The Australian live sheep export industry : curse or salvation.

Abstract

Animal Production in Australia THE SHEEP INDUSTRY IN AUSTRALIA INTRODUCTION P.S. HOPKINS* The sheep industry continues to command an important position in determining the balance of our nation's economy. The last financial year saw gross returns exceed $2.5 billion. By comparison, the total proceeds from our other major livestock products (beef, pork, veal, poultry, eggs and milk) totalled approximately $3.5 billion, whilst the vast array of crops produced throughout this continent returned a gross national income of almost $5.5 billion. The high level of revenue generated by the sale of sheep products indicates the extent to which the nation is dependent on this single component of our total livestock and cropping enterprises. If sheep are to maintain this position on the national scale of agricultural resources then it is important to consider current and future developments which contribute to industry progress. There is no room for complacency in a situation where market forces are continually changing. The need for flexibility and foresight is paramount. The presidential address delivered to this Society at the last biennial conference questioned the suitability of our present day Merino to meet the challenge of future years. Some of the thoughts presented in this contract support our past president's concern for future developments, and expand upon his theme to embrace areas outside the genetics and management of our nation's flocks. The future viability of our industry will depend largely on the extent to which our production and marketing forces can be integrated to keep pace with national and international demands. It is imperative therefore that we adopt an enterprising and well-balanced approach which will meet the challenge of future needs. This approach must provide the prerequisites of sound economic and practical judgement as well as the incentive for industry personnel. The papers included in this contract embrace a diverse range of industry components. Their presentation is partly directed towards an understanding of the forces currently contributing to the operation of each facet of industry. The contributors have also described some future possibilities for maintaining the national importance of the Australian sheep and its products which are so widely sought after throughout the world today. These latter endeavours offer a measure of foresight which may provide some basis for future industry policy. A PRODUCER'S VIEW OF THE NATION'S SHEEP INDUSTRY F.M. DAVIDSON** The history of the sheep industry in Australia is also the history of Australia's settlement and development by Europeans. The humble sheep took on noble stature as it developed the ability to produce a wealth of fibre to meet a growing world demand. The sheep man rapidly spread his flocks across this vast land, bringing settlement, trade and employment. Australia developed, riding happily on the sheep's back, and generally the sheep man was happy also, except when hit by droughts, flies, rabbits and all the other things that could go wrong. Australia today is a modern, complex, urbanised, industrialised society, and in a different way, continues its ride on the sheep's back. The sheep man is not at all happy about that because, although his sheep in his eyes are still noble and strong, their profitability is only just sufficient for him to ride alone. * Queensland Department of Primary Industries, G.P.O. Box 46, Brisbane, Qld 4001. ** National Farmers' Federation, P.O. Box 10, Canberra, A.C.T. 2600. 7 Animal Production in Australia Australia and the world For many years, Australia's sheep population was the largest in the world. Today we vie with Russia for that honour with China an unknown quantity not far behind. However, there is no question of Australia's leadership in wool production. This country dominates the world trade in wool, supplying 70% of the total amount of apparel wool produced by the five major exporting countries. This situation provides both opportunity and risk for the sheep industry. Maintenance of world demand for apparel wools is critical to its future. The Australian flock Australia's flock is about 75% Merino. Wool production continues to dominate gross returns to sheep men for 1981-82. Estimated gross values of production from the 130 million plus sheep in Australia are: Wool Slaughter Live Exports $1 860 million from 133.5 million sheep $ 652 million from 28.5 million sheep slaughtered $ 167 million from 6 million sheep I intend in this paper to deal with sheep for slaughter and wool growing. Mutton Historically, mutton has been looked on as essentially a by-product of the wool industry, with additional sources such as aged ewes from lamb-producing properties, and dual purpose sheep such as the Corriedale. With some 250 000 tonnes of mutton now being produced, the mutton industry must be an important aspect of sheep production. Our major markets are Japan, Russia and the Middle East and maintenance of these markets individually and collectively is critical to continued export demand. As a producer, I am only too aware of the range in quality and age of sheep going into the broad classification of mutton. I sometimes