Greater collaboration need to maintain beef’s competitive position

Jon Condon, 12/03/2012


JBS Australia director, John BerryA processing sector speaker at the ABARES Outlook 2012 conference last week used his presentation as a rallying-point for greater industry/government and internal industry unity, which he sees as critical if Australia is to further develop international market opportunities and maintain global competitiveness in beef.

JBS Australia director John Berry told the gathering that the northern Australian beef industry, while already the engine-room of the nation’s beef sector, had the opportunity for substantial further development.

“To achieve that, however, it’s about industry working collaboratively with Territory, State and Federal governments to address in a systematic way the roadblocks that are impeding development and investment,” he said.

Mr Berry made the point that a divided industry position could be fatal for such progress to occur. The industry was facing significant challenges and competition in the international market place.

“A single industry voice is critical if we are to effectively engage with government on key issues such as market access priorities, government costs and charges and a unified commitment to a northern beef development strategy, he said.

“Ministers want a clear, concise and one position from industry, if they are to have the confidence to actively push either trade or ‘politically sensitive’ issues on our behalf. The current industry structure can often impede such an outcome.”

“Northern Australia has the potential to breed bigger numbers of cattle given good seasons, but the solutions to addressing infrastructure roadblocks such as road and rail, water and land title issues require industry and government working through each issue in a strategic manner.

Again, industry needs to ensure that it has a common agreed position to ensure that Federal, State and Territory Governments have the backing to deliver the actions required and support the ongoing development of the industry.”

“If it’s all too hard, and there is always the potential for political compromise to occur resulting in much of Northern Australia being locked-up, leaving the potential unrealised,” he said.

“Stakeholders, whether they are individual family-scale enterprises, corporates or offshore investors, continue to invest in the Australian red meat industry. We all need to work with governments to make sure the message is clear on what the priorities are – whether they be market access, infrastructure or government charges generally.”

Mr Berry said in the current political debate, it should not be forgotten that meat processing was in fact a manufacturing industry, and not simply an extension of beef production.

“Beef is in fact the second largest industry after coal in Queensland. It’s the obligation of industry and key industry members to ensure that Government understands that as an export industry we actively compete in the international market place each day and are ‘price takers’.

Importantly, as processors, we have significant capital investment in assets and are a major employer of blue-collar workers across regional and rural parts of Australia.”

In 2009, Senator Heffernan headed a northern land and water task-force that identified a platform for northern industry development, Mr Berry said.

“Here is a blueprint for the further development of the beef industry in Northern Australia. Now we need the commercial drivers and the governments to work together to remove barriers so that the industry can deliver on it.”

Gladstone analogy

Mr Berry used the analogy of what previous State Governments had put in place with the development of Gladstone as a booming industrial hub in regional Queensland.

“As an industry development model, government identified Gladstone as a centre with key attributes to develop a minerals processing industry. The Queensland government had the vision, legislative powers and determination to signal Gladstone as a location for investment – the government was open for business. They put in place the environmental and planning approvals, and infrastructure required to support investment including cheap power through the development of a power station.”

Governments had ‘done what they needed to do’ in terms of planning and infrastructure to attract big investment to Gladstone. The beef industry circumstances were no different, in terms of creating the environment for long-term significant investment, Mr Berry said.

“We have the framework to deliver a ‘Gladstone approach’ to Northern Australia through Minister Crean’s beef strategy. Key industry participants need to actively engage in this process if we are to achieve the desired outcomes.”

Focussing on some specific challenges facing the beef industry, he highlighted road and rail transport issues, particularly in regions like Queensland and the NT.

“If we can’t move cattle in a cost efficient way, we can’t process them. Currently, we are actively working with Queensland Rail and the State Government on fixing urgently a critical rail bridge closure at Darr River between Winton and Longreach caused by recent floods in central western Queensland. If not resolved it will unnecessarily delay movements of 90,000 cattle this year,” he said.

