By any measure, the stage is set for a big year for beef in 2012.

Young cattle prices are at historic highs, market rates for all categories stand above year earlier levels, and grass is in abundance across many areas after Australia recorded its third-wettest year on record.

The world is experiencing an international beef shortage, and Australia is well positioned to capitalise, with a period of sustained herd rebuilding set to translate into a herd of 30 million head in 2012, Australia’s biggest national herd for more than 30 years.

However, a high Australian dollar and aggressive efforts by the US to rebuild its share of high-value export markets mean Australian exporters will have to fight hard for any gains in the new year.

Beef Central spoke to Cattle Council of Australia president Andrew Ogilvie yesterday to discuss the key challenges that the peak cattle body sees ahead for the Australian beef industry in 2012.

As in every year, there is always a risk of the industry being blindsided by events unforseen at the start, but from our early year vantage point, these are the eight key areas Cattle Council sees as the most pressing issues for beef as we head into 2012.

1. Structural reform

A strong mood for industry change has been evident in recent years and the groundswell reached a crescendo at Longreach in November last year where hundreds of industry members gathered for Meat and Livestock Australia’s annual general meeting.

After conducting a think-tank with its various issues-based taskforces just before to Christmas, Cattle Council of Australia has developed a structural reform paper that will be circulated to all beef industry members for consultation early this year.

The paper will invite comment on a proposed hybrid model for a newly restructured Cattle Council of Australia, that would see its current board replaced by a mix of independently elected and SFO member-elected delegates.

As always the tricky part in 2012 will surround how to fund a new structure.

There is a clear view in some areas that producers who are not paid members of State Farm Organisations should still be able to contribute to national industry policy setting. Giving non-SFO members a direct voice on Cattle Council would also strengthen the peak body’s claims to speak for all cattle producers in Australia.

However, removing the need for Cattle Council participants to be paid members of SFOs threatens to further weaken the already meagre-funding base that the organisation relies upon for financial survival.
Some funding alternatives raised at Longreach included proposals for a direct membership fee system and for part of the $5 transaction levy to be redirected to CCA to give the organisation greater resources to lobby on behalf of the industry. However the industry remains a long way from achieving consensus on both structural and funding issues.

Cattle Council is keen to grab the bull by the horns in 2012 and will circulate a proposed hybrid model for the industry to discuss early this year.

“It is just a discussion leader, it is not the final result,” he said. “It is to engender a bit of conversation and discussion which we will take on board to shape the final look of Cattle Council.”

“We will be looking closely at funding models  – it doesn’t really matter what it looks like, if it is not funded, it’s not going to work.”

2. Live export

After a horrific year for the live export industry, further uncertainty lies ahead this year after the Indonesian Government announced it will almost halve its cattle imports from Australia in 2012.

If Indonesia holds firm on that decision, Australia will have to find alternative markets for more than 200,000 northern cattle that would normally be destined for the market.

Mr Ogilvie said Cattle Council was optimistic that Indonesia will require more cattle than it is has indicated.

However the industry’s primary focus at this point, he said, was to ensure supply chain assurance programs were operating effectively and were successfully rolled out in all export markets according to the Federal Government’s staggered deadlines for this year.

One of the major and largely unheralded success stories of recent months has been the rapid uptake of pre-slaughter stunning procedures in Indonesian abattoirs.

Stunning is not a mandatory requirement in export markets under the Federal Government’s new regulatory framework, however the industry has committed to introducing stunning where possible as an enhanced animal welfare measure.

Latest MLA figures show that push is succeeding, with more than 85pc of abattoirs in accredited supply chains in Indonesia now using stunning.

“Everybody is really surprised that stunning has taken off to such a huge extent, and some of us up there predicted it would, because it is so much easier and more efficient for an abattoir to stun,” Mr Ogilvie said.

“The speed that stunned systems were working was much faster than non-stunned systems, so common sense would tell you that stunning was going to be the way to go and it has proved to be that way.”

3. Domestic market

Australia’s biggest single beef market is its own domestic market, which accounted for around 44 percent of total sales of Australian beef by volume in 2010-11.

Mr Ogilvie said Cattle Council had been pushing MLA considerably in recent years to deliver an enhanced domestic beef marketing campaign.

“The international campaign was always good but the domestic campaign we thought lacked a bit and we feel there are really positive signs now that our domestic marketing programs is going forward really well,” he said.

“MLA has responded to that really well and we’re expecting some really good marketing programs in 2012.”

Another key development on the domestic marketing front will be the implementation by Cattle Council of Australia of a pasture-fed cattle assurance standard this year.

The system will be implemented to ensure that labelling and marketing claims on beef sold in Australia comply with a minimum standard and give consumers clarity on descriptors such as free-range, natural or pasture fed.

After a long-running development process, during which time a number of grassfed brands have already entered the market, Mr Ogilvie said Cattle Council expected the new minimum standard to be introduced this year.

4. Exports

The movement of the Australian dollar relative to its US counterpart is likely to have a significant bearing over the fortunes of Australian beef prices in 2012.

The dollar’s rise above parity with the US dollar last year gave US product a strong price advantage in key export markets. When combined with the aggressive marketing campaigns by the US designed to rebuild export market share, Australia clearly lost ground to its major competitor in the past 12 months.