wonder if sufficient consideration is given to matching particular qualities of mutton to particular market requirements in order to maximise market opportunities. Certainly, strip branding to identify hogget was a major step in the right direction. As a Merino breeder, I believe I am typical of the majority of breeders who now are selecting consciously with an eye on live sheep export and carcase requirements. The great challenge is to maximise returns from these sources while maintaining or improving the quality and weight of clean wool production. I believe that, as an industry, we must accelerate progress in these directions while acknowledging the specific regional and climatic influences that must be taken into account. I do not believe that a desirable easy-care Merino sheep of good carcase and good wool production requires a dramatic change in our present Merino 'types. In fact large numbers now meet this criterion. I believe that careful selection and further positive leadership by stud breeders who are prepared to turn their backs on the traditional preferences of the show ring can retain the essential Merino characteristics and greatly improve the 'easy care' and carcase aspects. I believe also that stud breeders should make available to their clients full objective measurement information and relative production of sale rams. Already many breeders are doing this, but unfortunately ram buyers are not yet 8 Animal Production in Australia attaching sufficient importance to the information as an aid to their selection. The average cut per sheep in recent years is practically static at 4.3 kg with variations because of seasonal conditions and the proportion and lambs in the flock. As an industry we must intensify our efforts to productivity through increased average clean fleece weight. Equally we for greater productivity through higher fertility and lamb survival, and mutton potential. Prime lamb production Lamb production has reached a reasonably stable situation at 16 million slaughterings, and a marginal rise can be expected in the years ahead. About 80085% of the lamb prcduced in Australia is consumed locally, but there is potential for specialised production for particular markets; e.g., Middle East preference for light, lean lamb carcase of 8 to 12 kg. I am sure our lamb producers can and do produce high quality products but the livestock markets often receive excessive numbers of 'off types', and both unfinished and overfat lambs. Steady progress is being made in selecting for higher fertility, and top producers are getting good results. I presume breeders are considering whether any benefit would be gained from importing new genetic material or other breeds (quarantine permitting) to improve lamb production across Australia's wide range of climatic and pasture conditions. Australian wool production and international trends During the 197Os, total wool countries declined by 12% to around seasons, increased competition from long-term adverse movements in wool major factors responsible for this production in the five major exporting 1 435 million kg (greasy). Periodic pocr alternative land-use enterprises, and the growers' terms-of-trade appear to be the observed decline in wool output. around of ewes lift must look greater In that time there have been significant changes in micron category of wools offered for sale. Over the decade to 1981 world production of 25 micron and finer wool declined by 20%, and of 26-30 micron by 5%, while production of 31 micron and coarser increased by 8%. Most of the decline in finer wools resulted from a reduction in supplies from Australia (-21%), whereas all the increase in ccarser wools occurred in New Zealand (+14%). While there may be some further increases in production in New Zealand, production in Australia is expected to rise only gradually'in the 1980s from 438 million kg clean in 1981/82 to about 460 million kg clean in 1986/87. Long-term Australian wool production will depend mainly on the extent to which wool growers diversify further and on their ability to improve productivity. Factors underlying projections on wool production are: . The area sown to wheat will continue to expand over the next five years to a record 13.5-14 million hectares by 1987. The main reasons .for the continued expansion of wheat production are the relatively high cash returns and the opportunity to partially substitute capital for labour. The loss of pasture land to cropping enterprises over the next five years could reduce total grazing capacity by the equivalent of about 8 million dry sheep. Cattle numbers are projected to increase from 26 million to about 27-27.5 million over the next five years. Most of the increase will be 9 . Animal Production in Australia attributable to reduced slaughterings in the short to medium term. . Sheep meat production is projected to decline slightly in the short term and live sheep exports to increase slightly above the 6 million in 1981/82. Other factors which will influence sheep numbers and wool production include a likely increase in the percentages of breeding ewes and lambs and a consequent slight decline in average fleece weights to around 4.2 kg. . The most likely projections are for sheep numbers to increase from 