for key markets for exported goats, including forecasts for 2014 are highlighted in

Table 3. In 2013, Australia also exported goats to Norfolk Island and Thailand.

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Table 3: Goat Export Statistics for 2012 Calendar Year; 11/12 Financial Year; 12/13 Financial Year; 2013

Calendar Year; 2014 & 2014/15 Forecasts

GOATS

2012 Cal

Year 11/12

FY 12/13

FY

% trade 11/12

FY

% trade 12/13

Actual Calendar

2013

FYTD - Feb

2013/14

Forecast FY

2013/14 Forecast Cal

YR 2014 Forecast FY

2014/15

Brunei 635 610 985 1% 2% 1,777 1,427 2,000 2,000 3,000

Canada 0 0% 0% 5 5 0 5 5

Indonesia 130 130 28 0% 0% 44 16 24 26 28

Malaysia 59,107 63,117 57,446 88% 93% 55,398 34,480 56,000 60,000 65,000

Singapore 1,896 7,967 3,152 11% 5% 16,778 13,626 18,000 20,000 22,000

UAE 0 373 0% 1% 990 617 1,000 1,250 1,500

Uruguay 0 45 0% 0% 45 0 0 50 60

USA 21 21 0% 0% 0 0 25 30

Vietnam 0 0% 0% 15 15 25 0 15

Figures from Meat and Livestock Australia and LiveCorp, 2014

While overall the livestock export industry’s contribution to the Australian economy may be small

(equating to approximately 0.12% of GDP), the industry is economically significant on both the

regional and farm gate level. As the next section of this submission will show, the live trade increases

farm gate returns to producers by providing an alternative market for livestock. While the industry

opponents do not value this contribution, it is vital for Australia’s overall agricultural competitiveness.

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3. Upstream Impacts

3.1 Issue 2: Improving Farm Gate Returns While the matter of farm gate profitability is addressed in the Agricultural Competitiveness Issues Paper, the focus is primarily on on-farm determinants of profitability including day to day management decisions to improve productivity. While the issues paper acknowledges that profitability can be heavily influenced by factors beyond the farm gate, it is important to highlight that the strength of Australia’s livestock export industry has a significant impact on farm gate returns for livestock producers Australia wide, even for those not directly involved in the livestock export trade. In 2011, the Centre for International Economics (CIE) completed an independent assessment of the value of Australia’s livestock export industry. The CIE analysed the potential changes to market outputs, such as the price and quantity of livestock, should the live trade be closed. The analysis also looked at the impacts of this across Australia’s entire livestock industry. This report found that in the absence of a livestock export trade, Australian producers would be impacted significantly and negatively, stating that ‘without live exports farm gate returns would be lower because of the lower demand for livestock and higher transport costs involved in transporting animals to alternative markets’2. The report found that:

1. On average, the livestock export trade significantly increases livestock prices across the Australian red meat industry and in the absence of the livestock trade;

the saleyard price of grass fed cattle would be 4% or 7.8 cents per kilogram lower, and

the saleyard price for the sheep industry would also be lower, with a drop of 7.6% or 12 cents per kilogram for lambs and 17.6% or 14.6 cents per kilogram for older sheep

2. The live trade contributes significantly on a Gross Value of Production basis to farm level industries and in the absence of the livestock trade,

Farm level income would drop by $47 million or 3.1% in the cattle industry and $64 million or 12% in the sheep industry.

The report noted that while goats contribute significantly to the livestock export industry, as they are harvested from rangeland systems it is unlikely that in the absence of the trade, increased numbers would be diverted into the domestic processing system. A net benefit of the live trade in goats is improved environmental management of rangeland systems. In March 2014, Australian Wool Innovation Limited (AWI) commissioned the Centre for International Economics to undertake a research report considering the economic contribution of the livestock export industry, this time with a specific focus on Australia’s wool industry. The report was developed to determine the impact of the trade on woolgrowers and was calculated by comparing 2011/12 market outcomes, such as production and price, with the outcomes that would have been realised in the absence of the livestock export trade. Similarly to the findings of the 2011 report, the report found that:

1. The livestock export trade, significantly impacts the saleyard prices across Australia

In the absence of the trade, saleyard prices would decrease by $4.07 per head or 4.5% for lambs and $13.20 per head or 24.4% for older sheep i.e. prices for sheep would

2 The Centre for International Economics, The contribution of the Australian live export industry, 2011

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have been between $4 - $13 lower than observed in 2011-12 if the livestock export trade was closed. 3

The case study below highlights the importance of the livestock export trade in delivering farm gate returns and the indirect impact on other industries.

CASE STUDY 1: Livestock export impacts on the Western Australian Wool Industry The Centre of International Economics (CIE) believes if Australia’s livestock export trade was to cease, the impact on Western Australian producers would be ‘devastating’4. A report developed to consider the impact of the livestock export trade on Australia’s wool industry found that in the absence of the livestock export trade;

state wool production would fall by 12%,

the GVP of Western Australian wool producers would drop 6.5% or $302.3 million from the recorded 2012 figures,

the price paid by processors would default to that paid in the eastern states, less the cost of transport and it is expected that transport costs would be approximately $25 - $30 per head which would be borne by producers, and

saleyard prices may fall by $32 per head (or 35.1%) and $36 per head (or 66.2%) for lambs and sheep respectively.

It is important to note that not all livestock destined for export markets are suitable for domestic processing or would extract the same value domestically as in an off-shore supply chain. Consumer tastes and preferences are complex. There is no single market segment for red meat, rather there are a multitude of different market segments requiring a broad range of livestock products. What may currently be exported live to satisfy wet market demand in one country, may not be replaceable by a boxed or chilled product out of Australia for a range of reasons including price. By way of example, the production of lightweight 350kg Northern Australian steers exported to Indonesia enjoy a comparative advantage in providing animals ideal for finishing in off-shore feedlots. For many northern producers, there is effectively no other market. In other nations what is considered fresh is not a chilled product but rather a live product that the purchaser has seen slaughtered or indeed purchased from a market within hours of local slaughter. Such cultural factors are not replaceable by a boxed or chilled product.

