The economic importance of Australia s livestock industries and the role of animal medicines and productivity-enhancing technologies.

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1 The economic importance of Australia s livestock industries and the role of animal medicines and productivity-enhancing technologies. A Report prepared by the Australian Farm Institute for Animal Medicines Australia. August, 2015.

2 Australian Farm Institute, August, 2015 This publication is protected by copyright laws. Apart from any use permitted under the Copyright Act 1968, no part may be reproduced by any process without the written permission of the publisher: Australian Farm Institute Limited Suite 73, 61 Marlborough Street Surry Hills NSW 2010 AUSTRALIA ABN T: F: E: info@farminstitute.org.au W: All rights reserved The views and opinions expressed in this publication are those of the authors and do not necessarily reflect those of the Board of the Australian Farm Institute or the Institute s members or corporate sponsors. Disclaimer The material in this Report is provided for information only. At the time of publication, information provided is considered to be true and correct. Changes in circumstances after publication may impact on the accuracy of this information. To the maximum extent permitted by law, the Australian Farm Institute disclaims all liability for any loss, damage, expense and/costs incurred by any person arising from the use of information contained in this Report. Publication Data Author/ title. Keogh M., Henry M., and Clifton, L. (2015). The economic importance of Australia s livestock industries and the role of animal medicines and productivity-enhancing technologies. Research Report. Australian Farm Institute, Sydney, Australia. Design and Production: Australian Farm Institute

3 Foreword. Livestock industries have played a fundamental role in the development of Australia over the past 200 years, first as an essential source of food, then later as the principal source of exports which triggered the economic growth of the nation and underpinned the development of its land and water resources. Australia s livestock industries continue to play a critical role in the national economy, and with the rapid growth of Asia and the resulting changes in consumer diets in those nations in favour of animal protein consumption, are projected to experience a significant growth phase over coming decades. The challenge for the livestock sectors in Australia will be to take advantage of this opportunity by finding ways to expand output and improve the quality of livestock products, despite the constraints imposed by Australia s limited natural resources and highly variable climate. In order to achieve these outcomes, livestock industries will need to continually innovate and achieve productivity growth, and to do so will need access to the widest range of new technologies and products to enhance productivity, maintain the highest biosecurity standards, and to prevent and cure livestock diseases. The role of providers of livestock medicines and productivity-enhancing technologies will be of critical importance in the future in supporting the continued growth of the livestock industries. The research which is reported here has been commissioned by Animal Medicines Australia, the industry group which represents companies supplying animal medicines and productivityenhancing technologies to Australia s livestock industries. The research aims to provide a comprehensive picture of the economic value of Australia s livestock industries, to better understand the value contributed to the sector by animal medicines and productivity-enhancing technologies, and to develop insights into the potential impacts of a range of different factors on the future growth of Australia s livestock industries. Page i

4 Executive Summary The farmed livestock industries of the Australian agriculture sector, including the beef cattle, dairy, sheep, pig and poultry industries, account for 45% of the gross value of Australian agricultural output, and in the most recent year for which statistics are available, generated farmgate returns valued in excess of $22 billion. Some 78,000 Australian farms, out of a total of 115,000, are involved in livestock production, with beef cattle farms being the most numerous farm type nationally. Livestock farming businesses provide direct employment for some 140,000 persons nationally, although much of this employment is on farms that are also involved in the production of non-livestock commodities. The livestock industries also generate significant indirect employment and economic activity. Major inputs utilised by livestock farmers include advisory and technical services, road transport, energy, veterinary and pharmaceutical products, finance and insurance, and a wide range of manufactured goods. Downstream from farms, the livestock and dairy processing sectors in Australia directly employ some 72,000 persons, and contribute some $7.2 billion (Gross Value Added basis) annually to the national economy from an annual turnover of $22 billion. The livestock and livestock processing industries also generate approximately $11.2 billion in export revenue annually, and the value of these exports has increased steadily over recent years. Major export earners include beef, sheepmeats, wool, dairy and live sheep and cattle exports. A major factor is sustaining and expanding the economic value of the livestock industries in Australia is the very high national biosecurity standards that are maintained, which mean that many livestock diseases endemic in other parts of the world are not present in Australia. Australia s livestock industries also sustain relatively high rates of productivity growth, which is made possible as a consequence of strong levels of research and development investment, high management standards, and the availability of world leading animal health products and technologies. In combination, these factor help support global market access and high values for Australian livestock product exports. Despite Australia s livestock health and disease status, the livestock industries experience significant annual economic costs associated with diseases and other animal health issues. These costs are experienced in two ways through reduced income due to productivity loss, and through increased expenses for treatment and/or preventative measures. The extent of these costs vary enormously by disease and by livestock species, and the best available estimate is that the normal total annual costs may be as high as $2 billion per year, almost 10% of the total value of annual production There are a number of diseases that have the potential to impose significant costs on the Australian livestock industries, if they became established in Australia. The maintenance of biosecurity surveillance systems, and ensuring the continuing capacity of livestock industry support services are critical to minimising this risk. Page ii

5 Australian livestock industries have a greater degree of exposure to export markets that many national livestock industries, and hence are both exposed to more competition, but also operate in markets that are more sensitive to animal disease incidence or risk. This reinforces the need for Australian livestock industries to have good access to new or emerging animal production technologies or products, and to retain a strong focus on the capacity of the livestock disease and health system to optimise the management of livestock in Australia. Page iii

6 Table of Contents Foreword.... i Executive Summary... ii Table of Contents... iv Index of Figures... v Index of Tables... vii 1. Introduction Livestock industry overview The beef industry The sheep industry The dairy industry The pork industry The poultry industry The post-farm sectors associated with the livestock industries Livestock diseases and industry costs Cattle diseases and health Goat diseases and health Pig diseases and health Poultry diseases The potential cost of future foreseeable diseases Current Australian expenditure on livestock health Discussion and conclusions References Appendix Page iv

7 Index of Figures Figure 1 Commodity share of gross value of farm production Figure 2. Index of the volume of annual farm production Figure 3. Index of the value of annual farm production Figure 4. Gross value of Australian livestock slaughterings Figure 5 Employment on Australian livestock farms Figure 6. Australian beef cattle numbers and annual production Figure 7. Gross value of production of beef and veal, Australia Figure 8 Value of Australian beef and live cattle exports Figure 9. Export destinations for Australian beef and veal Figure 10. Export destinations for Australian live cattle Figure 11. Gross value of cattle production by state Figure 12 Number of beef cattle farms by state Figure 13. Distribution of beef cattle farms by value of output Figure 14 Distribution of beef cattle businesses by land area managed Figure 15. Changes in the average value of land and fixed improvements for beef farms Figure 16. Changes in average debt levels of beef farm businesses Figure 17. Changes in average farm cash income of beef farm businesses Figure 18. Australian lamb production and markets Figure 19. Australian sheepmeat production and markets Figure 20. Gross value of sheep and wool production Figure 21. Value of Australian sheep industry exports Figure 22. Destination of Australian lamb exports Figure 23. Destination of Australian mutton exports Figure 24. Destination of Australian live sheep exports Figure 25. Value of sheep industry output, by state, Figure 26. Number of sheep farms by state. ( ) Figure 27. Size distribution of sheep farms. ( ) Figure 28. Distribution of livestock farm types by land area Figure 29. Real value of land and fixed improvements Australian sheep farms Figure 30 Real level of farm business debt, Australian sheep farms Figure 31 Real farm cash income, Australian sheep farms Figure 32. Number of dairy farms in Australia by state Figure 33. Size of the Australian dairy herd and annual milk production Figure 34. Average milk yield per cow per annum Figure 35. Value of annual dairy production Figure 36. Destination of Australian dairy exports Figure 37. Value of dairy production by state ( ) Figure 38. Size distribution of Australian dairy farms Figure 39. Employment on dairy farms in Australia Figure 40 Real value of land and fixed improvements, Australian dairy farms Figure 41. Farm business debt, Australian dairy farms Figure 42. Real farm cash income Australian dairy farms Page v

8 Figure 43. Australian pigmeat production and trade Figure 44. Australian pig numbers by state Figure 45. Gross value of production, pigs Figure 46. Value of Australian pigmeat exports Figure 47. Distribution of pig farms by value of output Figure 48. Annual value of production of chicken meat and eggs Figure 49. Chicken meat production in Australia Figure 50. Changes in efficiency of chicken meat production in Australia Figure 51. Distribution of chicken meat and egg farms by state. ( ) Figure 52. Gross value of chicken meat and egg production by state. ( ) Figure 53. Distribution of annual farm output, chicken meat and egg farms Figure 54. Employment on Australian poultry farms, Figure 55. Major inputs utilised by the meat processing sector Figure 56. Major inputs utilised by the dairy processing sector Figure 57. Value added by the Australian food manufacturing sector, Figure 58: Total factory gate sales of animal health products in Australia Figure 59: Annual costs of diseases and health in the Australian beef industry Figure 60: Areas infected by cattle tick in Australia Figure 61: Annual costs of diseases and health in the Australian sheep industry Figure 62: Economic loss due to footrot in Australian sheep in Figure 63: Economic impact of selected diseases in different regions of the world Figure 64: Economic impacts from a Foot and Mouth Disease outbreak Figure 65: US bovine-related export trends Page vi

