> I ' I THE AUSTRALIAN

BEEF CATTLE INDUSTRY AN EXAMINATION OF THE CURRENT SITUATION, FUTURE PROSPECTS AND POSSIBLE POLICY OPTIONS ,

Occasional Paper No. 25 (Second Edition)

BUREAU OF AGRICULTURAL ECONOMICS, CANBERRA

I ~t#(n] BUREAU OF AGRICULTURAL ECONOMICS, CANBERRA

THE AUSTRALIAN BEEF CATTLE INDUSTRY A N EXAMINATION O F THE CURRENT SITUATION, FUTURE PROSPECTS AND POSSIBLE POLICY OPTIONS

Occasional Paper No. 25 (Second Edition)

AUSTRALIAN GOVERNMENT PUBLISHING SERVICE CANBERRA 1975

( i i i )

FOREWORD

Due t o a sudden marked reversal i n export markets, saleyard pr ices f o r c a t t l e i n Austral ia have f a l l e n rapidly during 1974 to t he lowest l eve l s for many years. Substant ia l numbers of stock which would have been turned of f f o r s laughter have been retained on .pastures. The incomes of producers, pa r t i cu l a r ly those re ly ing heavi ly on c a t t l e en te rpr i ses , have been severely affected as has t h e i r access t o credi t . There i s a p o s s i b i l i t y of a severe run-down i n t he industry 's resource base. Yet analyses of supply/demand trends po in t t o t h e l ikel ihood of a recovery i n t h e market over t h e m e d i m term.

The Government requested t h e Department of Agriculture, i n conjunction with t h e Treasury, t o formulate proposals which may be necessary t o a s s i s t t h e beef industry i n t h e immediate months ahead.

This repor t was prepared by the Bureau of Agricultural Economics and provided a bas i s f o r t he discussions between t h e two Departments. I t i d e n t i f i e s t h e causes and e f f e c t s of t he p r i c e decline, gives some ind ica t ion of i t s l i k e l y duration and reviews various pol icy measures which might be implemented t o a l l e v i a t e i t s e f f e c t s on producers. I t draws on the Bureau's continuing program of research i n t o t he economics of beef c a t t l e production and the marketing and market outlook f o r beef. This program i s pa r t l y financed by the Australian Meat Research Committee.

Due t o t he continuing widespread i n t e r e s t i n t h e beef s i tua t ion , it has been decided t o r e l ea se t h e report f o r publication. I t i s hoped t h a t it w i l l provide a useful guide t o fu r the r consideration of t h e most appropriate measures f o r meeting t h e current very d i f f i c u l t s i t ua t ion i n t h e beef industry.

(N.D. HONAN) Director

Bureau of Agricultural Economics CANBERRA, A.C.T. December 1974.

SUMMARY .

CONTENTS

Growth and Structure of the Australian Cattle

Industry

Market Characteristics and Trends

Market Outlook

Effects of Turn Around in Market Situation

Possible Policy Options

INTRODUCTION

GROWTH AND STRUCTURE OF AUSTRALIAN BEEF CATTLE INDUSTRY

Transfer of Resources into Cattle Industry

The Structure of the Beef Cattle Industry

Characteristics o f Beef ca t t l e Production

Vulnerability of Beef Producers t o Changes

i n Cattle Prices

M4RKET CHARACTERISTICS, TRENDS AND OUTLOOK

Characteristics of World Beef Production

Characteristics of World Trade

Genesis of the Current World Beef Situation

Recent Developments i n Australian Prices

Growth and Structure of the Australian Cattle Industry

. The Australian beef c a t t l e industry has expanded rapidly s ince the mid 1960s. Much of t h i s growth has been directed towards growing markets i n overseas countries and t h e industry has become a s ign i f ican t contr ibutor t o export income. I t i s also of considerable significance because of the importance of meat i n t he Australian d ie t .

. After r i s i n g ma&edly t o record levels i n l a t e 1973, saleyard pr ices for beef c a t t l e have f a l l e n rapidly t o t h e i r lowest levels f o r over ten years. Before these sharp var ia t ions , pr ices f o r c a t t l e tended t o increase throughout most o f the 1960s and i n t o t he ear ly 1970s and exhibited somewhat smaller f luctuat ions from year t o year than those f o r many other r u r a l commodities.

. Uuring the period of growth there was a t r ans fe r of resources i n t o . the industry from the sheep and dairying industr ies i n response t o the apparently more favourable market prospects for beef.

. There are current ly about 150 000 holdings i n Austral ia with meat c a t t l e . A t March 1971, 68 400 of these ran i n excess of 50 c a t t l e . Some 20%, o r 13 800 of t h i s l a t t e r group may be defined as ' spec i a l i s t ' producers, i.e. those producers who derived 85% o r more of t h e i r gross income from the beef c a t t l e enterpr ise . The proportion was above average i n the Northern Terr i tory (80%) and Queensland (36%).

. The s p e c i a l i s t s had 51% (i.e. 9m) of t o t a l c a t t l e and 52% (Sm) of breeders run by producers with over 50 ca t t l e .

. The vulnerabi l i ty of producers t o changes i n c a t t l e p r ices i s influenced by such factors as t h e i r dependence on the beef enterpr ise , t h e i r l eve ls of stock s a l e s and purchases, t h e i r cos t s t ruc ture , t h e i r debt-asset pos i t ion and t h e extent t o which debt has been incurred f o r and secured by c a t t l e purchases.

In the period leading up t o the current s i t ua t ion , the beef spec i a l i s t s although more exposed t o a f a l l i n beef pr ices were not as dependent upon purchases of c a t t l e as a means of production o r herd build-up and tended t o be f r e e r of debt than o ther beef producers. However, they had a higher proportion of inescapable costs and c a t t l e values comprised a much higher proportion of t h e i r assets . Some of the la rger s p e c i a l i s t s i n drought prone areas have developed- the a b i l i t y t o withstand large f a l l s i n income but t h e

I spec i a l i s t s i n the more c l imat ica l ly favoured areas have had l i t t l e previous experience of rapid declines i n c a t t l e returns.

. New entrants t o the beef industry who incurred debt t o purchase c a t t l e a t r e l a t i ve ly high pr ices and secured the loan against these c a t t l e could be expected t o be pa r t i cu l a r ly vulnerable t o t he recent f a l l i n pr ices .

Market Characteristics and Trends

. Although beef i s produced i n a very l a rge number of countries, l e s s than 10% of world output*, i s t raded in te rna t iona l ly and usually about 80% of world imports are-accounted f o r by the USA and the EEC.

. Beef import requirements of t he major importing countries are of a res idua l na ture and a r e usual ly controlled by various import r e s t r i c t i o n s . I n contras t , the indus t r ies i n t he major exporting countr ies of which Austral ia i s t h e l a rges t , a r e heavily r e l i a n t on overseas markets.

. These cha rac t e r i s t i c s impart t o in te rna t iona l t rade i n beef a p o t e n t i a l i n s t a b i l i t y , i n t h a t small changes i n supply/demand can have very la rge ramifications on t h e prosper i ty of t he beef i ndus t r i e s of exporting countries. This i s well i l l u s t r a t e d by the sharp f luc tua t ions in pr ices i n 1973 and 1974. However, during the previous decade, f luctuat ions i n output i n the two major importing countr ies tended t o o f f se t each other and t rade pr ices rose v i r tua l ly uninterrupted throughout the period.

. The marked decl ine i n saleyard pr ices i n Austral ia during 1974 w a s mainly due t o t he dramatic turn-around i n t he supply/demand s i t ua t ion on world beef markets.

A downturn i n economic a c t i v i t y i n major importing countries, associated with high r a t e s of i n f l a t i on , balance of payments problems and the o i l c r i s i s , caused a marked slackening i n t h e demand f o r beef i n 1974. However, f a l l s i n producer pr ices were not r e f l ec t ed i n r e t a i l p r ices , i n EEC and Japan, mainly because of increased marketing costs .

. This slackening i n demand coincided with large increases i n production i n major importing countries which were made possible by the marked expansion i n herd numbers i n t he e a r l y 1970s i n response t o favourable trends i n beef pr ices . Also, a combination of lower beef p r i c e s and sharp r i s e s i n feed costs have severely eroded producer incomes i n these countries.

. The .developing s i t ua t ion of increasing beef production, i n some cases r i s i n g stocks of beef, and f a l l i n g producer incomes led importing countr ies t o take increasingly severe act ion t o restrict imports. The EEC and Japan have v i r t u a l l y banned imports, Canada has r e s t r i c t e d them and t h e USA has issued warnings against large increases i n supplies t o t h a t market.

Market Out1 ook

. Abnormal events have had a strong influence on t h e sharp swings i n t h e beef market over t h e p a s t two years. The more bas ic supply/demand factors a r e considered l i k e l y t o r e su l t i n a recovery of t he market t o around the longer term trend over t he remainder of t he decade, although returns t o producers could well f luc tua te much more than i n t he ten years p r i o r t o 1973.

Present uncer ta in t ies preclude a c l e a r indicat ion of t he timing of any s ign i f i can t improvement i n t h e export market, but there i s a

strong l ikel ihood t h a t Aus t ra l ia ' s po ten t ia l beef supply w i l l f a r exceed export and domestic requirements through 1975 and possibly beyond.

Effects o f Turn Around i n Market S i tua t ion

(a) Bui ld up i n C a t t l e Numbers

. The response of many Australian beef producers t o t h e sharp downturn i n pr ices has been t o r e t a i n subs t an t i a l numbers of stock on pastures t h a t would otherwise have been turned o f f for slaughter. I t is

i! estimated tha t some 1.5m head of c a t t l e have accumulated t h a t would normally have been slaughtered; these a r e mainly f a t o r overfat bullocks and a r e concentrated i n beef s p e c i a l i s t regions.

Ca t t le numbers are expected t o r i s e from 30.9m i n March 1974 t o 34m a t March 1975. If breeding r a t e s continue a t normal levels . slaughter r a t e s continue a t t he r e l a t i ve ly low levels of 1974, a herd of 39m could r e s u l t by March 1976.

. Sheep numbers a r e a l so estimated t o increase t o 154m by March 1976 (representing say 19m c a t t l e equivalents i n terms of grazing requirements). A grazing pressure of 58m c a t t l e equivalents would be the highest ever experienced i n Austral ia and t h e a b i l i t y of t h e physical resource base t o cope with t h i s pressure depends largely on seasonal conditions which are unpredictable. The only s ign i f i can t control o f herd build-up is through s laughter of stock; control led matings e tc . a r e only p r a c t i c a l f o r l imited areas, mainly i n southern Australia.

. The a b i l i t y of slaughtering f a c i l i t i e s , f reezer and c h i l l e r capacity t o cope with a drought induced s laughter i s questionable. Moreover, the po ten t ia l ly very large increase i n turn-off overhanging the market has a depressing influence on pr ices .

(b) Producers' Income - L i q u i d i t y S i tua t ion

. The decline i n c a t t l e pr ices , reduced turn-off and r i s e s i n cos t s have had important but varying e f fec t s on producerst income - l i qu id i ty s i t ua t ions .

. BAE survey r e s u l t s indexed forward t o 1974-75 ind ica te t ha t n e t cash incomes have been reduced t o very low or negative values i n beef s p e c i a l i s t a reas viz. Northern Terr i tory; t h e Peninsula - Gulf, Inland North and Western regions of Queensland; Coastal N.S.W.; and the Kimberleys i n Western Australia. There appears t o have been l e s s pressure on the net cash incomes of producers with mixed enterpr ises .

Three groups of producers have been most a f fec ted

- l a rger es tabl ished producers f o r whom seasonal f luctuat ions and r i s k a r e a normal p a r t of t h e i r operations; t h e s i z e of many of these proper t ies , t h e i r ownership type and t h e leve l of cash reserves generated i n normal.years enable them t o withstand such f luctuat ions

- ' however, a large proportion of beef s p e c i a l i s t proper t ies are operated, of ten as family concerns, on a much smaller scale; t h e i r cash flow has been reduced t o a low leve l ; they have a large proportion of inescapable costs ; many have borrowed carry-on finance against an t ic ipa ted stock turn-off a t values and leve ls which have not eventuated; and a high proportion of t h e i r a s se t s i s represented by c a t t l e which have declined grea t ly i n value

- producers who recent ly entered t h e industry a t a time of high beef pr ices , many of whom operated small proper t ies engaged i n woolgrowing o r dairy farming and who tend t o be associated with higher debt commitments.

(c) Credit Availability

. The l i q u i d i t y of the Australian economy has been improved considerably as a r e su l t of recent government measures. This could mean t h a t the requirements of many producers f o r carry-on finance w i l l be met from normal sources.

. However, t he re i s an important gap i n t h e a v a i l a b i l i t y of c r ed i t t o those producers who have suffered a sudden reversa l of t h e i r l i qu id i ty s i t ua t ion , whose asset backing has been ser iously eroded and who lack a l t e rna t ive sources of income t o finance repayments.

. I t would require the development of appropriate administrative machinery t o ensure t ha t carry-on finance per se was spec i f i ca l ly directed t o such producers through ex is t ing i n s t i t u t i o n s providing shor t term c r e d i t .

However, o the r i n s t i t u t i o n s more geared t o providing longer term finance could he lp through debt rearrangement.

Possible Policy Options

. The appropria te approach t o t he problems which have a r i s en i n t h e beef industry would appear t o involve a combination of d i f fe ren t measures having the following fundamental objectives:

( i ) Assist v iab le producers t o remain i n t he industry;

( i i ) Assist non-viable producers e i t h e r t o leave the industry o r reconstruct t h e i r production uni t s ;

( i i i ) Protect t he resource base - breeding nucleus, .farm in f r a s t ruc tu re and pasture base;

( iv) Expand market o u t l e t s f o r beef.

. Within such a pol icy package it would appear t h a t high p r i o r i t y should be given t o the provision of f inance t o viable producers fo r debt reconstruction. An appropriate agency would be t h e Commonwealth Development Bank which has es tabl ished l inks with t h e pas tora l houses.

This would involve a fundamental approach t o producers' l i qu id i ty problems which have a r i s en p a r t l y because of shortcomings i n t h e i r financing arrangements i n a period of f luc tua t ing pr ices . I t should a lso f a c i l i t a t e the re lease of funds f o r carry-on purposes provided by t r ad i t i ona l lenders, and have considerable advantages over a l te rna t ive methods i n ensuring t h a t finance was d i rec ted towards viable producers most i n need because they a r e excluded from c r e d i t under ex is t ing arrangements.

Other s teps which could be taken would include ass i s tance t o non-viable producers through t h e Rural Reconstruction Scheme;

A defer ra l of income t a x payments by producers i n f inanc ia l d i f f i c u l t i e s ; fu r the r e f f o r t s t o expand markets supplemented where possible by the inclusion of beef i n food a i d programs, p a r t i c u l a r l y i n dr ied sa l t ed form; and i n t h e advent of a severe de te r iora t ion i n pastoral conditions, t h e introduct ion of f r e igh t subsidies t o f a c i l i t a t e the movement of stock t o more favoured areas.

In pa r t i cu l a r there seems a c l e a r need f o r an announcement t o i n j e c t confidence i n t o t he industry, which recognises t he s p e c i f i c problems being faced and ind ica tes t h a t s p e c i f i c s teps w i l l be taken as necessary.

THE AUSTRALIAN BEEF CATTLE INDUSTRY

AN EXAMINATION OF THE CURRENT SITUATION,

FUTURE PROSPECTS AND POSSIBLE POLICY OPTIONS

INTRODUCTION

Saleyard pr ices f o r c a t t l e 2n Austral ia have f a l l e n very rapidly during 1974 t o t he lowest l eve ls f o r over ten years. These marked f a l l s have occurred as a r e s u l t of a dramatic turn-around i n the supply-demand s i t ua t ion f o r beef i n a l l o f our major overseas markets. They represent an abrupt change i n previous t rends i n pr ices which tended t o r i s e throughout t he p r e v i o ~ decade and increased pa r t i cu l a r ly sharply during

Y 1 9 3 - The generally favourable market s i t u a t i o n f o r beef a t a time

when many other r u r a l commodities were encountering d i f f i c u l t i e s , 3 stimulated expansion i n t he industry, especial ly from t h e mid 1960s

onwards. The beef c a t t l e industry thus became one of t h e most rapidly expanding segments of t h e Australian r u r a l s ec to r and a s ign i f ican t contr ibutor t o export income.

The sudden pr ice f a l l i n 1974 has occurred a t a time of unusually favourable seasonal conditions, and although t o t a l slaughterings have been t h e th i rd highest on record, it has been a common response of producers t o r e t a i n subs tan t ia l numbers of stock on pastures which would otherwise have been turned o f f f o r slaughter. This has resu l ted i n a fur ther s ign i f i can t build-up i n the na t iona l c a t t l e herd, boosting the po ten t ia l f o r production rises a t a time of depressed marketing circumstances and t h e l ikelihood o f a severe run-down of t h e industry 's resource base, especial ly i n t h e event of a de te r iora t ion i n 'seasonal conditions.

Reduced turnoff and lower pr ices have a l so resu l ted i n a sharp decline i n producers' re turns from ca t t l e . Together with t h e rapid increases i n input p r ices facing a l l r u r a l producers, t h i s has affected the l iqu id i ty posi t ion of producers, pa r t i cu l a r ly those re ly ing heavily on

I

c a t t l e enterpr ises , and t h e i r access t o t r a d i t i o n a l sources of c red i t .

A most important consideration influencing t h e appropriate course of action i n the current s i t u a t i o n is t h e market outlook f o r beef. While it i s always d i f f i c u l t t o d i s t inguish shor t term f luc tua t ions from s ign i f ican t s t r u c t u r a l changes i n t h e supply o r demand f o r agr icu l tura l commodities, it does appear t h a t t h e beef market w i l l recover over t h e remainder of t he decade, although t h e timing of any s ign i f i can t improvement is uncertain. Thus the current p r ice slump may b e viewed as a shor t term phenomenon and the problems as e s sen t i a l l y ones of low l iqu id i ty , shortcomings i n c r e d i t and financing arrangements, and increasing pressure on pas tora l resources.

The purpose of t h i s report i s t o iden t i fy t he causes and e f f e c t s of t he pr ice decline, t o give some indicat ion of i ts l i ke ly duration and t o review the various policy a l t e rna t ives which might be implemented as a means of a l l ev i a t ing its effects on producers. The report opens with a number of scene s e t t i n g sections which describe relevant fea tures of t h e growth and s t ruc tu re of the beef c a t t l e industry i n Austral ia , and examine the charac te r i s t ics of t h e market fo r beef, and events leading up t o t h e recent p r i ce f a l l s . These s e t t he background f o r t h e following sec t ions i n which the market outlook for t h e commodity over t h e years ahead is analysed, the e f fec t s of t h e market reversa l a r e i den t i f i ed and pol icy options which might be applied a re reviewed.

GROWTH AND STRUCTURE OF AUSTRALIAN BEEF CATTLE INDUSTRY

The Australian b e e f ~ a t t l e industry has expanded rapidly s ince t h e mid 1960s. Beef and veal kroduction rose from some 950 000 tonnes i n 1965-66 t o a peak of 1.4m tonnes i n 1972-73, while c a t t l e numbers increased a t an even grea te r r a t e from 17.9m i n March 1966 t o 29.lm i n March 1973 and then fu r the r t o 30.9m i n March 1974.