CRITICAL QUESTION: Will stopping the live trade increase the international

competitiveness of Australia’s meat processing sector? The live export industry sees itself playing a complementary role to the domestic processing industry and is also a significant opportunity in its own right. It is not clear what proportion of a processor’s cost base is affected by the live export trade. However, it is clear that other factors such as labour costs, a higher Australian dollar, technical and market barriers and regulations and increased competition in export markets, both in terms of costs and market conditions, have a high impact. Those who promote shutting down the live trade for the benefit of the domestic meat processing sector fail to consider:-

3 The Centre for International Economics, Contribution of live exports to the Australian Wool Industry, 2014 4 The Centre for International Economics, Contribution of Live Exports to the Australian Wool Industry. 2014

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Large supply volatility due to seasonal conditions affecting both turn-off and restocking decisions and changes in related markets (e.g. changes in wool prices affecting producer decisions) make acquisition for the live trade only one factor affecting supply

A number of costs in the production chain affect processors’ competitiveness, and are likely to be of much greater consequence to the cost base than the increased prices resulting from demand from the live export trade. For example, changes in the need for supplementary feeding post farm-gate can increase the cost of livestock.

The changes to the domestic value chain and industry structure, such as increasing vertical integration and direct supply arrangements with the major supermarket chains, will be affecting processors’ margins

The continuing strength of the Australian dollar

Changes in global demand, including total consumption and changes in product attributes (including demands for quality), will also be a key driver of processor’s profitability which is likely to be largely delinked from live export sales

Ad hoc actions by foreign governments to suspend, ban or place new conditions on boxed or chilled product can disrupt trade and add unexpected costs

The meat processing sector is capital and labour intensive. To the extent the industry is not able to remain competitive there will be much competition for these resources in other sectors

The consolidation of the industry already taking place is likely to have a far larger impact on processor productivity and competitiveness than would the competition from the live trade

Restricting trade by stopping livestock exports will be reflected in changes in prices of inputs and outputs and will mean lower prices for livestock and the risk of lost market opportunities for product. The extent to which the competitiveness of the meat processors is being hampered by unnecessary and costly government regulation or policies is best dealt with by addressing these matters. They will not be overcome by restricting trade. Additionally, where other countries impose tariffs and subsidies to protect their domestic producers or consumers, it is not in Australia’s interests to restrict trade in goods where we still remain competitive despite the other countries’ trade barriers. The interests of Australia are best placed by creating competitive, flexible and resilient markets, where resources can flow to the most productive use. Market diversity is critical to the competitiveness picture and helps spread the risk of ad hoc shocks. It is very unlikely the government would do a better job of determining that it is in the long term interests of the Australian economy to only allocate capital and labour to meat processing through a live trade ban. A much better approach would be to allow the economy and export markets to determine if adjustment is desirable and for those resources to be freed up for other more productive activities. The future of the Australian meat processing industry will largely be dictated by market forces in a changing global economy and not by the existence of the livestock export trade. While a number of industry opponents have argued that importing nations would directly replace the import of livestock with the import of chilled or frozen meat products from Australia if the live trade was to cease, this is simply not true in some markets. The CIE notes that in the absence of the livestock export trade, an increase in the supply of meat in Australia (and subsequent lower prices) would mean that meat is diverted to the domestic and export meat markets. The scope for substitution however, is completely dependent on each market and subject to influential factors such as an overwhelming preference for fresh meat in importing countries.

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3.2 Issue 5: Enhancing Agriculture’s Contribution to Regional Communities

In addition to the significant impact on farm gate returns, the livestock export trade provides other economic benefits to regional communities such as increasing the land value in regions directly involved in the trade, improving productivity across broader industries and providing employment opportunities. Australia’s livestock export industry employs approximately 10,000 people across Australia, a large proportion of which are in regional areas and areas with limited alternative job opportunities, including significant Indigenous employment. While the price decreases expected at saleyards for both cattle and sheep in absence of the livestock export trade highlighted above represent a national average, both CIE reports note that the impacts would be most acute in regions directly reliant on the trade, such as Northern Australia for cattle and Western Australia for sheep. Research also found that the negative impacts on regional communities would likely to be ongoing as there is a lack of alternative farm enterprise options. For example, in Northern Australia, cattle enterprises specialise in producing light weight cattle in tropical conditions, ideal for finishing in off-shore feedlots. The Centre for International Economics found that on a regional basis, the GVP for beef producers and sheepmeat producers could fall by 21% and 42% respectively in areas heavily reliant on the livestock trade5. The case study below highlights the historical and economic influence of the livestock export industry on community development in Northern Australia including employment opportunities, industry development and returns to producers at the farm gate.

CASE STUDY 2: Northern Australia Development and the Livestock Export Industry Australia’s northern cattlemen have been accessing overseas livestock markets, particularly in Asia

and the Pacific, for more than 100 years. The first shipments of cattle exported from the Northern

Territory were recorded in the 1880s, destined for Hong Kong, Indonesia and Singapore and in the

early 1900s to the Philippines. The emergent livestock export trade had a significant impact on shaping

the cattle industry throughout the north of Australia. Prior to off-shore markets being considered a

legitimate and prosperous alternative, northern stockman drove cattle thousands of kilometres to

southern markets at which northern cattle sold for a third or less of the price of southern stock.

As the livestock export trade expanded, access to international markets provided cattle producers

across the Kimberley region, the Northern Territory and Northern Queensland an alternative to the

southern markets and greater returns than domestic sales. The impact of this included an increase in

property values in northern regions and greater investment in trade and infrastructure, including

transportation infrastructure.

During the 1960s and 70s, Australia’s northern livestock exporting industry experienced significant

growth. This reflected the economic development in a number of South-East-Asian counties (including

Indonesia) and their increasing demand for quality meat protein. The impact of the expanding trade

as well as the National Brucellosis and Tuberculosis Eradication Campaign, brought about significant

changes to the greater northern livestock industry. Northern producers began to restructure on-farm

management and operations with a primary focus on feeder and slaughter cattle for off-shore

markets. This included investment in greater livestock control systems and genetics and a shift in the

stocking of bos taurus cattle to bos indicus cattle breeds that are well suited to the northern climate.