9 Index of Tables Table 1. Volume and value of livestock production, Australia Table 2. Number of livestock farms, by state, Table 3. Source and value of inputs to the farm sector, Table 4. Livestock industry employment, Table 5 Methods of selling Australian livestock Table 6 Location of Australian livestock saleyards Table 7 Australian accredited meat processing facilities Table 8 Employment in food manufacturing, Australia, Table 9 Industry value-added, livestock processing sector Table 10 Employment in food and grocery retailing in Australia Table 11 Annual costs of major health issues in the cattle industry Table 12 Annual costs of the cattle tick in Australia by region Table 13: Annual costs of Bovine Ephemeral Fever for at-risk cattle herds in Australia Table 14: Annual costs of cattle bloat in the Australian beef industry southern regions Table 15: Annual economic loss due to worms in beef cattle - southern regions Table 17: Annual costs of diseases and health issues in the Australian sheep industry Table 18: Annual cost of internal parasites in sheep Table 19: Prevalence of resistant worm populations in sheep flocks Table 20: Annual costs of all forms of flystrike in sheep Table 21: Insecticides and resistance development in Australian sheep blowfly populations 62 Table 22: Annual costs of lice in sheep Table 23: Chemicals registered to treat lice and flystrike Table 24: Annual economic cost of footrot in sheep Table 25: Annual costs for major animal health issues in the goat industry Table 26: Annual economic cost of internal parasites in goats Table 27: Economic costs of potential disease outbreaks in Australian livestock industries.. 72 Table 28: Costs and duration of Foot and Mouth Disease outbreaks, UK Table 29: Total compensation costs for a Foot and Mouth Disease outbreak Table 30: Annual costs of major diseases, pests and health issues in Australia Table 31: Cattle disease where available technology would reduce annual costs Page vii

10 1. Introduction Australia s farmed livestock industries generate annual production worth in excess of $20 billion, based on farmgate values. This is equivalent to approximately 45% of the gross value of annual production of the Australian agriculture sector. However, the entire supply chain associated with the Australian livestock industries has an economic value well in excess of this, encompassing input suppliers, farm service providers, post-farm service providers, and the meat processing, wholesaling, retail and exporting sector. The exact extent of the value of the entire supply chain is unknown, but likely to be considerably greater than the gross farmgate value generated by the sector. There is, however, no comprehensive collection of data available that documents the economic significance of the livestock industries and associated economic sectors in the Australian economy. From a range of different perspectives, there is considerable value in developing a better understanding of the role of the livestock industries in the Australian economy. As well as being a major provider of food for domestic consumption, the livestock industries are also a large and growing source of export earnings. The post-farm processing and exporting subsectors are also very significant employers in regional Australia, as are the farm and farm service sectors. The domestic meat wholesaling, retailing and food service sectors are also a major source of employment throughout the entire nation. Australian meat and livestock exports are also a very important and strategic component of the food supplies of major regional nations, and are likely to become even more important in this regard in the future. The livestock industries are also very important in the management of Australia s natural resources, with agriculture being the main landuse on approximately 60% of Australia s land mass, and livestock production being the main agricultural activity on much of that land. Supporting the livestock industries are the suppliers of animal medicines and productivityenhancing technologies, with livestock farmers utilising more than $1.1 billion worth of these products annually in their production systems. These products play a critical role in maintaining livestock health, enhancing livestock productivity and protecting Australia s reputation as a safe and disease-free supplier of livestock products. The research detailed in this report involved the collation of data and statistics in order to develop a better understanding of the current economic value of the livestock industries to Australia, and the role played by animal medicines and productivity-enhancing technologies in securing and increasing the economic value of the sector. Objective: To quantify the economic importance of Australia s livestock industries, and the role of animal medicines and productivity-enhancing technologies in securing the future growth of these industries. Page 1

11 Scope The research was national in scope, and was focused primarily on farmed livestock, including; Broadacre sheep and cattle production Dairy production Intensive pig and poultry production. The research initially consisted of a desktop review of available literature and data detailing the economic significance of the livestock industries in Australia. The research involved accessing and collating relevant production and economic literature from the Australian Bureau of Statistics (ABS) and the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) as well as other relevant data that had been compiled by industry bodies. Export data was sourced from databases maintained by the Australian Farm Institute, which utilise information obtained from the Department of Foreign Affairs and Trade, and the UN Comtrade database. The research involved the collation of time-series statistics on livestock populations, production levels and the value of production and exports. The analysis also included farm level production, value-added through the meat processing sector (including employment and service inputs) and some estimate of the value-added through to the point of either retail sale or export embarkation. The report which follows provides the results of initial research aimed at gaining a better understanding of the economic value of Australia s various farmed livestock industries. Two measures of economic value are utilised to describe these industries. One is termed the Gross Value of Production (GVP), which is a measure of the total value of output from an industry or sector. The second is termed the Gross Value Added (GVA), which refers to the difference between the value of inputs used by a particular industry sector, and the value of outputs created by a particular sector. The latter is of more relevance to an intermediate sector such as meat processing, which purchases the inputs of livestock farms and converts then into a transformed product. In assessing the sum value of a sector in the economy that involves both primary production and subsequent product transformation, the use of GVA as a measure of the total value of the sector in the economy would result in considerable double counting.. Page 2

12 2. Livestock industry overview. The livestock industries are projected to account for approximately 50% of the $51 billion worth of the annual gross value (GVP) of farm output in Australia in 2013/14, with beef accounting for 17% of the value of farm output, followed by dairy (8%), Sheep and lambs (5%), wool (5%) poultry meat (5%), pigs (2%) and eggs (1%). Poultry 5% Pigs Sheep and lambs (a) 5% Eggs 1% wool 5% wheat Agricultural 16% commodities Gross value: $48,048 million coarse grains 7% Cattle and calves 17% oilseeds 5% cotton 4% rice pulses 1% 2% sugar cane grapes 2% 3% Whole milk 8% Vegetables 8% Fruit and nuts (excl. grapes) 8% Figure 1 Commodity share of gross value of farm production. (Source: ABS) Australian livestock industries are spread geographically throughout the entire continent, with sheep production mainly occurring in the southern states, beef production occurring in every state and territory, and the more intensive livestock industries such as pork, dairy and poultry tending to be concentrated in regions that are reasonably close to the major metropolitan areas or along the coast. As a general observation, the total volume of production from farm livestock in Australia has been relatively static over recent decades, with increases in the volume of poultry meat and beef production being offset by declines in volumes of production from the sheep, pig and dairy sector. These trends reflect both the constraints that exist in relation to access to land and water resources, but are also a reflection of the relative profitability of livestock production compared to crop production. Interestingly, while the volume of livestock production in Australia has remained relatively static over recent years, the value of livestock production has continued to increase. Factors contributing to the increased value of livestock production include higher global and domestic prices, as well as Australian livestock farmers increasing the quality of their products especially in the case of the wool, lamb and beef sectors. Page 3

13 Index: = 100 Index: = Crops Livestock Figure 2. Index of the volume of annual farm production. (Source: ABARES) Crops Livestock Figure 3. Index of the value of annual farm production. (Source: ABARES) The increase in the value of production that has occurred in relation to the total farm sector is also evident in statistics specifically relating to the livestock industries, as displayed in figure 4. Page 4

14 $ millions 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Cattle Sheep Lambs Pigs Poultry Figure 4. Gross value of Australian livestock slaughterings. (Source: ABS) A summary of the total volume and value of production of the Australian livestock industries is shown in Table 1. The data highlight that beef cattle production is the largest sector by value, with annual production of approximately $9.2 billion, followed by the sheep industry ($5.2 billion in total) then dairy ($4.5 billion) poultry ($2.9 billion) and pork (valued at approximately $1 billion annually). The table also includes livestock sector forecast production for It is estimated that there are a total of 78,000 livestock farms in Australia, with the most common being farms involved in beef cattle production. New South Wales is the state with the greatest number of livestock farms, although in the case of both NSW and Victoria, many of the livestock farms are quite small in scale and essentially operated on a part-time basis. Page 5

15 Table 1. Volume and value of livestock production, Australia. Volume of production unit f f Slaughterings Cattle and calves 000 8,364 8,097 7,873 8,457 9,580 9,000 Lambs ,478 17,880 18,879 21,122 21,925 20,300 Sheep 000 7,333 5,341 5,175 8,192 10,000 7,000 Pigs 000 4,561 4,643 4,733 4,745 4,758 4,800 Live exports Cattle exported live Sheep exported live 000 3,060 2,916 2,562 2,000 2,080 2,200 Meat produced Beef and veal kt 2,109 2,133 2,115 2,245 2,480 2,380 Lamb kt M utton kt Pig meat kt Chicken meat kt 834 1,015 1,030 1,046 1,080 1,110 Total kt 3,849 4,005 4,034 4,287 4,617 4,453 Livestock products Wool kt M ilk ML 9,023 9,100 9,480 9,201 9,130 9,300 Butter kt Cheese kt Casein kt Skim milk powder kt Whole milk powder kt Buttermilk powder kt Gross value of production f f Slaughterings Cattle and calves $m 6,567 7,164 7,134 7,136 7,812 8,153 Sheep $m Lambs $m 1,832 2,029 2,136 1,696 2,238 2,200 Pigs $m ,011 1,012 Poultry $m 1,785 2,077 2,078 2,214 2,313 2,414 Live exports Cattle exported live $m ,041 1,075 Sheep exported live $m Total livestock $m 12,722 13,795 13,797 13,207 15,305 15,686 Livestock products Wool $m 1,928 2,673 2,734 2,472 2,453 2,458 M ilk $m 3,371 3,932 3,986 3,687 4,565 4,418 Eggs $m Total livestock products $m 5,726 7,177 7,304 6,812 7,688 7,566 Total $m 18,448 20,972 21,101 20,019 22,993 23,252 Source: ABARES Australian Commodity Statistics, 2014 Page 6

