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Estimates: Rural and Regional Affairs and Transport Legislation Committee (Meat & Livestock Australia)

Estimates & Committees
Lee Rhiannon 28 May 2014

Senator RHIANNON: I am interested in what you see as the cause of low cattle prices. Something that is often raised with me is the many factors: falling live export numbers; increased demand and competition for chilled export market; the appreciation of the dollar; capacity restraints of specialised shipping with the retirement of a lot of vessels; and Brazil and India and other export countries coming back into the trade. I was interested in your comments on those different factors, because we have also got Indonesia's long-term plans to be self-sufficient, and then the 2011 suspension of the trade. I am interested in your comments on the reasons for the low prices and how you see some of those factors impacting on those prices.

Dr Barnard : I have consistently said that the major reason currently is levels of supply. Those levels of supply are predominantly caused by the climatic circumstances which Australia currently faces—namely, drought in a lot of areas, particularly in Queensland, where the major cattle numbers are. To give you some appreciation of the level of that supply, last year cattle slaughter was 8.3 million—13 per cent up on the previous year—so that is a big jump in itself. You have to go back to the 1970s, when we had a herd of more than 30 million, to find slaughter numbers of 8.3 million. It is up 13 per cent last year; this year it is up another 15 per cent on the weekly kills that we collect in the eastern states. So, 13 per cent up last year, 15 per cent up this year. When you get those sorts of numbers coming forward, that puts pressure on prices.

As I have said to this committee on previous occasions: demand for our beef worldwide has never been better. We have full set prices up to Japan virtually at record levels at over $6. We have our manufacturing beef prices to the United States virtually at record levels. We did 1.1 million tons of exports last year, which was a record. There is the demand there for the product. It is predominantly supply. Now part of the supply equation, but it is only one part, is still a hangover from the live export issues. There was probably of the order of 500,000 cattle—maybe a little more—that did not go overseas in live exports in 2011-12 that otherwise might have. Those cattle headed south and have been fed out and are now being presented to works. That is part of the equation, but I think drought is by far the bigger part of the equation.

Senator RHIANNON: How does this sit with the claims about the impacts of the 2011 suspension on prices and the impact it had on the industry?

Dr Barnard : We did the sums on the cessation of the trade. We got professional people to model those impacts and I have presented the numbers in the past. Nationally, it is a four to five per cent decline in grass-fed cattle prices if the trade ceased. But this is the critical point: it has multiple impacts of that number on North Australia. You look at the impact on Northern Territory producers, you look at the impact on producers up in the Kimberley and you are looking at a 20-plus per cent, 25 per cent, 30 per cent decline in prices due to a cessation of the live trade. It is very much felt regionally in the north of Australia.

Senator RHIANNON: When you say 'felt regionally', we often see this figure about the attribution of $600 million losses directly to that trade. Do you agree with that figure, and then would you say that it is greater in certain areas?

Dr Barnard : I think the figure is about right. I am happy to take the figure on notice, but I think about right. Certainly, without a shadow of doubt, that figure is felt hardest by those in northern Australia and in the Kimberley in terms of the cattle trade.

Senator RHIANNON: If you could take it on notice, just to check, because it is obviously interesting and it keeps on coming up for us. You have mentioned the severe impact on the Northern Territory and the Kimberley. Are there any plans to make farming more sustainable for those areas by building more abattoirs?

Dr Barnard : When I joined the industry—and for my sins I have been in the industry a long time; I have been in the industry almost 30 years—there was a series of works in northern Australia. There were works at Wyndham, Broome, Katherine and a number of other places. They closed down, and they closed down in part because they could only operate on a seasonal basis; it just got too wet at certain times of the year. They closed down because of the shipping logistics out of the region, and they closed down because that region is a natural fit in terms of providing feeder cattle to Indonesia. It is a beautiful trade, in a way, that works for both northern cattle producers and Indonesian feedlotters.

Senator RHIANNON: But can the Indonesian trade be an income for all those pastoralists and all those farmers?

Dr Barnard : Well it certainly adds incredibly to demand in that region. We will do I think this year over half a million head to Indonesia again. And it is not only live—I think we will do more beef to Indonesia this year and in future years. You look at the 250 million in Indonesia, you look at the fact that their economy is growing at more than six per cent a year, you look at the fact that they are mostly Muslim so they do not have pork in their diet, and the middle class there is growing incredibly each year and part of the package they want is to eat more beef.

Senator RHIANNON: And that could not be done more sustainably and more regularly for the industry up north by having the abattoirs in Australia, creating the jobs in Australia and creating the certainty here?

Dr Barnard : Certainly, abattoirs do a significant beef trade to Indonesia but those northern abattoirs were closed down because of the logistics of the region, because of the seasonal nature of the region, because of the increasing competition from mining for labour and because of this beautifully synergistic relationship between feeder cattle from northern Australia and the feedlot industry in Indonesia.

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