Bos indicus cattle remain an iconic part of Australia’s northern cattle industry today.

5 The Centre for International Economics, The contribution of the Australian live export industry, 2011

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The historic influence of the livestock export trade on northern Australian development has been

substantial. Today, the industry provides significant employment throughout regional areas across

Northern Australia. This includes high levels of Indigenous employment in areas with limited

alternative job opportunities.

Research conducted by the Centre for International Economics (CIE) in 2011 found that the trade has

supported changes in the northern cattle industry that have improved productivity across the

northern industry as well as provided a number of other economic benefits to regional areas including

increasing the land value of northern livestock properties6. This research also found that in the

absence of the trade, the Gross Value of Production (GVP) for beef producers in Northern Australia

could fall on average by 21%.

Today, northern cattle producers are faced with two broad market options: 1) to breed cattle for

(mostly) Asian markets, as slaughter animals or for entry into regional feedlots, or 2) to send cattle

long distances, sometimes in excess of 3,000kms, to eastern or southern markets for fattening and

domestic processing. In many circumstances, frozen and chilled meat products do not meet the

market demands off-shore and northern livestock does not meet the needs of domestic processors.

In these cases, the livestock export trade is the most viable market option.

As a result of the livestock export trade ban to Indonesia in 2011, some Northern Australian cattle

were diverted into the domestic market, causing significant downward pressure on cattle prices. The

longer term effects included a price impact on southern markets, a significant devaluation of cattle

properties across Northern Australia and the subsequent regulations imposed by the Australian

Government reduced confidence in the industry both domestically and internationally.

By way of contrast, a surge of exported livestock into Indonesia and Vietnam over recent months

(October 2013 – March 2014) has resulted in an increase of Darwin steer prices by approximately 50c

per kilo. The higher prices have delivered producers an additional $80 million (400,000 head x 400kg

x 50c/kg). The higher prices driven by Indonesian and Vietnamese demand have flowed through to

other markets, giving producers a further lift in income.

Enhanced market opportunities in Asia are driving new found optimism in northern production,

tempered in Queensland by the ongoing drought. These opportunities are being enhanced by

government action to assist with the opening of new markets, including the removal of trade barriers.

Private investment by prominent Australian businessman Andrew Forrest is reportedly gearing up for

the opening of the slaughter/feeder trade with China. MLA suggests that the greatest challenge for

the Northern Australia industry will be sourcing enough cattle to meet the growing demand.

The strength of Australia’s livestock exporting industry will continue to influence the northern

livestock industry at large, including significant impact on management and operations at a farm level.

While the impact of the livestock export trade is economically significant on a regional level for

livestock producers, it also impacts associated industries and businesses that derive revenue from the

trade such as; on farm contractors (mustering, fencing, stock handlers), road transporters, suppliers

of hay/fodder to both export yards and live cattle ships, freight companies, independent vets assessing

loading operations and stock inspections, shops and retail businesses in regional centres, fuel

suppliers, etc.

6 The Centre for International Economics, The contribution of the Australian live export industry, 2011

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CRITICAL QUESTION: Will shutting down the live export trade create jobs in Australia? One of the arguments run by the trade’s opponents is that shutting down the live trade will create

more jobs in Australia. That is, there will be a net increase jobs through more domestic abattoirs

processing more meat onshore leading to more jobs for Australians.

Opponents of livestock exports often wildly exaggerate the employment benefits that would flow to

the Australian meat processing if the live trade was shut down. They say that closure of the live trade

would create 30,000 or more Australian extra processing jobs.

The facts are that Australian abattoirs process 30-35 million sheep and cattle annually and employ

about 30,000 people, suggesting approximately one employee per thousand animals killed. Australia’s

livestock exports are in the range of 3-4 million annually. Applying the same one per thousand ratio,

would suggest that moving the live trade to domestic processing would create an extra 3-4000

processing jobs, or one tenth the number sometimes claimed by industry opponents.

This would mean a net loss of some 6000 jobs in Australia.

This of course is a purely academic exercise as:-

- Some producers and pastoralists are likely to leave the industry because a market for their livestock

would vanish and the cost of production against the price paid for their livestock (without the

competitive pressure of a live trade) would make them unviable. There would potentially be a

reduction in cattle available for processing domestically

- The end of a live trade does not of itself deal with the economic and financial pressures that determine

the viability of abattoirs in Australia.

- The skilled labour force necessary for any notionally increased abattoir work would continue to be

partially sourced from overseas as currently occurs rather than be sourced from the those whose jobs

have been lost in the live sector

- As indicated previously, the suggestion that a live trade product is directly substitutable by an

Australian boxed or chilled product is not correct. History shows when Australia closes off the live trade,

our trading partners look for live product from other nations more so than taking boxed and chilled

product from Australia. This is more to do with a cultural preference for freshly slaughtered product

and the higher price of boxed and chilled product.

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4. Downstream Impacts

4.1 Issue 1: Ensuring food security in Australia and Globally

Australia’s livestock exporting industry supplies high quality livestock for food-security and breeding purposes to countries around the world, many of which have insufficient resources to produce enough essential red-meat protein to feed their population. Many livestock importing countries such as Indonesia, Malaysia, Sri Lanka are examples of countries lacking sufficient resources to produce enough red meat for their populations and despite attempts to build their domestic capacity, look to Australia to meet the shortfall. In 2007, the World Health Organisation (WHO) estimated that two billion people were anaemic, a main cause of which is dietary iron deficiency7. Further to this, the Food and Agriculture Organisation (FAO) estimates that 842 million people are suffering from chronic hunger and regularly not getting enough food to conduct an active life8. Australia’s livestock export industry plays a critical role in supplying food to the world. Of the 30 counties Australia exported livestock to in 2012/13, one third were listed on the Global Hunger Index9. With governments focused on establishing Australia as the “food bowl of Asia” and the FAO projecting that world consumption of meat will increase by more than 100% between 2000 and 2050, the livestock export industry is a key element of Australia’s capacity to deliver against these ambitions and opportunities. As highlighted in the issues paper, opportunities for Australian agricultural commodities are developing in Asian markets as a result of increasing populations, rising affluence and a growing demand for more varied diets. The case study below considers such opportunities for the livestock export industry in China.