16 Table 2. Number of livestock farms, by state, NSW Vic. Q ld SA WA Tas. NT ACT Aust. Sheep Farming (Specialised) 4,266 3, ,624 1, ,221 Beef Cattle Farming (Specialised) 13,246 8,010 12,477 1,357 2,007 1, ,452 Beef Cattle Feedlots (Specialised) Sheep-Beef Cattle Farming 3,234 1, ,624 Broadacre livestock 20,849 12,876 13,370 3,712 3,825 1, ,767 Grain-Sheep or Grain-Beef Cattle Farming 4,130 2,359 1,037 2,046 2, ,108 Total crop/livestock 4,130 2,359 1,037 2,046 2, ,108 Dairy Cattle Farming 1,049 4, ,562 Poultry Farming (Meat) Poultry Farming (Eggs) Pig Farming Intensive livestock 1,650 5,273 1, ,331 Total livestock farms 26,629 20,508 15,408 6,268 6,705 2, ,206 Source: ABS. Statistical publication No Australian livestock industries have experienced considerable change over the past two decades, and are also subject to variations in seasonal conditions which can have a big effect on production. The sheep industry experienced a major disruption in early 1991 when the wool Reserve Price Scheme was disbanded. The consequence of this event was a substantial reduction in farm asset values and sheep profitability, from which the industry has taken a long while to recover. Up until that time the sheep industry was predominantly focused on wool production, however since that time there has been a growing focus on sheep meat production, boosted by recent growth in lamb exports to the USA and Asia. The beef industry experienced a period of strong growth in the early 1970s, but then cattle producers experienced a major price crash in the mid-1970s which resulted in a large reduction in cattle numbers. The size of the national herd has gradually increased since that time, although record slaughter rates in 2013 and 2014 are likely to result in a reduction in herd size over the next few years. The pork industry has also been through several periods of major restructuring, with a significant reduction in the number of farms and a large increase in average herd size over the last twenty years. Unlike the cattle and sheep industries, pork production in Australia is primarily focused on the domestic market. Australian pork producers have faced increasing competition from imports over recent years, which have reduced the profitability of pig production. The chicken meat industry has grown substantially in Australia over recent years as per capita domestic consumption has increased, in part due to price increases for beef and sheepmeats. Like the pork industry the chicken-meat industry predominantly supplies the Australian Page 7

17 domestic market and is not a major exporter, although unlike the pork industry the chickenmeat industry is not currently subject to competition from imports. The dairy industry experienced a major change in the early 2000s, when the domestic milk market in Australia was deregulated. This resulted in a drop in milk prices, and widespread industry restructuring of dairy farm and processing businesses. The number of dairy farms in Australia has subsequently declined, although average herd sizes have increased significantly, as has milk production per head. The sector has been further challenged by supermarket price wars over recent years, although buoyant export demand and an increased focus on export markets has resulted in some industry growth in recent years and an expansion of dairy farming in Victoria and Tasmania. Export markets for live animals are important for both the sheep and cattle industries, although have declined in importance over recent years for a number of different reasons. In the case of the sheep industry, prior to the demise of the wool reserve price scheme in 1991, the Australian sheep flock was much larger and consisted primarily of merino (wool producing sheep), which were suitable for export off-shears to Middle-East markets. Sheep numbers have reduced considerably since that time (down from 170 million in 1990 to 74 million in 2013), reducing the supply available for live exports, and production of lambs for domestic slaughter has become much more lucrative for farmers. In the case of the cattle industry, live exports grew rapidly during the 1990s and 2000s, but have been subject to several major disruptions. These include the suspension of live cattle exports to Indonesia in 2011, a disruption from which the live cattle export industry is only just starting to recover. The Australian livestock industries also have important upstream and downstream economic sectors which are dependent on the livestock production sector. These include machinery and equipment suppliers, veterinary medicine and chemical suppliers, transport services, fuel and energy suppliers and a wide range of technical support services providing inputs to farms, and a large transport, processing and marketing sector that services both domestic and international markets. Table 3 provides details of the source and value of inputs used by the farm sector in Australia, noting that it is not possible to disaggregate the livestock sub-sectors from the general farm sector in the available statistics. Page 8

18 Table 3. Source and value of inputs to the farm sector, Supplying sector. Sheep, Grains, Beef and Dairy Cattle Agriculture sector using Poultry and Other Livestock Other Agriculture Total agriculture Agriculture, Forestry and Fishing Support Services $ 2,844 $ 180 $ 1,983 $ 5,007 Non-Residential Property Operators and Real Estate Services $ 1,368 $ 210 $ 636 $ 2,214 Professional, Scientific and Technical Services $ 1,209 $ 153 $ 778 $ 2,140 Sheep, Grains, Beef and Dairy Cattle $ 1,440 $ 210 $ 40 $ 1,690 Wholesale Trade $ 1,125 $ 152 $ 390 $ 1,667 Other Agriculture $ 1,114 $ 266 $ 252 $ 1,632 Petroleum and Coal Product Manufacturing $ 731 $ 99 $ 670 $ 1,500 Basic Chemical Manufacturing $ 942 $ 56 $ 383 $ 1,381 Auxiliary Finance and Insurance Services $ 853 $ 65 $ 377 $ 1,295 Other Food Product Manufacturing $ 766 $ 466 $ 2 $ 1,234 Veterinary Pharmaceutical and Medicinal Product Manufacturing $ 1,056 $ 90 $ 34 $ 1,180 Finance $ 509 $ 65 $ 429 $ 1,003 Road Transport $ 632 $ 174 $ 137 $ 943 Construction Services $ 555 $ 142 $ 156 $ 853 Transport Support services and storage $ 696 $ 16 $ 117 $ 829 Water Supply, Sew erage and Drainage Services $ 280 $ 94 $ 226 $ 600 Other Repair and Maintenance $ 274 $ 23 $ 117 $ 414 Employment, Travel Agency and Other Administrative Services $ 254 $ 10 $ 46 $ 310 Poultry and Other Livestock $ 21 $ 218 $ 57 $ 296 Retail Trade $ 187 $ 10 $ 80 $ 277 Rental and Hiring Services (except Real Estate) $ 169 $ 29 $ 67 $ 265 Electricity Generation $ 116 $ 19 $ 102 $ 237 Electricity Transmission, Distribution, On Selling and Electricity Market Operation $ 115 $ 19 $ 101 $ 235 Specialised and other Machinery and Equipment Manufacturing $ 112 $ 9 $ 59 $ 180 Heavy and Civil Engineering Construction $ 116 $ 4 $ 48 $ 168 Meat and Meat product Manufacturing $ 98 $ 51 $ 1 $ 150 Insurance and Superannuation Funds $ 71 $ 9 $ 65 $ 145 Automotive Repair and Maintenance $ 80 $ 5 $ 54 $ 139 Food and Beverage Services $ 70 $ 5 $ 61 $ 136 Waste Collection, Treatment and Disposal Services $ 64 $ 18 $ 19 $ 101 Other $ 477 $ 146 $ 327 $ 950 Total $ 18,344 $ 3,013 $ 7,814 $ 29,171 Source: ABS Input/Output tables, The livestock industries are also directly responsible for a substantial amount of employment, with many of the jobs located in regional Australia. Table 4 provides a summary of the relevant industry employment statistics, noting that it is not possible to identify only those involved in farm livestock production due to the mixed enterprises on many Australian farms. Page 9

19 Thousands Table 4. Livestock industry employment, Livestock industry occupations. Persons employed Livestock Farmers 75,112 Mixed Crop and Livestock Farmers 34,723 Livestock Farm Workers 24,126 Mixed Crop and Livestock Farm Workers 3,489 Skilled Animal and Horticultural Workers nfd 25 Shearers 3,203 Total 140,678 Source data: ABS Census Some trend data is available concerning numbers employed directly in the farm sector, although it is not possible to segregate employment specifically to livestock farms, due to the mixed enterprise nature of many broadacre farm businesses in Australia. Nevertheless, Figure 2 below provides some perspective of trends in employment on livestock farms in Australia, and makes evident the significant reduction in employment associated with the onset of widespread drought conditions in and subsequent years Grains/sheep/cattle Dairy Poultry Other livestock Figure 5 Employment on Australian livestock farms. (Source: ABARES) The following sections of this report provide more information about specific sub-sectors of the livestock industries in Australia, noting that available statistics do not always enable a full separation of the livestock sectors from the farm sector more generally. Page 10

20 Kilotonnes 3. The beef industry. The Australian beef industry has a history that goes back to the very first days of European settlement in Australia, although unlike northern hemisphere beef industries, the Australian industry relies largely on pasture-based production systems. The national cattle herd reached a maximum of almost 30 million head in the mid-1970s, but subsequently slumped to around 20 million in the mid-1980s before recovering to stabilise at around 25 million head for most of the past decade. Despite relatively static cattle numbers, annual beef production levels have gradually increased due to improved production systems, and now exceed 2.15 million tonnes annually. As production has increased and domestic per capita consumption has decreased, the industry has increased its reliance on export markets which now account for 66% of annual production on a volume basis. Australia is the world s second largest beef exporter behind Brazil, with India and the USA also being major exporters. Major markets for Australian beef exports include Japan, the USA, Korea and China. Indonesia, Israel and Malaysia are major markets for Australian live slaughter cattle exports, while China and Russia are the major buyers of breeding cattle exported from Australia. 3,000 30,000,000 2,500 25,000,000 2,000 20,000,000 1,500 15,000,000 1,000 10,000, ,000, Exports Domestic consumption Cattle Nos. Figure 6. Australian beef cattle numbers and annual production. (Source: ABARES) While pasture fed production systems dominate the Australian beef industry, feedlots that grain finish cattle prior to slaughter also play a significant role. The total number of cattle in feedlots in Australia generally ranges from 700,000 to 800,000 head, although has been as high as 900,000 head during periods of severe drought. Queensland is the largest beef producing state, accounting for almost half of the national cattle herd, followed by New South Wales and Victoria. The gross value of beef production annually is currently approximately $8 billion, with an additional $500 million worth of live Page 11

21 $ millions Gross value of production ($ million) cattle exports. The annual value of production has ranged between $$7.3 billion and $8 billion over the past decade. $8,500 $8,000 $7,500 $7,000 $6,500 $6,000 $5,500 $5, Figure 7. Gross value of production of beef and veal, Australia. (Source: ABS) $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $ Beef & veal Slaughter cattle Breeding cattle Figure 8 Value of Australian beef and live cattle exports. (Source: ABARES) Major export destinations for processed beef and veal include Japan, the USA, Korea, China, Taiwan and the EU. Changes over recent years have included some opening up of high-value EU markets to Australian exports (the EU has previously restricted market access through quotas) and the emergence of China as a growing market over recent years. Australia also managed to retain access to both the Japanese and Korean markets continually over the past Page 12

