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Live export industry braces for the cost of fewer cattle on ships

By Matt Brann
Cattle looking out from a pen on board livestock vessel, the MV Ocean Drover, in the Darwin port.
Stocking densities for live cattle ships are about to be reduced.(ABC Rural: Lydia Burton)
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As of June 1, the number of cattle allowed onboard live export ships will be reduced, in a decision industry says makes no sense and will hurt the hip-pocket of exporters and producers.

Lowering the stocking density on ships was one of the key recommendations accepted by the Government following a review into the Australia Standards for the Export of Livestock (ASEL) by sea.

The exact change to how many cattle will be allowed onto a ship will vary, depending on a range of factors, including the length of the voyage and the weight of the cattle.

The chief executive of the Australian Livestock Exporters' Council (ALEC), Mark Harvey-Sutton, said the industry was still getting its head around what the changes will cost.

"Essentially you're looking at about a 17 per cent increase in space allocation for cattle onboard a vessel, but the review said for exporters who demonstrated a good performance, that increase may only be 5 per cent," he said.

Lowering the stocking densities are just one of 49 recommendations from the ASEL report that government said it would accept "either in full or in principle".

Not all of them will be enforced as of June 1 and none will have a more significant impact on the industry's bottom-line than changes to the stocking densities.

According to the ASEL report, the financial impact for sheep shipments will be even greater — but that is another story.

Nine Eagle
Even under the old regulations, Australia provided more space per animal than Ireland and the rest of the EU, and the same as New Zealand and the United States.(NT Country Hour: Daniel Fitzgerald)

Impact on the Indonesian trade

According to the ASEL report, the biggest changes in stocking density relate to lighter cattle — 200 to 350 kilograms — which affects the feeder cattle trade more than the slaughter trade.

Australia's biggest customer of live cattle, which almost exclusively imports feeder cattle, is Indonesia.

Mr Harvey-Sutton said the change would be noticeable.

"A vessel carrying 5,000 feeder steers [from Darwin to Jakarta] would now carry less than 4,300 head according to our estimates, based on an average weight of 300kg," he said.

When asked if exporters can afford the change, Mr Harvey-Sutton said exporters already operated on tight margins, so the extra cost "will likely be passed back through the supply chain".

In the ASEL report, it provided an example of what the stocking density changes could mean to profit margins for an exporter shipping cattle from Darwin to the Port of Jakarta — Tanjung Priok:

The modelling for this route focused on feeder cattle using a live weight of approximately 300 to 350kgs and a k-value of 0.027.

At 300kg, the space allowance moves from 1.110 square metres per head to 1.165 square metres, an increase of roughly 5 per cent.

The modelling resulted in a fall in the profit margin of about 2 percentage points and the total margin of well under 10 per cent.

At this level, it could be expected that exporters will pass a proportion of the cost increases back to farmers in the form of lower purchase prices in order to keep an acceptable margin.

What will happen to live export prices?

The live export price for feeder steers to Indonesia (ex-Darwin) is currently sitting at $2.80 a kilogram, so what could it do once the stocking density changes are enforced?

ABC Rural has not been able to get anyone to take a guess, but Northern Territory livestock agent Paul McCormick believed the live export price will be affected.

"I don't think we'll see a levy or square metre-tax [from the exporters], but this will be accounted for in a ship's profitability and ultimately impact on what exporters can pay for cattle and still make the export work," he said.

Chief executive of the NT Cattlemen's Association, Ashley Manicaros, said the likelihood of export prices being affected negatively was a concern for northern cattle producers.

"Consumer confidence and transparency is important to us, but there is a hip-pocket impact to this [change], which has to be discussed and has to be looked at moving forward," he said.

Data of live export stocking densities
Stocking densities for live export ships. How does Australia rate?(ASEL Report)

Why do stocking densities need to change?

The ASEL report acknowledged that Australia's current rules around stocking densities, in most cases, are "already superior to our major competitors and the lower densities recommended by the committee will widen this gap".

So why reduce the stocking density even further?

The exact science behind the decision seems to be a mystery according to those within the industry such as Mr Harvey-Sutton.

"The committee noted that determining an appropriate amount of space for penned livestock on a sea voyage 'was challenging' and it also noted a 'paucity of scientific studies regarding appropriate stocking densities'," he said.

"Australia already had the highest standards of animal welfare in the world and amongst the lowest stocking densities.

"Under the new recommendations Australia will be allocating more space per animal than any country in the world."

When the final ASEL report was published earlier this year, ALEC issued a media release "welcoming" the report's recommendations.

It was a diplomatic response which did not impress everyone within the industry.

Mr Harvey-Sutton said ALEC was thankful some of the "concerning recommendations" made in the draft report never made the final edition.

"I can understand why people might be concerned [about ALEC's initial press release] … but in the context of what could have been, it was an outcome we thought we should be able to work with going forward."