Costs biting beef processors
Regulations and red tape are crippling the global competitiveness of Australia’s beef processors, which are heavily reliant on export trade, and threatening future investments in this sector.
A new report commissioned by the Australian Meat Processor Corporation shows domestic beef processing costs are 24 to 75 per cent higher than the country’s three main international competitors.
Processor costs to operate are 24 per cent higher per head in Australia than in the US, 50 per cent higher than in Brazil and 75 per cent higher than in Argentina.
About 70 per cent of Australian red meat is exported and, in Australian dollar terms, this makes local beef about $125/head more expensive than beef from Brazil, $93/head higher than US beef and $91/head higher than beef from Argentina.
The peak body representing domestic beef, sheep and other meat processors plans to leverage the AMPC’s Cost to Operate report findings to push for Federal Government assistance in meeting inspection service fees imposed on them by importing countries.
AMPC director and Northern Co-operative Meat Company chief executive Simon Stahl said offshore inspection fees were in place in all export markets and cost the Australian meat industry about $110 million each year.
He said individual meat processors could pay up to $1 million annually in import inspection fees.
“The governments of the US and Brazil cover up to about 95 per cent of these fees for processors in those countries, putting us at a disadvantage,” he said.
“We are all for free trade, but we want a level playing field and recognition that governments in other countries see this as appropriate.”
The AMPC report, compiled by consultant economist Selwyn Heilbron, found high energy and other utility prices, regulatory burdens such as government inspection fees, and labour were the main culprits constricting Australian beef processing competitiveness.
The analysis showed government regulations accounted for 54 per cent of national red meat processing input costs, excluding livestock purchases. This was estimated to be 2.75 times higher than in Brazil, 2.4 times higher than in the US and 1.89 times more than in Argentina (based on 201516 data).
Labour-related expenses made up about 58 per cent of operating costs for processors, which was well above competitor nations that operated below 50 per cent.
The report said regulatory changes to labour, utilities and certification costs could transform the competitiveness of the domestic beef processing sector and reduce overall operating costs by up to 5.5 per cent.
“This could bring $700 million back into Australia’s beef processing industry — currently estimated to be worth $1.4 billion — and transform its prospects for investment, long-term income and employment,” the report said.
It recommended government and regulatory agencies address the high labour and energy cost disadvantages facing Australian processors, including strategies for more flexible workforces, visa systems and alternative energy initiatives.
Mr Stahl said it was difficult for the red meat industry to develop a solution to high energy and utility prices, which were significantly higher than in competitive countries, especially the US.
AMPC chief executive officer Peter Rizzo said the AMPC report highlighted the real risk of Australian red meat processing disappearing overseas.
He said there needed to be significant reform of industry-related costs, especially those subject to regulatory influence by the government, to maintain competitiveness and an estimated 130,000 jobs. He said the most imminent threat to industry identified in the report was for quarter-cut beef to be processed and value-added overseas.
AMPC chief executive Peter Rizzo.