Appendix Table I presents c a t t l e numbers and slaughterings over t h e l a s t decade. The growth pa t te rns i n both are indicated as percentage change values. Any d i r ec t comparisons of percentage changes between c a t t l e numbers and slaughterings f o r individual S ta tes are complicated by t h e movement of c a t t l e across S t a t e borders, but the contribution of the southern S ta t e s t o t h e changes i n t h e c a t t l e industry has c l ea r ly been very important. Nevertheless, t he northern c a t t l e areas i n providing s t o r e and breeder s tock t o t h e south e i t h e r as t r ad i t i ona l movements o r as drought-induced t rad ing have a s s i s t ed i n enabling the overal l growth t o take place.

Much of t h e growth i n the industry has been directed towards t h e growing markets i n overseas countries. I n 1973-74, some 57% of production w a s exported compared with 41% i n 1968-69 and 20% i n 1957-58.

Before t h e i r recent sharp var ia t ions , pr ices for c a t t l e a t t he p r inc ipa l saleyards i n Austral ia tended t o increase throughout most of the 1960s and i n t o t h e ear ly 1970s, and exhibited somewhat smaller f luc tua t ions from year t o year than those f o r many o ther r u r a l commodities. Thus quotations a t t he Homebush (Sydney) saleyards f o r ox and/or he i f e r s , 295-320 kg, first and second export qual i ty , rose from some 38c per kg (estimated dressed carcass weight) i n 1962 t o 64c i n 1972 and then sharply t o 85c i n 1973; they peaked a t 93 cents i n September 1973.

These t rends resu l ted i n t h e industry becoming one of t he f a s t e s t growing segments i n t h e Australian r u r a l sec tor and a s ign i f i can t cont r ibu tor t o export income. In 1973-74, t h e gross value of c a t t l e s laughter ings w a s $1,176m, some $534m above t h e leve l of only t h r e e years e a r l i e r , while the value of beef and veal exports more than doubled t o $619~1.

The industry i s a l so of considerable significance because of t he importance of meat i n t h e Australian d i e t . Meat has a weighting of 35% i n the food group of t h e Consumer Pr ice Index and contributes 10.9% t o the overa l l Index. Beef alone contr ibutes 4.7% t o the t o t a l Index. This means t h a t both the l eve l and var ia t ions i n r e t a i l pr ices a r e s ign i f i can t i n t h e s e r i e s used as an ind ica tor of i n f l a t i o n i n t he economy.

Transfer of Resources i n t o Cattle Industry

Throughout much of Austral ia , beef c a t t l e and sheep compete for grazing land. Consequently, developments within t h e beef c a t t l e industry a r e affected by events i n t h e wool and sheep industry as well as by beef market developments. A s ign i f i can t movement of resources out of sheep i n t o beef c a t t l e has taken place i n t h e l a s t decade, pa r t i cu l a r ly s ince 1970. I n t h e l a t e 1960s t h e pas to ra l resource base was growing at an unprecedented r a t e , mainly through investment i n land improvements:

fencing, stock water f a c i l i t i e s , timber clearing, and pasture development. However, s ince 1970, t he area of improved pastures and the appl icat ion of superphosphate have taken a downturn. In consequence, t h e growth of t he pastoral base i s also l i k e l y t o have slowed down i n the l a s t four years.

Observation of t he recent r e l a t i ve growth i n sheep and c a t t l e numbers and of t h e pri.ces which producers have received f o r sheep products and c a t t l e leads one t o t h e conclusion t h a t t h e increased concentration on beef was a react ion t o contemporaneous declining prospects fo r sheep and wool as well a s t o favourable prospects for beef. I t has been estimated tha t between 1966 and 1972 some 1 2 000 smaller s ized woolgrowing properties l e f t t h e sheep industry. Australian Bureau o f S t a t i s t i c s da ta c lass i fy ing ru ra l holdings by area and number of meat c a t t l e car r ied indicate t ha t many of these would have entered t h e beef industry, Between March 1969 and March 1971, t he number of holdings of l e s s than 200 acres which carr ied between 20 and 100 meat c a t t l e increased by 44% t o ju s t over 14 000.

Perhaps even more spectacular has been the 79% increase t o 31 829 i n t h e number of proper t ies carrying l e s s than 50 meat c a t t l e and no sheep between 1965-66 and 1970-71. Given t h a t t h e move i n t o c a t t l e by these small proper t ies would have involved sa les of low pr iced sheep and purchase of high pr iced c a t t l e , t he re would have been a tendency f o r the purchases of c a t t l e t o have been financed by borrowing. I t can .be seen from Appendix Table I1 t h a t a rapid increase i n t he number of beef properties carrying no sheep occurred i n N.S.W. and Victor ia between 1968-69 and 1970-71. This t ab l e a l so suggests t ha t most of t h e increase i n N,S .W. consisted of proper t ies which were formerly c lassed as small sheep proper t ies carrying e i t h e r no o r very few c a t t l e . In Victor ia on the other hand it appears l i k e l y t h a t almost a l l of the increase emanated from cereal and/or dairy farms,

Following t h e shor t sharp r i s e i n wool pr ices a f t e r t he low of the ear ly 1970s and more recent ly , t h e introduction of an auction f loo r pr ice , some confidence i s l i k e l y t o have returned t o t he woolgrowing industry. Certainly t he tendency t o s u b s t i t u t e c a t t l e f o r sheep i n the sheep industry, re f lec ted i n t h e doubling i n c a t t l e numbers on sheep properties from 5.lm t o 10.4m between 1968 and 1972, v i r t u a l l y ceased with no fur ther increase i n c a t t l e numbers on sheep proper t ies being recorded between 1972 and 1973.

A s imi la r process of adjustment has occurred i n the dairy farming industry. The number of da i ry farms and dairy c a t t l e has declined during the past decade, pa r t i cu l a r ly i n areas not espec ia l ly su i t ed f o r dairy production. For example, between March 1969 and . March 1971, the number of dairy farms with between t e n and 50 dairy c a t t l e and of an area l e s s than 200 acres declined by some 2350 o r 27% t o 6375. Because much of the cap i ta l inventory of a da i ry farm, including much of t h e l ivestock can serve unchanged t o produce beef c a t t l e , it i s l i ke ly t ha t those proper t ies which t ransfer red from dairy. farming t o beef c a t t l e during t h i s period became less heavily involved i n debt commitments than those t r ans fe r r ing from t h e sheep industry.

The S t r u c t u r e o f the ~ e e f . Cattle Indus t ry

There a r e current ly about 150 000 holdings i n Austral ia with meat c a t t l e , A survey of beef c a t t l e producers was conducted by t h e BAE

i n 1972 and 1973 and was based upon t h e industry s t ruc ture a t March 1971, when j u s t over 146 000 holdings were estimated t o comprise the industry. Of these, 68 400 holdings o r almost ha l f , ran i n excess of 50 meat ca t t l e . I n assessing, through sample survey procedures, t he economic s t a t u s of the industry, t he Bureau concentrated i t s a t ten t ion upon those producers running i n excess of 50 meat ca t t l e . Such producers ran a t o t a l of almost 18m head, approaching 90% of the 1971 nat ional beef herd.

& - . The beef-producing areas fo r survey purposes were broken i n t o 26

regions, each one r e l a t i v e l y homogeneous with respect t o climate, c a t t l e production and marketing pract ices , and r e s u l t s re la t ing t o t h e industry at regional and S t a t e leve ls were calculated.

Table No. 1 presents a general p ic ture of the enterprise combinations encountered on the 68 000 propert ies i n 1970-71. The method of c l a s s i f i c a t i o n i s based upon producers who derived 85% o r more of t h e i r gross income from the en terpr i se combinations l i s t e d i n the table.

The category 'Beef/Non-Earn'' r e f e r s t o properties where the combined re turns from beef c a t t l e and off-property enterprises exceeded 85% of t o t a l re turns and where off-property returns made up a t l e a s t 15%; Beef/Other includes a l l properties not f a l l i n g in to the other categories. The former group includes, f o r example, operators who undertake contracting work f o r others, and operators with income from other sources such as a professional practice. This group generally w a s below 5% although i n South Australia, Victoria and Tasmania it made up lo%, 11% and 14% of producers respectively. The Beef/Other category would include such enterpr i se combinations a s beef/sugar and beef/horticulture.

Of t he 68 359 producers running more than 50 c a t t l e , one-fifth, o r 13 834 were ' s p e c i a l i s t t producers, i.e., derived 85% o r more of t h e i r gross income from the beef 'enterprise. The 'proportion of s p e c i a l i s t producers was above average 'in the Northern Terr i tory (80%) and Queensland (36%).

The beef s p e c i a l i s t s ran 9.07m c a t t l e a t t h e time of the survey. Of these, 5.021~ comprised breeding cows and he i f e r s . This amounts to an average herd s i z e of 656 head with 55% breeders. The whole population w a s 17.75~1 head, an average herd size of 260 head. Thus the beef spec ia l i s t s , although only one-fifth of the population, comprise a very important par t of t h e c a t t l e industry as they had 51% of the c a t t l e and 52% of the breeders run by producers with 50 head o r more (see Table No. 2).

Characteristics of Beef Cattle Production

Examination of survey data covering :.ithe period 1968-69 t o 1971-72 disclosed a number of cha rac te r i s t i c s r e l a t ing t o key aspects of beef c a t t l e production.

C a t t k Pwhases: The purchase o r turn-on r a t e of the population r e l a t i v e t o numbers car r ied w a s 25%. For beef spec ia l i s t s the turn-on ' r a t e was only 13% and f o r the remainder 38%. In many cases the purchase O f c a t t l e i s associated with receiving short-term finance from pastoral firms, the debt being liquidated on the s a l e of the beasts when finished.

Generally, purchases made i n a l l regions included both beasts f o r breeding purposes and s tores for :fattening. However, beef spec ia l i s t s

Table No. 1;

DISTRIBUTION OF PROPERTIES BY STATE BY ENTERPRISE

COMBINATION (PROPERTIES I'JITH MORE THAN 50 MEAT CATTLE)

1970-71

S t a t e Beef S p e c i a l i s t s

Beef/Sheep/ Cereal

Beef/Non Farm and Beef/Other Tota l

% % % % % % No.

N.S.W. 18 32 '18 4 28 100 25 730 I

35 7 r

Vic. 13 7 38 100 16 130 w I

Q1d 36 7 - 1 56 100 15 438

S.A. 7 2 8 8 3 54 100 4 075

W.A. 16 17 16 5 46 100 4 430

N.T. 80 - - - 20 100 184

Tas . 11 32 1 10 46 100 2 372

A u s t r a l i a 20 26 10 4 40 100 68 359

Table No. 2

AUSTRALIAN BEEF CATTLE INDUSTRY SURVEY: 1970-71: SELECTED CHARACTERISTICS OF

PRODUCERS WITH MORE THAN 50 MEAT CATTLE AND THE PRODUCER COMPONENT EARNING

85% OF GROSS INCOME FROM THE BEEF ENTERPRISE (BEEF SPECIALISTS)

Item N.S. W. Vic. Q1d S.A. W.A. Kimberleys N.T. Tas. Australia (S.W.) -

A 2 2 Producers

No. of producers No. 25 730 16 130 15 438 4075 4332 98 184 2372 68 359

Average herd (meat c a t t l e ) No. 177 138 461 184 160 8003 7121 133 260

Total Nos. m . 4.55 2.22 7.12 0.75 0.69 0.78 1.31 0.32 17.75

% herd as breeders

Non-breederNos. m. 2.01 0.86 3.43 0.33 0.31 0.41 0.54 0.17 head

8.06

Breeder Nos. m. head 2.54 1.36 3.69 0.42 0.38 0.37 0.77 0.15 9.69

Beef SpeciaZist Producers

No. of beef spec i a l i s t s No. 4 683 2 174 5 576 293 609

Average herd (meat c a t t l e ) No. 236 242 939 722 29 i 8003 7121 176 656

Total Nos. m. 1.11 0.52 5.23 0.21 0.18 0.73 1.04 0.05 9.07

% herd as breeders % 57 69 51 56 60 47 5 8 3 7 5 5

m. Breeder Nos. head

0.63 0.36 2.68 0.12 0.11 0.34 0.61 0.02 5.02

% of t o t a l breeders run % 2 5 27 73 28 2 8 93 80 11 , 52 by beef spec i a l i s t s

tended t o purchase mainly s tores , while non-specialists purchased mainly breeders. The percentage of who declared themselves t o be s p e c i a l i s t s i n s t o r e fa t ten ing was only 5% ranging from 10% i n Tasmania t o zero i n the Kimberleys. Among beef s p e c i a l i s t s , the percentage was lower s t i l l ranging from 8% i n south-west Western Austral ia t o zero i n Victoria, South Australia, and the Kimberleys. Consequently, on many propert ies t h e purchase of s t o r e c a t t l e f o r fa t ten ing took place as an a c t i v i t y t o supplement the bas ic breeding enterpr ise .

Production: Gross turn-off r a t e s were 42% f o r the population, 32% for beef s p e c i a l i s t s and 52% among t h e remainder. However, because of the grea te r dependence of t h e non-specialists upon purchased c a t t l e , t h e net turn-off r a t e s ( i .e. gross turn-off minus turn-on) were 17% f o r t he population; and 20% and 14% f o r beef s p e c i a l i s t s and non-specialists respectively.

CapitaZ: The importance of herd value as a proportion of t h e value of t o t a l a s s e t s varied markedly between s p e c i a l i s t and non-specialist beef producers, and between regions. In Queensland, f o r example, c a t t l e values comprised 29% of the t o t a l farm c a p i t a l of a l l producers compared with 44% f o r beef spec i a l i s t s . In t h e Northern Terr i tory, c a t t l e accounted fo r 56% of t o t a l farm cap i t a l . On the o ther hand, i n a well d ivers i f ied area such as Victor ia the proportion was 13% f o r t h e population, r i s i n g t o an average of 23% f o r beef s p e c i a l i s t producers.

Indebtedness: Average debt per property as a t June 1971 did not d i f f e r g rea t ly between the two groups being $16,900 f o r t h e population, $15,750 f o r s p e c i a l i s t s and $17,192 f o r non-specialists . One quar ter of t he population was debt f ree ; while 44% and 20% of s p e c i a l i s t s and non-specialists respect ively had no debt. The debt involved i n c a t t l e purchase again did not d i f f e r g rea t ly on a property basis ($1,890 f o r t he population; $1,753 f o r t h e s p e c i a l i s t s ; and $1,924 f o r non-specialists) . Because of t he grea te r number of beas t s run on average on s p e c i a l i s t s ' proper t ies t h e amount of debt involved per beas t fo r c a t t l e purchase was $2.67; while among t h e remainder it averaged $12.10.

Debt incurred f o r carry-on purposes was $2,863 per property overa l l , $2,726 per property among t h e s p e c i a l i s t s , and $2,898 per property f o r the remainder. A comparison a t t he per beast l eve l i s not legi t imate , due t o the possible use of such finance i n other en te rpr i ses among non-specialist producers. However, it i s in t e r e s t i ng t o note t ha t carry-on finance on beef s p e c i a l i s t proper t ies amounted t o $4.16 per head a t t h a t time.

Equity: The equity r a t i o ( r a t i o of producer-owned a s s e t s t o t o t a l cap i t a l ) on average did not d i f f e r g rea t ly between the population and beef s p e c i a l i s t s , ranging generally a t S t a t e l eve l from 0.85 t o t o 0,93.

Data from t h e survey provide some degree of supporting evidence that recent entrants t o t he beef c a t t l e industry tend t o be associated with higher debt commitments, while those with longer experience with beef c a t t l e tend t o have higher equity i n t h e i r proper t ies . The data presented i n Table No. 3 apply t o June 1971, which was within t he period when many pas to ra l i s t s were engaged i n s h i f t i n g resources away from dairying and

sheep towards beef c a t t l e and when a t l e a s t a component of t h e i r borrowing would have been d i rec ted t o a s s i s t i n t h i s process of adjustment.

Table No. 3

AUSTRALIAN BEEF CATTLE INDUSTRY SURVEY: RELATIONSHIP

BETWEEN AVERAGE YEARS OF EXPERIENCE WITH BEEF CATTJE

OF PRODUCERS GROUPED ACCORDING TO PROPERTY EQUITY

RATIO(a) , AS AT JUNE 1971.

--

Beef Cat t le Average Experience Producers i n Each

Equity Ratio with Beef Cat t le Group with Less Producers Intervals Within G~~~~ (b) of Producers i n than 10 years Beef

Group experience

ps years % Less than 50% .. equi ty 5.2 16.3 44.5

50% t o 74% equi ty 11.0 16.8 29.6

75% t o 99% equity 52.0 20.5 25.8

Ful l equity 31.8 21.9 29.8

(a) Owned a s se t s over t o t a l property cap i t a l value. (b) ~Goducers . . . with more

than 50 cat t le(survey population).

An examination of t h e equity of producers by various herd s i ze s discloses no p a r t i c u l a r pattern. One would suppose tha t t h e la rger producers would not need much c red i t , and the small producers would have d i f f i c u l t y i n obtaining c red i t , so t h a t it would tend t o be the medium-scale producers who have t h e lowest equity levels. This pa t te rn was only borne out t o any extent i n New South Wales, South Australia, Tasmania and some regions of Queensland. The var ia t ion i n equi ty leve ls was not grea t , ranging from uni ty ( f u l l equity) t o ra re ly below 0.7.

Income: The l a t e s t survey data on the n e t farm income s i t ua t ion on beef-producing proper t ies r e l a t e s t o 1971-72. There did not appear t o be any s ign i f i can t differences between s p e c i a l i s t and non-specialist producers although some regional dif ferences appeared t o exis t . Data on n e t farm incomes f o r 1971-72 are presented i n Table No. 4.

The d i s t r i bu t ion pa t t e rn includes sometimes qu i t e large proportions of producers receiving low incomes (e.g. l e s s than $2,000). In t h e southern S ta t e s much of t h e problem was re la ted t o t h e then low wool pr ices , although some regions i n t he south having no sheep, e.g. Coastal N.S.W., 'had low income problems mainly associated with inadequate farm s ize . I n the north, t h e low income properties were usually associated with lagging production response t o recent development action.

Table No. 4

AUSTRALIAN BEEF CATTLE INDUSTRY SURVEY

DISTRIBUTION OF PROPERTIES BY NET FARM INCOME(a)

1971-72

(Percentages)

State or' Region

Income Class $

Negative 0-1,999 2,000- 5,000- 10,000- 20,:?00+ 4,999 9,999 19,999

Tota l

- --

N.S.W.

Vic. 14 10 21 36 13 6 100

S.A. 17 12 3 2 19 10 1 0 100

W.A. -South West 6 10 22 32 25 5 100

Tasmania 5 39 16 15 16 9 100

N.T. 33 7 7 10 11 3 2 100

(a) Off-property income included in returns: rent and interest included in costs.

C o s t Stmrcture: Producers experiencing a short-term setback such as a drought o r a sudden unexpected f a l l i n p r i ce f o r t h e i r produce of ten adopt a short-term surv iva l measure which involves cu t t i ng back on as many operat ional cos t s as possible and delaying c a p i t a l replacement. However, on a l l p roper t ies , t h e r e a r e a number of cos t s which tend t o be inescapable, and others which can be postponed f o r several years.

I n Appendix Table 311, the t o t a l cos t s t ruc tu re (hired labour, imputed family labour, mater ia ls , services , depreciation, rent and i n t e r e s t paid) has been broken i n t o t h r e e components - 'deferrable ' , 'possibly deferrable1, and ' l a rge ly inescapable'. The former category includes depreciat ion and the imputed value of family labour. The item 'possibly deferrable ' includes f e r t i l i s e r costs , repa i r s t o plant and improvements, and pes t destruct ion, which make up a category of costs with scope f o r some temporary cost paring. The f i n a l category includes t h e remainder of cos t items, such as h i red labour, materials such as fue l , se rv ices including f r e igh t and insurance, r en t and i n t e r e s t paid. Scope f o r reduction i n t hese l a t t e r c o s t s over t h e shor t term would be very l imited without suf fe r ing severe and immediate losses i n production.