133 million in 1981/82 to about 140 million by 1985/86. However, there are major uncertainties associated with the projections, particularly in relation to trends in the levels of livestock slaughterings, continuity of live sheep exports and growth in the percentage of'breeding ewes. Assuming continued access to live sheep export markets, the producer can expect to maintain his economic viability with some increase in meat as a source of income. Wool promotion and the Reserve Price Scheme Global promotional strategies in terms Of research and Promotion (0 development, market development and advertising will to a large extent determine wool's share of increased fibre consumption. Intensified activity by IWS to promote wool will be directed at those markets where consumption is most likely to increase. For example, in 1982-83, strong efforts will be directed towards the American and Chinese markets. This latter market implies an emphasis on offensive strategies within developing countries with potential for increasing wool consumption. Within the traditional wool markets, defensive strategies will be maintained with the emphasis on exploiting fashion changes and the positioning of wool 'up-market'. There should be a early 198Os, particularly 'environment awareness'; effect on demand for the continued consumer preference for natural fibres over the in developed countries where there is more emphasis on however more casual lifestyles will have a detrimental more formal apparel wool products. Promotional strategies by the IWS should ensure that wool maintains its share of the volume of fibre consumed over the next five years. However, wool's share of any increased fibre consumption will be relatively small. Projections are for an average growth in demand for wool as a whole of 0.25-0.75 per cent per annum over the next five years. This implies a growth in Net Domestic Consumption (NDC) of 5 to 10 million kg clean for all wool and 3 to 5 million kg clean for apparel wool per annum through to 1987. (ii) The Reserve Price Scheme This scheme, currently in its eighth season, is now broadly accepted by wool growers and users as an integral part of the wocl marketing system. Increases in the market indicator floor price of 14.8% and 12.3% introduced at the beginning of seasons 1980/81 and 1981/82 reflect the more aggressive stance adopted recently by the AWC in setting the floor. On current estimates, the average market price for 1981/82 is likely to be only 25 cents above the floor compared with 45 cents and 77 cents respectively during the previous two seasons. I believe strong market support by the AWC linked to a continuing programme designed to boost world demand for wool is essential for the future if the necessary proportion of the consumer's textile dollar is to remain with the wool growers. 10 Animal Production in Australia Research and Development - its influence on costs The cost savings flowing from investment in R 61 D activities are often overshadowed by underlying inflationary pressures in the rural economy. The exact pay-off from such investment is difficult to quantify. The maintenance of R & D effort in the current economic climate is critical, as during the next five years net returns to farmers will decrease. However, wool growers wiJ.l also face significant real cost increases in key areas of wool marketing. These areas include land transport, packaging and handling, wool harvesting and wool preparation. Cost saving innovations in all these areas will strongly influence net returns over the next five years. The effect of cost/price pressures on net industry revenues is uncertain. The effects of rising input prices will be minimised by improved technical efficiency and increased economies of size. However, many costs are incurred outside the farm gate and are, therefore, beyond the control of wool growers. These 'external' marketing costs which are reflected in farm gate prices will be a major factor, together with farm productivity and national economic policies, in determining profitability of sheep enterprises during the next five years. Prices paid and received, industry structure, etc. Trends in the costs of wool production and marketing will have an important bearing on future developments in the wool growing industry. From the wool growers' viewpoint costs of production and marketing can, to some extent, be modified either by altering the enterprise mix, adopting cost-saving innovations, or improving on-farm productivity. Faced with declining real prices, many wool growers will attempt to maintain net returns by minimising costs. In recent years, the index of prices paid for agricultural inputs has tended to increase at a slightly faster rate than the wool price index. Price rises recorded for major agricultural inputs have been variable with the price of fuel increasing faster than wages and, to a lesser extent, machinery. Prices for contractors' services have risen the least of agricultural inputs owing mainly to more efficient continuous machinery usage. In addition, contractors have probably substituted capital for labour for a number of activities, e.g., fencing, sheep handling equipment, etc. The terms-of-trade for wool growers since 1975/76 have not worsened since real