Live Export

How will Vietnamese suspensions impact cattle trade volumes?

James Nason, 21/07/2016

UPDATED 2:40pm 21 July 2016

How will the suspension of two Australian exporters and 21 cattle handling facilities affect Australia’s cattle trade to Vietnam – its second biggest market – in coming weeks and months?

Three feedlots and 18 abattoirs in Vietnam that were able to take Australian cattle a week or so ago are now off limits to the trade, temporarily at least.

The Department of Agriculture and Water Resources imposed the suspensions after conducting audits of the supply chains utilised in Vietnam by the eight Australian exporters currently licensed to export cattle to the country.

The investigation was triggered by footage showing cattle, believed to be Australian, being hit with sledgehammers in Vietnamese abattoirs.

The investigation saw two of the eight Australian exporters licensed for Vietnam ordered to cease supply to the market. Additional conditions were imposed on another four.

The department is declining to identify who is involved, saying only that the it will publish the full results of its investigation on its website when its investigation is complete.

However Ruralco said in a statement to the ASX earlier today that its live export division Frontier was one of the exporters suspended (full statement republished at the bottom of this article). The identity of the other has not yet been publicly confirmed by the exporter itself.

Why were the exporters suspended? The department told Beef Central it was because the investigation showed they ”lacked sufficient reconciliation, monitoring and verification of information supplied by their control and traceability systems”.

“This lack of oversight has resulted in failure to identify issues within their approved supply chains,” a department spokesperson said.

“The approval of consignments and implementation of regulatory action is decided on a case by case basis.

“Exporters must demonstrate compliance with the ESCAS control and traceability requirements and adequate verification of their system.”

Of the six exporters still able to supply Vietnam, four must now operate under additional conditions.

They have to provide increased mandatory reports back to DAWR, undertake additional monitoring and supervision of in-market staff to ensure ESCAS standards are being met, place more staff in-market, complete reconciliation of animals remaining in supply chains, and increase monitoring and verification through their existing control and traceability systems.

How long the suspensions and additional conditions last will depend on how long it takes the exporters involved to satisfy DAWR they have put in place effective measures to address animal control, traceability and verification processes.

Vietnam has grown to become a market of key importance to the Australian cattle export trade in the past three years.

It imported 282,952 Australian cattle in 2015-16, ranking as our second largest market behind Indonesia (566,389 cattle).

Amid signs that demand for Australian cattle in Indonesia could be impacted by the increasing presence of Indian buffalo meat imports, alternative markets such as Vietnam are only growing in importance to Australia’s cattle export industry.

The sudden reduction in the number of exporters able to supply the market from eight back to six, and the removal of 21 facilities from import supply chains, is bound to have at least some impact on the level of trade to Vietnam in coming weeks and months.

However that impact may not be overly significant.

As at 1 July 2016, there were 190 facilities in Vietnam included in approved supply chains – 120 abattoir and 70 feedlots, according to figures provided by DAWR to Beef Central.

The 21 suspended facilities represent 11 percent of all facilities approved to handle Australian cattle in the market.

67 feedlots and 102 abattoirs are still able to take Australian cattle, and six exporters are still able to supply them.

DAWR also notes that the processing capacity and use of the suspended facilities is highly variable, suggesting that not all of the suspended facilities account for high volumes of cattle.

Vietnam has been experiencing an oversupply n the last 12 months or so, and some sources who have discussed the issue with Beef Central this week believe that situation will limit the extent to which these suspensions directly impact on existing levels of trade.

The market in Vietnam has been relatively “soft” due to the large number of cattle on-feed in the market relative to current demand.

Exports to Vietnam were down 7pc in 2015-16 compared to 2014-15, attributable mainly to the oversupply situation.

“The suspension of the exporters, feedlots and abattoirs will help to correct the oversupply situation that has existed in Vietnam for the past 12 months”, one trade source commented.

The long-term impact of the suspensions will also hinge on how long they last, a question at this point no one can answer.

RURALCO STATEMENT TO ASX 21 JULY 2016

“Ruralco provides the following update relating to the supply of cattle into Vietnam. DAWR is currently auditing all Australian exporters with supply arrangements for feeder and slaughter cattle into the Vietnamese market. The department has identified areas for improvement around animal control, traceability and verification processes and the industry is working to resolve these issues as an absolute priority. As part of this process, the department has directed Ruralco’s live export business, Frontier, to cease further supply of feeder and slaughter cattle into Vietnam. At this time, only two (2) future shipments to Vietnam were scheduled for completion this financial year. The company continues to work cooperatively with the department in relation to this matter and is well progressed on a review of its processes and reporting protocols, with a number of refinements already having been made. Frontier is not aware of any instances of inhumane treatment of cattle in its supply chain and takes animal welfare and its obligations under live export laws extremely seriously.”

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