Asia Times: Australia leading the herd


	July 3, 2001	atimes.com

Oceania

Australia leading the herd

SYDNEY - Beef producers are expected to enjoy some of their best incomes in years in 2001 as the industry, now recording record prices at Australian stockyards and in overseas markets, maintains its healthy momentum.

Cattle Council president Peter Milne said as long as beef prices did not climb too high and price the product out of the market, the good times would continue. "Most people who are active in the industry think the current prices are very, very good and hopefully they are sustainable," he said.

Heightened concerns over possible contamination of Australia's livestock herds by bovine spongiform encepalopathy (BSE or mad cow) and foot and mouth disease from Europe have led to a tightening of import controls since the beginning of the year, but also speculation that the unfolding crisis in Europe may open new markets for Australia's meat supply.

The Australian and New Zealand Food Authority (ANZFA) said in May that countries would be officially rated "BSE free" under the new rules to be detailed later this month. This will allow European countries under temporary import suspension since January the chance to seek trade approval. On January 8, the federal government suspended imports of all beef and beef products from Europe, emphasizing that Australia is one of only five countries in the world recognised as being free from BSE in their cattle. The ban affects all beef goods from 30 European countries including Belgium, Denmark, France and Germany. Foods containing British beef have been banned from importation in Australia since 1996. "Australia and New Zealand have one of the safest food supplies in the world and the current steps are intended to keep it that way," ANZFA said.

Australia had an estimated 17,700 specialist beef raising properties in 1989-99, plus a further 232,800 on-specialist beef properties that had more than 50 beef cattle. About one-third of these beef properties were located in Queensland in 1998-99, with 29 percent in New South Wales and 23 percent in Victoria.

The Australian beef herd is estimated by the Australian Bureau of Statistics to have declined from a peak of 23.8 million in 1997-98 to around 23.4 million in 1998-99. The decline follows two years in which slaughter numbers were relatively high, with the slaughter of female cattle in 1997-98 at record levels.

Both specialist and non-specialist beef properties further improved their financial performance in 1999-2000, following a substantial improvement in 1998-99 when high turnoff and increased saleyard prices resulted in an average farm cash income of around A$45,600 (US$23,019) for specialist properties, or 76 percent above the average for the five years to 1997-98, according to the Australian Bureau of Agricultural and Resource Economics (ABARE).

The domestic market is the largest single market for Australian beef, taking up 35 percent of beef production in 1998-99. However with two-thirds of beef production exported, export markets are vitally important to the industry. Japan and the United States have traditionally dominated the export market for beef, but the market has become increasingly diversified in recent years. Economic recovery in some Asian economies in 1999 resulted in increased demand for Australian beef.

The falling dollar added more than $A500 million (to the overall incomes of meat producers during the past four years, according to an assessment by Meat and Livestock Australia (MLA) last year. Over that period, total meat export income rose A$1.16 billion. Beef producers did best, with A$330 million of the A$915 million lift in beef export income put down to the lower dollar, which has coincided with a surge in world beef prices. Australian beef prices hit an all-time high late last year, with the MLA suggesting the surge would continue.

The MLA said Japanese imports of Australian beef were up 25 percent in July 2000 for the same period from the previous year and up 21 percent in June. It predicted that Asian economies, apart from Japan, would grow by 6 percent in 2001, which should translate into a 10 percent climb in commodity demands.

Beef exports to the United States hit an eight-year high of 35,400 tons in July 2000, according to MLA figures. MLA manager of market analysis Peter Weeks said it appeared the strong US beef market would continue for up to three years. "It is quite an amazing performance," he said. "The good prices have been offset on the export market by the lower Australian dollar, which is good for producers."

The value of beef exports is forecast to climb 5.6 percent to a record A$3.3 billion in 2001, according to an annual forecast released in December 2000 by ABARE. The low dollar, falling beef production and growing demand are behind the strong performance, with beef prices expected to climb nine percent in 2000-01. It said with prices set to average around A$2.31 a kilogram, farmers are expected to start rebuilding their herds.