incomes have been about constant. Principal changes in the wool growing industry during that period include the adoption of new technologies which reduce the labour component, an increase in the size of the production unit, more efficient use of machinery, and developments in anthelmintics, chemicals and fertilizers. During the past ten years, the wool growing significantly in size and character. In response numbers and the increase in farm size, the number 200 sheep) has declined from around 87 000 in 1970 reductions in numbers of wool growers are expected industry has changed to the 25% drop in sheep of wool growers (with more than to 67 000 in 1980. Any further to be small. With wool prices being determined in the major economies of the northern hemisphere, the value of the Australian dollar is critical in transferring such prices into Australian dollar prices at auction. The large revaluation of the dollar during 1980/81 and weakening currencies in important European countries raised effective wool prices in buyers' currencies and lowered the $A prices received by Australian growers. During 1980/81, the $A appreciated by 9.3% against the trade weighted basket (TWB) and 20% against a wool trade weighted basket (WTWB). During the first 4% months of 1981/82, the tendency has been 11 Animal Production in Australia reversed owing to depressed export markets, lower US interest rates, higher Australian inflation relative to the rest of the world and lower real energy prices. However, over this period the $A has devalued by only 0.8% and 0.6% against the TWB and WTWB respectively, an insignificant off-set to the unfavourable impact of previous revaluations of the $A. Protection of Australian manufacturing industries has an effect both directly and indirectly cn the cost burden of the wool industry. The following are specific aspects of the impact of protection: w it increases cost of production because of the use of inputs from assisted industries and because of the need to compete with assisted industries for resources such as labour and capital it affects exchange rate because exporting industries receive lower prices in Australian currency for goods exported it tends to restrict access to new export markets, especially in developing countries. are some of the reasons why wool growers feel there national sport of riding on the sheep's back. For levels of assistance to the wool industry, the IAC 'zero', in stark contrast to many other industries is still too those posing the has calculated that in Australia. (ii) (iii) These much of the question of level to be I have dealt at some length with issues ccncerning wool because they are the dominant factor influencing future prcfitability for the sheep industry. In conclusion, I want to refer again to some major points of industry significance. A large proportion of sheep flocks are in the mixed farming lands where farmers have alternative production, particularly crops. Indeed, most farms are in a mixed enterprise situation. Expansion of cropping on such farms competes with sheep for land use, puts particular pressure on pasture resources at certain times and exacerbates the effect of less than average rainfall. All these factors increase the possibility of periodic stress to sheep and have a consequent adverse effect on wocl production. Furthermore, survival through the 1970s forced many farmers to stretch management and labcur rescurces very thin. With some pride, one man could be caring for up to 10 000 sheep. It was a holding situation with properties put on a care but low maintenance basis. Some profitability has returned to the wool industry, and with it a lot of confidence in the future. In return for the investment they make in their industry to lift prcduction and productivity, the sheep men of Australia want to see their products ccnvertible into longer term profitability and security. TOWARDS SALE BY DESCRIPTION R.A. ROTTENBURY* Introduction The Australian Wool Corporation has made a firm commitment to developing a system of selling wool by description. This concept has been the goal of many people employed in the wool industry for over 30 years. Presently, more than 96% of the wool sold at auction is sold by sale by sample and test certificate. This could be called partial sale by description. - ~--~ ~~ * Division of Textile Physics, CSIRO, 338 Blaxland Road, Ryde, N.S.W. 2112. 12 Animal Production in Australia The certificate gives results of objective measurement on the two main characters in wool valuation - the amount of fibre in the greasy sale lot (by determination of yield and vegetable matter) and the average diameter of the fibre. The remaining characters are appraised by inspection of the display sample. Efforts by the AWC towards total sale by description are giving encouraging results and point to the feasibility and eventual adoption of the system. These efforts concentrate on three main issues: (a) New measurement techniques (W Increased extension efforts (c) New administrative procedures. New measurement techniques This involves the measurement of the length and The staple approach w strength of a staple. The variation in these two characteristics accounts in part for the variation in card loss, noilage and fibre length in