The diversity of Australia’s red meat and livestock industry means we can cater to just about every market segment around the world, from wet markets in Indonesia to seven-star restaurants in Dubai.
Our success in delivering products to meet consumer requirements has continued to build this year, despite environmental and trading challenges. Beef sales at home and around the globe increased 5% to $11.5 billion; lamb and mutton is now valued at $3.6 billion – up 9% on last year’s total; and the value of our livestock export trade has grown 10% over the last 12 months to contribute $769 million to the total value of the industry.
Our ability to sustain this growth going forward hinges on our ability to identify, predict and meet the evolving expectations of the community, consumers and the industry itself.
MLA’s role is to ensure the industry has the tools and information required to meet these challenges, maintain its enviable reputation and continue to push the frontiers of the marketplace.
Community
The vision and foresight of the Australian red meat and livestock industry to consistently and collaboratively overcome relentless challenges has led to our strong position as a reputable supplier.
Challenges like brucellosis and tuberculosis in the 1970s, food safety scares in the late 80s, and BSE and FMD outbreaks overseas in the past decade have all had the potential to erode the value of our industry. Waning consumer confidence in our product is the ultimate threat to the success of our industry, and we have effectively met and overcome these challenges through a united industry approach. Some of the tools and systems our industry has developed and implemented to pass these tests, such as the brucellosis and tuberculosis eradication campaign (BTEC), national vendor declarations and more recently the National Livestock Identification System (NLIS) and Livestock Production Assurance (LPA), have been challenges in themselves. They have been fundamental, however, to our industry’s $15.9 billion success.
Community expectations are shaping the challenges we face today. Good corporate citizenship, land stewardship and the responsible treatment of animals are high on both community and government agendas.
We must respond to these signals as a unified industry by implementing best practice standards on farm, and actively communicating our achievements to build the community’s trust in our systems, our practices and our products.
Applying best practice standards in all areas of our business strengthens our reputation, positions us as a market leader in the ethical production of food and paves the way for a solid and successful industry for the next generation of producers.
Customers
Markets
This year, challenges on both the supply and demand sides of our business – with the persistence of drought and a slow down in export demand in the later part of the year – were exacerbated by a rapid rise in the Australian dollar.
In spite of these challenges, we achieved an 8% increase in beef exports to reach a record $4.9 billion, with almost half of this coming from sales to Japan ($2.1 billion).
The re-entry of US beef to the Japanese and Korean markets has been much slower than expected, giving our industry the opportunity to further cement the loyalties and market share we secured in the absence of a major competitor.
With the A$ expected to remain high and fierce US competition in North Asian markets restored, along with the anticipated start of a US–Korea free trade agreement, demand from these high value markets is expected to slow.
In contrast, Australian beef exports to the US and South Asian markets are set to begin a recovery, after five years of declining trade. This recovery, particularly in Asia, will depend, in part, on our ability to meet and anticipate consumer needs, differentiate our product against low cost competitors and boost our profile in these markets.
The value of our lamb exports dropped slightly to $779 million this year, despite volumes rising nearly 5%. In addition, an apparent end to the recent craze for Genghis Khan restaurants in Japan, which had seen a short-term surge (59% increase in Australian exports in 2005-06) in demand for lamb, led to a 31% fall in exports of lamb to Japan this year. However, this short-term ‘fad’ opened the doors to potential growth in the retail lamb trade, which we are working to capitalise on through our marketing activities in this sector.
The markets for lamb are numerous and most are expanding, with Australia and perhaps China the only suppliers capable of substantially raising export volumes. We must continue to differentiate our product as clean, safe and of consistently high quality to ensure we make the most of this opportunity.
Improved product presentation and marketing, a general lift in the health image of red meat, and a strong economy, have all contributed to a rise in Australian consumer interest in beef and lamb. Domestic beef consumption increased, with national expenditure jumping to a record $6.6 billion, while lamb sales hit almost $2 billion in 2006-07.
Over the long term, demand for Australian red meat looks set to grow, with expanding world economies and populations and rising demand for beef in Asia and for lamb in Muslim and Hispanic populations. On the supply side, our competitors’ limited land and feed availability should see restrained growth in global meat supplies, giving Australia a natural long-term advantage.
Access
Trading with a diverse set of markets is fundamental to our industry’s success. We supply a wide range of red meat and livestock products to over 100 markets around the globe. Our continued access to these markets and ambitions to expand our market base is a top priority.
2006-07 was a solid year for negotiations to secure and improve trade flows for the industry via free trade agreements and resolutions to trading barriers, such as the agreements to re-open the door for livestock exports to Libya.
The lack of progress in achieving outcomes from the World Trade Organization Doha Round is seeing Australia, and our competitors, look to bi-lateral trade arrangements.
The US and Korea are expected to ratify a free trade agreement which will adversely impact on Australia’s exports over the medium to long term unless we are granted similar access. MLA is working with our industry partners to ensure the position and priorities of red meat and livestock remain on government negotiating tables.
Consumers
There are some fundamental shifts occurring among consumers in developed nations. Triggered by the obesity crisis, concerns about personal health and wellbeing are seeing consumers opt for freshly made meal options. This is driving a renewal of cooking skills and a gradual return to specialist food retailers, particularly butchers and produce stores who now have a third of the market. This move back to fresh food is good news for the red meat industry and a timely reminder that we must continue to position red meat as a healthy and easy option for the family dinner table.
Developed countries are ageing. Australia’s aged population increased nearly 1% over the last five years and is expected to make up more than 25% of the national community by 2045. Typically, as consumers age, they eat less red meat. In Australia, average consumption is just on 29kg of beef a year for older people – considerably less than the national average of 36.3kg. Understanding and addressing age specific impediments to eating red meat is essential to maintain our market share in developed countries.
Industry
The difficulties of the drought and the unexpected rise in the A$ put significant pressure on the industry over the last 12 months. This is set to intensify, the drought continues for much of the country and grain prices are continuing to rise, leading to an irrevocable change in the cost of producing red meat in Australia.
We cannot compete on price, we cannot operate as a commodity trade and so we now face one of our biggest challenges yet – consumers around the world paying more for red meat.
Coupled with this, the US resumption of its normal trade with our largest overseas markets – Japan and Korea, means we must manage the expectations of our customers and continue to aggressively differentiate our product.
Our resilience will be tested. We need to harness the knowledge learned from generations of experience and created by R&D, and put it into practice to overcome these challenges.
This new order in the global arena challenges our industry to step up its efforts to be more responsive to customer requirements and community expectations, and to use the opportunity to take the lead in forging new market frontiers.
It is also a stark reminder that our solid reputation must be protected at all costs with unerring trust from our customers in our standards and systems, such as NLIS, LPA and NVDs, to deliver safe, healthy red meat products.
The environment we operate in is challenging and it is changing. Our industry’s history of turning seemingly insurmountable challenges into opportunities has paved the way to our current fortunes.
Our continued efforts to do everything at our disposal to not just meet but exceed customer requirements and community expectations will see us forge new frontiers in the complex economic, social and environmental trading arena that is the global red meat and livestock industry.
Don Heatley
Chairman