CASE STUDY 3: Opportunities for the Livestock Export Industry in China The combination of population growth and economic development in China has had a significant

impact on demand for both the quantity and variety of foods. China’s population already exceeds 1.3

billion. As the average household income continues to rise in line with national economic growth, it is

expected that by 2050 China’s demand for food will account for nearly half of the global increase in

food demand.

In an analysis of ‘What China Wants’ the Australian Bureau of Agriculture and Resource Economics

and Sciences (ABARES) estimates that the real value of food consumption in China will increase more

than 100% between 2009 and 205010. ABARES suggests that this is a result of increasing household

incomes and changes in consumer preferences. These preferences include a movement towards more

western and higher-value diets, reflecting an increase in demand for red meat and dairy products.

China imported 154,833 tonnes of beef from Australia during 2013, a 370% increase on 2012 levels.

Australian producers are well positioned to meet some of China’s future food needs. While it is

anticipated that China’s domestic food production will increase, it is not expected to grow at the same

rate as domestic consumption. As a result of a fall in China’s domestic cattle herd and a lack of

resources to produce enough livestock domestically, ABARES predicts that the demand for beef, sheep

7 World Health Organisation, Assessing the iron status of populations, 2007 8 Food and Agriculture Organisations, The State of Food Insecurity in the World, 2013 9 The Global Hunger Index: International Food Policy Research Institute, 2012 10 Australian Bureau of Agricultural and Resource Economics and Sciences. What China wants: Analysis of China's food demand to 2050, 2014

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and goat meat will be met by imports and that this import growth will be most pronounced between

2009 and 2029.

It is expected that these opportunities will be directly and indirectly felt by Northern Australia’s

livestock export industry. The increasing demand for both quantity and quality of red-meat protein in

China is also driven by growing demand for safe food. There is evidence that consumers have greater

trust in imported food and, as Australia is free of the most severe animal diseases and stringent

biosecurity regulations apply, our livestock is well positioned for the Chinese market.

Opportunities for the Australian livestock industry are not limited to China alone and together

represent a new phase in the growth of the Australian livestock sector. It is critical that we continue

to diversify markets for Australian live product which helps spread risk, increase opportunities for

producers and have the added benefit of increasing our animal welfare knowledge and skills transfer.

Off the back of increasing demand for live product, ALEC has set a target of 5 million head of exports

by 2015/16.

Recent changes to Indonesian trade policy on livestock is expected to increase exports of Australian

cattle to Indonesia in 2014 to 780,000 head. Indonesia has moved from a quota based import system

to a price based system to better meet the needs of its consumers and reduce the price in wet markets.

As a result, Indonesia has indicated plans to substantially increase imports of Australian cattle in 2014,

the majority of which are expected to be exported in the first half of the year. In 2013, ANZ released

a report into Indonesia’s plans to reach beef self-sufficiency by 2014. This report found that without

significant investment into domestic productivity, Indonesian beef self-sufficiency would devastate

the nation's cattle herd and is virtually unattainable11. The report suggests that Indonesia should aim

for 70% self-sufficiency and import the remaining 30% as this is a more achievable and sustainable

beef model. The report noted that as a result of the existing supply chains between Australia and

Indonesia, Australian exporters are well placed to continue supplying cattle to the Indonesian market

and are likely to remain a preferred source of livestock.

In South East Asia, changes in cattle herd disposition to meet China’s insatiable demand for meat is

creating renewed opportunity for exports to the region. From the 1970’s to around 2010, Chinese and

Indian cattle flowed south and east to satisfy red meat requirements. Since 2010, cattle movements

have reversed with a large draw down on domestic herds in India, Burma, Thailand and Vietnam

moving north to China. This has opened up trade opportunities for Australian cattle to the region with

exports already flowing to Malaysia and Vietnam and new impetus to complete trade protocols to

enable exports to Thailand and Cambodia.

Another key emerging market for feeder and slaughter cattle is Russia. Australia has consistently

exported beef breeders and dairy cattle to Russia since a market access agreement was reached in

2007. Between 2011 and this year, Russia has increased its import of beef breeder heifers to

approximately 30,000 head annually, with dairy heifers around 5,000 per year over the same period.

Public policy decisions by central and regional governments in Russia to improve domestic herd

numbers and genetics are the key drivers behind the export demand.

In April to May this year, exporters expect to send 30,000 British bred (Bos Taurus) feeder steers with

contracts already in place and a further 30,000 head planned for later this year. Industry expects that

the feeder market may grow to 70,000 – 120,000 head per year over the course of the next 2-5 years

and like other markets will be built on strong welfare fundamentals. With the recent Schmallenburg

11 ANZ, Indonesian Beef Self-Sufficiency, 2013

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virus issues in Europe, Russia has shut most European suppliers of dairy heifers out of the market,

having a positive impact on demand for Australian dairy heifers.

This bespoke livestock export market is particularly important for southern cattle producers who are

suffering relatively low prices and depressed farm gate returns due to a lack of competition and

markets for their cattle. Russia becoming a player in the feeder trade and continuing in the beef

breeder trade is important to southern producers to give them an extra marketing avenue for their

livestock.

Old and new market opportunities are also emerging in the MENA region (Middle East and North

Africa) for sheep and cattle. Industry remains committed to reopening the Saudi Arabian market which

has remained closed since the introduction of a regulatory welfare assurance system in 2011. Saudi

Arabia currently imports 8 million sheep, goats, cattle and camels each year, 2 million for Haj alone.

Much of this product comes from North Africa with a higher disease incidence and lower quality index.

Australia offers the Saudi market a high quality, price per kilo value and a disease free product superior

in many respects to North African product. Industry estimates that the Saudi market could take up to

2 million head of Australian sheep each year, many of which would be fat tail, composite breeds

(dorper, damara) that have been bred in Australia specifically for this market. Industry is working with

governments to overcome current impediments to the recommencement of exports but remains

committed to reactivating the trade at the earliest opportunity.