22 $'000 AUD nominal $ millions (fob) decade, while most other beef exporting nations were excluded from those markets for at least some of that time due to concerns about the risk of so-called mad cow disease. 6,000 5,000 4,000 3,000 2,000 1, Japan USA Korea China Taiwan E.U. Indonesia Russia Other Figure 9. Export destinations for Australian beef and veal. (Source: ABS) Major export destinations for live cattle exports include Indonesia, China, Russia and Israel. $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $ africa and middle east ASEAN Central and south asia Europe North america (NAFTA) Nth Asia Oceania South and central america Figure 10. Export destinations for Australian live cattle. (Source: ABARES) Page 13

23 Total meat cattle buisnesses (no.) Gross vaue of production Despite Queensland being the largest beef-producing state, New South Wales has the largest number of beef farms. This is because there are large numbers of small-scale beef farms in NSW coastal regions and also in areas close to major population centres. In many instances, the owners of these small-scale farms work full-time off-farm, and manage their beef cattle operations on a part time basis. Cattle production is particularly suited to this type of arrangement, due to the low level of labour inputs required compared to sheep, and the minimal capital and machinery requirements compared to crop production. $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Figure 11. Gross value of cattle production by state. (Source: ABS) 30,000 25,000 20,000 15,000 10,000 5,000 - Figure 12 Number of beef cattle farms by state. (Source: ABS) Page 14

24 Number of agricultural buisnesses no. of buisnesses The large number of small-scale cattle farm businesses is evident from the data displayed in Figure 7. It shows that there are almost 30,000 beef farm businesses in Australia which have an annual value of output of less than $100,000 per annum. 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - Estimated value of operations ($'000 AUD) Beef Cattle Farming (Specialised) Sheep-Beef Cattle Farming Figure 13. Distribution of beef cattle farms by value of output (Source:ABS) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - Area of land (ha) Beef Cattle Farming (Specialised) Sheep-Beef Cattle Farming Grain-Sheep or Grain-Beef Cattle Farming Figure 14 Distribution of beef cattle businesses by land area managed (Source:ABS). Page 15

25 $ 2013 The financial performance of Australian beef farms over the past decade has been impacted by the extended drought that occurred in southern Australia from to , the interruption to the live cattle export trade that occurred in mid-2011, and more recently by severe drought conditions in Western Queensland and North-Western NSW. Relatively high returns in the early 2000s resulted in a rapid increase in land values in cattle producing regions and especially in northern Australia in the mid-2000s, resulting in increased business debt for large-scale operators as many purchased additional land. Declining beef prices and the live export suspension have subsequently reduced beef profitability, and there has been a related decline in land values in northern Australia since Recent data indicates that debt levels are falling in aggregate, although not in regions that are currently drought-affected. Figures 9, 10 and 11 show relevant financial performance indicators (in 2013 dollars) for beef farm businesses, categorised on the size of their annual turnover. The large numbers of small scale beef farms with less than $100,000 in annual turnover are not included in the date depicted in these figures. $14,000,000 $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 $100-$200k $200-$400k $400k+ Figure 15. Changes in the average value of land and fixed improvements for beef farms. Source: ABARES annual farm surveys Page 16

26 $ $ 2013 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 $100-$200k $200-$400k $400k+ Figure 16. Changes in average debt levels of beef farm businesses. Source: ABARES annual farm surveys $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 -$100,000 $100-$200k $200-$400k $400k+ Figure 17. Changes in average farm cash income of beef farm businesses. Source: ABARES annual farm surveys (*Farm cash income is net farm cash income before paying an operators allowance or repaying debt.) Page 17

27 Kilotonnes Slaughterings (,000s) 4. The sheep industry. The sheep industry has in the past been an iconic sector of the Australian economy, and while it has declined somewhat in significance from its former prominence, it remains a major export earner and source of employment in regional Australia. The significance of the sheep industry was initially based on the production of wool, rather than meat. The wool industry reached its zenith in the 1950s during the Korean War boom when wool prices escalated dramatically on the back of wartime demand. The industry then went through a period of regulated wool prices during the 1980s, before the Wool Reserve Price Scheme collapsed in 1991 leaving the sheep industry with a large debt to repay and more than one year of production stockpiled at growers expense. The resulting low wool prices resulted in significant numbers leaving the industry, and a rapid reduction in sheep numbers. At different stages there has been a substantial post-farm wool processing sector in Australia, but this has largely closed down and been relocated to China, which is the dominant export market for Australian wool. Following an extended period of adjustment, the sheep industry has experienced growth in recent years based on growing demand for lamb especially in emerging markets in Asia. Lamb has also almost totally displaced sheepmeats (mutton) from domestic markets, although sheepmeat exports remain significant , , , , , Domestic Export Slaughterings (RHS) Figure 18. Australian lamb production and markets. Source: ABARES Significant and growing markets for Australian lamb exports include the Middle East, the USA and China. China and the Middle East are also major markets for sheepmeat exports, while the major markets for live sheep exports are also the Middle East region. China is the Page 18

28 $ million Kilotonnes Slaughterings (,000s) dominant market for Australian wool exports, accounting for more than three quarters of total exports in recent years. Other significant export markets for wool include India and Italy Domestic Exports Slaughterings (RHS) Figure 19. Australian sheepmeat production and markets. Source: ABARES The annual gross value of farmgate production of the sheep industry during recent years has been approximately $5.5 billion dollars, split evenly between sheepmeat and wool production. $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $ Sheep and lambs (a) wool Figure 20. Gross value of sheep and wool production. Source data: ABS catalogue 7503; issue Page 19

29 $ million fob $ million The vast bulk of wool produced in Australia is exported as unprocessed (greasy) wool, and lamb exports are also growing rapidly, and now account for almost 50% of the annual value of lamb production. The value of live sheep exports has remained relatively constant over recent years. $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $ Lamb Live sheep Mutton Greasy wool Semi-processed wool Skins Figure 21. Value of Australian sheep industry exports. Source data: ABARES Australian Commodity Statistics 2013: Farm sector tables 1,200 1, China UK EU Japan Middle East Papua New Guinea United States Other Figure 22. Destination of Australian lamb exports Source: ABARES Australian Commodity Statistics 2013 Page 20

30 $'000 AUD nominal $ millions fob China Japan Malaysia Middle East Singapore Taiwan United States Other Figure 23. Destination of Australian mutton exports. Source: ABARES Australian Commodity Statistics 2013 Australian exports of live sheep and goats $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $ africa and middle east Central and south asia North america (NAFTA) Oceania ASEAN Europe Nth Asia South and central america Figure 24. Destination of Australian live sheep exports. Source data: UN Comtrade HS96; 0104 Page 21

31 Numbre of buiisnesses millions New South Wales and Victoria are the two states that account for the largest share of the total value of sheep industry production in Australia, with South Australia and Western Australia also accounting for a significant amount of production. Sheep production is largely confined to the southern, temperate regions of Australia. $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 Sheep and lambs - Total disposals Wool - total Figure 25. Value of sheep industry output, by state, Source data: ABS catalogue 7503; New South Wales is the state that has the largest number of sheep farms based on farm categorisation used by the Australian Bureau of Statistics, although some caution is required in relation to this statistic. Many Australian farms are mixed-enterprise businesses, operating a combination of livestock and cropping operations. It is not always easy to categorise these on an enterprise basis. 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - Figure 26. Number of sheep farms by state. ( ) Source data: ABS catalogue ; Page 22

32 No. of buisnesses No. of businesses As is the case for the beef industry, there tends to be a large number of small-scale sheep farms in states like NSW and Victoria. In some instances the sheep enterprise on these farms is run as a secondary enterprise in conjunction with beef cattle or cropping, although smallscale sheep farms tend to be more specialised, rather than mixed-enterprise. Farm businesses which include a cropping enterprise tend to be larger in size, (either on the basis of the value of turnover or farm area) due to the scale-efficiencies associated with largescale machinery used in these enterprises. 3,000 2,500 2,000 1,500 1, Value of operations (A$'000) Sheep Farming (Specialised) Sheep-Beef Cattle Farming Grain-Sheep or Grain-Beef Cattle Farming Figure 27. Size distribution of sheep farms. ( ) Source data: ABS catalogue ; ,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Area of holding ha. Sheep Farming (Specialised) Grain-Sheep or Grain-Beef Cattle Farming Sheep-Beef Cattle Farming Figure 28. Distribution of livestock farm types by land area. ABS catalogue ; Page 23

33 $ $ 2013 The business environment for Australian sheep farm businesses has been more stable over the past decade than it was during the 1990s, a period that was impacted by the aftermath of the dismantling of the Wool Reserve Price Scheme in Overall sheep farm profitability was quite subdued during the 1990s in comparison with the previous decade, and improved only slowly until recovering strongly during , which was one of the rare periods during which commodity prices were high and seasons were favourable for farmers in southern Australia. This appears to have encouraged sheep farmers to expand the scale of their operations, especially those managing larger scale operations. This is reflected in the trends evident in Figure 30, where there was strong growth in the asset value of sheep farm businesses during the period from , as a result of both increases in land values and due to farmers buying more land, and taking on more debt, as is evident from figure 30. $8,000,000 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $3,000,000 $2,000,000 $1,000,000 $0 $100-$200k $200-$400k $400k+ Figure 29. Real value of land and fixed improvements Australian sheep farms. ABARES annual farm surveys $1,800,000 $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 $100-$200k $200-$400k $400k+ Figure 30 Real level of farm business debt, Australian sheep farms. Source: ABARES annual farm surveys Page 24

34 $ 2013 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 -$50,000 $100-$200k $200-$400k $400k+ Figure 31 Real farm cash income, Australian sheep farms. Source: ABARES annual farm surveys The period of drought in southern Australia that extended in some areas from 2003 to 2009 had a significant negative impact on the farm cash income of sheep businesses, especially over the period from 2005 to This undoubtedly contributed to the relatively high level of average farm debt amongst larger-scale sheep businesses over the period from 2007 to 2009, before the recovery in farm cash incomes allowed farmers to reduce debt. The decline in farm asset values post 2007 is probably a reflection of some reduction in farm land values due to the extended drought period. It is noteworthy that smaller-scale sheep farm businesses have experienced less business volatility over this period, which is probably related to the fact that farms in these categories ($100-$200k and $200-$400k) are more likely to be located in higher rainfall areas and are more likely to have the option of lamb production or other enterprises, than is the case for larger-scale sheep farms located in lower-rainfall zones. Page 25