The da t a i s presented f o r t h e average of t he th ree years 1968-69 t o 1970-71 and comparisons a r e possible between the survey population of beef producers and t h e beef s p e c i a l i s t s within t h a t population.

The da ta ind ica te t h a t t he deferrable cost component i s of t he same order f o r beef producers as a whole and beef spec i a l i s t s . Another point which emerges i s t h a t t he largely inescapable items t o t a l from 50% t o 60% of t o t a l cos t s i n t he southern regions, but are generally from 60% t o 70% i n north and inland Queensland, t h e Kimberleys, northern S.A. and t h e Northern Terr i tory. Thus, by ' t ightening t h e i r b e l t s ' , northern producers might f ind t h a t they can cut cos t s by 20% and possibly up t o 40% i f they defer payments on some of t h e items i n t he 'possibly deferrable ' column. Southern producers appear t o have more scope f o r cost cu t t ing beginning a t around 25% and extending up t o 50% of t o t a l costs.

Vulnerability of Beef Producers to Changes in Cattle Prices

Wide var ia t ions e x i s t i n types of beef producers, ranging from s p e c i a l i s t s e n t i r e l y dependent on beef c a t t l e t o mixed en te rpr i se proper t ies running a few c a t t l e . I n addit ion, t he beef en te rpr i se can involve one o r more of a range of a c t i v i t i e s extending from breeding and fa t ten ing t o spec ia l i sed s t o r e fattening. On many propert ies , espec ia l ly i n regions where c l imat ic v a r i a b i l i t y i s high producers consciously t a i l o r t h e i r beef a c t i v i t i e s t o t he seasons i n order t o tu rn off the type of beas t most appropriate t o t he current pas tora l conditions. The major beef a c t i v i t i e s of t h e survey population and of t he beef s p e c i a l i s t s i n p a r t i c u l a r a r e presented i n Appendix Table IV.

I n addi t ion t o var ia t ion between producers with respect t o en t e rp r i s e combination and beef a c t i v i t y , considerable differences e x i s t i n equity s t a t u s , t h e s i z e of t h e cash flow generated by the property and i t s va r i a t i on from year t o year , thevolume of cash reserves, the asse t backing and a number of other fac tors which would a f f ec t vu lnerab i l i ty i n t h e event of a decl ine i n beef pr ices . I n general t h e fac tors which would enable a producer t o r e s i s t a f a l l i n beef pr ices are: a low dependence on beef c a t t l e as a source of t o t a l revenue; an asse t s t ruc tu re which includes a low proportion of c a t t l e ; low debt/high equity; a large

reserve of l i qu id asse t s ; a subs tan t ia l a b i l i t y t o generate fu r the r cash reserves o r a t l e a s t maintain ex is t ing ones; and a f l ex ib l e cost s t ruc tu re with scope f o r temporary pruning.

The information presented on the s t ruc ture and cha rac t e r i s t i c s of the industry indicates t h a t considerable var ia t ion e x i s t s i n the industry with respect t o producer vulnerabil i ty. In general, i n t he period leading up t o t h e current s i t ua t ion , t he beef s p e c i a l i s t s , although they could be expected t o be more exposed t o a f a l l i n beef pr ices , were not as dependent upon purchases of c a t t l e as a means of production o r herd build-up. In addition, s p e c i a l i s t s tended t o be f r ee r of debt and a high proportion of them had no debt. Beef spec i a l i s t s , although highly dependent on c a t t l e , tend a l so t o be located i n the more remote and drought-prone regions, and i n normal years have a high proportion of producers who earn subs tan t ia l incomes. I t i s these same producers who i n times of drought have developed the a b i l i t y t o withstand very high negative incomes. Nevertheless, mention should be made of t h e large number of producers highly dependent on beef c a t t l e who run proper t ies which i n normal times a r e able t o support a family with l i t t l e i n reserve. These producers a r e located i n t h e c l imat ical ly more favoured areas , such as cen t r a l and coas t a l Queensland and coas ta l New South Wales. P r io r t o t h e current s i t ua t ion they had l i t t l e experience of large fal ls i n c a t t l e revenue and with l i t t l e cash reserves , and i n some cases a high leve l of development debt (e.g. brigalow s e t t l e r s ) , could be expected t o be highly vulnerable t o the f a l l i n c a t t l e p r ices ,

A fu r the r c l a s s of producers referred t o e a r l i e r who might be regarded as having a high degree of vulnerabi l i ty would be the new entrants t o t h e beef industry who had incurred debt i n order t o purchase ca t t l e . Given the r e l a t i v e l y common prac t ice of borrowing t o purchase c a t t l e and providing the lender with a l i e n on the c a t t l e as secur i ty , the e f f ec t of a decline i n c a t t l e p r ices would be twofold. Not only would such a producer's re turns decline, but t he value of h i s a s se t s standing as secur i ty against debt would decline.

On the other hand, those producers with a d ivers i f ied output-mix might be expected t o be ra ther l e s s vulnerable t o adverse changes i n c a t t l e prices. For example, evidence from t h e Australian Sheep Industry Survey indicates t h a t although sheep proper t ies accounted f o r about 40% of t he national beef c a t t l e herd i n 1972-73, t h e i r degree of dependence on t h e c a t t l e en te rpr i se was not g rea t (see Table No. 5). In addi t ion leve ls of indebtedness during tha t year did not appear t o be excessive i n r e l a t i on t o net cash income, although t h i s s i t ua t ion could have a l t e r ed with t h e subsequent downturn i n both beef and wool pr ices .

Table No. 5

DISTRIBUTION OF SHEEP PROPERTIES BY DEPENDENCE ON CATI'LE

E?!TERPRISE RETURNS BY ZONE: 1972-73

Beef E n t e r p r i s e Returns a s a Propor t ion o f T o t a l Returns

Zone negat ive 10% t o 20% t o 40% beef less l e s s l e s s than and To ta l

e n t e r p r i s e 10% t han , than over

r e t u r n s 20% -- a

40% - PROPORTION OF PROPERTIES

P a s t o r a l Zone

Wheat-Sneep Zone

High R a i n f a l l Zone

P a s t o r a l Zone

Wheat-Sheep Zone

High R a i n f a l l Zone

P a s t o r a l Zone

Wheat -Sheep zone

High R a i n f a l l Zone

5.9 47.9 16.0 21.0

3.8 61.3 16 .3 14.7

5.0 26.7 24.7 29.8

AVERAGE DEBT PER PROPERTY

S $ $ $

29 906 23 042 29 327 3 1 507

13 839 1 2 358 14 267 8 316

3 671 12 034 12 546 15 882

AVER4GE NET CASH INCOME PER PROPERTY

30 718 28 092 33 098 31 104

12 000 1 3 481 13 794 18 522

7 273 17 453 21 027 15 241

MARKET CHARACTERISTICS, TRENDS AND OUTLOOK

Before considering the fac tors behind t h e recent s h a r p turn-around i n t he world beef pr ices , it is useful t o examine t h e general cha rac t e r i s t i c s o f t he world beef market, towards which t h e Austral ian beef' industry has becohe increasingly oriented.

Characteristics o f World Beef Production

Although beef is produced i n a very la rge number of countries, nearly 80% of estimated world output is concentrated i n s i x main regions; these are , i n order of importance, t h e United States , t he Soviet Union, t he enlarged European Economic Community, Argentina, Brazi l and Australia. The USA alone accounts f o r over a quar te r o f t h e world's output while Austral ia ' s production makes up only about 4% of t h e t o t a l .

Charac te r i s t ica l ly , long term trends i n c a t t l e numbers and beef production i n a number of countr ies have followed a f a i r l y regular cyc l ica l pa t te rn but with occasional shor t term aberrat ions . A very marked cyc l ica l pa t te rn has long been a f ea tu re of Argentina's c a t t l e industry while t rends i n U.S. c a t t l e numbers have a l s o shown a d i s t i n c t cyc l ica l pa t t e rn but with l e s s amplitude. Growth i n t h e p rac t i ce of l o t feeding i n t he USA i n recent years may well have had an inf luence on some cha rac t e r i s t i c s of t he c a t t l e cycle there. I n Western Europe t h e c lose association of t he beef industry with dairy production (approximately 90% of beef and veal production comes from da i ry o r dual purpose c a t t l e ) has meant t h a t re turns from beef and dairying have influenced trends i n c a t t l e numbers which nevertheless have shown some s l i g h t cyc l ica l movements with peaks usual ly separated by about e igh t years.

The underlying bas i s f o r t he observed cyc l ica l t rends has been documented elsewhere,(l) but i n b r i e f r e l a t e s t o producer react ions t o current and expected fu tu re l eve l s of p r o f i t a b i l i t y and t h e r e l a t i v e l y long period required t o e f fec t desired increases i n t h e l eve l of production. Seasonal conditions and other la rge ly random elements a r e a t times the causes of i r r e g u l a r i t i e s i n t h e cycle.

World beef production increased a t a r a t e of about 3% p e r annum during t h e 1960s. Large f luctuat ions i n output i n t h e major importing regions, the United S t a t e s and Western Europe tended t o o f f s e t each o ther thereby reducing the annual var ia t ions i n world output. Since t h e l a t e 1960s however, t he re appears t o have been some synchronisation of t h e c a t t l e cycles i n several major producing countries. This led t o a s ign i f ican t slowdown i n t he r a t e of growth i n world output during the ear ly 1970s as producers re ta ined stock t o bu i ld up numbers i n response t o r i s i n g prices, especial ly during 1973. I t a l so provided t h e bas i s f o r t h e sharp r i s e i n output i n 1974 as t h e stock from the expanded herds came forward f o r market.

A notable decl ine i n ca l f slaughterings contributed t o t h e overal l r i s i n g t rend i n c a t t l e numbers i n t he l a t e 1960s and e a r l y 1970s. In t he United S ta t e s corumercial ca l f slaughterings declined from 7.4m i n 1965 t o 2 . 3 i n 1973. In Western Europe c a l f s laughter ings dropped from 12.4m i n 1967 t o 8.2m i n 1973; ca l f slaughterings as a percentage of t o t a l herd numbers f e l l from 14.3% t o 9.1% over t h e same period. A t h i r d

of t h i s decl ine occurred i n France. In Austral ia too, ca l f slaughterings f e l l by near ly im i n t h e e igh t year period t o 1972. However, much of t h e r i s e i n c a t t l e numbers i n 1973 was a l so due t o producers delaying turn-off of s laughter c a t t l e i n an t ic ipa t ion of higher prices. Marked production increases i n Western Europe and the USA therefore followed i n 1974 without any decl ine i n numbers of breeding stock. It is s ign i f i can t t h a t t he Austral ian industry has recent+ly been 'out of s t e p ' with production trends i n t h e main importing countries; i t expanded output sharply i n 1973 and reduced marketings during 1974.

Characteristics o f World Trade

As with production, world t rade i n beef and veal is mainly confined t o a s m a l l number of countr ies with l e s s than 10% of world production being traded i n most years. Austral ia , Argentina and New Zealand a r e t h e main exporting countries and together account for about h a l f o f world exports. Main importing regions a r e t h e EEC:9, USA, Japan and Canada, t h e f i r s t two of these usual ly taking about 80% of beef traded in te rna t iona l ly .

The USSR generally takes l i t t l e o r no place i n world trade. I t i s p o t e n t i a l l y an importer bu t i ts purchases have been i r r egu la r and unpredictable. Reports suggest t h a t purchases o r contracts t o purchase made recent ly have been considerable (50 000 tonlles plus a fur ther 25 000 tonnes option from t h e EEC; 90 000 tonnes from Argentina over t he next t h ree years; and some purchases from Austral ia a r e being negotiated). These appear t o be st imulated by low trade pr ices .

I n general, beef import requirements of the major importing countr ies a r e of a r e s idua l nature and a re usual ly control led by various import r e s t r i c t i o n s . The USA imports about 8% of t o t a l requirements while t h e EEC-9, imports 16% o r l e s s ( i t was p rac t i ca l ly s e l f - su f f i c i en t f o r most o f 1974). In cont ras t , a s izeable proportion of production i n t he major exporting countr ies is exported; Austral ia has marketed about 60% of output overseas, Argentina 30% and New Zealand about 70%.

These cha rac t e r i s t i c s impart t o in te rna t iona l t rade i n beef a po ten t i a l i n s t a b i l i t y , i n t ha t small changes i n supply/demand pat terns i n main importing countr ies can have very la rge ramifications on the prosper i ty of t h e beef indus t r ies of exporting countries. This i s well i l l u s t r a t e d by t h e sharp f luc tua t ions i n p r i ce s i n 1973 and 1974. However, during t h e previous decade f luc tua t ions i n output i n t he two major importing regions tended t o o f f se t each other; f o r example, output i n Western Europe was below trend i n the mid 1960s when output i n the USA rose sharply. Thus t r ade pr ices rose v i r t u a l l y uninterrupted throughout t he period; t h e c . i . f . p r i ce of Australian frozen boneless cow beef i n t h e United S ta t e s , f o r instance, rose continuously from some 75 U.S. cents per kg i n 1962 t o 138 cents i n 1972, a r a t e of 6% per annum.

The pa t t e rn of world beef t rade is a l s o influenced by the elobal d i s t r i b u t i o n of animal diseases pa r t i cu l a r ly foot and mouth disease. North America, Japan, I re land and Oceania a r e t h e only s ign i f i can t t rading a reas t h a t a r e f r e e of t h e disease, and countr ies i n which i t is present a r e denied access of f resh , ch i l l ed o r frozen product t o markets i n North America and Japan.

- GRAPH I

PERCENTAGE DEVIATIONS FROM TREND IN CATTLE NUMBERS AND BEEF PRODUCTION. SELECTED COUNTRIES. 1956- 1973

t Cattle Number? . A ~ S T R A L I A ; Beef Production',

1956 60 65 70 73 1956 60 65 70 73

N o t e R r r e ~ r t a g ~ s h u . r n f w T ~ e n d n r r e n ~ l s k p r ~ ~ s r ~ ~ r c ~ : r ~ r a g r o i a v e r a g e r s i i l c i ~ ~ ~ m D e r r ~ ~ r o d u c ~ ~ o n o v e r period.

Exports from South American countr ies are therefore largely dependent on markets i n t he EEC-9 . In 1973, nearly 40% of beef imports i n t o t he EEC-91 came from ~ r ~ e n t i n a and Brazi l , while i n t he same year 77% of ~ r ~ e n t i n a ' i expdrts were s e n t t o t he EEC-9 .

Exports of Aus t ra l ia ' s beef and veal are shipped t o over 80 countr ies bu t four a r e of pa r t i cu l a r s ignif icance. In 1973-74 exports amounted t o 495 000 tonnas (slfipped weight) of which 61% was sen t t o USA, 18% t o Japan, 9% t o U.K. and 5% t o Canada. Total shipments t o a l l o ther des t ina t ions amounted t o only 32 000 tonnes, 7% of t o t a l exports i n t h a t year.

Genesis o f t h e Current World Beef S i t ua t i on

In cont ras t t o the very buoyant conditions i n t he world beef market i n 1973, world beef pr ices i n 1974 have f a l l e n subs tan t ia l ly t o depressed levels , and producer re turns were a l so adversely affected by r i s i n g costs of production pa r t i cu l a r ly feed grain costs i n the EEC, Japan and North America. The downturn i n pr ices has been associated with a s ign i f i can t r i s e i n world beef production, notably i n major importing countr ies , and a marked slackening i n consumer demand f o r beef.

The developing s i t u a t i o n of increasing beef production, r i s i n g s tock leve ls and f a l l i n g producer incomes led some countries t o take increasingly severe ac t ion t o r e s t r i c t imports. A s e r i e s of such measures i n t he EEC culminated i n t h e banning of imports i n July (except those covered by t h e GATT quota), while i n Japan t h e decision was made t o defer p a r t of the 1973-74 beef import quota and not t o announce a quota f o r 1974-75, thus e f f ec t ive ly placing a v i r t u a l embargo on imports. In August, Canada announced the imposition of an import quota scheme. In t h e USA, desp i te low pr ices and considerable pressure from producer organisations, t h e provisions of t he 1964 Meat Import Law have not been reapplied although measures were taken i n November t o r e s t r i c t c a t t l e and meat imports from Canada.

World t rade i n beef has been severely r e s t r i c t e d by these measures and general ly by the downturn i n beef pr ices . An indicat ion of t h e extent of reduction i n t he volume of beef traded i n 1974 can be gauged by t h e import/export f igures f o r t he major t rad ing countries presented i n Table No. 6.

Restr ic ted access t o markets f o r exporting countries has r e su l t ed i n c a t t l e being held on proper t ies and herd numbers i n these countr ies a r e expected t o r i s e markedly i n t h e current year. Even i n t he USA and t h e EEC where production i n 1974 i s estimated t o be 8% and 13% . . . . - -. .- .. respec t ive ly a6ove 1973 leve ls , herd numbers a r e l i k e l y t o increase i n t h e current year. I n t h e USA numbers a r e forecas t a t 134.5m i n January 1975, a r i s e of 5.5% i n t h e current year, while i n t h e EEC c a t t l e numbers a r e fo recas t t o r i s e by nearly l m t o 79.4m a t t he end of 1974. Thus the po ten t i a l appears t o e x i s t f o r fu r the r production increases i n 1975 i n a l l main t rading countries, except perhaps Japan.

A combination of several developments has accompanied the dramatic change i n t h e world beef s i t u a t i o n i n 1974. Some have been sudden and l a rge ly unpredictable.

Table No. 6

COO0 Tonnes Shipped Weight)

1973 1974 LForecast) % change

Beef exports from

-New Zealand 206 172 -1 7

Beef imports in to

-EEC 777 200 - 84

(a) BAE estimate.

Source : FA0 Intergovernmental Group on Meat, Rome 7-10 October, 1974

The following a re notable - . A very marked slowdown i n economic growth general ly and a

decline i n r e a l GNP i n some main economies. This was accentuated by the dramatic r i s e i n o i l p r ices and accompanied by high r a t e s of i n f l a t i o n and balance of payments d i f f i c u l t i e s . Beef consumption, being income and pr ice responsive, has been adversely affected by lower r a t e s of growth i n consumer incomes and some consumer r e s i s t ance t o high r e t a i l meat p r ices . In t he face of domestic p r i c e support schemes i n a number of importing countries and widening marketing margins, r e t a i l p r i ce s have not re f lec ted movements i n t r a d e prices.

. Because producers cha rac t e r i s t i ca l ly respond t o p r i ce increases by withholding breeding stock and calves, t he r i s i n g trend i n world beef pr ices i n t h e l a t e 1960s/early 1970s tended t o s p c h r o n i s e t h e c a t t l e production cycles of major beef producing countries. The build-up i n world c a t t l e numbers i n t he ea r ly 1970s, pa r t i cu l a r ly i n 1973, provided the bas i s f o r marked production increases i n 1974.

. The sudden downturn i n demand following t h e o i l c r i s i s and r i s i n g domestic production caused a rapid build-up i n stocks of meat i n the EEC, t he USA and Japan ear ly i n 1974, Stocks i n Japan and pa r t i cu l a r ly the EEC remained a t high levels throughout 1974.

A combination of lower beef pr ices and sharp r i s e s i n costs of production with feed! costs continuing a t unusually high levels has severely eroded producer incomes i n 1974.

