Recent falls in northern cattle prices are stimulating renewed buying interest from price-sensitive markets in South East Asia such as the Philippines and Malaysia, according to export industry sources.
However, efforts to convert that interest into sales are reportedly being stifled in some cases by the strict requirements of the new Exporter Supply Chain Assurance System (ESCAS).
The Gillard Government introduced the mandatory welfare assurance system across Australia’s live export markets last year in response to the 2011 ABC television expose of Australian cattle being subjected to cruel treatment in Indonesian abattoirs.
Importers must now secure Australian Government approval for their supply chains before they can continue to receive Australian cattle.
For many importers that has required significant investments in cattle handling and processing infrastructure, traceability systems, training of staff and development of standard operating procedures and the adoption of ongoing monitoring and reporting systems.
Importers must also pay to have their supply chains routinely inspected by independent third-party auditors to maintain their ESCAS accreditation.
The new requirements have come at a significant cost, with Northern Territory Cattleman’s Association president David Warriner estimating that ESCAS had added about $100 a head to the cost of every animal exported.
While export industry leaders have voiced their support for the ESCAS system, and see it as a necessary way to demonstrate the trade’s commitment to improved welfare outcomes, they have also expressed concern about what they see as excessive levels of cost and administrative requirements with the one-size-fits all system.
Efforts to streamline ESCAS and reduce its paperwork and costs without compromising welfare protections are currently the focus of ongoing talks between the industry and the Federal Government.
In the meantime, the upshot for the northern cattle trade is that, at a time when orders to Indonesia have been slashed and dry conditions are forcing more and more northern cattle onto the market, the requirements of ESCAS are posing a barrier to much-needed sales to alternative markets.
“We’re entering unchartered territory,” live export cattle buyer Richard Bond told Beef Central.
“Normally when cattle become cheaper, the importers would buy more, and other countries come and fill some voids.
“But that is being inhibited by ESCAS.
“A lot of the other countries that normally would step in when there is an opportunity to buy cheaper cattle aren’t set up well enough to handle the ESCAS system.”
Mr Bond, who is based in Katherine, said buyers in markets such as the Philippines and Malaysia financed their purchase by selling a percentage of their shipment upon arrival to a host of smaller customers.
This doesn’t fit well under existing ESCAS rules, which require exporters to maintain full control of all exported Australian animals at all times through to the point of slaughter.
“There are lots of those other countries where one guy might have enough money to put down a deposit to buy a whole shipload of cattle, then he might sell half of them on arrival to a heap of different people, do some trading to afford the shipment and then just retain a certain amount of cattle himself, so it makes ESCAS in that situation impossible.”
Another export industry source also confirmed that exporters were working hard to secure orders to a range of countries within South East Asia, including in promising new markets such as Thailand, and agreed that ESCAS in its current form was making it very difficult to convert price-related demand into actual sales.
“If it wasn't for this challenge we would have cattle moving already,” the exporter said.
As dry seasons bite harder across the north and pressure increases on northern cattle producers to sell, some are pointing to the irony that a system implemented to protect the welfare of Australian cattle in foreign markets could now being contributing to another animal welfare problem by hindering opportunities to sell cattle from droughted paddocks.
North Queensland livestock agent Tim McHugh has long argued that the live export trade plays a vital role in dry years in helping northern producers to sell store cattle which are of little value to meatworks.
"I think back to the drought early 1990s, if it hadn’t been for live exports we would have had a terrible situation,” Mr McHugh said.
“We had no domestic demand for store cattle whatsoever, and fortunately we had live exports and that is where they went.
“If this was 2009 (when shipments to Indonesia peaked), the live export trade would be saving out bacon.
“The Gillard Government is certainly in the firing line as far as responsibility goes for the complexities of the situation now.”
Supply continues to pressure prices
Richard Bond, who travels northern Australia in his R22 helicopter buying cattle for Wellard Rural Exports, and also operates his own private livestock agency business from Katherine, said there was no denying that the ready of supply of cattle now available was forcing export prices lower.
When he spoke to Beef Central on Friday he had just finished loading 2100 cattle in Cloncurry to truck to Darwin to fill a live export shipment to Indonesia.
The price of cattle in the Northern Territory was largely dictated by the prices being paid in Queensland, he said.
With Queensland producers carrying plenty of stock and lacking the grass to be able to hold them, they were dropping their price expectations in order to get cattle off.
“Basically sourcing cattle at the moment is like walking into Bunnings,” Mr Bond said.
“It is just completely overwhelming, from Broome right across to Townsville, it is just a one stop cattle shop.”
Mr Bond said the lack of orders from Indonesia pointed to a tough year ahead for northern producers.
“This is our biggest quarter now and there is not enough orders to go around now, so it is a worry to think what the second half of the year holds.”