35 5. The dairy industry. The Australian dairy industry developed essentially as a domestic industry, predominately based around major metropolitan and regional centres in order to regularly supply fresh milk. As transport capacity developed early in the 1900s, dairying expanded in higher rainfall zones such as southern Victoria, Tasmania and in many coastal regions. Dairy processing cooperatives were also established, often owned by dairy farmers. For a number of reasons, including food safety and a desire to secure reliable supplies of dairy products for major cities, Australian dairy markets were regulated by state governments for most of the second half of the twentieth century. These regulations include prices, and supply quotas. As part of a broader policy objective of deregulating the Australian economy in the latter half of the 1990s, Australian dairy markets were also deregulated. This took effect on 1 July 2000, and the result has been some acceleration in the rate of decline in the number of dairy farms in Australia, and a decrease in the overall size of the Australian dairy herd, but an increase in the average size of dairy herds on individual farms. There has also been some reduction in the total volume of output, although to a lesser extent than the decline in cow numbers. A significant factor in Australian dairy markets over recent years has been the pricing policies of major supermarkets, which have introduced one dollar per litre milk pricing which has had the effect of reducing farmgate prices. To some degree this has been offset by growing export demand, which has led in the last few years to new, large scale dairy farms being established in Tasmania, southern Victoria, and in major irrigation areas. It is estimated that approximately 50% of Australian dairy production is now exported, and export demand is projected to grow more rapidly than domestic demand for the foreseeable future. 25,000 20,000 15,000 10,000 5,000 0 NSW VIC QLD SA WA TAS Figure 32. Number of dairy farms in Australia by state. Source: Dairy Australia. Page 26

36 Litres per cow per annum Number of dairy cows (,000s) Megalitres of milk 4,000 12,000 3,500 10,000 3,000 8,000 2,500 6,000 2,000 4,000 1,500 2,000 1,000 0 Cows (LHS) Milk production (RHS) Figure 33. Size of the Australian dairy herd and annual milk production. Source data: ABARES Australian Commodity Statistics ,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Figure 34. Average milk yield per cow per annum. Source data: ABARES Australian Commodity Statistics 2013 The gross farmgate value of milk production is Australia has ranged between $3.5 and $4 billion over recent years, while the value of dairy exports has been approximately $1.6 billion per annum. Major dairy export markets include Japan, Singapore, Malaysia, China and Indonesia, although Australia exports dairy products to a wide range of different international locations. Page 27

37 $ millions $ million $5,500 $4,500 $3,500 $2,500 $1,500 $500 -$ Figure 35. Value of annual dairy production. Source data: ABS catalogue 7503; issue $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $ China Indonesian Japan Korea, Rep. of Malaysia Philippines Saudi Arabia Singapore Thailand United States Other Figure 36. Destination of Australian dairy exports. Source data: ABARES Australian Commodity Statistics 2013 Victoria is the most dominant dairy state, based on both the number of farms and the volume of production. New South Wales and Tasmania also have significant dairy industries. Page 28

38 no. of buisnesses $ millions 2,500 2,000 1,500 1, Figure 37. Value of dairy production by state ( ). Source data: ABS catalogue 7503; issue Unlike other livestock sectors, the large capital requirements associated with operating a dairy farm means that there are relatively few small-scale dairy farms operating in Australia. Over the period from 1980 to the present day, the average dairy herd size has increased from 90 cows to 258, although there has been some development of dairy farms running several thousand cows. Dairy farms are generally quite small in terms of land area, with most dairy farms being between 100 and 500 hectares in size Estimated value of operations ($'000) Figure 38. Size distribution of Australian dairy farms. Source data: ABS catalogue ; Page 29

39 '000 persons Total employment at the farm level in the dairy industry is estimated to be approximately 25,000 persons. There has been some fluctuation in the number over recent years, largely in line with fluctuations in dairy farm returns. In periods of higher returns, it is likely that dairy farmers are more inclined to employ additional labour, while in periods of lower returns they reduce the level of hired labour and extend their own working hours. Dairy Australia estimates there are an additional 20,000 persons employed in the dairy processing sector in Australia, bringing total direct industry employment to around 43,000 persons Figure 39. Employment on dairy farms in Australia. Source data: ABARES Commodity Statistics 2013 There are a number of important differences between dairy farms and other broadacre livestock businesses. Firstly, dairy farming is a high cash-flow business, with much more significant cash costs and revenue flows on a regular basis throughout a year, relative to a similarly-sized beef or sheep farm. Dairy farms also experience lower revenue volatility than other broadacre livestock farms, as a consequence of regular milk payments throughout the year. Taken together, these two differences mean that dairy farm businesses often operate with considerably more debt and a lower equity ratio than other livestock farms. Since the time of dairy deregulation in 2000, Australian dairy farms have generally been increasing in size, and decreasing in number. This is reflected in the growth in the average per farm value of land and fixed improvements of dairy farms over the period from 2002 to Dairy farmers received dairy industry adjustment payments during this period, with the money used for these payments generated via a levy on the price of milk. Those that elected to remain in the industry therefore had some capital that could be used to scale up the size of their operations, and increase the number of cows that they milked. The fall in global dairy prices after 2008, which occurred due to the global financial crisis, dampened demand for land suitable for dairy farming, as did the so-called milk wars in Australia which commenced with heavy discounting of the price of milk by Australian supermarkets in January Page 30

40 $ $ 2013 The financial performance of dairy farm businesses has been variable over recent years, due to a number of factors. As was the case for broadacre livestock industries more generally throughout southern Australia during the period from 2003 to 2008, the impact of the extended drought and the related reduction in the availability of irrigation water and increases in feed grain prices $4,500,000 $4,000,000 $3,500,000 $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $- Australia NSW Victoria Figure 40 Real value of land and fixed improvements, Australian dairy farms. Source: ABARES farm surveys. $900,000 $800,000 $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $ Australia NSW Victoria Figure 41. Farm business debt, Australian dairy farms. Source: ABARES farm surveys. As Figure 41 highlights, Australian dairy farms have been taking on progressively more debt over the past decade, although it needs to be remembered that this has occurred against a Page 31

41 $ 2013 backdrop of significant growth in the size of an average dairy farm, as highlighted in figure 40. It is likely, therefore, that average debt per cow or litre of milk produced has not increased to the same extent. Australian dairy farms have recorded significant fluctuations in farm cash income in the post de-regulation era, as is highlighted in Figure 42. This has been caused by the extended drought in southern Australia, which limited irrigation water availability and increased feed grain prices, and more recently by declining average domestic milk prices. Farmgate milk prices have recovered somewhat over the past twelve months due to growing export demand, suggesting some recovery is likely from the low farm cash income figures recorded in $250,000 $200,000 $150,000 $100,000 $50,000 $- Australia NSW Victoria Figure 42. Real farm cash income Australian dairy farms. Source: ABARES farm surveys. Page 32

42 Thousands Kilotonnes Thousands 6. The pork industry. The Australian pig industry transitioned from what was an industry based on what was essentially a part time, second enterprise on Australian dairy and grain farms in the 1950s and 1960s to a sector composed of large-scale, highly productive piggeries by the end of the 1990s, with a significant reduction in the number of pig farms as part of that transition. In , it was estimated there was 40,000 pig farms in Australia, a number which has reduced to around 1,500 farms in The pork industry has encountered a number of headwinds over the last two decades, with the extended 2000s drought (and associated high feed grain prices) in combination with the relatively high value of the Australian dollar resulting in Australian producers being rendered less competitive compared to imported pigmeat products , , ,600 2,400 2,200 2,000 1,800 1,600 1,400 1, , Production Imports Exports Pigs (RHS) Figure 43. Australian pigmeat production and trade. Source data: ABARES Commodity Statistics ,500 3,000 2,500 2,000 1,500 1, NSW Vic Qld SA WA Tas Figure 44. Australian pig numbers by state. Source data: ABARES Commodity Statistics 2013 Page 33

43 $ million $ million The Australian pig industry is the livestock industry that is most exposed to import competition, which has been growing since the mid-1990s. The pressure on the sector has resulted in increased production, despite reduced pig numbers, through increased weaning and growth rates. The industry has recently adopted changed pig welfare standards and promotion of Australian pork, which it is anticipated will help to differentiate Australian product from imported pigmeat products and increase sales. Annual gross value of production has been approximately $900 million for most of the past decade, of which approximately $100 million has been exported (14% of output by volume) although exports have declined over recent years due to the persistently high Australian dollar exchange rate. $1,100 $1,050 $1,000 $950 $900 $850 $800 $750 $700 $650 $ Figure 45. Gross value of production, pigs. Source data: ABS catalogue 7503; issue $200 $180 $160 $140 $120 $100 $80 $60 $40 $20 $ Figure 46. Value of Australian pigmeat exports. Source data: ABARES Australian Commodity Statistics 2013 Page 34

44 number of farms The competitive pressure arising from imported pigmeats over the past decade has resulted in structural changes in the pork industry, with pig farmers either needing to expand the size of their operations to capture economies of scale, or to operate what might be termed boutique piggery operations focusing on specialised markets or managed on a part-time basis in conjunction with other farm enterprises. As a result, the industry now has a group of very large-scale operations, and also a collection of smaller operations, but relatively few midsized farm operations Estimated value of output ($'000) Figure 47. Distribution of pig farms by value of output. Source data: ABS catalogue ; The relatively small size of the pig industry compared to other Australian livestock industries means there is very limited data available of financial performance at the farm level. 7. The poultry industry. The poultry industry in Australia consists of two distinctly different sub-sectors the chicken meat sub-sector and the egg sub-sector. The two are significantly different structurally, with the egg industry consisting largely of independent farm businesses, while the chicken-meat industry consists largely of vertically integrated production and processing supply chains, dominated by a small number of major businesses. Both are essentially domestic focused, with only a small proportion exported each year. Neither sub-sector faces substantial competition from imports, with quarantine constraints limiting imports of either raw chicken meats or unprocessed eggs. Page 35