Having just returned from a pre-Christmas trip to Japan, Mr Ogilvie said it appeared that after a year of disasters and economic downturn Australia’s demand in highest value export market was showing positive signs of strengthening in 2012. The US is also actively seeking to increase exports to the market with age-restrictions on Us imports set to increase from under 20 months to under 30 months from April.

Strong challenges also exist in Korea where Australian efforts to negotiate a Free Trade Agreement have slowed in the wake of a political backlash to the recently signed FTA with the US.

“It is going to be a priority to get that up and running fairly early this year so we are not faced with a disadvantage of US tariffs coming off and ours remaining,” Mr Ogilvie said.

“The high $A is quite a serious impediment on its own, and if the Americans start getting substantial tariff reductions and we don’t, it is going to make it pretty interesting.”

Another largely unsung success story for the beef industry in the past few years surrounds the significant diversification that has been achieved in export beef markets.

The growth of new markets in the Middle East, South Asia and Eastern Europe, particularly Russia, had played a key role in helping Australia to partially offset the challenges it faced that in the big three export markets of Japan, the US and Korea last year. Alternative markets represented a record 30pc of all export beef sales in 2010-11.

Mr Ogilvie attributed the growth in export markets to ongoing work by MLA and exporters to reduce Australia’s reliance on a handful of major markets.

“The industry has been telling MLA that it needs more markets for quite some time, and I think all the hard work of MLA and the exporting companies is starting to come together,” Mr Ogilvie said.

“MLA has been in there in those markets working very hard for quite some time now, and in combination with the exporters is starting to get some traction.”

5. R&D

The vast majority of the cattle industry’s $76m annual spend on research and development is targeted at projects to improve efficiency in beef production, such as through improving feed conversion and weight gain efficiency.

In 2012, as in every year, a major challenge is to get more producers to adopt the knowledge that their substantial R&D spend has paid to develop.

Mr Ogilvie said that in addition to pushing for increased adoption rates, CCA’s R&D taskforce was eager to increase attention on ‘blue-sky research’ in 2012.

While blue-sky research carries greater risk of not delivering concrete returns, it also increases the possibility of unlocking potentially significant advances in productivity.

“Blue-sky is left field type research and you can’t really predict where it is going to take you,” Mr Ogilvie said.

“Somebody is going to have a bright idea and the secret is not to knock it on the head, but to say well this might be worth looking at.

“There is a risk it is going to end up in a dead end, but unless you have a look at it, could be an opportunity wasted.”

6. Carbon

Cattle Council says it is taking “a fairly conservative view” on the question of whether the Gillard Government’s Carbon Farming Initiative will provide any tangible benefits to beef producers.

“It is really too early to tell what the impact of carbon price on the beef supply chain is going to be, and whether the CFI is actually going to provide any  benefits,” Mr Ogilvie said.

However Cattle Council’s environmental taskforce was analysing the issue and also working with MLA on the development of potential methodologies to create income-earning opportunities for cattle producers through carbon storing or saving activities.

7. Market access

A key role of peak industry bodies such as Cattle Council is to work with market trading partners and Governments to improve market access, reduce trade restrictions and to represent the industry on social licence to operate issues.

Mr Ogilvie said Australia’s engagement with beef industry leaders from the US, Canada, Mexico and New Zealand in the Five Nations Beef Alliance was proving to be an increasingly important initiative in dealing with the global challenges facing the industry.

“We believe it is of great value for Australia to belong to a group like that because you have five major trading nations in the world working together with similar issues and similar problems.

“We’re all competitors but when we sit down together we find there are a lot of issues that we’re all dealing with often caused by Governments and other organisations like animal welfare groups and environmental groups that we need to deal with.

“We’re finding that when we deal with those groups as a group of nations we quite often get a lot better results.

“They work across national boundaries themselves, and we need to do a similar thing otherwise we get isolated.”

8. Matthews Report on FMD preparedness

The Matthews Report on Australia’s biosecurity response capacities last year uncovered some alarming gaps in Australia’s preparedness to handle a major livestock disease incursion.

Given past experience with FMD outbreaks in other countries, particularly Britain in the early 1990s, an outbreak here would have devastating consequences for Australia’s $10b a year beef industry.

In response to the Matthews Report, Cattle Council wants State and Federal Governments to plug these holes as a matter of urgency.

Work is underway with the Federal Government and industry to conduct a simulated FMD exercise that will put state and Federal response systems to the physical test later this year.

A review of movement protocols and vaccination policies has also been scheduled for 2012.

“There has to be some serious scrutiny of this issue,” Mr Ogilvie said.

“With Korea and Japan experiencing major FMD outbreaks recently and exotic diseases like rabies appearing on our doorstep in Indonesia, we have to make sure our preparedness for any exotic disease is right up there and working really well.”

Looking ahead

Keeping a lid on ever-increasing costs remained a key challenge, particularly given cattle replacement costs this year, Mr Ogilvie said.

“Our costs are going to be a major problem this year, the price of weaners is high in comparison to the price of finished cattle, so the profitability from the weaner to the finished article could be tight.

“However a lot will depend on the Australian dollar and how well our export markets continue to develop.”

However the strength of Australian beef prices in defiance of the strong Australian dollar provided good reason for optimism.

“There is a global shortage of beef, and that is being reflected in the strong demand back through the markets, even with the strength of the dollar.”