By Matt Dalgleish - Mecardo
This is the second installment of a three-part blog series which summarises the importance of the live cattle trade to Australia. The information contained within this blog was sourced from a Mecardo report commissioned by Livecorp/MLA and released in November 2018 entitled “Value analysis of the Australian live cattle trade - key highlights”.
In part one of this blog (link) we outlined the structure of the Australian beef sector with specific reference to the flow of live export cattle through the system from farm to offshore destination. The importance of the live cattle trade to farmers, particularly in Australia’s northern regions, in terms of the proportion of annual cattle sales was evident.
In this blog, we will delve further into the live cattle value chain and demonstrate the reliance that participants across the supply chain have on annual revenue earnt from their involvement in the live cattle export industry.
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Live cattle value chain
Indicative value chains for the live cattle export industry in Australia to arrival at port destination were analysed to understand and quantify the revenue retained across the value chain. The estimated costs of various components of the live export value chain were weighted and calculated as a proportion of total value chain costs on a per head basis for the Northern Territory, Western Australia, Queensland, south eastern states beef and dairy industries.
The bulk of the live cattle revenues are retained by producers, ranging between 40-57%. This equates to an estimated $620 million of revenue retained by Australian cattle farmers. Shipping operators and export companies take the second and third largest share, 22% and 7% respectively.
Other value chain participants, such as livestock agents, veterinarians, port workers and transport operators take a much smaller slice of the value chain. However, for some of these participants located in more remote areas their relatively small piece of the value chain can still represent a significant proportion of their overall annual revenue.
How much do participants rely on the trade?
Results from a qualitative survey conducted by Mecardo show that participants in the live cattle trade from the Northern Territory and Western Australia derive a higher proportion of their business revenue from the live cattle export industry compared to participants from the remaining states.
Participants in the northern regions, that make up a relatively small proportion of the value chain, report that a high proportion of their annual revenue is reliant upon the live cattle export trade. This includes fodder suppliers, transport operators and veterinarians.
The findings are in line with results of industry consultation in the Clarke, Morison and Yates report from 2007, entitled ‘Assessing the Value of the Livestock Export Industry to Regional Australia’. This report outlined the proportion of annual turnover earned from live cattle export-related activities for value chain participants/ businesses involved in the supply chain for Western Australian and southern supply chains.
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The live cattle export trade contributes a vital element to regional economies across cattle production regions, with particular importance in the Northern Territory and North of Western Australia. The vast area of Northern Australia is well suited to breeding cattle but has limited capacity to fatten cattle. In contrast, the fertile area of South East Asia can fatten cattle, but limited space with which to breed cattle. The export of live cattle from Northern Australia to South East Asia aligns with the natural advantage of each region. It allows tropical breeds that are well suited to the Northern Australian climate to be delivered into an Asian market that prefers this type of breed, to the benefit of all supply chain participants.
In the Northern Territory and North Western Australia, the value of cattle underpins the land value itself. In many remote cattle stations, the live export trade supports the cattle value, which in turn, flows through to the ability for the cattle farmer to borrow against.
In the third installment of this blog we will look at case studies on five major export destinations for Australian live cattle exports, assessing the value of the live cattle for Australia’s trading partners and answering the question – why do Australia’s export market destinations want to import live cattle?
www.mecardo.com.au
www.mecardo.com.au
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