the top that would be observed in a specified worsted processing arrangement. Other characteristics causing variation in the top (yield, vegetable matter, fibre diameter) are already measured objectively. In this approach staples are drawn at random from the display sample and fed through devices which determine length and strength. However, both the sampling and testing phases are time-consuming, and procedures will have to be automated before they can be evaluated under commercial conditions. An advantage of the staple approach is that it provides a comprehensive list of raw wool characteristics. Apart from offering a better understanding of the ways particular wools perform during carding and combing, this knowledge may be useful for prediction purposes at later stages of processing. There may be other characteristics that will also assist in prediction although it is not expected that their influence will be of great significance. Resistance to compression, which gives an objective measure of crimp, and staple structure are likely candidates. Fibre length in the top is of vital importance to the (ii) The fibre approach spinner. Wool buyers are frequently asked to deliver to the topmaker a consignment of greasy wool that will have a fibre length in the top of not less than, say 70 mm. Why not carry out 'miniprocessing' and produce a sliver of fibres that can be measured for length in the same way as a top is measured? Slivers produced from both secured and greasy wool staples subsampled from display samples are giving excellent results in laboratory trials although much work remains to be done. An advantage of the system is that should there be characteristics that we cannot measure commercially at present, such as tip damage, or other factors that have not yet been identified, their influence will still be reflected in the results obtained. At present, developmental work is concentrated on the staple approach with a view to its commercial introduction. In the meantime research will swing toward the fibre approach so that proper comparisons can be made over the next few years. Regardles s of which technique is finally adopted the prediction of 13 Animal Production in Australia fibre length in the top probably represents the last major technical barrier to sale by description. Problems such as the presence of stained and pigmented fibres in white wool must be overccme although the solution may lie in preventative techniques and appropriate guarantees rather than routine measurement. Increased extension efforts Although sale by sample and test certificate represents a milestone in wool marketing, the procedures for testing yield and fibre diameter have been familiar to the processor. This does not apply in the case of new measurements such as staple strength where the units of measurement (Newtons/kilotex) and the range of values obtained (e.g., O-60 N/ktex) are quite foreign. It has been concluded that a major extension programme directed towards the processcr is necessary to explain the nature and value of new measurements. This programme is called TEAM (Trials Evaluating Additional Measurements). The TEAM project i s a collaborative effort between the CSIRO Pivision of Textile Physics, the Australian Wool Testing Authority, and the Australian Wool Corporation. The main aim is to obtain a range of measurements on a considerable number of commercial consignments and to demonstrate the relationship between these measurements and subsequent topmaking performance. Twelve mills embracing nine countries will each order, through normal channels, 20 consignments representing the type of wool they process. The wool buyer and selling broker will co-operate with the research team to ensure that every sale lot in each of the 240 consignments is sampled and tested for yield, vegetable fault, fibre diameter, staple length, staple strength, and colour. The mill will return a ful 1 combers report and will be asked to collect additional informat ion tha t may be useful for the interpretation of results. It is hoped that the trial will demonstrate the benefits measurements and that a demand for measurement will develop. importance is that the TEAM project demonstrates that the AWC magnitude of the extension programme which is needed if market accepted. The data emanating from the programme will provide between the wool grower and the processor. New administrative procedures Under sale by description, major advantages will hopefully accrue from computerisation of marketing operations. This should enable full use of programmed selling and the matching of sale lots into consignments meeting certain commercial and technical specifications. A standardised format is required for recording the many pieces cf information. For example, owner's identification, lot identification, classer's description, quantity and quality should be shown for each lot of wool. It is hoped that data on quality would consist primarily of measurement results although it is more than likely that a number of assessments such as type of classing, standard of classing and even certain wool characteristics such as tip configuration and other aspects of style will continue to be assessed subjectively by the AWC. The main problem associated