. The decisions by the EEC and Japan t o v i r t u a l l y ban imports. Po l ic ies t o pro tec t domestic p r i ce levels i n these countries involve r e s t r a i n t s on imports. In 1974 both countries extended these measures t o take the unprecedented s teps of e f fec t ive ly excluding t h e great bulk of imports. These r e s t r i c t i o n s are still operative.

. Against a background of a de t e r io ra t ing cost-price s i t ua t ion i n t he USA, beef producers have reduced output through feed l o t s and increased the production of grass-fed beef. This type of beef i s po t en t i a l l y more d i r e c t l y competitive with imports of lean, frozen beef from Austral ia , p r ices f o r which have f a l l e n t o very low leve ls ,

A b r i e f account of recent developments i n Austral ia ' s major export markets i s as follows.

I n t he USA an estimated 8% increase i n beef production during 1974 and some reduction i n t he growth of consumer demand have depressed c a t t l e pr ices which together with r i s i n g cos t s has severely s t ra ined the f inanc ia l pos i t ion of l o t feeders and feeder c a t t l e producers. High grain p r i ce s , r i s e s i n cos t s of production and r e l a t i v e l y high feeder c a t t l e p r ices ea r ly i n 1974 resu l ted i n there being 24% fewer c a t t l e on feed i n October than a year ago. Almost 3m fewer feeder c a t t l e were placed on feed i n t h e f i r s t 9 months of 1974 compared with t he same period i n 1973. Lower demand f o r feeder c a t t l e reduced t h e i r p r ices by ha l f i n t he year t o October 1974, and a l so pa r t l y as a r e s u l t o f drought conditions i n autumn, t he re has been a f ive- fo ld increase i n t h e number of grass fed s t e e r s and he i f e r s slaughtered i n 1974 compared with 1973. Thus it is estimated tha t only 84% of s t e e r s and he i f e r s slaughtered i n 1974 went through feed l o t s compared with 96% i n 1973. Cow and ca l f s laughter ings have a l so increased pa r t i cu l a r ly i n recent months.

Pr ices f o r grain-fed s t e e r s f e l l sharply i n the first ha l f of 1974, from around $50 t o $36 per 100 l b l i v e weight i n Kansas City by mid June. Pr ices recovered i n August and September but have s ince declined. However, with prospects of lower suppl ies of fed beef i n the northern spr ing of 1975 and cur ren t low feeder pr ices , the p r o f i t a b i l i t y of l o t feeding appears t o be improving and higher placements could r e s u l t .

With increased domestic supplies of beef from grass-fed animals, p r ices f o r u t i l i t y cows and imported meat have f a l l e n t o very low levels . Austral ian beef pr ices f e l l from 192.6 U.S. cents per kg c . i . f . i n January t o 124 U;S. cents per kg i n October.

I n Japan consumer demand f o r beef has f a l l e n subs tan t ia l ly . The sharp ;decline i n t h e r a t e of growth of nat ional income accompanied by

/'

rapid p r i ce i n f l a t i o n has resu l ted i n . a decline i n r e a l consumer incomes, despi te t h e recent subs tan t ia l boost i n wages. Furthermore, r i s i n g in f l a t i on has affected marketing margins and r e t a i l meat p r ices have been maintained a t high leve ls and have met with some consumer res is tance.

Lower demand and increased supplies of dairy s t e e r beef caused domestic wholesale pr lces f o r t h i s type of beef t o f a l l sharply ea r ly i n 1974. Second grade dairy s t e e r beef pr ices averaged 848 yen per kg i n t h e first quar te r of 1974 compared with 1,065 yen i n t hc l a s t quar te r of 1973. These fac tors a l so contributed t o a sudden build-up i n s tocks of imported beef following the rccord quota a l l oca t ion f o r t he ha l f year ending March 1974.

The e f f e c t s on producer incones of declining p r i ce s and r i s i n g production costs especial ly f o r feed grainshavereportedly been very adverse even though many producers i n Japan have other sources of income. The decision to de fe r 40 000 tonncs of the previous quota and t o not announce the 1974-75 quota appears t o have had its bas i s i n tho concern f o r f a l l i n g producer incomes.

Dairy s t e c r p r ices on t h e Tokyo Wholesale market have recent ly been f luc tua t ing around 950 yen per kg (MAF e a r l i e r indicated t h a t p r ices would have t o s t a b i l i s e above 1,000 yen before t he import question would be reconsidered). There has a l so been a very marked i n c r e a s e i n da i ry ca l f slaughterings (ten-fold increase i n September 1974 compared with September 1973) which i f continued w i l l a f f cc t production i n 1975-76.

The EEC beef s i t u a t i o n i n 1974 has been adversely affects i . by a f a l l i n consllmer demand and an estimated 13% increase i n production made possible by a subs tan t ia l build-up i n c a t t l e herds over t he l a s t few years.

Fa l l ing market p r ices together with s t eep ly r i s i n g costs of production severely a f fec ted producer incomes from the l a t t e r p a r t o f 1973 onwards. In consequence the Council of Ministers introduced a number of measures t o strengthen t h e market. Among these, t h e decision t o r a i s e guide pr ices by 12% i n April immediately put t he compulsory intervent ion buying p r i c e above t h e market p r i c e and in te rvent ion s tock began accumulating rapidly thereaf te r . Other ;neasures were aimed a t r e s t r i c t i n g imports and these culminated i n t h e e f f ec t ive ban on imports being imposed i n July. Small quan t i t i e s o f imports have continued however under t he GATT quota.

Despite these measures producer incomes a r e reported t o have shown I i t t l e improvement and t h e s tockpi le had grown rapidly to some 200 000 tonnes i n October. A high leve l o f cow and c a l f s laughter ing continues as many producers a r e current ly unable t o finance t h e feeding of stock through winter.

Recent Developments in Australian Prices

A s about 60% of Australian beef has been so ld on overseas markets, sharp f luc tua t ions i n export pr ices have a varying influence on saleyard pr ices f o r a l l types of beef ca t t l e .

I n November 1974 saleyard pr ices f o r export q u a l i t y bullocks (295-320 kg estimated dressed carcass weight, 1st and 2nd export qua l i t y

a t Homebush) had f a l l e n t o 29 cents per kg. (see Appendix Table V) . This is the lowest l eve l s ince May 1957 and compares with a peak of 93 cents p e r kg i n September 1973, only l i t t l e more than a year e a r l i e r . Prices f o r year l ing c a t t l e were maintained a t reasonably high levels u n t i l April 1974 when on average they were only about 10 cents per kg below t h e peak leve l i n September 1973. They have s ince f a l l e n t o around 39 cents per kg i n November 1974, 42% of the pr ice a year ago. Cow pr ices a r e estimated t o have f a l l e n 66% i n the 13 months t o October 1974 t o an average of 27 cents per kg. Although export re turns rose following devaluation, t h i s was not re f lec ted i n producer pr ices , possibly owing t o an upsurge i n the numbers of stock coming forward f o r slaughter.

Rising wages and other cost increases i n 1974 have tended t o widen marketing margins i n Austral ia as i n many other countries. Also, by-product p r ices have f a l l e n s ign i f i can t ly and l a rge r numbers of over f in i shed stock have been marketed involving higher trimming losses.

S t a t i s t i c a l s e r i e s on r e t a i l beef p r i ce s have thus no t generally r e f l ec t ed the f u l l ex ten t of t he downturn i n saleyard prices.(2) Estimated r e t a i l beef pr ices rose t o record levels i n February and March 1974 but have s ince declined and i n November were about 20% below peak pr ices . However considerable quan t i t i e s of beef t h i s year a r e thought t o have been so ld a t subs t an t i a l l y discounted pr ices , pa r t i cu l a r ly where bulk purchases have been made so t h a t published s t a t i s t i c s on r e t a i l p r ice s e r i e s may not be a t rue indicat ion of t h e average costs of beef purchases t o consumers.

MARKET OUTLOOK

An unusual degree of uncer ta inty surrounds the shor t term outlooh for beef. This is seen e s sen t i a l l y as the r e su l t of a number of abnormal events which have recent ly affected basic supply/demand trends i n the world market f o r beef. The grea te r s e n s i t i v i t y of supply t o seasonal conditions, given heavy stocking r a t e s i n many major producing countries;

I apparently more v o l a t i l e producer responses concerning, f o r example, calf slaughterings; and the increasingly unclear prospects f o r economic

I a c t i v i t y and demand growth i n t he coming year a r e bu t some of the elements of increased uncertainty. A t t he same time, developments i n import policy over t he l a s t twelve months ind ica te a wider range of possible trading actions by major importing areas and cloud even fu r the r the outlook f o r the fu ture t rade s i t ua t ion . Under present conditions it i s pa r t i cu l a r ly d i f f i c u l t t o give any p rec i se ind ica t ion of when any upturn i n the export market, and thus i n saleyard pr ices , can be expected.

Demand f o r beef has been closely linked t o the r a t e of growth i n consumers' incomes. The l a t e s t fo recas t s of trends i n economic a c t i v i t y by such organisations as t he OECD ind ica te t h a t economic r a t e s of growth i n most countries a r e expected t o pick up only very moderately i n 1975 from the depressed leve ls o f 1974. Inf la t ion i s l i ke ly to continue a t high levels and balance of payments d e f i c i t s w i l l probably continue i n a number of important Western t rading nations. Such forecasts however, a r e also associated with considerable uncer ta inty and the degree t o which they are rea l i sed w i l l depend on t h e response of t he various market economies t o present and immediate fu ture government po l i c i e s . Continuing rapid in f l a t i on r a t e s could a l so contr ibute t o a fu r the r widening i n marketing margins from the r e l a t i v e l y high levels of 1974, thereby influencing r e t a i l p r ices and adversely a f fec t ing consumption levels.

On the other hand, suppl ies of competing meats i n the USA and the U.K. a re l i ke ly t o be lower i n 1975. The outcome of these various influences on demand i s by no means c e r t a i n bu t , under t h e circumstances most l i ke ly t o prevai l , world demand f o r beef is l i ke ly t o expand a t only a r e l a t i ve ly slow r a t e i n t h e s h o r t term. Therefore, t rade prospects w i l l depend importantly upon developments i n supply,

Stock holdings of beef a r e a t r e l a t i v e l y high leve ls i n the EEC and Japan and increased herds have provided the po ten t ia l fo r fur ther marked r i s e s i n output of beef and veal i n a l l major t rading countries except Japan. However, the timing and duration of any production increases w i l l be very much influenced by decisions r e l a t i n g t o the slaughter of breeding and young stock. Increased slaughterings of such stock, while adding t o output i n t h e sho r t term, r e t a rd fu tu re production growth. producers' future decisions w i l l be influenced by seasonal conditions, feed grain pr ices and t h e i r expectations of developments i n beef pr ices , but it i s notable t h a t cow and c a l f slaughterings have been heavy recent ly i n a l l major importing countries and t h i s must eventually a f f ec t production. A fu r the r f a c t o r curbing production increases w i l l be changes i n l ivestock feeding prac t ices brought about by high feed grain pr ices .

Short term market prospects f o r t he Australian beef industry w i l l depend c ruc ia l ly on developments i n i t s main markets, t he USA, Japan, the EEC-g and Canada. Shipments t o the many minor markets w i l l be

influenced by competition with other suppl ie rs but s a l e s t o other countr ies , l i k e t he USSR, a r e largely unpredictable. The degree t o which increased quan t i t i e s of beef can be absorbed by the domestic market w i l l l a rge ly depend upon r e t a i l beef p r i c e movements r e l a t i v e t o other meats and food items.

In the USA some increase i s expected i n demand f o r beef i n 1975 and consumption is l i k e l y t o r i s e above the near record leve l of 53 kg per person i n 1974.(3) Real consumer incomes a re unlikely t o r i s e much but supplies of competing meats are predicted t o f a l l subs t an t i a l l y - poul t ry meat by around 10% and pork by more than 10%. On t h i s bas i s , t o t a l beef supplies could r i s e by over 10% without t o t a l red meat consumption i n 1975 being above t h a t i n 1974.

Recent rapid increases i n c a t t l e inventor ies provide the bas i s f o r marked r i s e s i n beef production i n 1975 and i n t o 1976. However, prospects of high feed grain pr ices continuing i n t h e shor t t e n as well as t h e low placements of feeder c a t t l e i n t o feed l o t s i n 1974 ( the number of c a t t l e on feed i n October 1974 was t h e lowest f o r s i x years) point t o some reduction i n t he number of grain-fed c a t t l e slaughtered i n 1975 compared with 1974. Nevertheless, slaughterings of a l l other c a t t l e should be well up on l a s t year, and overa l l t o t a l c a t t l e slaughterings (assuming average seasonal conditions) could be around 10% higher i n 1975. The tendency t o place c a t t l e i n feed l o t s a t heavier weights and feed them f o r s h o r t e r periods ( t h i s t rend being s t imulated by high feed costs , and some changes proposed f o r t h e U.S. meat grading standards) as well as a higher proportion of grass-fed c a t t l e i n t o t a l s laughter w i l l most l i k e l y r e s u l t i n a subs t an t i a l decl ine i n average s laughter weights. Total beef and veal production i n 1975, therefore , may be about 5% up on output i n 1974. These developments a r e l i ke ly t o r e s u l t i n pr ices f o r lower grades of beef, including imported beef, remaining a t r e l a t i v e l y low levels ; p r i ce s f o r choice grades, however, could improve above present levels.

Seasonal conditions and fu tu re gra in p r i c e s w i l l have a major inf luence on the timing of production increases and on the type of beef produced i n 1975 and beyond. With l a rge inventor ies on pasture (about 90% of t o t a l numbers) the U.S. industry is unustially vulnerable t o an adverse season. Should poor seasonal conditions prevai l i n the USA winter and spr ing of 1975, c a t t l e s laughter ings could r i s e by up t o 20% above yea r - ea r l i e r l eve ls . This would have very adverse e f f e c t s on c a t t l e p r i ce s and on p r i ce s f o r imports o f Austral ian beef. However, t he re would a l so probably be an a r r e s t o f herd growth, a lower than expected output i n 1976 and an e a r l i e r pick-up i n t h e market. Current low leve ls of feeder c a t t l e p r i ce s appear t o be improving the economic posi t ion of l o t feeders and placements i n t o feed l o t s could begin t o increase i n t he months ahead i f g ra in pr ices do not r i s e subs t an t i a l l y higher than current l eve ls . This may r e s u l t i n higher grain-fed c a t t l e slaughterings i n t he l a t t e r h a l f of 1975, a trend which could continue i n t o 1976, pa r t i cu l a r ly if good grain harvests a r e forthcoming i n 1976.

With production of grass-fed beef l i ke ly t o increase i n t he sho r t term, downward pressure on pr ices f o r imported beef i s l i ke ly t o continue f o r much of 1975. I t is most d i f f i c u l t t o give a c l e a r ind ica t ion of t he timing o r ex ten t of any improvement i n the U.S. market. Much w i l l depend on seasonal conditions i n e a r l y 1975, feed grain supplies and pr ices , and fu ture economic trends. However, cow slaughter r a t e s i n recent months have been above the leve l o f t h e l a s t few years and high

r a t e s are expected t o continue i n t o 1975. Also, ca l f slaughterings i n the f i r s t nine months of 1974 were up 15% from a year ago, while i n t he t h i rd quar ter they were up nearly 50%. Any continuation of these trends w i l l reduce the numbers of mature animals avai lable f o r s laughter i n l a t e 1975 and 1976 and so have a pos i t i ve e f f e c t on the market.

In Japan demand f o r beef , which has f a l l e n subs t an t i a l l y i n the past twelve months, should show some increase i n 1975 i n l i n e with an expected slow recovery i n economic a c t i v i t y from zero growth i n 1974. There should a l so be some decrease i n Japanese domestic beef and veal production fram t h e estimated near record output i n 1974.

In the past year the bulk of the r i s e i n output has been derived from Holstein c a t t l e , pa r t i cu l a r ly from the increase i n slaughterings of dairy s t ee r s . This was made possible by the very low leve l of dairy ca l f slaughterings i n 1973 when t o t a l beef and veal production was some 23% below the peak production of 295 000 tonnes i n 1972.. Dairy beef production has accounted f o r a much grea te r proportion of t o t a l output i n 1974 than the generally more highly priced beef from Wagyu c a t t l e .

The number of dairy s t e e r calves, l ess than one year of age i n ear ly August 1974, t o t a l l ed 280 000 head, 8% l e s s than i n the previous year. Since August, c a l f slaughterings have been well above recent years, and taken together with a normal average age of dairy s t e e r slaughter of l e s s than two years, i t seems t h a t dairy s t e e r production may show some decline, pa r t i cu l a r ly ir. t he l a t t e r h a l f of 1975. There may however, be some o f f se t t i ng increases i n Wagyu beef production, .but t h i s type of beef appears to be l e s s competitive with the bulk of imported beef.

These factors could r e s u l t i n a reduction i n stocks and i n some improvement i n c a t t l e pr ices although producer incomes w i l l continue t o be adversely affected by r i s i n g costs and prospects of fu r the r increases i n feed grain pr ices , a t l e a s t i n t h e first h a l f of 1975.

I t is unclear when a new Japanese import quota w i l l be announced, dependent as t h i s w i l l be on a var ie ty of fac tors , such as the s t a t e of t he market, t he balance between producer incomes and beef pr ices t o consumers, and Japan's in te rna t iona l trading considerations. However, it does appear l i ke ly t h a t t he demand/supply balance w i l l have improved suf f ic ien t ly t o r e s u l t i n a s ign i f i can t r i s e i n producer pr ices by about the middle of 1975 and some quota announcement may possibly be made around tha t time, i f not sooner; i n t h e pas t , quotas have r e l a t ed t o the s i x monthly periods beginning 1 April and 1 October.

Depending on the immediate trends i n cow and c a l f slaughterings, Japanese production should s t a b i l i s e or, a t t he most, show some moderate increase i n 1976. Also, most estimates point t o a considerable improvement i n economic a c t i v i t y about t h a t time. I t i s l i ke ly therefore, t h a t i n the period beyond 1975 Japan w i l l again be a major beef importing nation, although her purchases may expand a t a slower r a t e than i n recent years.

In t he United Kingdom, Austral ia ' s main market i n the enlarged EEC, beef and veal production i n 1975 is forecas t t o r i s e by about 6% above output i n 1974 and demand f o r beef is unlikely t o r i s e much. Economic growth i s expected to continue a t low levels and a high r a t e of

i n f l a t i o n i s a l so l i k e l y f o r much of 1975. An o f f s e t t i n g f ac to r s t imulat ing demand could be lower supplies of pork and sheepmeats. However, t h e prospects f o r Austral ia ' s exports t o the U.K. w i l l depend primarily on the general level of self-sufficiency i n the EEC as a whole. In t h i s respec t , production i n t he EEC-9 i n 1975 i s l i k e l y t o be above the expanded output i n 1974, while any stimulus t o demand f o r beef as a r e s u l t of moderate increases i n economic a c t i v i t y could i n p a r t be o f f se t by increased suppl ies and consumption of pork i n o ther member countries. These t rends, taken together with t he very subs tan t ia l stocks of in te rvent ion beef , suggest t h a t t he Commu~ty 's import requirements i n 1975 w i l l be very much l e s s than i n e a r l i e r years and the present embargo on beef imports (excluding t h e GATT quota) which was recent ly extended inde f in i t e ly may not b e removed much before 1976. However, it is s ign i f i can t t h a t a general review of t he Common Agricultural Policy as it appl ies t o beef is being undertaken by the EEC Commission. The proposals being considered a r e not known but , should there be any change i n t he EEC beef regime involving less d i r e c t support of producers' incomes by consumers, then consumption might increase and import r e s t r i c t i ons might be eased sooner than expected.

