Processing

First submissions for red meat processing inquiry published

James Nason, 26/05/2015

Competition for livestock in Australia has never been stronger, one of Australia’s largest private export processors has argued in a submission to a senate committee inquiring into the effect of market consolidation in Australia’s red meat processing sector.

The Senate Rural and Regional Affairs and Transport References Committee has been accepting submissions for its inquiry into red meat processing for over a month and the first eight submissions to be published have just appeared on the inquiry’s website (see here).

In one of the published submissions, Fletcher International Exports owner Roger Fletcher argues that red meat processors operating in Australia today are efficient, competitive and customer-focused, and must compete without Government assistance in a highly competitive global protein market.

The only way to increase farmgate returns and still provide value to customers, he says, is to focus on reforming industry R&D and marketing work, improving road, rail and port efficiency and streamlining regulatory and tax systems.

Mr Fletcher draws upon more than 40 years of direct experience in livestock sourcing, processing and marketing.

The one-time drover and shearer has built his business Fletcher International Exports into one of Australia’s largest privately owned meat processing operations.

The company operates two abattoirs in Dubbo, NSW and Narrikup, WA, and has the capacity to slaughter, process and market over four million sheep a year.

As recently as 25 years ago, Mr Fletcher said, many abattoirs in Australia were council or Government owned. They were poorly managed, inefficient and reliant upon Government handouts to survive. More than 45 of these operations have since closed or gone bankrupt, he said, and not a single council-owned abattoir remains.

“What is left are efficient, competitive and customer-focused private enterprises with no Government assistance competing in a highly competitive global protein market,” Mr Fletcher said.

He said processor exporters had driven gains in efficiency and productivity in several ways over the past 25 years, including:

  • By moving from a carcase to a carton trade to unlock globally competitive container transport to any global market;
  • By producing and marketing exacting products to specific customer requirements from a boneless lamb shoulder in a Japanese restaurant to a lamb rack on an American cruise line to a mutton leg in an indian curry house in the UK;
  • By growing markets for Australian red meat – in 25 years Australian export processors had increased markets over 400pc and the mouths they can reach by over 300pc;
  • By pushing efficiency improvements in livestock and container transport;
  • By vertically integrating into further by-product production and marketing;
  • By investing in quality assurance, meat safety and training; and
  • By absorbing and improving on the Government inspection service.

Despite the reduction in the number of abattoirs in Australia, Mr Fletcher said competition for livestock has never been stronger.

“Competition is strong with 7-8 highly efficeinty meat export companies competing for livestock in more regional markets on any given day,” he said.

Additionally, producers now had more marketing formats than in the past, including saleyard, forward contract, over the hook, paddock and online.

Processors had to ensure their plants were full every day of the year to achieve optimal efficiency, while managing supply increases and decreases, market fluctuations depending on seasons, festivals and economies, as well as deal with a perishable product.

“Any consolidation has allowed global brands to be formed and marketed to over 90 countries, hence allowing maximum increase in farm gate returns as products move way from commodity status.”

These gains had been so far reaching that Mr Fletcher estimates the cost of processing a sheep in Australia today is the same as it was 25 years go.

But in the same period farm-gate returns had increased from $5-$100 for mutton and $20-$120 for lamb.

Livestock producers had also achieve tremendous gains in animal health, productivity per head and lambing percentages, whilst battling the elements such as drought and floods.

If Australia was to have a successful red meat sector, it had to be world’s best at every point in the supply chain from paddock to plate.

Those that are not competitive in that system would fail.

He said the Government could assist by negotiating favourable market access for Australian red meat products in all global markets, providing an export framework that was free of inefficiency, and drive investment in road, rail and ports to ensure a globally competitive sector.

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Comments

  1. Philip Downie, 27/05/2015

    Bill I was commenting on the article and asking question, most of which will not be answered. Ideas, I think, have been pretty well covered by the recommendations of the grassfed levy inquiry which barnacle Barnaby is yet to do anything about. Further I would suggest no further consolidation of the processing sector and limiting the number of clients per commission buyer. They truck cattle from north of Tennant Creek to Naracourte so to state as the ACCC did that 500 kms was far enough was shining a light on their total lack of knowledge and really shows how little sway farmers have in Canberra.

  2. rod moore, 27/05/2015

    I consider submission from mr Primmer is the correct method into the future. Have the auctioneer ‘ call backwards’ to determine the knock down value, either per head or per kg live, no difference in outcome, the consumer has only X amount of the necessary to spend and how the Buyer equates that back to Where, Why and When that money is transacted is their business. I was at Newmarket saleyards on 14 Feb 1966 — Pounds/shilling/ pence to Dollars/ cents – that was a learning day – Reverse physiology was the winner that day – everyplayer was equal. When an Auctioneer, producer, yardman or other buyers can work out what a buyer intends to do – it is time to change jobs. There should never be a need to have conversation with any body – if a buyer is confident. Look forward to Auctioneers ” Talking Backwards” Rod Moore

  3. bill nicholas, 26/05/2015

    phillip I don’t see any idea’s on how to fix it in your complaint

  4. Philip Downie, 26/05/2015

    How competitive were they 12 months ago? Not very. Who made all the money? Not farmers. Why do we have MLA, the export processors have done it all. He may talk about sheep price increases, mainly due to lack of supply. However he fails to do the same for beef I wonder why? Not quite so amazing prices, still the same as 20 yrs ago, until we look like having a supply issue. I wonder if the cost of processing a steer is the same as 20 yrs ago?

  5. Edgar Burnett, 26/05/2015

    I wonder whether Mr. Fletcher has been selectively screwed in the market place by the large Multinational Processors as Cattle Producers have been? Good on this Little Aussie Battler anyhow – maybe Cattle Producers can learn some lessons from him! I notice that he main product is from sheep.

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