In 2011, 4 Corners released ‘A bloody business’ highlighting beef animal welfare in the live-trade industry. The story basically shut down the beef live-trade industry in northern Australia for about 6 months. In 2018, the beef industry was seeking over $600 million in compensation by the forced shutdown.The lack of market resilience (i.e. markets can be shut down by either party) exposed the lack of financial resilience in the northern beef industry. One key option strategy to diversify the beef industry was to encourage the development of abattoirs to increase market opportunities.
Well the Australian Agricultural Company (AACo) has just mothballed its $100 million, 3 year old abattoir, primarily due to supply chain logistics. This should be putting fear into the northern beef industry. The AACo identified the under-performing non- wagyu cattle supply chain. Beef production in the north is closely tied to the wet season when cattle are fattened and sold. For those that are unaware of the industry, read Gleeson, Martin and Mifsud (2012), but in summary cattle take a lot longer to get to market than southern areas as they experience significant weight loss during the year when feed is not available. Also read the ACCC report for more information.
While the Live trade industry is still a small component of the value of beef exports (data from: ABARE 2017, Table 12.4 Table) but for the northern region it is the major option for sales. Being limited to one sales option reduces the industries resilience to future shocks.
With the recent debacle in the live sheep trade industry, some hard thinking about how suppliers can improve their herds for the abattoir sector is long overdue. Primarily they are going to have to break the significant weight loss they experience and find an economic way of achieving this.
Blog post prepared by Dr. David Adamson