With regard t o the outlook two o r three years hence, it i s s ign i f i can t t h a t cow and ca l f slaughter r a t e s have been a t high levels i n 1974 but have no t been so great as t o c u r t a i l herd expansion i n most member countries. Nevertheless, any continuation of t he recent very heavy s laughter ings of cows and calves as a r e s u l t of producers not wishing t o feed some c a t t l e through winter because of high feed cos t s , can be expected t o lead t o a leve l l ing out i n herd growth i n 1975, which i n t u rn would r e s u l t i n a leve l l ing o r even downturn i n production within the following year o r so.

Canada has announced a global quota of 57 000 tonnes f o r the twelve months ended August 1975 (no more than 30% of the t o t a l t o be shipped i n any quar te r ) . I n recent years Austral ia has supplied about 42% of t he Canadian market so t h a t t o t a l shipments i n 1975 may not be much more than 24 000 tonnes.

The la rge number of minor markets , with the exception of t he USSR, a r e ind iv idua l ly unl ikely t o take grea t quant i t i es of Australian beef and increased s a l e s w i l l probably depend on the extent t o which world p r i ce s f a l l . I n aggregate however, these minor markets could account f o r s i g n i f i c a n t q u a n t i t i e s of Australian beef exports and e f f o r t s a r e being made t o increase s a l e s t o them.

Sa les of Australian beef t o t he USSR were being negotiated i n l a t e 1974. This country tends t o be an opportunis t ic buyer of ag r i cu l tu ra l products, enter ing the world market i n force when pr ices a r e r e l a t i v e l y low. Prospects fo r any fu tu re s a l e s a r e d i f f i c u l t t o assess and need t o be viewed i n t he context o f purchases already made by the USSR and t h e s u b s t a n t i a l supplies avai lable f o r export i n the shor t term from suppl ie rs o ther than Australia.

Other main beef e x p r t i n g c o u n t r i e s , Argentina, Uruguay, New Zealand and Ire land have the po ten t ia l t o g rea t ly expand exports i n 1975 but ac tua l shipments w i l l depend on market access. The l a t t e r two countr ies have access t o the U.S. and Japanese markets but South American exports of f resh , ch i l l ed and frozen beef a r e excluded from these markets. Beef ava i l ab l e f o r export from New Zealand i n 1975 i s forecast t o be

nearly 24% greater(4) than i n 1974 and Ireland, which i s a t present holding subs tan t ia l stocks of intervent ion beef, w i l l a l so have increased quant i t i es avai lable f o r export. Argentina's export a v a i l a b i l i t y w i l l depend on domestic po l i c i e s regarding r e s t r i c t i o n s on domestic consumption but is forecast t o be near ly 40% above estimated shipments i n 1974. (5) Nevertheless, po ten t ia l exports i n 1975 would s t i l l be below actual exports i n 1973. Brazil i s not l i k e l y t o be a large net exporter of beef i n the shor t term. Overall, i t i s l i ke ly t h a t Australian exporters w i l l face strong competition on overseas markets i n 1975.

Beef and veal consumption on the AustraZian domestic mmket i n 1975 w i l l depend on movements i n r e t a i l p r ices , which i n tu rn w i l l be influenced by the leve ls o f saleyard pr ices and marketing margins, and the a v a i l a b i l i t y of other meats.

I n 1974 t o t a l beef consumption i s estimated t o be about 650 000 tonnes (49 kg per person) compared with 507 300 tonnes f o r 1973. Given the l ikelihood of fu r the r r i s e s i n the pr ice of many other food items, the reduced a v a i l a b i l i t y of some other meats, notably pigmeat, and prospects of r e l a t i ve ly low r e t a i l beef pr ices continuing, consumption i n 1975 may well exceed 700 000 tonnes o r about 52 kg per head. Taking estimates of per caput consumption of other meats, t o t a l meat consumption i n 1975 would s t i l l be below the record leve l of consumption of 114 kg i n 1971-72 (Appendix Table V I ) .

Forecasts of AustruZiufs beef and veaZ production i n t he sho r t term a r e pa r t i cu l a r ly d i f f i c u l t t o make i n the present uncertain.climate. I t i s apparent t h a t f o r much of 1975 the industry 's po ten t ia l t o supply beef, based on average s laughter r a t e s of recent years, f a r exceeds present (November 1974) assessments of foreseeable opportunit ies i n t r ad i t i ona l markets. The outcome of t h i s s i t u a t i o n w i l l probably be a fu r the r marked increase i n c a t t l e numbers while unsold s laughter c a t t l e w i l l continue t o put downward pressure on pr ices a t l e a s t f o r the greater p a r t of 1975. However, a number of fac tors , such as any e a r l i e r improvement i n demand f o r overseas than i s present ly expected o r dry seasonal conditions i n Australia, could operate t o subs t an t i a l l y a l t e r these forecasts.

Production trends i n subsequent years w i l l depend g rea t ly on how the current problems i n the beef industry a f f e c t producers' assessments of t he medium term prospects f o r beef. With herd numbers cur ren t ly a t a record leve l , fu r ther subs tan t ia l production increases i n t h e medium term a r e expected, but t he precise timing of a s ign i f i can t upsurge i s unclear. One probable outcome might be t h a t t he expected fur ther build-up i n c a t t l e numbers i n t he shor t term, while r e s t r i c t i o n s on exports remain, w i l l be followed by a marked slackening i n t h e r a t e of herd growth i n subsequent years as beef producers attempt t o improve t h e i r low l i q u i d i t y posi t ion. Considering the high stocking r a t e s which w i l l prevai l i n t he sho r t term, t h e industry w i l l be pa r t i cu l a r ly vulnerable t o dry seasonal conditions and, should drought occur within t h e next few years, c a t t l e numbers may even decline. In t h i s event, Australia 's production of beef and veal could expand very rap id ly and a leve l of production approaching t h e recent ly projected output o f 2.0m t o m e s i n 1978-79(6) could be achieved e a r l i e r than expected.

With projected increases i n suppl ies of other meats t o t he domestic market i n t he medium term and t o t a l per caput meat consumption

unl ikely t o increase much, the outlodc fo r s a l e s of beef on the domestic market i n t h e period t o t he end of t h i s decade i s f o r only marginal increases above t h e record leve l forecast fo r 1975. Depending on future movements i n r e t a i l beef prsces there could even be some decline i n consumption. Thus, subs tan t ia l increases i n suppl ies would be ava i lab le f o r export.

Thc demand for Australian beef from overseas markets, while continuing t o f l uc tua t e , i s expected t o recover t o around the longer term trend over t he remainder of t he 1970s. The cyc l ica l nature of beef production trends suggest some l eve l l i ng o r even downturn i n beef production i n main importing countr ies within t h e next few years, A very s ign i f i can t f ac to r , which contributed t o the bu i ld up i n herd numbers i n t he l a t e 1960s and ea r ly 1970s and led t o the synchronisation of the ~ a t t l e cycles of several countries i n t h a t period, was the marked decline i n ca l f s laughter ings . Producer react ions t o r i s i n g beef pr ices and a favourable market outlook f o r beef provided t h e bas i s f o r these declines. In t he USA, c a l f slaughterings declined by over 5m i n t he e igh t years t o 1973 when they were only 2.3m, and i n Western Europe they dropped nearly 4m i n the s i x years t o 1973.17) The scope f o r fu r the r reductions is qu i t e l imited and, taken together with recent very high ca l f and cow slaughterings and l i k e l y producer responses t o low c a t t l e pr ices , it would appear t h a t r a t e s of herd expansion and production increases i n these regions i n the medium term may be considerably l e s s than i n recent years.

Besides such biological cons t ra in t s on t h e r a t e a t which beef production can b e expanded over an extended period, there a r e many o ther fac tors r e s t r i c t i n g increases i n output:

(a) the heavy demand on resources t h a t l ivestock expansion requires , espec ia l ly land and/or grain f o r feeding;

(b) unsui table farm s t ruc tu re s (both (a) and (b) a r e of pa r t i cu l a r relevance i n Japan) ;

(c) i n Europe, increased beef production seems t o imply an expansion i n da i ry output, with i t s disposal problems;

(d) i n many o f the l e s se r developed countr ies there a r e pa r t i cu l a r disease problems and inadequate i n t e rna l transport and s laughter ing f a c i l i t i e s .

World demand f o r beef, which has been s t rongly influenced by increasing populations and r i s i n g incomes i n postwar years, should resume i t s upward t rend over t he medium term. There does not appear t o have been any bas ic change i n consumers' t a s t e s f o r the comodity. Rates of growth i n incomes have h i s t o r i c a l l y shown considerable f luctuat ions , but a r e expected t o recover t o more usual r a t e s during the second ha l f of the 1970s. Demand f o r beef i n Middle E a s t countries could r i s e dramatically i n t he medium term i f t h e revenue from o i l is spent on improving in f r a s t ruc tu re and standards of l iv ing. An o f f s e t t i n g influence could be any fu r the r market penetration by syn the t i c meats, pa r t i cu l a r ly i n the market fo r processed meat products which a t present contain a large proportion of the type of beef exported by Australia. However, there is considerable debate as t o whether t h e grea te r acceptance of synthe t ic /na tura l meat blends, by expanding t h e t o t a l market for processed meat-type products, may increase the demand f o r beef for manufacturing purposes r a the r than reduce it.

These supply/demand t r enas should r e s u l t i n a resumption of t h e r i s i n g t rend i n demand f o r Austral ian beef from importing countries over tHe medium t o longer t e n . However, world t r ade i n beef w i l l remain highly sens i t i ve t o small var ia t ions i n t he supply/demand posit ion i n t h e small number of major importing countries, and with the Australian industry becoming more export-oriented, re turns t o producers could well f luc tua te much more than i n the decade p r i o r t o 1973.

Beef output i n Austral ia has recent ly been out of s t e p with t he production cycles i n t h e major importing countries and t h i s has been f a c i l i t a t e d by our e s sen t i a l l y pasture based production system. A continuation of t h i s s i t ua t ion would provide opportunit ies f o r t he po ten t ia l ly la rger export a v a i l a b i l i t y expected i n t he next few years t o be marketed during periods of higher r a the r than lower prices. Such a marketing s t ra tegy however, has implications f o r the industry 's c a p i t a l s t ruc ture and i t s production and processing inf ras t ruc ture .

In Summary it is concluded t h a t abnormal events have had a strong influence on the sharp swings i n t he beef market over the l a s t two years. The more bas ic supply/denand f ac to r s a r e considered l i ke ly t o r e s u l t i n a recovery of t he market t o around t h e longer term trend over the remainder of t he decade, although returns t o producers could well f luc tua te much more than i n t he t en years p r io r t o 1973.

Present uncer ta int ies preclude a c l e a r ind ica t ion of t he timing of any s ign i f i can t improvement i n t he export market. With prospects of only a moderate recovery i n economic growth and demand and o f . fu r the r r i s e s i n production, there i s l i t t l e l ikelihood of a s ign i f i can t increase i n U.S. import requirements o r of an opening of t h e EEC market f o r much of 1975. However, adverse weather conditions and fu r the r heavy r a t e s of slaughter over t he next few months could lead t o some easing of the supply s i t ua t ion i n these countries e a r l i e r t han . i s present ly expected. The main prospects f o r expanding import demand during 1975 l i e with Japan where subs tan t ia l imports a r e expected t o resume next year (given some recovery i n economic a c t i v i t y ) , and with a number of smaller markets which, however, generally absorb l e s s than 10% of export s a l e s . Substant ia l sa les t o t he USSR could well occur but remain unpredictable. The Australian domestic market i s expected t o absorb considerably grea te r quant i t i es of beef i n 1975 as a r e s u l t of r e l a t i v e l y low r e t a i l p r ices and reduced a v a i l a b i l i t y of some other meats.

Nevertheless, i n view of Austral ia ' s growing c a t t l e herd and r i s i n g production capabi l i ty , t he re is a s t rong l ikelihood tha t our po ten t ia l beef supply w i l l f a r exceed export and domestic requirements through 1975 and possibly beyond. One industry reac t ion would be t o hold stock on pasture and continue with a rapid build-up i n c a t t l e numbers. However, t h i s r a i s e s t he question of t ~ e a b i l i t y of beef producers t o survive the period of market recession and t h e extent t o which t h e build-up i n c a t t l e numbers puts a t r i s k t he physical resource base and the breeding and young stock on which t h e fu tu re prosper i ty of the industry r e s t s .

EFFECTS OF TURN AROUND IN MARKET SITUATION

The sharp turnaround. i n t he market s i t u a t i o n during 1974 has resu l ted i n a number of i n t e r r e l a t ed problems which may be conveniently considered under th ree broad headings - build-up i n c a t t l e numbers, producers' income/liquidity s i t u a t i o n and c r e d i t ava i l ab i l i t y .

Build-up in Cattle Numbers

The response of many beef producers t o t he downturn i n pr ices has been t o r e t a i n stock which would otherwise have been so ld f o r s laughter . I n doing t h i s , they have been aided by favourable seasonal conditions. The l eve l of slaughterings may a l s o have been a f fec ted by i n d u s t r i a l problems i n t h e meatworks and mustering and t ransport problems a r i s i n g from t h e floods. Recently there has been an upsurge i n s laughter ings which s ince about September have approached year -ear l ie r levels .

I t is estimated tha t slaughterings of c a t t l e and calves w i l l approximate 6.7m during 1974, compared with 8.2m i n 1973, 7.4m i n 1972 and 6.lm i n 1971. These leve ls of slaughterings were associated with r a t e s of growth i n c a t t l e numbers of 12%, 6% and 6% i n the th ree years t o March 1974, when t h e nat ional herd t o t a l l e d 30.9m head. On the b a s i s t h a t breeding r a t e s continue a t previous leve ls , these f igures ind ica te a herd s i z e of 34m by March 1975. They a l so suggest t h a t some 1.5m head of c a t t l e have accumulated t h a t would normally have been slaughtered.

This build-up i n numbers has thus provided the bas i s f o r a l eve l of production during 1975 which f a r exceeds opportunit ies i n t h e main markets. Recent trends ind ica te t h a t a c a t t l e and ca l f s laughter of considerably l e s s than 8m head would be required t o meet domestic demand (including canning) and demand from the main overseas markets. I t i s estimated t h a t such a leve l of s laughter would, with breeding r a t e s a t normal leve ls , and subject t o forage reserves holding out, allow t h e herd t o amount t o 39m by March 1976. Together with an estimated 154m sheep (say 19m c a t t l e equivalents) t he grazing pressure of 58m c a t t l e equivalents would be t h e highest ever experienced i n Australia.

The a b i l i t y of the forage base t o s u s t a i n such pressure i s thus a quest ion which becomes re levant . The continuation of favourable seasonal conditions perhaps gives l e s s urgency t o t h i s question. On t h e o the r hand, a number of f ac to r s suggest t h a t i t s resolut ion is not a mat ter t o be t r ea t ed with complacency. There is f o r example reason t o be l ieve t h a t t h e steady growth i n improved pastures which occurred during t h e 1960s has not so f a r continued i n t o t h e 1970s. During t h e period 1971 t o 1973 the re was an absolute decl ine i n t h e area of sown grasses and clovers and i n the r a t e of f e r t i l i s e r appl icat ion t o pastures. In addi t ion t h e sharply r i s i n g cos t s o f a l l purchased inputs including f e r t i l i s e r , together with t h e uncer ta in outlook f o r t he beef and sheep indus t r i e s , suggest t h a t fu r the r expansion of t he pasture base i s unl ikely t o take place t o any s ign i f i can t degree i n t h e immediate future. There i s thus some danger t h a t t he unprecedented grazing pressure w i l l r e s u l t i n overgrazing. (8)

It is probable t h a t t h e 1.5m head of c a t t l e t h a t have accumulated unslaughtered a r e mainly located i n beef s p e c i a l i s t regions,

and a re f a t or overfat bullocks which normally would have gone f o r export. In the event of no subs tan t ia l improvement i n export demand f o r a one o r two year period, such c a t t l e a r e of doubtful national value, as they by t h e i r very grazing presence put t he remainder of t he herd i n jeopardy. I t i s the remainder of the herd, the breeders and young stock, which has t he br ightest prospects i n terms of i t s productive capacity when demand recovers.

. . In t h e southern S ta tes , pr ices f o r the younger, l i g h t e r type of

beast produced have not f a l l e n t o the same extent as f o r the heavier export beast produced i n the north. Pasture reserves a r e exceptionally high i n most areas i n t he south and so the accumulation of unsold beasts i s probably not yet c r i t i c a l . If the market continues t o requi re l e s s c a t t l e f o r s laughter than the herd can supply, then some scope e x i s t s f o r producers i n t he south t o contain t he s i z e of t h e i r herds by r e s t r i c t i n g matings and, depending upon the market requirements, by slaughtering calves and females. In t he north, almost no scope ex i s t s f o r controlled mating.

The temptation t o r e t a i n f a t stock on t h e hoof with continuing favourable seasonal conditions r a i s e s the question of the a b i l i t y of marketing and s laughter f a c i l i t i e s t o cope with a sharp increase i n c a t t l e f o r slaughter i n t h e event of a setback i n seasonal conditions o r as a r e su l t of a general des i re on the pa r t of producers t o avoid such a r i s k .

Slaughtering f a c i l i t i e s , f reezer and c h i l l e r capacity, and markets w i l l probably be t o t a l l y below the leve ls which would be'required for any drought-induced slaughter. For instance, given t h e numbers not slaughtered t h i s year i n Queensland, c a t t l e avai lable next s laughter season could be i n t he order of 3m. This compares with a normal slaughtering of 2.lm head. In t he unhappy event of a drought, t he sudden ava i l ab i l i t y of drought-induced slaughterings of both sheep and c a t t l e beyond t h e l i ke ly ava i l ab i l i t y of 3m head would put probably impossible pressures upon a l l t ransport , marketing and exporting f a c i l i t i e s beyond the farm gate.

The very large la ten t production represented by the expanding c a t t l e herd poses a t h rea t t o an already depressed market of an upsurge of supplies. I t could be argued tha t as long as t h e market i s under the th rea t of a flood of f a t c a t t l e f o r slaughter t h e delay i n recovery w i l l be lengthened. The probabi l i ty of such a flood occurring i s l i ke ly t o increase i n t h e event of loss of confidence i n t h e market by beef producers. Such a loss of confidence is more l i k e l y t o occur, t he longer i s the delay i n recovery. The d e s i r a b i l i t y of in jec t ing confidence i n t o the market and of maintaining a flow of f a t c a t t l e f o r s laughter during the interim period p r io r t o recovery could thus become c r i t i c a l . ( 9 )

Although c a t t l e numbers and grazing pressure i n terms of c a t t l e equivalents a r e already a t unprecedented leve ls , seasonal conditions a r e a l so generally good. While a widespread drought would undoubtedly have a d ra s t i c e f f e c t o n l ivestock numbers and c rea te t h e need f o r increased slaughterings, continued favourable seasons might give producers t h e physical capacity t o hold on i n t he face of increasing herd numbers f o r one, or even two seasons. However, t h i s c rea tes t he need f o r working cap i ta l for producers t o attend t o t h e costs of husbandry of a rapidly-growing herd i n a s i t u a t i o n of reduced revenue associated with a depressed marketing s i tua t ion .

