The Rationale behind the AMIC Conference Theme

Australia’s beef and sheepmeat industries are at a crossroad with some terrific opportunities both in the Australian domestic market and on export markets but also facing some significant challenges both from market access as well as challenges in driving greater efficiency in a sometimes fragmented supply chain. What are the priorities in Securing the Future for the red meat industry.

The Largest Trade Export Manufacturing Sector

The red meat processing sector is arguably one of the largest trade-exposed manufacturing sectors in Australia. The sector has undergone enormous rationalisation and reform over the last few decades in order to remain globally competitive in today’s complex international marketplace. That rationalisation is most likely to continue. Between 1980 and 2005 over 90 export abattoirs closed their doors with the social and economic fallout such rationalisation brings with it. Only around 13 or 14 green field sites have been built in that time. As a result of that rationalisation we are producing more processed meat products than ever from less than half the number of export abattoirs in 1980 but this achievement has not eventuated without significant cost and sacrifice by the meat processing sector in order to remain competitive.

Brand-based Marketing to Differentiate our Product

The move over the last two decades to build strong company brands in concert with ongoing rationalisation has also driven more vertical integration in order to put in place production and marketing frameworks that would protect those brands. In the drive for greater efficiency and the removal of cost from the sector in what is a high volume low margin business, both these trends are likely to remain prominent.

We should never forget that the domestic market still remains our single largest market globally and is bigger than Japan, Korea, the United States or China. The domestic market also brings with it a significantly reduced risk in market access and a better understanding by processors of the market parameters that underpin demand. Export markets however allow business in Australia to develop greater scale economies to help offset the high domestic cost of production. An export focus then means market access becomes essential if we are to leverage those economies.

The Cost of Compliance

The meat processing sector is facing increasing pressure maintaining its productive base in Australia. We are seeing wage increases without productivity offsets, processing costs that are now twice that of our competitors in South America and the United States, increasing government charges and compliance costs, in particular the return to full cost-recovery for export certification – a cost not faced by many of our competitors plus increasing energy costs and transport infrastructure that needs substantial investment in order to meet the efficiency needs of a global competitor in the future. How do we Secure the Future?

Remaining Globally Competitive

Despite these disadvantages the Australian red meat processing sector remains globally competitive because of the comparative advantage in the production of red meat that draws heavily on a range of factors including our premier health and hygiene status around the world and the whole of life traceability systems that exist in Australia that few global competitors can match. In addition the quality, variety and shelf-life of Australian meat products is the envy of many. The quest for lower costs has also encouraged the adoption of the latest technology in our processing facilities. Together with the entrepreneurial skills and professionalism of our export sector and their ability to provide a customised product year round to over 100 countries, we still see Australia as one of the world’s market leaders in red meat exports despite our high cost environment but can we maintain this position in the future?

Productivity is the Key

One of the megatrends in agribusiness over the next decade or two will be increasing demand for high protein foods in Asia as millions emerge from poverty. Australia is in a good position to benefit from this trend but it is not without competition. As the high cost supplier in the region, government must not add regulation and compliance costs that undermine the potential. If anything they should be looking to remove it. The red meat sector will need to respond to the new market pressures that eventuate including the removal of supply chain inefficiencies and investment in infrastructure at home. Seventy-one percent of the world’s estimated 75% rise in food demand by 2050 will come from Asia and almost half of that from China. At the same time a new generation of meat exporters such as India and Brazil will provide serious global competition. Access for Australia to Asia is not a foregone conclusion. Realising the potential will require significant capital investment to lift productivity to remain competitive in growing markets and to overcome limitations from aging public infrastructure, capacity constraints and the fact that the sector is still subject to major weather trends and fluctuations making it a difficult investment environment.

Securing the Future will examine all of these trends and will identify those challenges and opportunities and identify which ones we can influence and which ones we should leverage in order to generate the best possible returns for the Australian industry. Productivity will define the future success for the Australian red meat sector on the international market. Securing the Future will examine some of the ways of achieving that.