In that case, the local council at Winton has committed extensive funds to building a balloon loop on the existing rail line, effectively turning Winton into a consolidation-point for rail freight for northern cattle.

The beef industry also continued to face challenges from the mining sector in terms of preferential rail access.

“Rail is a significant strategic piece of infrastructure in Queensland. We as processors and producers need the ability to move 1000 head of cattle on a full train.”

“We have to actively work with the State Government to ensure that it doesn’t become too hard to move cattle on rail. JBS along with other industry players will continue to work with the State Government to ensure that livestock rail is not lost to the ‘Beef State’,” Mr Berry said.

“The impact of losing rail will impact in jobs – and will put more trucks on the roads in what is an already stressed road system. The most efficient way of shifting larger numbers of stock, volumetric point-to-point, is rail,” he said.

The cost to move product internally and to export to market in Australia need to become more efficient if the industry was to remain competitive in the supply of export markets.

“Ours is a supply chain that operates on very small margins, and Australia remains a high-cost-to operate environment, on a global beef comparison. We need cost taken out of the system, not added,” he said.

The industry had worked well with Federal Ag minister Joe Ludwig on stage one of the AQIS reform.

“However, the processing industry is meeting this month in Canberra with the Minister and his Department to set a plan and timetable on where improvements in Government export, market access and certification systems can deliver lower costs and improved commercial opportunities for the meat industry. This is a major priority for government and industry,” he said.

The industry has implemented a reform agenda in the area of meat inspection that took inspectors out of AQIS and put them into industry, at cost. But the Government, through its full cost-recovery policy, took away the 40pc rebate, resulting in significant increases in operating costs for processors.

“We are continuing to work with Minister Ludwig to take costs out of Government inspection and market access services for industry and at the same time deliver greater market access and streamline current systems and gain market opportunities and competitiveness for the Australian meat industry,” Mr Berry said.

“As an industry, we have to ensure we continue to look at our costs to operate. Australia is twice the costly to process a beef animal compared to our competitors such as the US and Brazil. The Australian industry needs to actively work with both Federal and State Government’ to identify and take costs out of the supply chain.”

He also highlighted how Australia had ‘negotiated’ technical access to a range of markets, including  the EU, that were in fact considerably more onerous than conditions applying to export competitors.  Industry continued to work through these issues with Government.

“But as the Australian red meat industry, the priority for 2012 and beyond must be in improving our ability to access international markets -especially those with significant growth potential in the most cost-effective way.”

Industry needs to work better with the Federal Government and Ministers in formulating clear and deliverable market access strategies, before negotiations begin.”     

Turning to internal industry relationships, he said the days of adversarial contact between beef producers and processors had to end, and the industry needed a single voice, with a common position on key matters affecting the outcome of industry competitiveness.

“Otherwise we risk real problems in terms of all of our commercial operations being compromised, either politically, or from a market competitiveness perspective,” he said.

Similar views applied in terms of market access and trade negotiations. This required industry to develop and maintain a common position on which Government could base its negotiations.

Recently, there was evidence of industry disjoint over the best way forward in negotiations over the establishment of a Free Trade Agreement with Korea and the different messages producers and processors sent to Minister Emerson and his Department.

From March 15, US exporters will enjoy a 2.5pc tariff advantage in export to Korea over their Australian rivals.

“We need a cohesive industry, not a divided one in dealing with government on trade issues otherwise Australia will have the potential to pay a heavy price,” Mr Berry said.

Turning to prospects for new export abattoirs to be established in Northern Australia, he said while it was ‘good to see entrepreneurial spirit out there looking at opportunities,’ meat processing plants were labour and capital intensive, and processing was a high-volume, low-margin business. It required a long-term commitment and focus.

“It is challenging to operate these plants for 30 or 35 weeks a year. They need to be in production virtually year round,” he said. “Whether it be producing cattle or processing them, there is a great degree of specialisation and skill required, working within the area of strategic strength. It is hard to be all things to all people,” he warned.

“In operating meat processing plants you cannot turn them on and off like a tap.”


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