The slaughter of cows and heifers was down 3 percent. However a report issued in May by the OECD said the high prices beef farmers are now enjoying were set to dip. Australia is preparing to take advantage of opportunities for beef and lamb sales to countries affected by the foot and mouth outbreak in Europe. Markets could include the UK and Europe, plus markets which traditionally sourced their meat from the European Union. They include Africa, Eastern and Central Europe and Asia. Australia currently has a European quota of 7,000 tons of high quality beef. The OECD report said that while spread of BSE and FMD were likely to affect the European beef sector, opportunities for Australian beef farmers may not materialize given falling consumer demand.

Meanwhile, deregulation of the dairy market has had little success despite an expensive relief package. Dairy farmers, particularly those in Queensland, Western Australia and New South Wales where many held quotas to supply heavily subsidized milk, were to get payments to either restructure or go out of the industry with a few dollars in their pocket when deregulation hit on July 1.

An A$1.8 billion package, to be funded by an 11 cents a liter tax on milk for the next eight years, is under way to help save the nation's dairy farmers. "The package ... will certainly assist dairy farmers through these difficult times," Agriculture Minister Warren Truss told parliament in June 2000.

It was the largest single industry bail-out ever cleared by the parliament, and most MPs and industry players believed it would be enough. But Truss has been back in the federal parliament, arguing he needs A$160 million more to coincide with the first year of deregulation. The original package has not gone far enough, he says. The pain of deregulation had been worse than anticipated, and for good measure the milk tax would be extended.

For almost A$2 billion, what has dairy deregulation achieved? Several hundred farmers have gone out of the industry. An ABARE report found small dairy towns such as Monto in Queensland and Dungog in New South Wales would be hit hard, and that many NSW, Queensland and Western Australia dairy farmers had lost 30 percent of their income; the generous payments of the original $A1.8 billion package not enough to keep them in business. Several milk producing plants have closed up shop, and in a bizarre twist, there is a threat of milk shortages in some areas of Queensland.

While a majority of dairy farmers voted for deregulation early last year, the NSW Dairy Farmers Association recently estimated 70 percent of all farmers now oppose the process. An Australian Competition and Consumer Commission report found consumers of supermarket milk were up to 22 cents a litre better off. But it also found small shops were missing out on selling cheaper milk, while milk processors were up to 18 percent out of pocket because of deregulation. Some farmers have benefited from deregulation, particularly those in Victoria who got huge payouts which allowed them to restructure and take the benefit of good manufacturing milk prices.

Australian Milk Producers Association spokesman and southern NSW dairy farmer John Cartwright says deregulation has "left a holy mess", with "consumers worse off and the supermarkets claiming a windfall profit". The organization maintains the industry needs re-regulation, although the chances of that occurring are remote.

Victoria, where 63 percent of dairy farmers come from, would simply press on with shipping its cheaper milk into other states, which is the reason deregulation, and the rescue package, happened in the first place. The real fallout of deregulation, apart from that on the farms, may be at the ballot box, especially for the National Party.

A special regional assistance program which Labor has labelled a "milk-barrelling" exercise was put in place to help dairy areas rather than dairy communities. Under that A$45 million program, a polo field, camping ground and a concrete batch plant all won funding.

While they may bring some relief, Labor backbencher Bob Horne said a A$1 million payment for street works in the town of Gloucester, in his NSW electorate of Paterson, was welcomed but appeared to be a short-term solution. "It will keep in employment for six months only the people who lost their jobs at the [local] dairy factory when it closed, and at the end of six months those jobs will disappear," he told parliament lasdt week. "Those six months may be up until the election period; they probably will be. And what will be the government's responsibility then?"

There are fears that rural anger expressed in this year's Queensland state election will be repeated at at the federal level. Truss' own seat of Wide Bay, held by a margin of 2.9 percent, is home to many disgruntled, and now broke, dairy farmers.

(Asia Pulse/Asia Times)

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