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| Development of Australia’s livestock industries has occurred not only because of growth in domestic demand but also as a result of growth in foreign demand. Australian producers in Western Australia and the Northern Territory have developed an industry that responds to the specific consumer demands of south east Asia and the Middle East. Foreign demand has provided Australian sheep and cattle producers with a broader network of markets for which they have adapted their production methods, particularly in the west and the north of the country. Live export trade for these regions is a vital market outlet for these regions. The future prospects for the Australian live export sector are likely to depend on several key factors. Continued population and income growth in the countries to which Australia currently exports live animals is expected to result in increased demand for beef and sheep meat as a more highly valued source of protein. However, the possibility that regions that produce cattle and sheep and currently have endemic foot and mouth disease, such as Brazil, could eventually be free of the disease represents some threat to Australia’s ability to maintain its share of these markets. If this were to occur, Australia’s market share in importing countries could be eroded by increased competition from lower priced livestock sourced from these countries. Improvements to the feedlot sectors of south east Asia may also influence Australia’s share of the market in future. A combination of transport and infrastructure logistics in importing countries, together with a range of cultural and religious practices, mean that there is currently a strong preference for live animals rather than chilled or frozen meat. Live animal exports to these markets are not perfect substitutes for exports of beef, veal and sheep meat. If that were the case, the current demand for chilled and frozen halal beef and sheep meat to south east Asia and the Middle East would probably be higher. Indeed, Middle East markets for both live sheep and sheep meat have been growing at similar rates as a result of the growth in urban centres and incomes. Regardless of this trend for sheep meat, however, growth in Australia’s share of these markets will continue to depend on the trade in live animals. Any restrictions on this trade from Australia are therefore expected to have an adverse impact on the industry as the importing countries would source livestock from competing markets rather than substantially altering their demand for beef, veal or sheep meat. |
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| Economic implications of restricting exports of live animals | ||
| If Australia were to restrict live exports it is likely that there would be significant regional economic effects, particularly on the cattle industry of western and northern Australia and the sheep industry of Western Australia. It is generally accepted that there would not be a 100 per cent transfer of the industry from live animal sales to their meat equivalent, despite the potential that currently exists for sheep meat. This would result in a loss of farm income to producers currently specialised in the trade of live animals. The quantification of these potential economic losses was beyond the scope of this study. For beef, the prospects for increased sales of carcasses and boxed beef to south east Asia and the Middle East appear limited. Challenges to be addressed include the lack of access to storage and refrigeration by a large proportion of the south east Asian populations. In addition, there are currently no halal certified abattoirs in the northern cattle producing region that could supply these markets. The prospects for selling meat domestically from animals reared in the north and west also appear limited. The cattle reared for live export from the west and north are Bos indicus breeds. The meat from these animals is not what is demanded by Australian beef consumers. Meat from these animals is therefore unlikely to command a high price domestically. Without a market for live Bos indicus breeds, producers may return to a form of production that existed prior to the opening of the south east Asian and Middle Eastern markets — producing cattle for low quality manufacturing beef that commands a relatively low price. For sheep, the potential for the domestic market to absorb the surplus supply caused by a cessation in live sheep exports is limited. Domestic consumption growth may be affected by price declines in the short term but long term growth is largely related to population growth. Consequently, initiatives to supply halal sheep meat to foreign markets would have to be pursued more aggressively and the price of the product would have to fall in order to compete with lower priced competitors such as China and Uruguay. Unlike south east Asia, the Middle East is not as restricted by its food distribution system in terms of refrigeration. However, strong cultural preferences for fresh meat will continue to drive demand for livestock in the region and this demand is likely to be met by alternative suppliers, such as north Africa, rather than through a surge in frozen sheep meat imports. |
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| Conclusion | ||
| Continued population and income growth in south east Asia and the Middle East is expected to result in increased demand for live cattle and sheep imports. Australia has secured its current share of this market for live cattle and sheep largely because it is free of diseases such as foot and mouth disease and has a reputation for delivering reliable quality compared with competing suppliers. Australian shipments of live cattle and sheep are meeting the specific demands of other countries. The countries that demand live sheep and cattle from Australia are varied in their stages of economic development, cultures, religions and diet. Given the stage of economic development of the south east Asian countries, it is unlikely that the nature of demand from these markets will change in the near future. What is apparent is that demand is highly sensitive to changes in relative prices. As demonstrated in the country profiles, a depreciation of domestic currencies relative to the Australian dollar or an increase in the saleyard price of Australian cattle can have a profound effect on demand. For sheep, the increase in Australian export prices led to a shift to alternative suppliers of sheep, including north Africa. While the cultural and religious differences between Australia and the countries to which it exports live animals can perhaps be influenced by Australia — for example, in terms of its preferences for the handling of livestock — they are unlikely to be changed. If Australia ceases to ship live cattle and sheep to south east Asia and to the Middle East, there is likely to be a significant effect on some of the regional economies of Western Australia and the Northern Territory, although the magnitude of the potential losses is as yet unknown. What is known is that these market losses would stem from the substitution of demand of current export markets to alternative sources of supply. That is, countries that currently import live sheep and cattle from Australia are unlikely to substitute their demand for live animals to beef, veal or sheep meat. Rather, they are likely to source the animals from elsewhere. This transfer of demand would be expected to result in economic losses to the industry and surrounding regional communities. Further analysis is required to quantify the extent of the losses associated with the potential cessation of live export trade. Areas requiring a closer assessment include the potential loss in producer income and to the regional cattle industry more broadly. The flow-on effects to regional communities as well as other industries — such as road and sea transport — also need to be taken into account. Further, as a consequence of any restriction on livestock trade, there may be requests by industry for government assistance to support any transition to alternative activities. |