Costs bit­ing beef pro­ces­sors

Countryman - - LIVESTOCK - Melissa Wil­liams

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.

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