The success of Australia’s red meat and livestock industry lies in its ability to weather storms and charter new waters in our global trading environment.
This year industry faced challenges from drought, a high A$ and the resumption of US trade to North Asia, however its robust systems helped steer a course through these rough seas and continued to achieve solid demand and good prices for its products. The resilience of industry to meet these continued challenges is outstanding.
MLA continued to deliver the best possible services and solutions to industry this year, partnering with all sectors of the red meat supply chain to grow demand, increase competitiveness and sustainability, improve market access and build the capability of our industry to navigate this turbulent environment.
Growing demand
Bolstered by the increased cattle transaction levy, we endeavoured to reinforce the positive attributes of Australian red meat and livestock to our global customers with a package of activities designed to motivate increased purchasing, stem resistance to consumption and open new avenues to expand our consumer base.
In foreign markets, the value of beef exports increased 8%, to a record $4.9 billion, in 2006-07. The value of lamb exports eased slightly by 0.3% to $779 million, despite volumes rising 4.8%. This dip mostly resulted from a 1% drop in export values to the US.
The re-entry of US beef to North Asia is yet to reveal its true impact on our industry, with Australian beef exports up 4% in Japan and 29% in Korea. Our efforts this year have been in consolidating Australian products as the safe and healthy choice in these markets with a new nutrition program for Japanese school children and a push in online marketing to internet-savvy Koreans.
On the domestic front, our first foray into beef-specific promotions had a fairly lacklustre beginning. Though the point-of-sale material encouraging customers to ‘Bring out the Beef’ achieved widespread popularity, the response to the accompanying television commercial was disappointing. We re-launched the campaign with a new angle – ‘Kids love Beef’ – and saw servings of beef meals increase by nearly one million a week during the duration of the campaign. This contributed to the $217 million growth in Australian consumer expenditure on beef this year.
Our lamb marketing campaigns – Sam Kekovich for Australia Day and ‘Lâmb’ for spring – again dominated the headlines, and more importantly helped to drive sales a further 12% to reach nearly $2 billion this year.
While catchy marketing campaigns undoubtedly influence consumer purchasing, we must not underestimate the increasing impact on consumption of such community concerns as animal welfare, the environment and individual and family health.
Our ‘Foundation Food’ campaign with actor Sam Neill, the RMIT anti-acne diet for teenagers and the launch of the CSIRO Total Wellbeing Diet Book 2 are all helping to reinforce the health benefits of red meat in the diet and reduce resistance to consumption.
We have undertaken rigorous research that empirically supports our national transport code of practice and we are in train for gaining accurate scientific measurements of the impact of red meat production on the environment. Supporting this scientific rigour we are delivering tools such as the Environmental best practice guidelines for the red meat processing industry (launched in May by Minister McGauran), to help industry demonstrate its credentials to the community.
Market access
Rights of passage for Australian red meat and livestock to world markets must be vigorously defended with sound and sensible economic principles. Lack of progress in the World Trade Organization Doha Round this year meant we focused on consolidating our position with the Australian Government in bilateral free trade negotiations with Japan, China and Korea.
The massive effort undertaken by industry and MLA to implement and roll out the National Livestock Identification System (NLIS) to meet government legislation last year has paid off. The NLIS database successfully tracked 300 cattle and their cohorts over a 48-hour period in a simulated disease outbreak in May this year. The system proved its reliability in performing under pressure and shored up confidence that it can deliver outcomes that meet Australian government and industry requirements.
Increasing competitiveness and sustainability
The Australian industry operates in a fiercely competitive environment – we are buffeted by low-cost competitors, adverse environmental conditions and increased scrutiny from the community. Our portfolio of research and development programs provides tools and systems to enable individual enterprises to remain viable and compete in this challenging marketplace.
A major difficulty for the industry is its ability to retain and attract staff. We are working to understand and identify how to cost effectively manage people on pastoral properties and guide investment in labour retention strategies. We are also investing in technologies to reduce labour requirements with remote property monitoring systems that decrease the need for physical inspection and maintenance of property infrastructure. Robotic technologies are also providing opportunities to reduce reliance on staff and increase savings in processing facilities.
Continued genetic improvement in the sheep industry remains a high priority. MLA’s and AWI’s SheepGenomics program laid the foundations for the release of 60,000 gene markers using next generation DNA marker technology – SNP chips.
Accelerated genetic improvement is also a strong focus for our beef program, with over 100 potential markers identified this year. In addition, new BREEDPLAN estimated breeding values are on the way as a result of our funding of research into the factors affecting maternal herd efficiency.
Building industry capability
The long-term viability of our industry depends on our ability to nurture future industry leaders and allow individual enterprises to remain empowered and independent.
In collaboration with industry and Government partners, over 30,000 Tips & Tools publications were distributed to producers, covering issues such as management of pastures during drought, weeds, groundcover, soils and internal parasites. This year over 17,500 producers attended MLA-funded learning activities and events such as Cost of Production workshops, Beef-up forums, Meat Profit Days, EDGEnetwork workshops and Grain & Graze and Evergraze regional activities.
Our role in the collection, analysis and dissemination of market information had a broader reach this year, providing a larger sector of industry with tools to support business decisions. Subscribers to the ever-expanding online market news service more than doubled to over 3,500, and partnerships with the Rural Press network ensured this valuable information was readily accessible. While the MLA/SFE Cattle Futures Contract offers to mitigate business risks, trading was again disappointing this year with just 1,700 completed trades. We are continuing however to develop alternative simple and effective risk management tools.
Measuring performance
To ensure we meet the objectives of our programs and deliver real benefit to industry, we have undertaken an independent evaluation of our work. Based on a framework developed by the Centre for International Economics, three of our programs have been assessed so far. The outcomes illustrate the benefits of industry’s investment through MLA being 8:1 for market access, 11:1 for food safety and 5:1 for eating quality. Another three programs will be assessed next year and so on, until we have solid data to demonstrate the cost-benefit of all components of our investment in industry.
The budget
After a deficit of $4.0 million last year, 2006-07 saw the company record a surplus of $2.2 million. A number of savings were achieved across the business that allowed for this result after an initial projection of a budget deficit of $4.7 million at the beginning of 2006-07.
Revenues totalled $161.8 million for the year, compared with $154.6 million for 2005-06 – an increase of $7.2 million. Levies revenue was up by $16.2 million, largely due to the full year impact of the increased levy endorsed by industry, and the growth in slaughter rates caused by the drought.
Our people
The success of our programs is a direct result of the professionalism, enthusiasm and commitment of our people. I would like to take this opportunity to acknowledge the dedication that drives MLA staff and our many collaborators to make our industry a world leader in every aspect. Their efforts through 2006-07 are reflected throughout the pages that follow.
On the horizon
A clear direction for MLA’s future is mapped out in the MLA strategic plan 2007-2011 which outlines the steps the company will take to meet its four strategic imperatives – increasing market access, growing demand, enhancing competitiveness and sustainability and increasing industry capability. The five year plan will be reviewed annually to ensure it remains contemporary and reflects current industry needs.
The mettle of industry will continue to be tested next year and our programs are positioned to support it for success. Some of the activities we will undertake next year include strategic marketing at home and overseas; robust scientific research that demonstrates the true nutritional value of red meat and the industry’s environmental credibility; active and persistent representation of industry priorities for trade reform; delivery of even more advanced animal genetic information; and a targeted campaign to attract skilled employees to the industry.
We continue to value the advice and direction from our stakeholders, particularly industry peak councils and the Australian and state governments. These important partnerships are fundamental to MLA’s ability to deliver effective services and solutions to our industry.
David Palmer
Managing Director