The response of producers t o a fur ther f a l l i n pr ices , a t ightening of t h e i r l i q u i d i t y s i t ua t ion , o r loss of confidence i n t h e mediwn and long term outlook f o r beef is l i ke ly t o be complex and d i f f i c u l t t o assess a t t h i s stage. Reactions would pa r t l y depend upon t h e degree of spec i a l i s a t i on i n beef c a t t l e and the a l t e rna t ive en te rpr i ses which a r e ava i lab le t o produ'cers. Beef spec i a l i s t s , with no a l t e rna t ive en te rpr i ses possible, might attempt t o cut costs and increase turnoff t o 'produce t h e i r way out of t roub le t . Producers i n mixed-enterprise s i t u a t i o n s would probably s h i f t resources t o other more a t t r a c t i v e en te rpr i ses .

Producers1 future decisions t o e i t h e r r e t a i n c a t t l e unsold on proper t ies , o r t o s e l l a proportion of t h e i r po ten t ia l turn-off, o r t o l i qu ida t e t h e i r herds a r e c r i t i c a l f o r t h e fu ture of t he industry. On the one hand, panic s e l l i n g is l i k e l y t o destroy confidence and d is rupt markets; while on t h e other hand excessive re ten t ion of s tock w i l l accentuate t h e r i s k of overstocking. There i s l i k e l y t o be an optimum l e v e l of slaughterings which would keep t h e productive nucleus of t he herd i n t a c t and c a l l f o r a minimum of f inanc ia l support f o r t he beef en te rpr i se . In cases where mixed-enterprise proper t ies ex i s t , i t is poss ib le t h a t much of the f i nanc ia l support, given maintenance of confidence i n t h e fu tu re of beef , could come from cash flows generated from other cur ren t ly more p ro f i t ab l e enterpr ises . In beef s p e c i a l i s t regions, f i nanc ia l support might come from cash reserves accumulated i n t h e past . However, both these sources of working cap i t a l may be in su f f i c i en t t o maintain t he operations of herd management.

Producers' Income - L i q u i d i t y S i tua t ion

The decl ine i n c a t t l e pr ices , reduced turn-off and increases i n c o s t s have had important bu t varying e f f e c t s on producerst income - l i q u i d i t y s i tua t ion .

In s i t u a t i o n s where t he p r i ce received f o r produce f a l l s sharply, and hopefully f o r a sho r t period, t he net farm income measure which embodies concepts of inventory change, imputed cos t s and depreciat ion i s not e n t i r e l y appropriate. A more cash-oriented measure of income i s usefu l as it enables one t o gauge the res is tance of producers t o sho r t term shocks. By including on t h e re turns s ide only t h e re turns from c a t t l e t rad ing and t h e net income derived from off-farm a c t i v i t y , and on t h e costs s i d e only the expenditure on h i r ed labour, materials, services , r e n t and i n t e r e s t , a measure of net cash income is derived. Management gain on c a t t l e inventory (a Ipaper1 p r o f i t o r loss) i s not included. The n e t cash income measure i s t he sum which t h e owner-operator would have t o maintain himself and h i s family, t o pay f o r new o r replacement items of c a p i t a l , and t o amortise debt.

The l a t e s t survey estimates of average net cash incomes a s a t 1971-72 provide a bas i s for estimating t h e impact of t h e present s i t ua t ion on current incomes. In Table No. 7, estimates from the beef c a t t l e industry survey o f average ne t cash incomes i n 1971-72 a re presented together with es t imates of t he e f f ec t s of subsequent movements i n pr ices f o r inputs and products on these income leve ls . The estimates for 1973-74 ' have been derived by indexing forward the survey values of 1971-72, using t h e BAE pr ices paid and pr ices received series.( lO) Final ly , p ro jec t ions a r e presented of net cash incomes f o r 1974-75. This l a t t e r exerc i se was based on pr ices f o r c a t t l e and wool as a t

- 39 -

Table No. 7

AUSTRALIAN BEEF CATTLE INDUSTRY SURVEY

ESTIMATED PROPERTY NET CASH INCOME 1971-72: INDEXED FORWARD TO 1973-74; AND .PROJECTED TO 1974-75

S t a t e / T e r r i t o r y N.S.W. Vic. Qld S.A. W.A. Tas . N.T.

Estimated Net Cash Income1 Property 1971-72 $ 8,069 7,428 9,562 7,227 10,662 10,237 35,235

Index of Net Cash Income (NCI 1971-72 = 100) . .

1973-74: 229 214 173 217 191 218 139 1974-75 94 60 43 67 57 62 neg .

Region (N.S.W.) Coas ta l Tablelands Slopes P l a i n s .

Estimated Net Cash Income/ Property 1971-72 $ 5,449 5,068 11,780 8,042

Index of Net Cash Income - . --.- (NCI 1971-72 = 100)

1973-74 105 345 218 272 1974-75 2 2 59 118 126

' Region (Qld) Pen/ Inland Coas ta l Western Inland Coastal South Gulf North North South Cent ra l Eas t .

Estimated Net Cash Income/ Proper ty 1971-72 $ 47 658 1 8 811 14 606 . 13 198 4,004 7,178 7,100

Index of Net Cash Income (NCI 1971-72 = 100)

1974-75 neg . neg . 55 17 25 65 58 -

Region (Western A u s t r a l i a )

Co.as t a 1 Item Inland

South west^ South West Kimberleys

Estimated n e t cash income proper ty 1971/72 $ 9,112 15,162 14,818

Index of n e t cash income (NCI 1971-72 = 100)

- 1973-74 168

1974-75 40 129 neg.

September-October 1974. For other products such as wheat and other cereals p r i ce s were based upon July.1974 values. The cost calculat ions incorporated an allowance f o r p r ice increases t o continue i n t o 1974-75 a t the same r a t e a s took place i n t h e previous two years. Consequently, cost levels presented f o r 1974-75 are about 13% t o 15% up on t h e estimate f o r 1973-74. Results a r e presented a t S t a t e leve l and f o r regions i n New South Hales, Queensland and Western Austral ia ; t he l a t t e r provide examples of t h e differences which a re associated with pa r t i cu l a r regional enterprise-mixes.

In a number of regions o r S t a t e s , t h e indexed values f o r net cash incomes s ince 1971-72 r i s e t o values somewhat l e s s than 200, and then drop back t o very low o r negative values i n 1974-75. Without exception, these regions (N.T., Coastal N.S.IV,, Peninsula-Gulf, Inland North and Western regions of Queensland and the Kimberleys) a r e associated with proper t ies der iving high proportions of income from beef c a t t l e . I n regions where mixed en te rpr i se s i t ua t ions a r e common, t he resurgence of t he wool market together with r i s i n g pr ices f o r wheat and other crop products (as well as f o r beef) , caused indexed income values t o more than double i n t h e two years p r i o r t o 1974-75. I n those regions where c a t t l e do not form a very l a rge component of income, t he index i n t he 1974-75 year tends t o remain r e l a t i v e l y high, approaching or exceeding 100 i n some cases.

The income l i qu id i ty s i t ua t ion of beef producers is not of course determined so l e ly by movements i n t h e pr ices received f o r t h e i r output nor by t h e e f f ec t s of r i s i n g input pr ices . Other i n f luen t i a l fac tors r e f e r r ed t o i n an e a r l i e r s e c t i o n , ( l l ) include t h e composition of t he en t e rp r i s e mix, levels of stock s a l e s and purchases, movements i n t he leve ls of inputs employed, t he debt-asset pos i t ion and t h e extent t o which outstanding debt has been incurred f o r and i s secured by c a t t l e purchases.

The e f f e c t s of these fac tors w i l l tend t o vary between d i f fe ren t groups of producers, and the following discussion makes a bmad assessment of these e f f e c t s on t h e th ree main groups of beef producers i den t i f i ed previously.

. Specialist Producers:

- The s ign i f i can t ly grea te r dependence of t h i s type of producer on t h e c a t t l e en te rpr i se f o r revenue w i l l mean t h a t t h e f a l l i n c a t t l e p r ices w i l l r e s u l t i n a subs tan t ia l f a l l i n gross farm returns . The estimates shown above ind ica te t h a t i n some areas t h e average f a l l could be i n excess of 100%.

- The a b i l i t y of beef producers t o reduce expenditure i s l imited, (12) and a considerable proportion of t he decl ine i n gross re turns w i l l be transmitted t o net re turns .

- The tendency exhibited by many producers t o withhold c a t t l e from t h e market i n t h e expectation t h a t p r ices would soon r i s e w i l l have in t ens i f i ed t h e f a l l i n income.

- After a number of good seasons and s t ead i ly r i s i n g beef pr ices , i t might be expected t h a t t h e l iqu id a s se t levels of s p e c i a l i s t producers would be high. However, t he tendency t o

undertake investment and t o fur ther expand herd s izes during a period i n which t h e outlook f o r beef was b r igh t may have acted a s a constra int on t h e build-up of l i qu id assets . In addition, the slump i n beef p r i ce s w i l l a l ready have resul ted i n some reduction i n cash reserves and t h e c losure of meatworks during the wet season i s l i k e l y t o see fu r the r de te r iora t ion of t h e f inancial posi t ion of many s p e c i a l i s t producers.

- The a b i l i t y of s p e c i a l i s t producers t o borrow w i l l have been inhibi ted by t h e decline i n beef pr ices . I t was shown e a r l i e r tha t t he c a t t l e component i n t h e a s se t s t ruc tu re p r i o r t o t he current s i t u a t i o n was commonly between one-quarter and one-half.(l3) I n addit ion, t he land i s of ten leasehold and the ' value of improvements, being c lose ly associated with ' the.. fortunes of t he c a t t l e industry, i s a l so l i k e l y t o have suffered' a sharp f a l l .

- The prac t ice i n more favourable times of borrowing carry-on ' f inanceaga ins t stock and t o l i qu ida t e t he r e su l t i ng debt when stock a r e sold each year may force some p roduce r s to s e l l stock, perhaps even breeding stock, i n order t o meet t h e i r repayment comitments.

- Within t h e s p e c i a l i s t group, two broad categories may be distinguished. On t h e one hand t h e r e a r e t h e la rger established producers f o r whom seasonal f luc tua t ions and r i s k a r e a normal par t of t h e i r operations. The s i z e of many of these proper t ies , t h e i r ownership type and the leve l of cash reserves generated i n normal years have enabled them t o withstand sudden f a l l s i n income i n t h e past . On t h e other hand, a l a rge proportion of beef s p e c i a l i s t proper t ies a r e operated, of ten as family concerns, on a much smaller s c a l e i n more c l imat ica l ly favoured and l e s s remote areas. Their cash flow has been reduced t o a low level. They have a l a rge r proportion of inescapable costs. Many have borrowed carry-on finance against ant ic ipated stock turn-off a t values and levels which have not eventuated and a high proportion of t h e i r asse t s i s represented by c a t t l e which have declined g rea t ly i n value.

Producers who Recently Entered the Beef Cattle I d s t r y :

- In response t o t he apparently favourable market outlook f o r beef and the general po l ic ies f o r adjustment i n t he r u r a l sec tor , a number of ru ra l producers i n recent years subs tan t ia l ly increased t h e i r commitment t o t he beef c a t t l e industry, even t o t he extent o f spec i a l i s ing i n beef.

- Many of these producers tended t o operate small proper t ies engaged i n woolgrowing o r dairying.

- The ef fec t s of t he sharp decline i n beef pr ices and the marked increases i n input p r ices a r e l i ke ly t o have undermined what was i n some cases an already precarious income s i t ua t ion .

- The l iqu id reserve posi t ion of t h i s category of producer was unlikely t o have been high even p r i o r t o t h e c u r r e n t s i t ua t ion .

- I t i s suspected t h a t a considerable number of these producers would have borrowed t o purchase beef c a t t l e a t r e l a t i v e l y high pr ices and tha t t h e i r subsequent debt amortisation commitments i n t he face of the pr ice slump w i l l have subjected them t o a severe l i qu id i ty sqlieeze.

Diversified Producers:

- The incomes of producers with d ivers i f ied output mixes, pa r t i cu l a r ly those involving cropping en te rpr i ses are unl ikely t o suf fe r as severe a decline as those of s p e c i a l i s t producers.

- The continuation of a cash flow from the non-beef en te rpr i ses should enable many of t h e viable producers i n t h i s category t o avoid severe f inanc ia l hardship.

- The a b i l i t y of producers i n t h i s category t o borrow carry-on finance i s unl ikely t o be as severely r e s t r i c t e d as t ha t of s p e c i a l i s t producers because t h e e f f ec t o f t he pr ice decline on a s s e t values w i l l have been l e s s pronounced.

Need for Financial Support

Among a l l types of beef c a t t l e producers who prove t o be i n need of f i nanc ia l help over t h e current s i t u a t i o n , individual assessment w i l l d i sc lose two broad groups. One w i l l comprise those who, p r io r t o t he decl ine i n c a t t l e p r ices , were v iab le ( i .e . able t o make an adequate income and maintain a steady leve l of investment i n order t o improve methods of production) but because of a rapid de te r iora t ion i n t h e i r l i q u i d i t y and a s se t backing pos i t ion a re unable t o obtain c r ed i t from t r a d i t i o n a l sources. Generally, these producers, given access t o finance w i l l be ab le t o m o r t i s e a loan when t h e market recovers.

The o ther group w i l l include those who a r e not only affected by a dec l ine i n c a t t l e en te rpr i se re turns b u t who a r e i n need of farm adjustment o r he lp t o leave t h e industry . I n many cases rapidly increasing input p r ices may have transformed the proper t ies of such producers from a h i the r to viable en t e rp r i s e i n t o one which is no longer v iab le .

The number of producers f a l l i n g i n t o each of these groups can only be assessed by examining the records of individual producers.

Credi t Avai 1 abi 1 i ty

In recent weeks the Government has eased some of the t i g h t cons t r a in t s on c r e d i t a v a i l a b i l i t y i n t h e Australian economy. The r e su l t i ng improvement i n l i q u i d i t y could mean t h a t t he requirements of many producers f o r carry-on finance(l4) t o a s s i s t them during the current d i f f i c u l t marketing s i t ua t ion w i l l be met from normal sources.

The t r a d i t i o n a l lenders of shor t term c red i t t o t he r u r a l sec tor a r e the t rad ing banks and the pas tora l houses. I t appears t h a t the t rad ing banks a r e receiving increased requests f o r finance from beef c a t t l e producers and tha t generally these a r e being met. However, t he banking system has i . t s own secu r i ty arrangements f o r lending whj.ch a re not always appropria te for beef c a t t l e en te rpr i ses ; i n pa r t i cu l a r , it i s not

normal prac t ice f o r t he t rading banks t o lend against t he s ecu r i t y of l ivestock nlortgages.

The lending a c t i v i t i e s of the pastoral houses a r e anc i l l a ry t o t h e i r major functions as stock agents, wool brokers and suppl iers of farm input requirements. The provision of c r ed i t f a c i l i t i e s f o r t h e i r c l i e n t s i s largely a service designed t o a t t r a c t and r e t a in good c l ien ts r a the r than t o obtain p r o f i t s d i r e c t l y from financing.(lS) In general , t h e pastoral houses a r e geared toward providing short term cred i t . Where formal secur i ty i s taken, it i s commonly i n t he form of a l ivestock mortgage o r l i e n on wool o r other produce. The lending a c t i v i t i e s of the pastoral houses a r e pa r t i cu l a r ly vulnerable to si tuatj .ons such as t he present decl ine i n t he beef market, and the reduced turn-off of stock which have caused loan repayments t o be unexpectedly delayed, thus making it d i f f i c u l t f o r fur ther requests f o r finance t o be accommodated. This d i f f i c u l t y has been compounded by t h e e f f ec t of t h e decline i n l ivestock values on the secur i ty of ex is t ing loans and probably by a f a l l i n c l i en t s ' balances, which represent an important source of funds f o r lending. The r e l a t i v e l y buoysnt conditions i n other sec tors of ru ra l industry such as grains and sugar have had l i t t l e e f f ec t on the s i t u a t i o n of pastoral houses, as i n many cases such commodities f a l l outside t h e i r normal course of operations.

A c r i t i c a l f ac to r governing the will ingness of commercial lenders t o continue t o meet t he c r e d i t needs of beef producers, w i l l be the degree of confidence which t h e lender has i n t h e outlook f o r beef. I n addition, there w i l l be groups of normally viable producers whose requirements f o r carry-on finance w i l l not be met by commercial lenders, because they are unable t o s a t i s f y t he c r i t e r i a imposed on borrowers re la t ing t o equity and income.

Other c r ed i t i n s t i t u t i o n s , such a s t he Commonwealth Development Bank and the Rural Reconstruction au tho r i t i e s , d i r ec t t h e i r a c t i v i t i e s towards t he provision of longer term cred i t including finance f o r t he rearrangements of short term debts. Act ivi ty by the Commonwealth Development Bank and the Rural Reconstruction au tho r i t i e s i n refinancing ex is t ing short term debts of beef producers over longer terms could f a c i l i t a t e the re lease of funds provided by t r a d i t i o n a l lenders which could be used f o r normal carry-on purposes. Through the farm development loan funds, t he t rading banks a l s o have a capacity t o refinance shor t term debts over longer terms.,-~- I t would seem t h a t addi t iona l f inance would have t o be made avai lable t o t h e Commonwealth Development Bank f o r t h i s purpose. The funds posi t ion of t h e Rural Reconstruction au tho r i t i e s i s more l iqu id , but a po ten t i a l l y l imi t ing fac tor on the a b i l i t y of t he respective Rural Reconstruction a u t h o r i t i e s t o meet appl icat ions f o r funds from beef producers i s t h e SO% l i m i t on t he proportion of funds which can be allocated f o r purposes other than farm build-up. Removal of t h i s l i m i t requires the p r i o r consent o f t h e Federal Government. (16)

POSSIBLE POLICY OPTIONS

The recent ly published Green Paper(l7) examines i n some depth the implications which income i n s t a b i l i t y has f o r resource a l locat ion and welfare i n t he r u r a l sector . The report suggests t ha t i f a g rea te r degree of income s t a b i l i s a t i o n could be introduced, t he viable producer would bene f i t i n welfare terms, since t h e a b i l i t y of himself and h i s family t o survive periods of depressed product p r ices and markets would be enhanced, and t h e economy a s a whole would benef i t from more e f f i c i e n t resource a l l oca t ion a s a r e s u l t of reduced uncer ta inty and the re tent ion of productive resources i n what i n t h e longer term was an economically sound form of en te rpr i se ,

The relevance of t h i s argument f o r beef producers r e s t s largely on t h e expectation, a s outl ined on pp. 29 t o 35 t h a t t he market f o r beef w i l l recover and t h a t t h e present low pr ices a r e an e s sen t i a l l y shor t term phenomenon.

The case f o r providing adjustment ass i s tance t o ru ra l producers who would be operating non-viable production un i t s even given a recovery i n t h e market, was es tabl ished with t h e introduction of t he Rural Reconstruction Scheme and w a s elaborated i n t he Green Paper (Chapter V11).

I n the preceding sec t ion of t h i s report a number of d i f f e r en t , a l b e i t i n t e r r e l a t e d , problems were i d e n t i f i e d i n t h e context of t he current beef industry s i tua t ion . Because they a re inherently d i f f e r en t , t h e appropriate approach t o these problems would appear t o involve a combination of d i f f e r en t measures. This 'policy package' could be considered a s having t h e following fundamental objectives:

( i ) Assis t v iable producers t o remain i n t he industry.

( i i ) Assist non-viable producers e i t h e r t o leave the industry o r reconstruct t h e i r production uni t s .

( i i i ) Protect t h e resource base - breeding nucleus, farm in f r a s t ruc tu re and pasture base - from longer term damage.

( iv) Expand market ou t l e t s f o r beef.

