Importance of the industry

1 INTRODUCTION

1.1 Importance of the industry

In 2002 the export of livestock generated over a billion dollars in export revenue and made Australia the world’s largest exporter of livestock. Cattle exports including buffalo of 977,540 head contributed 59 of the total revenue while 6.1 million sheep contributed 40 and 135,530 goats contributed 1. At these levels, live exports of cattle accounted for almost 10 of the total annual turnover and about 16 in the case of sheep including lambs. Moreover the industry is in growth mode with lack of supply a constraining influence at this time. While being remote from some of its markets, Australia enjoys a competitive advantage in the supply of live animals due to the nation’s freedom from serious diseases such as FMD and BSE. This advantage is complemented by the preference for some countries to import meat animals live, rather than as carton meat. This preference is linked to cultural and logistical imperatives prevailing at this time. There can be no doubt that the live export trade has put a floor under farm gate prices and strengthened the economics of livestock production throughout Australia – but most particularly in northern and western Australia. If the trade were to be phased out from tomorrow, however, it is unlikely that all of the income generated by the livestock currently exported live, would be lost. Cessation of the trade could, in our opinion, to bring about the following economic impacts: • Specialist livestock exporters would be put out of business and they would lose the future income stream associated with ongoing trade. In this event, there would be second round implications for employees and service providers. • The economics of sheep and cattle production in northern and western Australia would suffer severely. Not only would there be less competition but transport costs to a terminal market would be much higher. The age profile of flocks and herds would probably advance with negative implications for production efficiency and product quality. Also more livestock would die in the paddock. • Abattoir throughput would increase – albeit not proportionately. The additional supply of carcass and carton meat could potentially depress prices in traditional markets. However, such price impacts depend on the elasticity of demand, with the export market being relatively elastic and therefore less responsive to supply from Australia. But saleyard prices are affected most by the number of local abattoirs competing for slaughter sheep at the time. In the short term at least, bid prices would probably plummet and might be kept artificially low due to the market having too few buyers. • Overall employment within Australia would increase due to the higher labour demands associated with production of carton meat versus live export. The average distance cattle travel might also increase, thereby increasing the demand for transport services. • The live export industry’s customers would be made worst off on account of losing the world’s largest supplier to fresh meat markets. In many cases this would mean higher prices and a long period of painful adjustment. It is clear from the above generalisations that the individuals who would be impacted most in the event of a cessation in the trade would be front line exporters. Without the trade the exporters would have no business to operate and grow. Livestock producers would also suffer significant losses – particularly in the shorter term. Many producers in the more remote areas would suffer capital losses and some might be forced out of business. On top of the above economic impacts of cessation, there might be implications for animal welfare. It is apparent that continuation of the trade must satisfy a simple mathematical relationship. For the trade to continue, the sum of its net economic gains less any contiguous social costs must exceed 15 the sum of any social gains, if the trade were to stop, less the net economic losses. Clearly the prospects of this condition being satisfied will be enhanced by any measures that reduce the social costs associated with exporting livestock. SUMMARY: Australia is the world’s largest exporter of livestock with this distinction applying to both sheep and cattle. The live export market underpins saleyard prices throughout much of the nation and as such has the strong support of producers. However, there are other stakeholders in the trade, including members of the Australian public who are concerned about the animal welfare implications of live export.

1.2 Significance of animal welfare