Table 1: Monthly Utilisation of Slaughtering Capacity in Western Australia during 2002.  

Cattle 

 Sheep 

 (a)     ABS

(b)     Estimates provided by abattoir managements, Ed O'Loughlin (DAWA)

3.                  DISTORTIONS TO COMPETITIVE NEUTRALITY BETWEEN VALUE CHAINS

 3.1.       Competition Between Value Chains 

Based on the evidence presented above, it was clear to taskforce members that the processing sector is in direct competition with the live export sector.  Because the two sectors compete for the limited supply of animals at the farm gate, growth of live animal exports has had a major impact on the supply of animals for processing.  In turn, this has resulted in under utilisation of excess slaughtering capacity and consequent rationalisation of the meat processing sector.  In an early study that recognised competition in Australia for supply of livestock, the BAE stated that: "Competition between live sheep exporters and meat processors should ensure that sheep of comparable quality fetch similar prices irrespective of the final destination of those sheep."  (BAE 1983, page 6).  The BAE study also noted that this competition results in significant net benefits to livestock producers.  "The additional demand by live sheep exporters effectively raises the price which meat processors have to pay to secure sheep for slaughter in Australia.  " (BAE 1983, page 6).   

Not only does the live animal export trade provide benefits in the form of higher farm gate prices for livestock producers, it also provides more marketing options, although such benefits are partly offset by higher risks.  Moreover, the development of the live export trade has had negative impacts on other industry sectors, including in particular the processing sector.  

The two sectors often also compete to meet consumer demand for meat products in overseas importing countries.  For instance, Heilbron (2000) notes that during the closure of the Saudi market, Australian sheepmeat exports to that market increased strongly, and more than trebled from 7.9 kt in 1989 to 25.7 kt in 1993 before settling at around 20 kt.  By the late 1990's, Heilbron (2000) reports that Saudi Arabia took around 25% of Australia's lamb and 50% of Australia's mutton exports to the Middle East.  However, this direct substitution of meat imports when live animal imports were banned appears to have been a short term response to meet the growing demand for meat in Saudi Arabia.  An ABARE study found that during the Saudi embargo, Australian live sheep exported to the UAE were processed there and re-exported to Saudi Arabia as chilled and frozen product (ABARE 1995).  In some years, indirect imports of live animals occurred via third countries.  The initial substitution of live imports by direct meat imports, followed by a switch to third country processing is evident from Table 2 next page.