Iran also offers the potential of a 1 million head market per year for Australian sheep. Australia had a

live export trade with Iran up to the late 1970’s but was shut down at the time of the Iranian

revolution. Recent commercial impetus has seen a re-engagement at a Government to Government

level which is close to reaching a conclusion and industry expects to see trade commence later in 2014.

Turkey is also looking increasingly likely to restart the trade after it imposed a trade freeze on imports

of all livestock. This is a highly competitive sheep and cattle market of moderate scale but an

important market in the suite for the region.

Iraq, Algeria, Libya and Morocco are all markets that industry is also working with to complete

necessary protocol arrangements that would enable trade to commence.

As noted above, the closure of the livestock export trade does not mean that importing countries will

substitute livestock with the import of chilled or frozen meat. When a trade ban to Saudi Arabia was

lifted in 2000, the pace of growth in sheepmeat exports actually increased. In 2001, while 2.14 million

Australian sheep were being exported to Saudi, meat exports also peaked at 32,030 tonnes, suggesting

that the two products are complimentary, not substitutes, in some markets. On many occasions, a

disruption to Australia’s livestock trade has caused importing nations to find alternative sources of

livestock to meet their demands. In 2012, when the livestock export industry voluntarily suspended

trade to Bahrain, Bahrain replaced Australian livestock with carcases (some only from Australia) and

livestock imported from Somalia.

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CASE STUDY 4: Australian livestock export competitors Over 100 nations from all parts of the globe are involved in the trade of livestock across international

borders. The Food and Agriculture Organisation of the United Nations (FAO) has estimated that the

global trade in livestock has grown dramatically over the past five decades from around 15 million

head in 1961 to almost 70 million head in 2010.

The growth in livestock exports has been largely under-pinned by a growth in middle class incomes in

developed and developing nations, many of which are unable to produce significant protein from

domestic production. While some nations have set active public policy targets of boosting domestic

herd and flocks from imports of breeding stock, in the main, nations are importing both boxed and

live product to satisfy consumer demand for red meat.

A recent analysis undertaken by the Australian Farm Institute12 into the global trade in livestock

indicates that Australia competes against the likes of Brazil, Canada, France and several African nations

in the livestock exporting space. Contrary to popular opinion in Australia, France is the world’s leading

exporter of live cattle exporting to 35 countries in 2012. Australia was responsible for less than 10%

of world cattle exports and exported to 22 countries.

Source: FAO, AFI Analysis

Reference: Australian Farm Institute, Australia risks missing out on a big livestock export and animal welfare

opportunity, August 2013

While Australia remains the largest exporter of live sheep, our share of the global trade fell to 20% in

2010 as our sheep flock numbers have fallen. The gap in large part has been filled by sheep from North

African and Eastern European nations.

12 Mick Keogh and Adam Tomlinson, Australian Farm Institute, Australia risks missing a big livestock export and animal welfare opportunity, August 2013, http://www.farminstitute.org.au/newsletter/2013/August_2013/August_2013_featurearticle.html

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Source: FAO, AFI Analysis

Reference: As per AFI above

The Australian livestock export sector has one of the highest cost structures imposed by government

regulation and red tape globally. This largely relates to the Government and industry’s commitment

to place animal welfare as a critical component of business, reflecting both ethical concerns for the

humane treatment of livestock as well as reflecting the Australian public’s social license contract with

industry. While all nations to which Australia exports are members of the international animal health

and welfare body, the World Organisation for Animal Health (OIE), Australia has deemed it necessary

to place the onus on livestock exporters to assure welfare along the supply chain to point of slaughter.

This reflects Australia’s implementation of its OIE commitments and concern that Australian exported

livestock receive a comparable level of treatment to domestically slaughtered livestock. No other

nation involved in the export of livestock has a welfare focused regulatory system from paddock to

point of slaughter on the same scale as Australia. This places the Australian livestock sector at a

competitive disadvantage to other supplier nations which to varying degrees place a much lesser

importance on assuring welfare for their exported livestock.

4.2 Improving Animal Welfare Globally

The Issues Paper recognises that attracting highly skilled employees is not only essential for

agricultural competitiveness but also increasingly difficult. While the Issues Paper is referring to the

employment demands domestically, this issue is a priority area for Australian livestock exporters who

face increasing public scrutiny of their employees and supply chain participants, not only in Australia

but also in importing countries.

In addition to exporting livestock around world, Australia’s livestock export industry delivers skills to

people working in the supply chains of our export markets. In recognising that great responsibility

comes with being the one of world’s largest export of livestock, Australia’s livestock export industry

invests significantly to provide training, conduct welfare risk analysis and offer technical support in

off-shore markets.

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The Livestock Export Program (LEP) is a joint program between Meat and Livestock Australia (MLA)

and LiveCorp and invests producer and exporter levies in a range of livestock export activities along

the supply chain to deliver outcomes against four key imperatives;

Ongoing improvement in animal welfare outcomes

Improved industry efficiencies, capabilities and livestock performance through the supply

chain

Build Government and community support for the industry and increase stakeholder

awareness and satisfaction

Improve market access conditions and build demand for Australian livestock.

LEP projects are directly focused on supporting the needs of exporters and their activities in market.

Each year MLA and LiveCorp, in close consultation with exporters and producer peak councils, prepare

an annual operating plan focused on the industry’s key strategic objectives.

The LEP undertakes in-market training programs in animal handling and slaughter to help exporters

and importers improve welfare outcomes and support compliance with the Exporter Supply Chain

Assurance System (ESCAS) and OIE guidelines.

In 2012-13, training was delivered to 1100 participants in supply chains in Middle East North Africa

(MENA) markets and 850 participants across South East Asia. Since September 2011, over 4000 people

involved in approved supply chains in Indonesia have participated in LEP training activities. The LEP

delivers standardised training programs for cattle and sheep to deliver uniform training against

Standard Operating Procedures (SOPs) along the supply chain with relevant modules for ports,

transport, feedlot, lairage, animal handling and slaughter with and without stunning.