Assis t ing producers who a re viable i n t h e longer term may be viewed as deal ing with t he income/liquidity problems which have ar isen o r a r e l i k e l y t o a r i s e i n t h e future . Because of a sudden reversal i n t h e i r l i q u i d i t y 'posit ion, lack of a l t e rna t ive sources of income and exclusion from exis t ing c r e d i t sources, normally viable producers may be forced t o run down t h e i r a s s e t s and stock numbers o r leave the industry altogether. ' The c r i t e r i a f o r determining which producers a r e viable could be based upon number of breeders on t h e i r proper t ies i n addit ion t o t h e i r equity r a t i o s and re turns /cos t s r a t i o s over a defined period, However, i n deciding upon measures t o a s s i s t them, allowance should be made f o r t he p o s s i b i l i t y of f luc tua t ing pr ices becoming more of a fea ture of t he industry than p r i o r t o 1973, because of t h e grea te r re l iance of t he industry on overseas markets. This may ind ica te t h e need f o r addi t ional financing and c r e d i t arrangements t o those t h a t have applied i n t he past .

The expansion of market o u t l e t s would a l so have an important bearing on producers' income/liquidity s i t u a t i o n and re l ieve t h e pressure

on the resource base. A f i n e balance i s required t o allow marketing5 t o proceed but t o keep t h e herd and industry i n f r a s t ruc tu re i n t a c t t o enable t h e industry t o take advantage of t h e expected market recovery.

A n appropriate approach t b t h e problems outl ined above could include a combination of some of the following measures:

Provision of Credit t o Viable Producers

I n considering t h e provision of c r ed i t t o viabl'e producers, questions a r i s e a s t o t h e overa l l need, t he appropriate i n s t i t u t i o n s through which finance could b e made avai lable and the terms of t h e loans.

The recent re laxat ion of c r ed i t r e s t r i c t i o n s w i l l r e s u l t i n ex t r a l i q u i d i t y i n t h e economy, and t h i s could mean t h a t t h e requirements of many producers f o r carry-on finance w i l l be met on commercial terms from normal sources.

Traditional Sources of Carry-on Finance: The t rading banks and pas tora l finance companies have t r a d i t i o n a l l y met t h e demands f o r carry-on finance from t h e r u r a l sector . For reasons which were referred t o e a r l i e r , however, t he equity and income c r i t e r i a which a re applied by commercial lenders w i l l almost ce r t a in ly r e s u l t i n some viable beef producers being denied access t o carry-on finance.

There are a number of measures which could be taken t o encourage lenders t o provide shor t term c red i t t o beef producers i n need. These would include a government guarantee i n support of loans by commercial lenders and a s t r a i g h t a l l oca t ion of funds by t h e government t o commercial lenders t o meet t he demands of producers i n need. I n each case, the amount of carry-on finance could b e determined by r e l a t i n g it t o t h e number of breeders carried. There a r e precedents f o r measures of t h i s nature i n overseas countries, (18) bu t t h e Australian r u r a l s ec to r lacks t h e type of administrative framework which would ensure t h e smooth operation of such schemes.

The use of commercial lenders would minimise t h e delay i n access t o c r ed i t by producers i n need. In order t o prevent explo i ta t ion of cheap c r e d i t by producers who a re not i n need, it would appear des i rab le t o apply commercial i n t e r e s t r a t e s t o such c red i t f a c i l i t i e s .

Both schemes however, would involve problems i n drawing up and ensuring adherence t o spec i f ied lending conditions. Thus it is uncer ta in t h a t they would achieve t h e i r object ive of meeting t h e needs of those viable producers who a r e precluded from access t o c r e d i t under ex i s t i ng arrangements.

Altemtive Sources of Credit: Another approach would be t h e provision of finance f o r debt reconstruction by i n s t i t u t i o n s such as t h e Rural Reconstruction agencies and t h e Commonwealth Development Bank.

The rearrangement of debts on t o a longer term bas i s by these i n s t i t u t i o n s should f a c i l i t a t e t h e re lease of funds provided by t r a d i t i o n a l lenders and these could b e used f o r normal carry-on purposes.

This would require a de t a i l ed consideration of t h e debt and equity s t ruc tu re of each producer but would o f f e r t h e opportrunity of

taking a more fundamental approach t o the l i qu id i ty problems t h a t have arisen. In a prospective s i t u a t i o n o f f luc tua t ing l ivestock pr ices and producer incomes, t he need f o r ' special carry-on finance' could be a recurring one unless t h e r e is a bas ic change i n t h e industry 's re l iance on shor t term c red i t . I n pa r t i cu l a r , t h e widespread prac t ice of s ign i f i can t borrowings on a sho r t term bas i s against t h e secur i ty of stock would no longer be appropriate.

The c a t t l e industry is already t h e major borrower from the Commonwealth Development Bank and a working re la t ionsh ip has developed between t h e Bank and t h e pas tora l houses. Thus a mechanism is i n existence which should provide the flow of funds t o viable producers who a re cur ren t ly denied access t o c red i t . However, t he resources of t he Bank would have t o b e augmented f o r i t t o make f u r t h e r funds avai lable t o t h e beef industry.

The government appropriated some $30m t o t h e Rural Reconstruction Scheme f o r a l l r u ra l producers i n t h e 1974-75 budget. Under t he scheme, funds a r e made avai lable t o the S t a t e s on the bas i s of t h e i r demonstrated need. The administration of the Scheme i s a S t a t e r e spons ib i l i t y and differences could occur between States . Nevertheless, t h e Rural Reconstruction au thor i t i es would a l so appear t o be appropriate lending channels .

Given t h a t t he current marketing d i f f i c u l t i e s a r e regarded as being of a temporary nature, there are grounds f o r deferr ing i n i t i a l repayments of loans from these sources. However, as the group of producers receiving t h i s type of ass is tance would be viewed a s viable i n t he longer term, it would seem tha t normal commercial r a t e s of i n t e r e s t should apply.

Tax Deferrals

Deferral of income tax i n t h e current circumstances would be worthy of se r ious consideration. The Commissioner of Taxation has indicated t h a t h i s discret ionary power f o r dealing with taxpayers i n f i nanc ia l d i f f i c u l t i e s w i l l be read i ly appl ied over t h i s coming year. He does not have the authori ty t o grant 'across t he board' defer ra l s and has indicated t h a t t he bes t procedure would b e f o r individual producers who a re unable t o meet t h e i r t a x obl igat ions i n t he normal way, t o apply t o t h e S t a t e Commissioners.

Assistance f o r Non-Viable Producers

For those producers who are deemed t o be non-viable i n t he longer term, t he re i s an accepted case f o r ass is tance through the Rural Reconstruction Scheme t o e i t h e r reconstruct t h e i r proper t ies o r t o move out of t h e r u r a l sector .

Marketing and/or Price Stab i l isa t ion Schemes

A number of schemes have been proposed f o r t h e beef industry which would have a s t h e i r main objectives t h e s t a b i l i s a t i o n of re turns t o producers. They take a number of forms including guaranteed pr ice schemes, bu f f e r stock schemes and arrangements for d i f f e r en t i a t i ng between pr ices paid on various markets (through industry levies and/or government subsidy o r d i r e c t a l loca t ion) . In some cases, they involve market

intervention by a cen t r a l agency f o r t h e purpose of manipulating product p r ices and/or supplies.

Such schemes f o r r u r a l i ndus t r i e s w i l l be examined i n d e t a i l during the forthcoming invest igat ion in to r u r a l income s t a b i l i s a t i o n by the Indus t r ies Assistance Commission. S t a t e Government inqui r ies have ident i f ied ce r t a in problems per ta ining t o t h e i r operation i n t he meat industry.(l9) I n general these r e l a t e t o t h e complex marketing System f o r the commodity, i t s perishable nature , t he lack of a uniform, objective system of product descr ipt ion, t h e necessi ty f o r forecast ing future pr ices , the d i f f i c u l t i e s of avoiding income t ransfers between producers turning of f d i f f e r en t q u a l i t i e s of stock a t d i f f e r en t times of the year, the longer run e f f e c t s on resource a l loca t ion and consumer preferences and the i r general administrative d i f f i c u l t i e s and costs. The provisions of Section 92 of t he Constitution, which s t i p u l a t e s f r ee t rade between the States , a lso present d i f f i c u l t i e s f o r those schemes involving the maintenance of p r i ce s on t h e domestic market; i n any case, i n t he current s i t ua t ion where domestic demand is proving t o be r e l a t i v e l y pr ice e l a s t i c , the introduction of a scheme t o maintain a r e l a t i v e l y high home pr ice would appear questionable.

Although such schemes may have a r o l e t o play i n c e r t a i n isolated cases, i n general terms it would appear preferable to introduce measures which a r e aimed a t f a c i l i t a t i n g the functioning of market forces ra ther than attempting t o intervene i n t h e complex marketing system f o r beef. Expansion o f Market Outlets

The reduction i n r e t a i l beef pr ices , both absolutely and re la t ive ly , i s s t imulat ing a marked expansion i n domestic cotzsqt ion. Promotional campaigns could fu r the r assist t h i s but t he re a r e limits t o the capacity of the domestic market t o absorb beef. Consideration could be given t o welfare schemes such a s food stamps f o r low income earners which have been introduced i n overseas countries. Household meat consumption surveys car r ied out by t h e BAE(20) have revealed a wide d i spar i ty between t h e quan t i t i e s of beef consumed by d i f f e r en t groups i n the Australian community. Nevertheless, t h e costs involved i n such welfare schemes would be very high f o r them t o have much of an e f fec t .

A s regards e q o r t s , Ministers and o f f i c i a l s have continually pressed f o r access t o major overseas markets through d i r e c t negot ia t ion and i n a number of mu l t i l a t e r a l fora. Opportunities f o r s a l e s i n other markets a r e promoted and monitored through the Trade Commissioner Service and the Australian Meat Board. Government sponsored t rade delegations have made frequent v i s i t s t o overseas countries t o develop markets.

It has been proposed t h a t these e f f o r t s be suppleeented by government subsidies or the use of industry funds t o finrmceoverseas'saZes pa r t i cu l a r ly t o opportunis t ic buyers. Subsidies on overseas sa les might st imulate r e t a l i a t o r y act ion by competing exporters and they would not be i n the s p i r i t o f t h e pr inc ip les o r object ives of a number of in te rna t iona l organisations t o which Austral ia belongs. The use of industry lev ies t o finance exports would require considerable judgement i n forecast ing pr ices and could r a i s e problems s imi l a r t o those discussed under Marketing and/or Price S t ab i l i s a t i on Schemes, but such a measure may have a ro l e i n t he current d i f f i c u l t s i tua t ion .

The question has a l so been r a i s e d of including beef i n food d d programs. Exist ing programs generally do not include meat because of t h e h i t h e r t o high pr ices and food a id r ec ip i en t countries have preferred c e r e a l based foods and some dairy products. Nevertheless, there are meat ea t ing food d e f i c i t a reas , ,par t icu la r ly i n Africa. There are d i s t r i b u t i o n problems with frozen meat a r i s i n g from transporta t ion costs and inadequate s torage f a c i l i t i e s i n d e f i c i t areas. The provision of canned meat would overcome some of these problems and t h e supply of $50,000 of canned meat f o r del ivery t o displaced persons i n Cyprus has been approved. I t should be noted, however, t h a t canning i s a r e l a t i v e l y expensive means of processing meat and t h a t there are la rge stocks of 'canned beef i n South America. There would appear t o be merit i n inves t iga t ing t h e p o s s i b i l i t i e s o f supplying d r i ed s a l t e d meat; processing costs would be low, t h e product keeps f o r a long period and the consumption o f meat i n t h i s form i s already widespread i n areas of Africa and LatinAmerica. The supply of such a product, however, would have t o b e developed i n consultation with t h e rec ip ien t countries and probably f i t t e d i n t o es tab l i shed programs.

Freight Subsidies and Other Relief Measures

Mechanisms have been developed, mainly on a S t a t e bas i s , over t he years t o introduce drought r e l i e f measures such as r a i l and f r e igh t concessions, and ass i s tance t o purchase fodder and develop emergency water suppl ies i n t he event of drought being declared i n an area.

Should pas to ra l conditions i n c e r t a i n areas de t e r io ra t e t o a degree which was not acceptable i n terms of stocking r a t e s and forage a v a i l a b i l i t y , consideration could be given t o t h e introduction of f r e igh t subsidies t o f a c i l i t a t e the movement of s tock t o more favoured areas if these were available. I t would seem des i rab le t o give p r i o r i t y t o subsidies f o r t h e t ranspor t of breeding and younger stock.

Overall Appraisal

Bearing i n mind the d e s i r a b i l i t y of a s s i s t i n g market forces r a t h e r than impeding them, the d i f f i c u l t y of defining which producers a r e i n need and the p o s s i b i l i t y of f luc tua t ing pr ices becoming more of a f ea tu re of t he industry than p r i o r t o 1973, it would appear t h a t high p r i o r i t y should b e given t o the provision of finance t o viable producers fo r debt reconstruction. An appropria te agency through which such finance could be made ava i lab le would be the Commonwealth Development Bank which has a working re la t ionsh ip with the pas tora l houses.

This would involve a more fundamental approach t o t h e l i qu id i ty problems which have a r i sen , than t h e d i r e c t provision of carry-on finance. These problems have been p a r t l y influenced by the i n a b i l i t y of the indus t ry ' s ex i s t i ng financing arrangements t o adequately cope with sharp f luctuat ions i n p r i ce s ; large borrowings on a shor t term bas i s against the s ecu r i t y o f stock do not seem appropriate i n a s i t ua t ion of f luc tua t ing l ivestock pr ices and producer incomes. Moreover, it should f a c i l i t a t e the re lease of funds f o r carry-on purposes provided by t r a d i t i o n a l lenders, and have considerable advantages over a l t e rna t ive methods i n ensuring t h a t the finance was d i rec ted t o viable producers most i n need because they a re excluded from c r e d i t under ex is t ing arrangements. The amount o f finance required cannot be r ead i ly assessed because i t would b e dependent on the examination of individual producer's records. However, an i n i t i a l sum could be made ava i lab le with provision f o r fur ther amounts as needs became more apparent.

This measure could be supplemented by a number of others as pa r t o f an overa l l package t o meet t h e s i tua t ion . Important among these would b e ass is tance t o non-viable producers through the Rural Reconstruction Scheme. Consideration could a l so b e given t o t h e Commissioner of Taxation using h i s discret ionary powers t o defer income t a x payments by producers i n f inanc ia l d i f f i c u l t i e s . E f fo r t s t o expand domestic and export markets should continue, and these could be supplemented by the inclusion of beef, pa r t i cu l a r ly i n dr ied s a l t e d form, i n food a i d programs where su i t ab l e arrangements could be reached with rec ip ien t countries. I n t he event of a severe de te r iora t ion i n pas tora l conditions i n ce r t a in areas, consideration could be given t o the introduction of f r e igh t subsidies t o f a c i l i t a t e t he movement of young and breeding stock t o more favourable areas i f these were avai lable .

I n p a r t i c u l a r t h e r e seems a c l e a r need f o r an announcement t o i n j ec t confidence i n t o t he industry which recognises t h e s p e c i f i c problems being faced and ind ica tes t h a t s p e c i f i c s teps w i l l be taken a s necessary.

(1) See f o r example G.O. Gutman, 'The Cat t le Cycle', QuarterZy ~~~i~~ o f AgricuZturaZ Economics, Val. 3, January 1950;

Shlomo Reutlinger, 'Short-Run Beef Supply Response, JoumaZ of Farm Economics, Vol. 48, No, 4, Par t 1, November 1966; and

J.W. Freebairn, 'Some Estimates of Supply and Inventory Response Functions f o r the Cat t le and Sheep Sector of New South Wales', Revim of Marketing and AgricuZturaZ Economics, Vol. 41, June and September 1973.

(2) For a discussion of re la t ionships between saleyard, wholesale and r e t a i l meat p r ices see 'Price DifferentiaZs i n the Meat Wrke t ' BAE Occasional Paper No. 20, March 1974.

(3) USDA, Livestock and Meat Situation, October 1974.

(4) FAO, Intergovernmental Group on Meat, Fourth Session , October 1974.

( 6 ) BAE, AgricuZturaZ SuppZy Projections, Australia 1978-79, Canberra, Ju ly 1974.

(7) The importance of ca l f slaughterings i n determining fu ture herd growth and beef production i s highlighted by demographic s tud ies of the Australian herd. Under t he assumptions made, these ind ica te t h a t Aus t ra l ia ' s nat ional herd would have been near ly 6m head lower in 1974, had ca l f s laughter r a t e s .in t h e preceding seven years remained a t t h e high 1967 l e v e l s (see'G.W, Reeves, 'The Influence of C a l f Slaughterings on t h e Growth i n Cat t le Numbers and Beef Production i n Aus t ra l ia1 , Meat Situation and OutZook, 1975).

(8) The re la t ionsh ip between over grazing and s o i l erosion has been s p e c i f i c a l l y recognised i n a number of more a r i d pastoral regions i n which maximum stocking r a t e s , a r e imposed by Government appointed pas tora l inspectors act ing i n accordance with leg is la ted s t a t u t e o r ordinance.

(9) Ylhilst the c losure of meat works i n Northern Austral ia during the wet season w i l l l i m i t t h e a b i l i t y of beef producers i n t h e north t o market f a t l ivestock, there is some evidence t o suggest t h a t c a t t l e movements do not cease during the wet. (See f o r example, Girdlestone and Parsons, 'The Regional Supply of Beef Cat t le f o r Slaughter i n Queensland' , QuarterZy Review of AgricuZturaZ Economics, Vol XXVI, No. I, January 1973, In addit ion the beef pr ice recession i s expected t o continue well beyond the date when Northern meatworks usual ly reopen. Given these f ac to r s , t he re would appear t o be scope f o r considering t h e introduction of measures aimed a t maintaining a flow of f a t c a t t l e from the beef s p e c i a l i s t regions.

(10) The indexing exercise was, i n view of l imited knowledge of s t r u c t u r a l changes i n input and output mix, based on t h e assumption of t he industry re ta in ing i t s 1971-72 s t ruc ture . I n view of t he time lags which tend t o charac te r i se adjustments i n l ivestock numbers and the generally buoyant conditions f o r a wide range of r u r a l products, it is l i k e l y t h a t , t h e e f f e c t s of changes i n t h e beef c a t t l e industry on the estimates presented would not have been great .

(11) See the sect ion e n t i t l e d 'The Vulnerabil i ty of Beef Producers t o Changes i n Cat t le Pr ices* .

(12) For a discussion of t h i s aspect, see t h e sect ion e n t i t l e d 'Cost S t ruc tu re t , page 18.

(13) See page 15.

(14) Carry-on finance may b e defined a s shor t term c red i t which i s supplied t o a producer t o meet t he subsistence needs of h i s dependants and himself and t o meet t he e s sen t i a l input requirements of h i s property.

(15) Reserve Bank of Austral ia , Credit FaciZitZes for Rural Producers i n AustraZia, JmuaV' 1970

(16) See '!The RuraZ Reconstruction Scheme - a Review of Progress ' Second Report, BAE, Canberra 1974.

(17) Rural Poticy i n AustmZia, Report t o t he Prime Minister by a Working Group, May 1974.

(18) I n t he United S ta t e s , pa s to ra l finance com?anies operate as government reg is te red lenders with SO% of t h e i r farm lending being subject -to go-gernment guarantee. I n e f f e c t t h e pas tora l finance cozpany operates as the agent of t he government f o r the assessment of t he loan applicant and f o r t h e administration o f t he term of t h e loan i n r e l a t i on t o repayment and guzrantee,

In New Zealancl recent ly , a sheep re ten t ion scheme was introduced which was aimed a t preserving t h e breeding stock of t he sheep industry during what was considered t o be a temporary period of depressed pr ices . Under t he terms of t h i s scheme sheep producers received a bounty per head of breeding stock held on the property a t a given date i n the future. Evidence of numbers was accepted on t h e basis of information contained i n t a x re turns .

