2023 will offer the meat processing and export sector new opportunities but also a set of real risks and challenges that if not managed with foresight and diplomacy and with strong government/industry cooperation, could deliver vastly different outcomes by the end of the year.
On the negative side we enter 2023 with global inflation and a predicted general economic downturn, impacting most major meat import markets and driving consumer intentions towards cheaper alternatives.
While this may be a positive factor in manufacturing beef markets like the US, it will work to our disadvantage in markets like China according to the US Meat Export Federation. This is especially now that the Chinese economy is not performing as well and its changing Covid policies are driving further uncertainty.
On the positive side, US beef production and the US exportable beef surplus is forecast to fall in 2023 as the liquidation phase over recent years dissipates, drought conditions hopefully ease and cows and heifers are retained for breeding. This will be to Australia's advantage in North Asian markets in particular where the US competes directly with Australia in the high quality end of the market.
The Australian dollar has depreciated around 8 per cent against the US dollar over the past 12 months. That has given Australia a short term advantage over the US but that differential could easily change as the international economy responds to war, inflation, high energy costs and market uncertainty.
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At home, processors will be facing a range of difficult variables with energy costs skyrocketing along with rising transport, labour, government inspection fees and other input costs and this in an environment of ongoing negative margins.
In the sheep and lamb sector the Australian Meat Industry Council has continued to advocate for national harmonisation of eID tagging on all managed sheep, lambs and goats by January 1, 2025 as the states seek to implement their own plans. Harmonisation will be critical to reducing uncertainty and disruption to commercial activity.
Labour shortages, however, will remain the single largest limitation to increasing production in Australia. AMIC continues to list this as its number one issue in driving better returns for the industry.
2023 will deliver further transformation on industrial relations with a number of significant changes on the horizon. The most extensive originate from the Fair Work Legislation Amendment (Secure Jobs,Better Pay) Bill 2022 which passed into law in December. The Bill could affect the enterprise bargaining process, job security and pay equity in the workplace.
AMIC opposed the Bill and were critical of the lack of consultation with the meat industry. AMIC do not support multi-employer bargaining and considers it should be up to the businesses as to how they engage in the industrial relations system.
In addition domestic violence leave will also be introduced into the National Employment Standards and there will be an increase to Services Australia's Parental Leave Pay entitlement to 26 weeks.
As a high-cost global operator, ongoing investment in research and development in the processing sector will be essential in maintaining our competitive position globally. Investment in automation that can reduce the demand for unskilled labour will remain a priority.
The threat of exotic animal disease and the impact this will have on individual businesses and the industry as a whole remains an ongoing danger that needs to be part of every processor's risk management profile.
Previous experience of organochlorides in Australia in the 1980s, foot and mouth disease in the UK in 2001 and BSE in North America in 2005 are good examples of the economic destruction of processing businesses that can evenuate when these issues occur.
MLA managing director Jason Strong recently commented that the whole-of-supply chain work to ensure Australia was as protected as possible was the "greatest collaboration across our supply chains I have seen in my lifetime", reflecting the contribution processors are making to what is an all of industry issue.
As an export dominated industry, market access always remains at the top of any priority list. The United Kingdom FTA offers the first break in the tight quota and tariff controls on Australian meat imports into Europe in over 40 years. The new quotas to the UK when they finally come into force this year represent a real opportunity for both beef and sheepmeat to be marketed on the basis of consumer demand rather than maximising the return on restricted quota access.
Any trade agreement with the remaining 27 countries of the EU will not offer anywhere near the same market freedom.
India offers potential for the sheepmeat sector after the Australia-India Economic Cooperation and Trade Agreement came into force on December 29. For the moment it is without any competition from New Zealand sheepmeat as they have struggled to get negotiations going with India because of Indian fears of the Kiwi dairy industry.
Despite the significant non tariff trade restrictions with China, the market remains a major customer for Australian beef and sheepmeat.
The economic impact of the much publicised processing plant suspensions by China has been worn essentially by the suspended plants themselves along with those plants that have been left waiting for many years to be approved for China.
The inequality this has generated has been very costly to the plants involved and removing that inequality will be a major objective for AMIC in 2023.
"We are prepared to do whatever is necessary in order to get back to full capacity for the Chinese market," AMIC CEO Pat Hutchinson said.
As the global tariff walls have slowly been reduced over the last 20 years there has been a growth in non tariff trade barriers - technical issues that are not covered by free trade agreements and that the leverage for resolution is largely left with the importing country. China is a good example but NTBs are in many markets and can be very costly to export plants.
In 2023 this area of trade policy will need additional resources from the government in order to identify and then seek to rationlise NTBs before they become too trade limiting.