45 $ million $2,500 $2,000 $1,500 $1,000 $500 $ year Poultry Eggs Figure 48. Annual value of production of chicken meat and eggs. Source data: ABS catalogue 7503; issue : The egg sub-sector consists of approximately 300 egg producing farms, with NSW, Queensland and Victoria accounting for about 85% of these. Total production in 2012 was approximately 400 million dozen eggs, produced by approximately 17 million laying hens, with a farmgate value of around $600 million. Australian egg producers have been under a degree of pressure on animal welfare issues, and that pressure has now increased with a pledge by major retailer Woolworths to phase out all caged eggs from their shelves by Some Australian egg producers have already adopted free-range and barn egg production systems, and pressure will continue to adopt these systems more widely. In 2012, free-range, barn-laid and organic eggs accounted for 49% of retail market volumes, and 61% of retail market value of egg sales in Australia. Despite the mature status of the domestic egg market, the Australian Egg Corporation reports that, over the past decade, Australian egg consumption has increased by 30% on a per capita basis. This has triggered a 26% increase in the number of laying hens. The chicken meat industry is largely vertically integrated, with two large integrated national companies Baiada and Inghams enterprises, accounting for more than 70% of total production each year. According to the Australian Chicken Meat Federation, growing broiler chickens, from day old chicks to the day of processing, is generally contracted out by processing companies to contract growers. Approximately 800 growers produce about 80% of Australia s meat chickens under these contracts. Other meat chickens are produced on large company farms, or on farms owned and managed by intermediary companies which own a number of farms, each managed by a farm manager, and who enter into contracts with processing companies to grow out chickens on a larger scale. Page 36

46 Contract growers own the farm and provide the management, shedding, equipment, labour, bedding and other inputs to rear chickens. The processing company provides (and owns) the chickens and provides feed, medication and technical advice. The per capita consumption of chicken meat has steadily grown in Australia over the last thirty to forty years, displacing the consumption of beef and lamb. Chicken meat obviously has a significant cost advantage, and is also a protein of choice for many overseas immigrants who have settled in Australia over this period. Figure 49. Chicken meat production in Australia. Source: Australian chicken meat Federation. Figure 50. Changes in efficiency of chicken meat production in Australia Source: Australian chicken meat Federation. Page 37

47 $ million buisnesses (no.) There is only very limited data available about individual farm businesses involved in the chicken meat or egg industry, as these farm types are not included in farm survey programs conducted by either the Australian or state governments. Some data is available on the stateby-state distribution of farms, and the value of production. It highlights that farms and production capacity are concentrated in states with larger populations. 2,500 2,000 1,500 1, Meat chickens Eggs Figure 51. Distribution of chicken meat and egg farms by state. ( ) Source data: ABS catalogue ; $800 $700 $600 $500 $400 $300 $200 $100 $0 New South Wales Victoria Queensland South Australia Western Australia Tasmania Northern Territory Australian Capital Territory Poultry - total disposals - value ($) Eggs - value ($) Figure 52. Gross value of chicken meat and egg production by state. ( ) Source data: ABS catalogue 7503; Page 38

48 Thousands no. of buisnesses The structural differences between the chicken meat and egg sectors are evident from the data displayed in figure 53. It shown that while chicken meat farms are predominantly large scale with annual output in excess of $0.5 million per annum, egg producing farms have a much more even size distribution, ranging from small, part-time farms to much larger enterprises Value of annual output ($) Poultry Farming (Meat) Poultry Farming (Eggs) Figure 53. Distribution of annual farm output, chicken meat and egg farms. Source data: ABS catalogue ; Australian poultry farms employ approximately 8,000 workers, with total employment trends showing some evidence of fluctuating with the profitability of poultry farms. Total employment dropped, for example, during 2008 when grain prices were at extremely high levels which would have imposed considerable pressure on farm profitability Figure 54. Employment on Australian poultry farms, Source data: ABARES Commodity Statistics Page 39

49 8. The post-farm sectors associated with the livestock industries. There are a number of different industry sectors associated with the livestock industries in Australia, although they are generally not consolidated as one sector for the purposes of statistics. These include the livestock marketing and transport sectors, the livestock processing sectors, the livestock-product manufacturing sectors, and the livestock product wholesaling and retail sectors. A variety of different research reports have consolidated statistics about these various sectors for a range of different purposes, although there is no single authoritative report that provides a complete picture of the economic value of all of these in combination. The following is a summary of some of the main characteristics of each of the relevant different parts of the post-farm livestock sectors. Livestock transport. Livestock transport services and general transport services are a significant input for the farm sector, the meat processing sector, and for live exports. According to ABS input/output data, the farm sector utilised road transport valued at $943 million in 2012/13, and transport services and storage to the value of $829 million in the same year. With the livestock sector accounting for 45% of gross farm output, it is reasonable to estimate that the transport and storage services utilised by the livestock sectors were valued at approximately $800 million in Livestock marketing. There are a number of different avenues that are used to market livestock. A summary of these is provided in the following table. Available statistics do not provide a definitive indication of the market share of each selling method, although ABARES surveys of beef farms provide some indication. In southern Australia, saleyards have remained the primary method for selling cattle, accounting for over 60% of transactions. Over-the-hook sales account for approximately 15%, while paddock sales have ranged from 15 to 20% of sales. In northern Australia, saleyards account for about 35-40% of cattle sales, approximately equal to over-the-hook sales. Paddock sales account for the remaining 20-30%, with virtually all sales for live export being paddock sales. In the case of the sheep industry, approximately 70% of lamb sales are via saleyards, with the balance of sale spread evenly between over-the-hook and paddock sales. For adult sheep, saleyards account for around 70% of all sales, with virtually all other sales being paddock sales. Page 40

50 Saleyards Table 5 Methods of selling Australian livestock. Market system Species Utilisation Cattle, sheep, pigs (store and slaughter), goats Over-the-hooks Cattle, lambs (slaughter) livestock sold on a carcassweight basis. Direct sale (paddock sale) Cattle, Sheep, lambs (store and fat), pigs, goats Contract supply Electronic sale Cattle, sheep, lambs, pigs, (slaughter, but also feeder cattle for feedlots) Cattle, sheep, trade lambs (store) Significant for cattle and sheep in southern Australia. Limited use of saleyards by pig producers, northern beef producers. Common for cattle in northern Australia. Common for store stock sales and for pigs, and for cattle in northern Australia Common for beef feedlots, sheep destined for live exports, larger-scale lamb production and pig production. Growing in significance, especially for store cattle, sheep and lambs. In most cases, but in particular for sales through saleyards, sales are transacted via a livestock agent, who typically charges between 2% and 5% commission on the sale. The Australian Livestock and Property Agents Association (ALPA) states there are 1,200 livestock agency businesses Australia-wide, employing 8,500 staff. Today: Of these, approximately 800 agency businesses are owned by the major pastoral houses, while 400 are independent private agency businesses. Livestock saleyards represent a major avenue for the sale of all forms of livestock (except poultry). There are a total of 124 saleyards in operation nationally, located as indicated in the following table. Table 6 Location of Australian livestock saleyards. State Number NSW 63 Vic 27 Qld 21 SA 5 WA 5 Tas 2 NT 1 National total 124 Page 41

51 Meat and dairy processing. The meat processing sector consists of some 120 facilities spread throughout Australia. These include abattoirs (both export and domestic) and boning rooms (export and domestic) that are involved in the slaughter, storage and processing of cattle, sheep, pigs and goats for domestic and export sale. Table 7 Australian accredited meat processing facilities. Export Abattoir Export Boning room Domestic Abattoir Domestic Boning room VIC QLD NSW WA SA TAS NT Total Australia The dairy processing sector consists of some twenty large milk processing organisations, which are a mix of farmer owned cooperatives, Australian-listed companies, and international dairy processors. Many of these have multiple processing facilities located throughout Australian dairy regions. There are also a large number of other companies involved in the manufacture of consumer dairy products, utilising a range of different dairy products in that manufacture. Total employment in the meat processing sector is estimated to be approximately 25,000 persons. This includes employment in meat processing and boning facilities associated with abattoirs. Total employment in meat and meat product manufacturing (including employment in abattoirs) is estimated to be approximately 53,000 persons. In the dairy processing sector, it is estimated that total employment is approximately 18,000 persons. In total, livestock related processing is estimated to employ 71,000 persons nation-wide, and constitutes approximately one third of the total employment in the food processing sector. Page 42

52 Table 8 Employment in food manufacturing, Australia, NSW VIC Qld SA WA Tas NT Australia Meat and meat products 15,750 11,750 14,500 5,250 5, na 52,750 Dairy products 4,250 11,000 1,250 na 750 1,000 na 18,250 Fruit and vegetable processing 1,750 2, ,000 na 6,500 Oil and fats 750 na na na na na na 750 Flour and cereals 1,500 1, na na na 3,750 Bakery products 18,750 19,250 13,250 5,000 4,250 2,000 na 62,500 Other food 5,750 6,250 5,500 2, na 21,000 Beverage and malt 6,500 12,000 3,000 7,500 2, na 32,000 Food, beverage and tobacco nec 10,750 na na na na na na 10,750 Total food and beverage 65,750 63,500 38,500 21,500 13,500 5, ,250 Livestock related 20,000 22,750 15,750 5,250 5,750 1,500 na 71,000 % Livestock-related 30.4% 35.8% 40.9% 24.4% 42.6% 27.3% 34.1% Source: Australian Food Statistics, ABARES. Total value added for the meat and dairy processing sectors for is estimated to be $7.2 billion dollars, with meat processing and manufacturing accounting for $4.7 billion of this total, and dairy processing $2.5 billion. Table 9 Industry value-added, livestock processing sector. Livestock Manufacturing Industry ( ) Industry Value Added GVA ($m) Meat processing 2,779 Poultry processing 1,366 Cured meat and smallgoods manufacturing 609 Milk and cream processing 335 Ice cream manufacturing 210 Cheese and other dairy product manufacturing 1,906 Total $7,205 Source: ABS catalogue 8155; Australian Bureau of Statistics Input/output tables provide an estimate of the inputs used by both the meat and dairy processing sectors, in generating an annual of $7.2 billion of value added for the national economy. These data are displayed in the following two tables. It highlights that the beef and dairy processing sectors generate $7.7 billion per annum in employment in the Australian economy, as well as being significant consumers of a broad range of other goods and services. Many of these facilities are located in non-metropolitan regions, and hence play a very significant role in regional economies. Page 43