with the introduction of such a scheme will not be a technical one. Rather it will centre on obtaining agreement from the various sectors of the industry on uniform systems of identification and 14 of additional Perhaps of greatest recognises the reform is to be a powerful bridge Animal Production in Australia specification. Currently, for description of bales or classed numbers for wool growers. When considered, rightly or wrongly, becomes difficult. example, there is no national scheme for lines, nor is there a system of identification attempts to remedy such limitations are to impinge upon vested interests, progress Some likelv developments Final comments relate to the way in which sale by description may come about. There is a sharp contrast here with sale by sample. Although sale by sample altered the physical shape of the sale room quite markedly, all the traditional valuing tools of the buyer could be applied. Changes brought about by sale by description will be far more radical. Until buyers have full will be necessary to have an examined. On the other hand industry to rationalise its confidence in the description of the wool offered it arrangement for some years whereby samples can be commercial pressures will continue to urge the operations. One feature that the wool grower must accept is that the description provided for the buyer must be guaranteed. This point is often raised to dampen enthusiasm but it should be of little concern. Every measured characteristic will carry a guarantee that the test has been carried out according to a standard procedure. If an error is proven then responsibility lies with the testing authority, as it does already in the case of yield and fibre diameter measurements. It is logical to assume that information based on subjective assessments, e-9. I the standard of clip preparation or style, will be provided by the AWC as part of its normal valuing operation and that these assessments will be guaranteed by the Corporation within certain limits. It would be advisable to devise objective procedures for settling disputes relating to such appraisals. It should be remembered that the Corporation has disposed of its own stocks by sale by description for some years. The disposal of individual sale lots is a very different matter; however, in the light of increasing cost pressures on the marketing system the prospect of a guaranteed description dominated by test results makes the advent of sale by description a strong possibility. THE AUSTRALIAN LIVE SHEEP EXPORT INDUSTRY - 'CURSE OR SALVATION?' R.J. LIGHTFOOT* and C.L. MCDONALD* Introduction The export trade in live sheep from Australia to the Middle East has developed rapidly in recent times, and has received considerable attention from the media. Unfortunately this coverage has tended to focus on the industry's growing pains. Objections to the trade by meat workers, animal welfare groups and more recently, communities surrounding the assembly areas and ports of shipment have received widespread comment, particularly when newsworthy incidents such as shipping tragedies or the closure of abattoirs have occurred. Throughout such news coverage, the benefits of the trade to the farming community, allied industries and the Australian economy have usually received scant treatment. Such matters are only poorly understood by the general public and have often been viewed with a degree of scepticism. * Department of Agriculture, South Perth, W.A. 6151. 15 Animal Production in Australia The objective of this paper is to present a more balanced overview of developments in the live sheep export industry, and in particular, the effects of the trade on future trends in the Australian sheep industry. Historical background Although the export of sheep to the Middle East is relatively new to Australia, there has been a substantial live sheep export trade around the Mediterranean, through the Red Sea and across the Persian Gulf to the Middle East region for many centuries. With demand routinely exceeding supply, and with the preference of Muslims for fresh sheep meats killed according to their traditional Halal customs, the predominantly Muslim people of the Middle East have long been importers of live sheep. It is also relevant to note that Australia was exporting live sheep long before trade with the Middle East began. Exports from Western Australia to the Singapore region date from well before the turn of the century and 100 000 sheep per annum of traditional heavyweight wethers are still shipped to this country on a regular basis. It was undoubtedly the forerunner of Australia's present live sheep export trade, but today it appears almost insignificant when compared to more than 5 million sheep per annum currently shipped to the Middle East region. In its formative years, the Australian live sheep export trade was regarded merely as a profitable outlet for wethers cast for age from the Merino wool Today it is a large and vital rural industry in its own right, industry. returning to Australia more than 150 million dollars per annum in export income. Despite claims of harm to the slaughter industry, live sheep exports have increased trade and employment through the shearing, stock assembly, feed processing, road transport, veter