For many participants, this is the first time they have participated in formal or informal training. The

recognition they receive for their new set of welfare skills can be a powerful motivator of better

treatment of animals. In addition, a ‘train the trainer’ module is delivered which helps leverage

industry’s efforts to improve animal welfare by embedding animal welfare training capability in the

markets receiving Australian livestock.

As the global demand for red meat continues to rise, it is crucial that Australia’s livestock export

industry remains competitive. Any reduction in livestock exported from Australia, will force importing

nations to source animals from alternative exporting nations, none of which has welfare standards or

assurance regulations near comparable to that of Australia. Of more than 100 countries exporting

livestock around the world, Australia is the only country investing in delivering animal welfare skills to

people working in the livestock supply chains in our export markets. Australia is also the only livestock

exporting nation which regulates animal welfare standards throughout the entire supply chain, right

through to the point of slaughter in off-shore markets. It is through this combination of industry

initiative and government regulation that the Australian livestock exporting industry is helping to

improve animal welfare globally – a fact acknowledged by Dr Derek Belton of the World Organisation

for Animal Health (OIE) at an industry forum in Australia in October 2013.

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5. ALEC Priorities and Government Action

5.1 Issue 7: Removing ineffective regulations and reducing the cost of compliance

The Government must ensure that the current regulatory framework is delivered as efficiently and

cost effectively as possible.

Australia’s livestock export industry has undergone significant change in recent years. In 2011 the

Australian Government introduced a new regulatory framework, the Exporter Supply Chain Assurance

System (ESCAS) under which Australian exporters must provide evidence of compliance throughout

the entire supply chain before export approval is given by the Department of Agriculture.

ESCAS, which is designed to assure the welfare of exported Australian livestock, is based on four key

pillars; international animal welfare standards, control through the supply chain, traceability through

the supply chain and independent auditing.

While ALEC supports the principles of ESCAS and Australian exporters have invested significantly in

meeting the requirements of the system, the administrative cost associated with complying with

ESCAS imposed by the industry regulator, the Department of Agriculture, is detrimental to industry

competitiveness. The industry’s efforts over several years to engage the Government have failed to

deliver any real and lasting gains in cost efficiency and Australian exporters remain subject to

Departmental charges, little or no transparency, and no reasonable right of appeal. In addition, these

charges have increased substantially in recent years as a result of an increase in the Department’s

corporate overheads and the removal of a 40% rebate in 2009.

Departmental charges per animal increased by an average 19% per annum between 2003/4 and

2010/11 prior to the implementation of ESCAS. This represents a cumulative increase in charges over

that period of 141% despite a fall in export numbers by an average 2% pa at that time. One of the key

cost elements in determining export certification charges is the Department’s corporate overheads

which increased by 157% between 2009/10 to 2010/11. By any measure, this is an astonishing rate of

increase in charges. Annual CPI increases of about 3% pale alongside Department’s charging regime.

As mentioned, the high costs imposed on exporters includes a price increase associated with the

removal of a 40% rebate in 2009. The rebate was removed based on a recommendation of the Beale

Review into Biosecurity which suggested that export certification processes are to the benefit of

industry and therefore industry should bear the costs. ESCAS however, was imposed on industry by

government in response to community concern. That is, the benefits derived from ESCAS confer a

public good and as such it is a community service obligation (CSO), not an export certification

requirement. The competitive neutrality guidelines of government are clear in that if CSO’s exist, they

should be transparent, appropriately costed, and directly funded by government.

There is an onus on the Department to not abuse its position as a monopoly provider. The

Department’s charges should not exceed those that would be made by equally qualified Australian

commercial providers and should be competitively tested. According to the Australian Government

Cost Recovery Guidelines, the following key principles apply:

1. Agencies should set charges to recover all the costs of products or services where it is efficient

to do so, with partial cost recovery to apply only where new arrangements are phased in,

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where there are government endorsed community service obligations, or for explicit

government policy purposes.

2. Cost recovery should not be applied where it is not cost effective, where it is inconsistent with

government policy objectives or where it would unduly stifle competition or industry

innovation

Industry participants have expressed serious concern about regulator’s ability to meet these

guidelines in providing services associated with the delivery of ESCAS, estimating that additional costs

of regulation is in the $ millions. It is incumbent upon government to work to enhance industry

competitiveness, not to detract from it and to do so must review the current cost structure associated

with compliance of ESCAS and ensure that Departmental services are delivered as efficiently and cost

effectively as possible.

Even prior to the introduction of ESCAS in 2011, the impact of regulatory costs had been significant

for the Australian livestock export industry. A report developed by ProAnd Associates in 2012 titled

Regulatory Costs and Assistance for the Red Meat and Livestock Industry, analyses the costs and

charges imposed on the industry in 2008/09 and acknowledges that the livestock export industry has

been subject to increasing regulation, the result of which is significant cost to exporters. The report

found that regulation costs were equivalent to 7.4% of total expenses for cattle and 12.9% for sheep.

While this doesn’t seem too high, it is important to note that over 70% of expenses for livestock export

enterprises are incurred in the purchasing of livestock and regulatory charges account for almost 30%

of expenses after the livestock have been purchased. In addition, the report highlighted that

regulatory conditions placed on export permits, such as changes to stocking densities or veterinarian

requirements, also significantly increase the cost of individual consignments and the overall costs to

importers.

The Issues Paper notes that compliance with regulations creates a significant cost and can be

“particularly difficult for companies whose scale of operation extends across jurisdictional borders and

for those companies who are competing in export markets alongside international competitors who

may be subject to lower regulatory standards.” To ALEC’s knowledge, none of the industry’s

international competitors are burdened by such regulatory costs imposed by their governments.

CASE STUDY 5: Charge out Rates for Live Export by Air Freight Air freight is a large and growing sector of the livestock export industry. 100% of live goat exports are air freighted and make up the largest component of livestock movements by air. High value breeders and smaller consignments of sheep tend to make up the remainder of air freight movements, excluding companion animals, horses and zoo animals which are not represented by ALEC.

A long running sore and hinderer of growth of the sector is the excessive and inequitable fees being charged for certification by the Department of Agriculture.

