banner.png

Mecardo Blog

The enemy of my enemy is my friend

Posted by Robert Herrmann on 16 March 2016
Robert Herrmann
Find me on:

The AMIEU acting in the interests of its members comes as no shock – but when they act in the interests of the meat processors we are bemused. Throw in supporting comments from the Animal Activists and you could be excused from thinking the world has gone mad. The ancient proverb 'the enemy of my enemy is my friend' could well have been mused with this relationship in mind!e5c05396bea80656dd2833a303ebce58.jpg

The take away message when you look at the recent press releases from the AMIEU regarding the threat to processing jobs from the Live Export (LE) trade is that the 1.4 million cattle exported last year have the potential to ruin cattle producers, processors and destroy the AMIEU member’s jobs.  I was hoping to read that it was also the cause of Donald Trump’s hair-do but unfortunately no mention.The recent AMIEU publication called for the government, producers and the processing sector to come up with a plan to save the processing industry which is currently under attack from the strong(er) Live Export trade – this was the “call to action” from the union enclosed in the emotive opinion piece.

To give the union its due, it has always acted in the interests of its members, however generally without any concern for other industry players or the longer term consequences for the industry. Judging by the “Readers Comments” that followed, there was no shortage of cattle producers happy to point this out and offer the AMIEU some free advice.

“The AMIEU was getting back the seeds it had previously sown by making Australian meat processing un-competitive”

This is a reasonable summary of the cattle producers comments. You could visualize the two-fingered salute accompanying.

There was a counter point made by the Animal Activist members about the cruelty of LE, however this time they seemed to support killing animals as long as it was on home soil and contributing to the demise of the LE trade. Curious bedfellows at best but also opportunists I think.

It’s hard to really feel sorry for the AMIEU; certainly there was no public sympathy from the union when cattle producers were selling their herds due to the drought. And there was no suggestion that the processors could have shared a bit more of the record margins they were banking as they shovelled record numbers through their plants.

It is most concerning however, if we consider the additional cattle to be slaughtered if LE is banned and the effect that would have on the price. Hardest hit would be the northern cattle producers, but Ocean-Drover.jpgthe spin-off effect would impact all producers – we had a taste of this in 2011 when the government banned LE. This ban only lasted 1 month but the effect rippled through the cattle market.

Not only would more cattle be funnelled into the processing sector, markets need to be found for up to 15% of our kill; over the past 5 years LE has accounted for 8.4 to 15.8% of the slaughter numbers.

Banning LE is a heart strings story; save Australian jobs, ensure processors are viable, add value with-in our shores etc.

The real story is more complex; on the one hand it includes meeting the red meat needs of our largest near neighbour. Indonesia has 4% of the world’s population and spends 49% of the household budget on food.

Almost as critical though is finding a home for large numbers of cattle from the north. These cattle are not yet finished to a condition our current meat export markets expect or require so Indonesian feedlots are a natural destination.

In the end, it is about using diversity to insure the Australian Beef Cattle industry is successful and has a range of customers – in any business this would be seen as good “Risk Management”.

At Mecardo, we remove the the emotion from our analysis and examine the numbers in order to ascertain what different events actually mean to your business. Our analysis of the likely impact of a live export ban can be reached by clicking on the link below:

Discover the impact of a LE ban on prices

 

Topics: Cattle market / cattle price, live export