(19) See Parliament of New South Wales, Report from the.SeZect Cormnittee of the Assembly upon the . Meat Industry, 1972; and Enquiry i n t o the Economics -of Marketing of Livestock and Meat i n Victoria, Report by L.E. Cozens, Melbourne, May 1973.

(20) BAE, Household Meat Conswnption i n Sydney, .Beef Research Report No. 3 , December 1967; and BAE , HousehoZd Meat Consumption i n MeZbourne, Beef Research Report No. 8, Ju ly 1970.

Appendix Table 1

CATTLE NUMBERS AND ADULT CAT~LE SLAUGHTERINGS: BY STATE: AUSTRALIA: 1963-64 TO 1973-74

Year N.S.W. Vic. Qld S.A. W.A. Tas. N.T. Aust. (a)

'000 '000 ' 000 ' 000 '000 ' 000 '000 ' 000

X Change

H. ADULT CATTLE SUUGHTERINGS

% Change

1963-64 to 1973-74 25.2 50.8 1.9 . 62.6 37.2 87.7 32.0 28.3 1963-64 to 1966-67 -26.4 -2.0 -8.5 -1.1 -16.2 -1.6 34.0 -11.9 1966-67 to 1972-73 105.5 74.0 25.9 79.3 63.0 95.8 14.9 65.4 1972-73 to 1973-74 -17.2 -11.6 -11.6 -8.3 0.4 -2.6 -14.2 -12.0

C. OUTPUT ANALYSIS 1963-69 to 1973-74

Total change 1963-64 to 1973-74 in adult cattle slaughterings 345 564 27 119 126 107 16 1 314 cattle numbers 3866 2784 2 855 996 1023 437 222 11 830 'Output' (i.e. number + slaughterings) 4211 3348 2 882 1115 1149 544 238 13 144

Total 'output' growth as % of herd size in 1964 87.9 101.4 38.9 160.7 88.5 120.9 21.5 69.0

t contribution to total growth in output 32.0 25.4 21.9 8.5 8.7 4.1 1.8 100

(a1 Includes A.C.T. @) As at 31 March of second year stated. Note: Percentage totals may not add due to rounding.

S o u r c e a : Australian Bureau of Statistics, Bureau of Agricultural Economics.

Appendix Table I1

W B U ( OF SHEEP-CAKRYING PROPERTIES: BY SIZE OF CATTLE HERD

BY SIZE OF PROPERTY* 1968-69 and 1970-71

1968-69 1970-71 Sheep-Carrying P rope r t i e s With Beef Properties Sheep-Carrying P rope r t i e s With

N O < 50 ' So With No Sheep No 50 > 50 Tota l Reef P rope r t i e s S i r e of Property c a t t l e c a t t l e c a t t l e c a t t l e c a t t l e c a t t l e With No Sheep

N.S. W. Slnall p rope r t i e s 6 345 11 198 4 882 22 425 4 423 8 362 7 168 ' 19 953 !Medim s i r e d p rope r t i e s 1 615 3 309 5 329 10 253 1 563 2 572 6 783 10 918 Large p m p e r t i e s 30 60 396 486 33 38 502 573. Tota l 7 990 14 567 10 607 33 164 19 025 6 019 10 972 14 453 31 444 22 233

vic. Small p rope r t i e s 7 856 8 510 3 621 19 987 5 810 7 313 5 326 18 449 Medium s i z e d p rope r t i e s 863 1 096 1 683 3 642 920 1 156 2 468 4 544 L u g e p rope r t i e s 10 7 79 96 12 11 117 140 Tota l 8 792 9 613 5 383 23 725 14 819 6 742 8 480 7 911 23 133

QZd Small p rope r t i e s 427 479 662 . 1 568 354 386 837 1 577 Medium s i z e d p rope r t i e s 469 604 1 518 2 591 388 399 1 441 2 228 Large p rope r t i e s 36 51. 296 383 15 15 177 207 Tota l 932 1 134 2 476 4 542 21 270 757 800 2 455 4 012

S.A. Small p rope r t i e s 6 411 3 510 1 080 11 001 A 206 3 492 1 925 9 623 Medim s i z e d p rope r t i e s 598 617 930 2 145 607 542 1 260 2 409 Large p rope r t i e s 21 11 76 108 23 9 62 94 Tota l 7 050 4 138 2 086 1 3 254 1 735 4 836 4 043 3 247 12 126 2 468

W.A. Small p rope r t i e s 4 041 1 505 783 6 329 3 692 1 299 939 5 930 Medim s i r e d p m p e r t i e s 3 071 1 384 1 148 5 603 3 288 1 428 1 431 6 147 Large p m p e r t i e s 132 49 129 310 111 40 159 310 Tota l 7 244 2 938 2 060 12 242 3 125 7 091 2 767 2 529 12 387 3 346

T'as. h l l prope r t i e s 476 999 514 1 989 345 730 667 1 742 Medim s i z e d p rope r t i e s 57 111 36 1 529 37 83 398 518 Large p rope r t i e s 50 50 1 1 66 68 1 602 To t a l 533 1 110 925 2 568 3 176 Aus t. Small p rope r t i e s 25 556 26 201 11 542 63 299 18 830 21 582 16 862 57 274 :ledimn s i z e d p rope r t i e s 6 204 7 121 10 969 24 294 6 803 6 180 1 3 781 26 764 Large p rope r t i e s 219 178 1 026 1 423 195 114 1 0 8 3 1 3 9 2 Tota l . 31 979 33 500 23 537 89 016 65 150 25 828 27 876 31 726 85 430 71 887 * S n a l l sheep p r o p e r t i e s are those carrying less than 2000 s:iccp. i'cdiurr ::iied yro?crtics cn1.q between 2000 and l e s s than 10 000 shczi; and

la rge p rope r t i e s carry over 10 000 sheep. Some: C l a s s i f i c a t i o n of Rural Holdings, A6S, Canberra.

Qpendix Tabla 111

u~snu\LIAh' BEEF U I T L E I W S T R Y SURVEY: 19-@-69 R) 1971-72: COST S T R U m E :

AVLVUUGEIPROPFRN -

Total Costs Deferrable Porslbly Deferrable Largely - . % of Costs Costs I n e s e a ~ a b l s >=ar.tl/ B e d . Region Spec ia l i s t s A l l Beef Al l Beef All Besf A11 Beef

Spec. Producers Spec. Produsas Spoc. Prndueerr Spoc.

t S S t I t : t I

NEW SOUTB WALKS

s western 9 11.650 9.200 26 27 17 15 57 58 -. ... ~~

S. Eastern 21 10;150 6;900 26 30 19 20 55 50 N. Eastern 18 9.450 13.200 31 27 17 18 52 55 N . Western 4 18.500 12.100 30 29 IS 16 55 55

PeninsulaIGulf 77 36,400 11,800 18 18 1 2 12 70 70 Inland N. 49 22,800 23,500 20 21 IS 12 66 67 Coastal N. 20 15,350 18,250 21 24 21 14 58 63 Western 32 38,000 37,650 24 18 10 14 66 69 Inland 5 . 37 16,950 17,500 23 23 11 11 66 66 Coastal Central 60 14,150 13.900 29 24 12 11 60 65 South E. 26 13.850 11,850 31 28 15 11 54 65 guoensland 36 16,050 15,900 27 24 14 12 59 65

mUTH AUrnRALI.4

S. Eastern 8 12.650 14,100 28 23 19 17 53 60 C m t r a l 2 21,400 13,400 31 15 16 15 53 40 Northern 37 40.000 38,650 23 24 1 3 12 64 M South *Uli tr l l ia 7 16,100 18,500 29 25 17 1s 54 60

UESl'KRN AU5TRALIA

- -~ ~ - ~ --,... -~,~.. -~

;"land S.W. 3 23,300 27.000 26 19 13 24 51 57 Sovth West H.A. 14 15,150 17.000 28 29 24 27 48 44

Tasmania 11 15.650 7,350 23 37 17 22 59 41

Alice Sminzr fa ) 45.950 25 17 58 - .. ~ ~

brkly(;) 148;750 20 17 63 V i e t m i a nivorca) - 135,300 19 12 69 mnin /Gul f [a) 72.200 22 13 66 N.T. (a) 76;450 22 15 64

(a) No d a t a on beef s p s i ~ l i s t a i n p a r t i s u l a r a r o a v a i l a b l o f o r there regions. Information from f i e l d survey s u ~ e s t s t ha t the c o s t s t rnc ture3 of s p e c i a l i s t pTOdUcezs do not d i f f e r g rea t ly from thoso of tho produsor population i n *re rezigioar. . .

Appendix. Table IV

AUSTRALIAN BEEF CATTLE INDUSTRY SURVEY

DISTRIBUTION OF PROPERTIES BY STATES BY PRINCIPAL BEEF

ACTIVITY 1970-71 - ..

Breed and Breed, S e l l Breed, S e l l Fatten Other, No Total Fatten Stores Vealers Stores Main Act ivi ty

N.S.W.

V i c .

Qld

S.A.

W.A.

N.T.

Tas .

Austral ia

. i oo (100)

(Values i n parentheses r e l a t e t o proper t ies on which 85% or more of gross re turns came from the beef en te rpr i se . )

Appendix Table V

BEEF PRICES HOMEBUSH(a)

(Cents per kg) -

Month 1970 1971 1972 1973 1974

January 58.36 61.73 61.77 68.89 79.92

February 59.37 62.72 60.54 74.76 80.05

March 60.63 62.06 58.91 91.76 68.78

April 60.12 69.79 58.36 88.03 NQ

May, 59.35 59.46 57.85 79.63 65.30

June 60.67 61.55 59.35 83.27 52.36

July 60.10 61.86 59.97 84.17 48.10

August 58.14 66.23 63.69 92.79 45.20

September 62.39 69.86 69.97 93.48 37.10

October 63.32 66.45 70.81 92.99 35.60

November 61.53 62.63 72.75 88.32 28.80

December 61.75 60.98 71.10 85.61

(a) Average monthly prices at Homebush Saleyard i n Sydney, for ox and/or he i f er 295-320 kg first and second export quality. Prices quoted on an estimated dressed weight bas i s .

Source: Australian Meat Board.

Appendix Table V I

APPARENT PER HEAD CONSUMPTION OF MEAT: AUSTRALIA

(Kilograms)

Year Beef and Mutton Lamb Pork Poultry Canned Bacon

Veal meat Meat and Ham Total , . (a) Ca) [a) . . . @) . @ I (c) Cd) 1eJ I

til V

~. I

1964-65 45.0 20.8 . 17.8 5.4 5 . 2 2 . 1 3.4 101.7 1965-66 42.0 20.9 16.7 , ' 6.1 6.2 :2.O 3.4 99.2 1966-67 38,. 6 18.7 19.3 : 6.1 7.4 12.4 3.7 97.8 1967-68 40.7 18.9 19.6 6.6 8 . 4 2.2 3.5 101.8 1968-69 41.4 IS. 1 '21.7 7.3 9.0 $2.4 3.5 106.3 1969- 70 38.8 17.0 21.5 7.6 10.5 2.4 3.7 103.4 1970-71 39.7 19.7 23.8 6.9 11.4 2.6 4.6 111.2 1971-72 39.5 20.4 24.4 :6.9 l 2 . 6 2.6 5.0 113.7 1972-73 39.3 14.8 18.7 7.9 13.3 2.5 5.5 104.6 1973-74 (p) 40.1 8.7 16.0 :7 .7 13.6

. .

(a) Carcass weight. (b) From 1964-65, f igures not s t r i c t l y comparable with e a r l i e r years because of changes i n method of collection; dressed weight. (c) Canned weight. (d) Cured carcass weight. (e) In terms of carcass weight; excludes offal . @) provisional.

Sources: Australian Bureau of S t a t i s t i c s , Stat is t ical BuZletin - The Meat Industry: Austmzia (various issues) and StatisticaZ BuZZetin - Chicken Hatchings and Poultry SZaughterings, Australia (various issues) .

Appendix Table V I I

CATTLE W E R S SLAUGHTERINGS PRODUCTION AND EXPORTS OF BEEF AND VEAL: AUSTRALIA

Exports Ca t t l e

Total Beef 6

Year Nos. Slaughterings Veal Carcass weight (a) Production Weight

Equivalent (b)

TOO0 tonnes

1026

946

879

904

9 35

1010

1047

1168

1438

1301

'000 tonnes

321

278

262

256

256

32 8

339

402

586

495

'000 t o m e s

465

419

, 390

387

386

489

499

894

872

739

(a) A s a t 31st March in second year. (p) Provisional. @) Estimated by W.

Source: Australian Bureau of S t a t i s t i c s . The Meat Industry (various issues) id. Ldvestock Statist ics. (various i s sues) .

Appendix Table VIII

PRICES FOR AUSTRALIAN MEAT ON PRINCIPAL OVERSEAS MARKETS

Year/ Beef Lamb Mutton

Month USA(a) United Kingdomtb) Japan [c) United Kingdomtd) USA (e) Japan(f)

U.S. Aust. Aus t . Aust. Aust . U.S. Aus t . Aust. c/kg c/kg p/kg c/kg c/kg p/kg c/kg c/kg c/kg c/kg

F AS FAS FAS FAS FAS FAS

1967-68 95.5 na 32.8 na na 22.9 na 65.7 na na

1971-72 127.4 95.2 44.1 79.4 na 30.0 42.3 82.5 55.3 na

1972-73 157.1 108.0 59.8 95.0 121.7(g) 43.9 56.9 102.3(g) 76. l(g) 92.0(g)

1973-74 182.3 107.4 66.2 88.9 124.4(g) 60.4 71.9(g) "9 102.2 (g) 99.3(g)

July-Sept . 207.4 130.8 68.7 102.7 124.4(g) 58.1 71.9(g) nq "9 119.3

Oct. -Dec. 201.8 120.6 73.1 98.1 "9 65.7 nq nq 104.4(g) 98.4(g)' I VI

Jan. -March 180.9 102.8 68.0 83.2 nq 61.5 nq nq 100.0 (g) 94 5 (g) ID I

Apr . -June 139.2 75.2 54.8 71.7(g) nq 56.2 nq nq n'-l 84.9(g)

1974-75

Ju ly 147.2 80.4 49.4 nq nq 51.4 "9 nq "9 65.0

August 142.9 77.4 56.2 nq "9 51.6 nq nq nq 66.1

September 123.2 64.2 nq nq "9 55.4 49.6 "9 "9 "4

October 123.9 73.1 nq nq nq 56.2 57.3 nq nq 65.31

(a) Boneless manufacturing cow beef . @) Austra l ian f rozen crops. (c] Boneless ox chucks and blades. (d) Aust ra l ian lamb, 1st qua l i ty . (e) Boneless processing mutton. Cf] Boneless mutton carcasses . na, not ava i l ab le . nq, no quote. (g) Average based on incomplete f i g u r e s , as no quotes were a v a i l a b l e i n c e r t a i n months.

&wee: Aus t ra l i an Meat Board.

Appendix Table I X , .

AUSTRALIAN EXPORTS OF BEEP AND VEAL TO SELECTED COUNTRIES : BY MONTHS

(Tonnes Shipped Weight)

Year/Month U. K. USA Japan Other Destns. To ta l 19 73 1974 1973 1974 1973 1974 1973 1974 1973 1974

January 13 905 3979 17 918 17 769 6 810 4519 4 387 2806 43 020 29 073

February 9 856 1497 19 329 15 822 6 0 3 6 5375 5 468 3171 40 689 25 865

March 9 357 1442 24 926 17 999 7 296 3438 5 546 2269 47 125 25 148

Apri 1 8 941 1920 16 104 13 393 8 770 2141 7 758 2491 41 573 19 945

May 5 308 3562 25 093 16 837 16 274 3777 6 350 3729 53 025 A27 905 I

June 5 209 2470 27 447 14 947 10 684 1419 6 772 3408 50 112 22 244 m 0

July 5 845 1546 30 274 18 578 10 243 1312 9 233 3717 55 595 25 153 I

August 7 381 465 40 675 12 257 11 487 1111 7 463 3280 67 006 17 113

September 4 609 444 34 590 19 855 9 863 2228 5 4 5 2 4434 54 514 26 961

October 2 644 1324 39 211 '26 303 1 3 241 733 6 994 6653 62 090 35 013

November 3 318 29 954 8 385 6 808 48 465

December 3 100 21 958 6 330 5 515 36 903

Year 79 473 327 479 115 4i9' 77 746 6 0 0 117

Source: Austra l ian Meat Board, Meat Producer and Exporter (various i s s u e s ) .

- 6 1 -

INDEX TO TABLES

Page 1 I Table No. I

1 DISTRIBUTION OF PROPERTIES BY STATE BY ENTERPRISE ~ -~ ..

COMBINATION (PROPERTIES WITH MORE THAN 50 MEAT CATTLE)

AUSTRALIAN BEEF CATTLE INDUSTRY SURVEY : 1970-71 : SELECTED CHARACTERISTICS OF PRODUCERS WITH MORE THAN 50 MEAT CATTLE AND THE PRODUCER COMPONENT EARNING 85% OF GROSS INCOME FROM THE BEEF ENTERPRISE (BEEF S P E C I A L I S T S )

AUSTRALIAN BEEF CATTLE INDUSTRY SURVEY : RELATIONSHIP BETWEEN AVERAGE YEARS OF EXPERIENCE WITH BEEF CATTLE OF PRODUCERS GROUPED ACCORDING T O PROPERTY EQUITY RATIO, AS AT JUNE 1971

AUSTRALIAN BEEF CATTLE INDUSTRY SURVEY : DISTRIBUTION OF PROPERTIES BY NET FARM INCOME 1 9 7 1 - 7 2

D I S T R I B m I O N OF SHEEP PROPERTIES BY DEPENDENCE ON CATTLE ENTERPRISE RETURNS BY ZONE : 1 9 7 2 - 7 3

TRADE I N BEEF AND VEAL : SELECTED COUNTRIES

AUSTRALIAN BEEF CATTLE INDUSTRY SURVEY : ESTIMATED PROPERTY NET CASH INCOME 1 9 7 1 - 7 2 : INDEXED FORWARD TO 1973-74 AND PRQJECI'ED T O 1974-75

Appendix Tab Ze

I CATTLE NUMBERS AND ADULT CATTLE SLAUGHTERINGS: BY STATE: AUSTRALIA: 1963-64 TO 1973-74

NUMBER OF SHEEP CARRYING PROPERT1ES:BY S I Z E OF CATTLE HERD:BY S I Z E OF PROPERTY

AUSTRALIAN BEEF CATTLE INDUSTRY SURVEY : 1968-69 TO 1 9 7 1 - 7 2 : COST STRUCTURE

AUSTRALIAN BEEF CATTLE INDUSTRY SURVEY DISTRIBUTION OF PROPERT1ES:BY STATE :BY PRINCIPAL BEEF ACTIVITY 1970-71

BEEF P R I C E S HOMEBUSH

APPARENT PER HEAD CONSUMPTION OF MEAT : AUSTRALIA

CATTLE NUMBERS SLAUGHTERINGS PRODUCTION AND EXPORTS O F BEEF AND VEAL : AUSTRALIA

V I I I P R I C E S FOR AUSTRALIAN MEAT ON PRINCIPAL OVERSEAS MARKETS

AUSTRALIAN EXPORTS' OF BEEF AND VEAL TO SELECTED COUNTRIES : BY MONTH