Certification for sea freight is charged at a capped rate per head up to a set number of departmental hours. If the level of hours required by the Department exceeds the maximum allocated, the exporter will be charged at a rate of $70.50 for each 15 minute block ($282 per hours). The number of allowable hours is quite generous, with sheep and goats being shipped to a Tier 1 country having a maximum of 22 allowable hours of departmental time spent before the capped rate per head ceases and the hourly rate of $282 per hour kicks in. If the time the department spends on this type of shipment is 22 hours or less, the exporter will pay a fee of $0.22 per head.

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Comparatively, air freight is charged at $101.25 per 15 minute block ($405 per hour) for every hour the Department spends on an air based shipment with no cap. If the department spends 22 hours on air freight for a slaughter sheep/goat shipment, the exporter will pay $8910. For an average size shipment, this equates to $7.21 per head.

The last review of these fees was conducted in 2007. That review said, “there was insufficient data available for these (airfreight) exports and fees set did not fully recover costs mainly due to the large number of out of business hours service required. Livestock exports by air will remain on an hourly rate. This is due to the multiple export markets, variance in size from a single animal to 800 head and consistency of consignments.” {Reference: Cost Recovery Impact Statement – Amendment of Fees for the Live Animal Export, page 6).

This inequitable approach to air freight charges is based on a number of inaccurate assumptions. In truth:-.

- The proportion of overtime required is not greater than sea freight - The processes that the Department employs for document processing, processing health

certification, health and welfare inspections are identical regardless of whether livestock are being loaded on a livestock ship or on an aircraft. An analysis of departmental invoicing shows that 54% of all departmental time is spent on document processing which is not likely to be an out of hours activity. Animal inspection accounts for the balance of 46% of time spent by departmental officers. Only some of this inspection occurs out of hours.

- Air freight exports service as diverse a range of markets as sea freight exports - Air freight consignments leave from international airports located capital cities locations and do

not require Departmental staff to travel to regional or coastal areas as is sometimes required for sea freight shipments

- A subjective assessment by government that air freight has the capacity to absorb high charges is unreasonable. The majority of air shipments are high volume low value small ruminants for slaughter

- The lack of any charging limitations combined with the very high hourly charges creates a perverse incentive for certification and inspection inefficiencies and a temptation to “over service” air freight shipments.

A simple solution would be to place a capped price per head for livestock exports by air to that offered by the sea freight industry. This would pass the fair and reasonable test and enable air freight exporters to be more cost competitive.

5.2 Provide ongoing Policy Security for the livestock export industry

The Government must recognise the economic, regional and diplomatic significance of Australia’s

livestock export trade and provide policy security for the livestock export sector

The Agricultural competitiveness Issues Paper states that “The Government is committed to providing all businesses with the flexibility, certainty and confidence to innovate and compete in global markets”.

Industry participants are still reeling from the decision taken in June 2011 and a repeat performance by a future government could end the trade once and for all, devastating many farming families and their communities, and further undermining Australia in the eyes of our trading partners as a nation. We would be seen as a significant sovereign risk.

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Given the substantial production lead times and investment in shipping and supply chain infrastructure, industry needs certainty that it will not be shut down by the stroke of a pen.

One of the challenges for our political system is to provide long term policy certainty for all industries. The fractious nature of political debate, our shortening political cycle, and the retail nature of politics in a 24/7 news and social media cycle does not serve industry well. Well manufactured campaigns by noisy groups which set community perceptions that a bad incident within an industry is the “norm” tend to win the day in this environment. Across agricultural industries, including livestock exports, industries are in a medium to long term process of better aligning industry performance and public attitudes, ethics and perceptions. There is real change underway by industry to genuinely demonstrate actions that meet social acceptance and earn the trust of the public. The outcomes of this process will not be immediate and so requires government to have the “guts” to see out the timeframes involved in industry reform – play a long game in the interests of the nation - rather than react on an ad hoc absolutist basis.

5.3 Consistency, Transparency and Predictability of the Regulator

The Government must reduce regulatory inefficiencies in the certification and ESCAS process to reduce cost and red tape and provide consistency, transparency and predictability to regulatory decision making.

The livestock export industry is one the most heavily regulated industries in Australia. The industry

also operates in a competitive international environment and it is therefore vital to the industry’s

competitiveness, that productivity is not hindered by an inefficient regulator.

The Issues Paper is seeking consideration of opportunities to reduce ineffective or inefficient

regulation and for industry participants, this includes:

Improving the consistency in the interpretation and implementation of regulation

Reduce the significant delays associated with processing of applications for export; and

Increase the accountability of regulatory decision-making to improve transparency and

predictability

From an exporter’s viewpoint the key issues in the regulatory relationship with the Department of Agriculture and Government are:-

a. Are regulations, directions, order and conditions on consignments clear, essential and verifiable?

b. Are the Department’s decision-making processes and timelines reasonable, consistent and transparent?

c. Does the Department operate off a set of business rules and work instructions that are well known and understood by staff and applied consistently?

d. Is the Department’s risk assessment of markets and consignments appropriate, factually based, consistent across exporters and transparent?

e. Does the Department have clear policy settings based on relevant considerations that are transparent, accountable and consistent?

While exporters recognize that there are actions they can take to improve the regulatory relationship, a number of issues of regulatory inefficiency have been consistently identified by exporters including:-

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- Lack of consistency in the interpretation and implementation of regulation

- Significant delays to processing of applications for export certification and ESCAS

- Notification of new export conditions on consignments at the “11th hour” which appear

to be excessive and reasons for inclusion not provided

- Lack of accountability for regulatory decisions – lack of transparency and predictability

ALEC is of the view that the Department can take a number of initiatives to improve consistency,

transparency and predictability of its decision-making processes including:

o Ensure that there is a clear delineation within the Department between the policy and trade

functions and the regulatory functions

o Commitment by Government to reduce regulatory inefficiencies in the certification and

ESCAS process to reduce costs and red tape and provide consistency, transparency and

predictability to regulatory decision-making

5.4 Improving the competitiveness of inputs to the supply chain

Government must prioritise investment in infrastructure that reduces the bottle necks and

disruptions that add costs and inefficiencies across the supply chain.