53 Sheep, Grains, Beef and Dairy Cattle Compensation of employees Poultry and Other Livestock Road Transport Meat and Meat product Manufacturing Wholesale Trade Employment, Travel Agency and Other Professional, Scientific and Technical Non-Residential Property Operators and Paper Stationery and Other Converted Electricity Transmission, Distribution, Electricity Generation Other Repair and Maintenance Polymer Product Manufacturing Finance $8,000 $6,000 $4,000 $2,000 $- Figure 55. Major inputs utilised by the meat processing sector. Source: ABS Input/Output tables Sheep, Grains, Beef and Dairy Cattle Compensation of employees Dairy Product Manufacturing Wholesale Trade Polymer Product Manufacturing Road Transport Professional, Scientific and Technical Paper Stationery and Other Converted Telecommunication Services Publishing (except Internet and Music Other Food Product Manufacturing Transport Support services and storage Internet Service Providers, Internet Poultry and Other Livestock Other Repair and Maintenance $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $- Figure 56. Major inputs utilised by the dairy processing sector. Source: ABS Input/Output tables Page 44

54 Food processing and manufacturing makes up approximately 18% of the value added by the manufacturing sector, with those processing facilities associated with livestock products making up more than a third of the total value-added contributed to the economy by the food manufacturing sector. Collectively, the livestock and dairy processing sectors account for approximately one third of the value generated by the food and beverage processing sectors in Australia each year. Other food product manufacturing Meat processing Sugar and confectionery manufacturing Poultry processing Cured meat and smallgoods manufacturing Milk and cream processing Ice cream manufacturing Bakery product manufacturing Cheese and other dairy product manufacturing Grain mill and cereal product manufacturing Oil & fat manufacturing Seafood processing Fruit & vegetable processing Figure 57. Value added by the Australian food manufacturing sector, Food retailing. Source: ABS The total value of retail food sales (including supermarkets, takeaway foods and cafes and restaurants) in was estimated to be $126 billion. It is not possible to separately identify the share of this expenditure attributable to livestock-related products, because of the complexity of value-added elements and service costs associated with different food categories, although some indication is available from ABS statistics which indicate that approximately 20% of average weekly household expenditure on food and grocery items (excluding liquor) is spent on livestock-related products. Nationally, there are approximately 1.1 million people employed in food retailing in Australia, with approximately half of these employed in cafes, restaurants and takeaway food outlets, and 270,000 employed in the supermarket sector. Available statistics do not enable Page 45

55 any of these to be specifically identified as being associated with the livestock-related sectors, although meat and dairy products obviously form a very significant part of the total turnover of this sector. Table 10 Employment in food and grocery retailing in Australia. NSW Vic Qld SA WA Tas NT Australia Wholesale,grocery,liquor,tobacco 21,750 16,750 12,500 5,000 7,500 2, ,250 Supermarket and grocery 76,750 67,000 60,500 23,500 29,250 7,500 3, ,000 Specialised food retail 39,000 26,000 21,250 9,750 9,750 2, ,500 Food retailing, other 1, , ,500 Café, restaurant,takeaway 159, ,000 96,500 34,250 52,250 11,000 4, ,250 Pub,tavern,bar 33,500 17,500 18,750 11,750 9,500 3,000 1,000 95,000 Club 32,250 6,500 15,000 1,500 1, ,500 Food and beverage other. 250 Total 364, , ,500 86, ,500 25,750 10,250 1,095,000 Source: Australian Food Statistics, ABARES. Other sectors. There is a wide range of other sectors that provide a range of different products and services to the livestock industries and associated downstream sectors. These range from transport and energy, to services such as administration, finance, export facilitation and shipping. It is not possible to specifically identify the value of these (beyond the information in ABS input/output tables) to regional economies, or the impact of changes in the livestock and associated industries on these sectors. Page 46

56 9. Livestock diseases and industry costs. This section of the report includes a review of the available literature on the current costs of livestock diseases in Australian livestock industries. This review provides some important baseline information for a larger research project that aims to quantify the economic importance of Australia s livestock industries, and the role of animal medicines and productivity-enhancing technologies in securing the future growth of these industries. This review involved analysing major diseases and other animal health issues (such as those caused by specific insect pests) that impact on Australian livestock industries, with specific reference to beef cattle, dairy cattle, sheep, goats, pigs and poultry. In some circumstances, there was a narrow range of information available. This meant that the analysis conducted in these situations was based on relatively old information published in the 1990s and early 2000s, but still considered relevant. The information was largely sourced from industry research bodies such as Meat and Livestock Australia (MLA). This review also analysed the potential cost of future foreseeable diseases which involved sourcing information from both domestic and international research bodies such as the Australian Bureau of Agricultural and Resources Economics and Sciences (ABARES) and the United States Department of Agriculture (USDA). The final part of this review involved analysing the current Australian expenditure on livestock health. This part of the literature review also includes analysis on animal health products that are currently restricted for use in Australia, but could potentially impact on current expenditure if regulations were to change. Background A significant factor of farm profitability for Australian livestock producers is the cost of livestock diseases and other animal health issues such as those caused by specific insect pests. There have been several studies that have attempted to quantify the prevalence and severity of common livestock diseases and animal health issues in Australia, and responsibility for continually updating this information rests with Animal Health Australia. Generating projections of the national economic cost of animal diseases and animal health issues is a difficult exercise. There are a range of different costs associated with livestock disease, which include the cost of surveillance systems, the direct costs of preventative treatment, the cost of curative treatment for diseased animals, the cost of lost production of diseased animals, and the possible cost of loss of markets or international market access as a consequence of the disease. The relative significance of each of these can vary by disease, and by livestock species. There have been two research projects carried out over recent years in Australia to estimate the economic cost of animal diseases in the sheep, cattle and goat industries. (Sackett et. al. 2006, Lane et. al. 2015). These two research projects resulted in differing estimates of the costs of various diseases, in part because they were based on sheep, cattle and goat population numbers that were current at the time each report was prepared but that changed Page 47

57 over the nine years between these reports. A second reason the two estimates differ is that the researchers involved in each of the two research projects used either published or their own estimates of possible disease incidence and prevalence both within and between flocks or herds, and these differed for a number of reasons. For reference, both sets of estimates have been reported here, noting that the latter estimates (Lane et. al. 2015) are more contemporary. Available evidence indicates that reduced income for livestock producers due to diseases and animal health issues can be much higher than the cost of treatment and/or prevention in most circumstances. There is no single overall estimate available of the annual cost of livestock diseases in Australia. Some research available for the sheep and beef cattle industries estimates that the annual economic cost in these two livestock industries may average between $1 and $2 billion per year (including both direct treatment costs and economic costs), although this obviously varies greatly year-by-year due to varying seasons and disease incidence and prevalence. Similar estimates are not available for the dairy, pork and poultry industries, although the more intensive production systems utilised in those livestock sectors are likely to mean that the economic cost of disease may be relatively less. Nevertheless, even based on these broad estimates, this suggests that up to 10% of the annual $20 billion in value generated by Australian livestock industries may be lost due to the costs associated with livestock disease. These estimates are based on the costs associated with livestock diseases that are currently endemic in Australia. Australia is relatively fortunate in that there are many livestock diseases that are endemic in many overseas locations that are not present in Australia. Appendix 1 provides the current disease status of the Australian livestock industries, as reported by Animal Health Australia. (Animal Health Australia, 2014) The potential cost of the emergence of an exotic disease such as foot and mouth disease or avian influenza are estimated to be much greater. For example, a recent estimate of the cost of a widespread outbreak of foot and mouth disease was that it would cost in excess of $50 billion over ten years (Buetre et al, 2013), an average of $5 billion per year. Even the direct cost of livestock disease prevention and treatment are substantial, and appear to be increasing. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) publishes annual statistics on factory sales for animal health products (see Figure 2). These data are gathered from members of the National Association from Crop Protection and Animal Health (AVCARE) and are likely to represent about 90% of actual total sales nationally. Between 2006 and 2013, the total sales of animal health products in Australia experienced an annual average nominal growth rate of 5%. In 2013, the Australian market for animal health products was estimated to be over $938 million. Page 48

58 Figure 58: Total factory gate sales of animal health products in Australia Source: ABARES (2014) The following review examines the major diseases present for different livestock species in Australia, with a focus on those considered to impose the greatest cost. Cattle diseases and health The beef and dairy cattle industries are Australia s largest livestock industries by value, and are also the livestock industries that have the greatest geographical spread across the continent. Beef production occurs throughout the entire nation, while dairy production is confined to southern areas and coastal regions, excluding the tropical coasts. Beef and dairy cattle are bovine livestock susceptible to many of the same diseases, although mastitis and Bovine Johne s Disease (BJD) are relatively more prevalent and economically important in Australian dairy herds. The prevalence of each major disease varies depending on a number of factors such as geographic location, climate and management practices. These variations add to the complexity of developing models that estimate national economic costs of diseases and animal health issues. Figure 1 and Table 1 provide a ranking and a cost estimate for the major diseases and animal health issues that impact on the Australian beef cattle industry in the northern and southern regions of the country. The costs include the estimated treatment costs, costs due to loss of production, and the costs associated with curative or preventative treatment of the disease. The data used in the modelling that was the basis of this analysis was derived from Australian agricultural census data collected by the Australian Bureau of Statistics (Lane et al, 2015). Page 49