The Agricultural Competitiveness Issues Paper recognises that Australian agricultural enterprises

require reliable logistics and effective transportation infrastructure. The issues Paper seeks comment

on the necessary transport and distribution infrastructure required to support the food and fibre

production systems in the future.

Ports

For the live shipping industry, port infrastructure and access is an issue of keen interest and poses a

significant risk to the industry’s capacity to meet the growing demand for Australian livestock.

The livestock trade exports between 3 – 4 million head of livestock out of (at least) eight ports –

Fremantle, Adelaide, Portland, Townsville, Karumba, Darwin, Wyndham and Broome.

The key areas of concern for the industry include:-

Infrastructure investment – replacement and development

Port access – user agreements, berthing protocols, congestion

Further challenges – port pricing, urban encroachment and public perception

Infrastructure investment is an issue of major concern to industry due to the lead time required to get

port facilities built or improved. Funding issues and red tape imposed by local, state and federal

governments have been significant impediments to infrastructure spending. A good example of this

is the political constraints over consecutive governments placed on the development of the Kwinana

(James Point) facility in Western Australia.

Financing investment in infrastructure replacement and/or development is often complex due to the

various ownership/financing models in place (mix of public and private sector investment that are

managed by an overarching Port Authority).

Due to significant private investment from competing sectors (minerals and energy) into specialised

port infrastructure such as pipelines, container cranes and bulk loading facilities, port authorities often

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prioritise vessels to these berths. In comparison, the loading of livestock onto vessels does not require

investment in fixed loading infrastructure. Therefore the perception may be that the industry is not

contributing to investment which reduces equal loading opportunities.

Port access and congestion continues to cause enormous logistical risk to the industry. In at least two

of the major export ports for livestock exports – Fremantle and Darwin, exporters have access to one

berth only. At certain times of the year due to import policies of destination markets, exporters have

acute needs over a short period of time that need to be accommodated but this is difficult with the

very restricted berthing access for vessels.

Due to the private investment into specialised loading facilities, ports have reduced the number of

berths available to livestock vessels or make berth availability conditional on the arrival of vessels that

require the fixed loading facilities at that particular berth. The ‘first in first served’ policy appears to

be the approach adopted by the majority of port authorities. However, this approach creates further

uncertainties associated with the up-country logistics of planning a consignment, as delays are often

not realised until within 48 hours of the planned loading time. This places unreasonable financial risks

onto exporters, due to additional feedlot costs, quarantine, land transport commitments, etc.

Port congestion is often a significant concern to exporters, as berths are often congested with

imported products from the previous vessel or nearby berth. This can impede the efficient loading of

a livestock vessel to the point where loading needs to be suspended until the congestion is addressed.

In the longer term, port congestion could become a significant logistical risk and undermine industry’s

ability to take up growth opportunities in fast expanding markets in South East Asia and China down

the track. This would have a detrimental impact on producers who are in many instances just

beginning to reap new rewards from a reenergised live trade after several difficult years.

Port pricing is another issue of concern. The ports used by the industry are geographically dispersed,

multi-purpose, structurally different and operated as independent, self-supporting businesses

wanting to recover fixed costs. These costs include harbour dues, berthage, electricity, water, waste

disposal, security, pilotage, towage and provisioning.

These cost variations are mostly due to variations in the charges applied at different ports. An

exporter’s decision to use a particular port tends to be dictated by the availability of stock and limits

an exporter’s ability to use the least cost facility.

While industry operations are limitations to reducing port costs, the setting of port charges is not

undertaken by an open, transparent and relatively competitive market. There have been reported

instances where a particular port has charged double the standard charge, with no apparent basis for

doing so. This raises concerns for industry’s both in terms of reasonable and fair charging for access

and our capacity to absorb future increases in port charges if inadequate lead times are not afforded.

Road Transport

The CSIRO, in partnership with the Commonwealth, Northern Territory, Western Australia and

Queensland Governments recently completed a logistical and mapping analysis of livestock

movements across northern Australia. Utilising data from 50,000 properties, 88,000 origin to

destination combinations and over 1.5 million vehicle movements, the study comprised, “ the most

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comprehensive mapping and analysis of northern transport routes and beef industry infrastructure

ever undertaken”.13

The report noted that, “Moving northern Australia’s cattle from farm to market can involve the longest

land transport distances of any Australian commodity. Cattle from the Northern Territory, for

example, travel an average of close to 1000 km and sometimes as much as 2,500 km to east coast

abattoirs”.

The report went on to say, “Long distances raise costs and risks to production. Land transport costs

comprise up to 35% of the market price of livestock. Floods and seasonal road closures can, for months

of each year, prevent stock reaching ports or abattoirs. This reduces the efficiency of use of these key

infrastructure assets, challenging their economic viability and reducing industry profitability and

resilience”.

There are also OHS considerations for drivers and animal welfare concerns that must be managed

within the above context.

In terms of port access, the northern live trade operates out of at least five ports spread from Broome

to Townsville. Almost invariably, exporters face delays to loading due to limited berthing space or

competition from the mining sector. With typical demurrage costs of $20,000 a day, in addition to the

price of general operations, these delays add significant cost to the livestock export process.

Inefficient logistical routes and hubs undermine the benefits of Northern Australia’s proximity to Asian

markets. If Northern Australia is to fully reap the benefits of markets on its doorstep, then addressing

logistical impediments is of critical importance. Governments have a large part to play in this through

strategic investment in road and port infrastructure.

The CSIRO study produced tools that can assist industry and government reduce recurrent transport

costs and identify logistic benefits of such actions as road upgrades.

The Fourth Northern Australian Beef Industry Roundtable held in Broome on 1 March also identified

a new project to review port loading efficiency in Australia and in Asia for both boxed beef and live

cattle. This project, building on the work of the CSIRO road logistics study, would recommend priority

infrastructure improvements.

13 Andrew Higgins (Editor), “Livestock Industry Logistics, Optimising Industry Capital Investments and

Operations, CSIRO, November 2013, v.