59 Figure 59: Annual costs of diseases and health in the Australian beef industry Source: Lane et al (2015) Table 11 Annual costs of major health issues in the cattle industry Disease Source: Sackett et al (2006), Lane et al (2015) National economic cost ($ millions) 2006 (Sackett et al) 2015 (Lane et. al.) Cattle tick $147 $161 Bovine Ephemeral Fever $101 $59.8 Buffalo Fly $78 $98.7 Bloat $49 $76.8 Mastitis $40 N/A Vibriosis N/A $21 Bovine Respiratory Disease (Feedlots) $40 Internal parasites (e.g. worms) $39 $93.6 Grass tetany $12 $24.3 A description of the major cattle diseases and other animal health issues, along with further information on the national economic costs, is provided below. Page 50

60 Cattle tick Cattle tick is an external parasite that is a serious pest to the northern regions of Australia for cattle producers (see Figure 3). The costs associated with cattle tick are estimated to be the largest economic cost of a pest or disease incurred by the national beef cattle industry. Including both direct and indirect costs, these costs are estimated to be $161 million per year (Lane et al, 2015). A large share of this national cost of cattle tick occurs in the northern cattle zone (see Table 2). Figure 60: Areas infected by cattle tick in Australia Source: Sackett et al (2006) Table 12 Annual costs of the cattle tick in Australia by region Zone Total cost (million) Northern $156 Southern $5 Total $161 Source: Lane et al (2015) Direct costs include reduced productivity, veterinary costs, chemical treatment and regulatory costs. The government-controlled tick line inspection points from New South Wales to Queensland are also relatively expensive, with annual costs of between $2 million and $7 million (Sackett et al, 2006). Additionally, the research concluded that maintenance of the tick line within Queensland costs a further $3.3 million per year. Indirect costs for diseases and animal health issues include labour costs during mustering and treatment, capital cost of facilities for treatment (e.g. the cost of installing a livestock plunge dipping facility is approximately $20,000) and costs of research and policy. Ticks have a Page 51

61 direct effect on cattle production through increasing mortality and morbidity rates, weight loss, decreased immunity and fertility decline. The production effects of cattle tick include: Reduced market accessibility with discrimination against Brahman cattle and loss of potential to produce organic beef Reduced value of hides (by 25 30%) Residues in meat requiring withholding periods and extended export quarantine Occupational health and safety issues (Sackett et al, 2006). Bovine Viral Diarrhoea Virus (BVDV or pestivirus) There are various strains of Type 1 BVDV that are present in Australian grazing beef cattle herds. The major implication of the virus are conception failure, early-pregnancy abortion, and mortality of persistently-infected (IP) calves. Although there is no effective treatment once the disease is present, there are effective preventative vaccines available that generally cost over $4/dose. The total cost of BVDV in cattle across Australia at the current prevalence of disease is estimated at $114.4 million a year. However this estimate is an average and does not recognise the episodic patterns in which BVDV often impact individual herds (Lane et al, 2015). Bovine Ephemeral Fever (BEF) The economic impact of BEF (also referred to as three day sickness) to the cattle industry is estimated to be $101 million per year (see Table 3). The disease is widespread in Queensland with common symptoms including short fever, shivering, lameness and muscular stiffness of the animal. Typical productivity effects of BEF involve up to 20% weight loss, temporary sterility of bulls, milk loss, abortion, calf mortality (from milk loss), veterinary costs and disruption to management procedures. There is a commercial vaccine which is widely used by beef and dairy producers. The cost of this treatment is estimated to have increased animal health expenses by $2.40 per head per year therefore contributing heavily to the increase in costs of animal health issues for Australian cattle producers (Sackett et al, 2006). Page 52

62 Table 13: Annual costs of Bovine Ephemeral Fever for at-risk cattle herds in Australia Zone Buffalo fly Number of cattle at risk (million) Increased expenses (million) Total cost (million) Northern 53.4 $26.7 $83.1 Southern 11.5 $6.4 $17.9 Total 65 $36.1 $101 Source: Sackett et al (2006) Buffalo fly has a similar geographic distribution to that of the cattle tick, occurring mainly along the coast and northern regions of Australia. It is a small biting fly that feeds off the cattle and causes irritation which can result in reduced production if cattle are heavily infested. It is the third most costly disease to cattle producers with the average loss of production around $30 per head per year. The total national economic impact is estimated to be over $98.7 million a year (Lane et al, 2015). Control methods rely primarily on chemical insecticides, but unfortunately fly resistance to some treatments has become an issue, as well as some chemicals known to leave residues in the meat. Consequently, a variety of nonchemical control options are being favoured by producers. For example, Buffalo fly traps can reduce fly numbers on cattle by 60-70%, costing between $1,000 and $1,500 per trapping system. However, economic surveys of cattle producers have found that the savings in labour and chemical expenses should make the trap economically worthwhile over a five-year lifespan (MLA, 2011). Cattle bloat Cattle bloat is a common animal health issue in both beef and dairy cattle sectors, with a national annual cost estimated to be $76.8 million per year (Lane et al, 2015). Previously, Sackett (2006) reported the total annual cost of cattle bloat to sum $47.5 million indicating an increasing trend of the animal health issue. It is caused by the consumption of young, rapidly growing legume pasture species (such as white clover and lucerne) that are low in fibre. Subsequently, the low fibre pasture source results in excess gas production in the rumen during digestion, and the inability of the animal to burp this gas quickly enough results in a build-up of pressure and distention of the rumen, which can quickly suffocate the animal (Dairy Australia, 2015). Although bloat can occur anywhere and at any time, it is generally confined to high-rainfall regions where white clover is an important part of the pasture base or regions where lucerne dominates the pasture. The incidence of this animal health issue and the number of deaths associated with it are highly variable, leading to a relatively broad range of cost estimates. Table 4 indicates it is more economical for cattle producers in high risk areas to use prevention practices against cattle bloat compared to risking the incidence of the illness. An important point to note about this disease is that one of the preferred treatments, the anti-bloat capsule, has a growth Page 53

63 promotant effect. Previous studies have found that this treatment resulted in an additional live-weight gain of 8kg in sale steers, thus explaining why some treated herds have negative costs (Sackett, 2004). Table 14: Annual costs of cattle bloat in the Australian beef industry southern regions Category Total cost (million) Treatment Prevention Production Total Source: Lane et al (2015) $3.1 $24.9 $48.8 $76.8 Mastitis Mastitis, a bacterial infection of a cow's udder, costs Australia's dairy industry more than $40 million in lost production every year (ABC Landline, 2013). It is the most costly animal health issue for the dairy industry, with clinical cases costing individual dairy farmers an estimated $270 per case (Dairy Australia, 2014). In the past, it was difficult for farmers to recognise mastitis problems in herds until an outbreak occurred. Dairy Australia s Countdown Mastitis Focus report released in 2013, allows farmers to effectively track the udder health of a herd helping identify problem areas and potential risks by tracking progress in the herd after changes are made (Dairy Australia, 2014). Mastitis can also be a health issue for beef cattle producers, however it is less common. There are studies currently being undertaken in the United States with the testing of antibiotics for treatment against the disease, however the likelihood that such treatments would gain approval and be available for use in Australia is unclear. Bovine Respiratory Disease Bovine Respiratory Disease (BRD) is a common disease associated with cattle in feedlots, and is estimated to account for between 50% and 90% of all cattle deaths in feedlots. In some cases, up to 5% mortality has occurred due to the disease (Sackett et al, 2006). The disease arises due to a combination of stress factors and exposure to infectious agents during the first three to four weeks that cattle are introduced into a feedlot. The stress associated with movement from farm to saleyards and transport, combined with the stress of socialising with cattle from diverse sources and associated exposure to infectious agents can result in the development of respiratory disease which can be fatal in serious cases. It is estimated the disease results in an annual cost of some $59.7 million for the industry, with around $56.6 million of this being the cost of lost production (Lane et al, 2015). Page 54

64 A range of management strategies are available to minimise the risks of BRD, which include pen weaning of cattle and backgrounding prior to feedlotting to accustom cattle to handling and socialising in pens. Treatments for the disease include antimicrobials, and vaccines are now becoming available to protect against the most common infectious agents. Internal parasites The most common internal parasites of cattle in Australia include worms, flukes and protozoa. The prevalence of worms is mainly a function of rainfall, with high risk areas considered to be those receiving more than 600mm of annual rainfall. Table 5 indicates that 87% (or $82 million) of the national economic loss of internal parasites is concentrated in southern regions. Overall, it is estimated that internal parasites cost the cattle industry over $93.6 million annually. A large component contributing to this economic impact are the costs associated with prevention practices. These products, generally drenches, are estimated to involve annual costs of $50-60 million (Lane et al, 2015). A challenge faced by cattle farmers is the increasing consumer demand for organic beef. As organically produced livestock cannot be treated with chemicals to control internal parasites, farmers are left with very limited treatment options (Neeson and Love, 2014). There have been some organic drenches developed which have shown measurable effects, but their effectiveness is generally much lower than conventional parasiticides. Trials indicate that while conventional drenches achieve a 95% reduction in internal parasite numbers, organic drenches have only achieved less than 50% reduction (James, 2009). The question of treatment options is therefore problematic for farmers, not only due to the significant cost of drenches and other treatments but also due to restriction on their ability to sell their products into high-end markets. Table 15: Annual economic loss due to worms in beef cattle - southern regions Category Prevention Production loss Total cost (million) Per head Per herd Total Source: Lane et al (2015) High Medium Low High Medium Low High Medium Low $6.84 $5.40 $0.66 $5.10 $3.88 $3.37 $11.94 $9.28 $4.03 $1,286 $1,016 $124 $959 $729 $634 $2,245 $1,744 $758 Hypomagnesaemia (grass tetany) $42.4m $39.6m $82m Grass tetany is predominately confined to medium and high-rainfall regions in south-eastern parts of Australia and has been a common cause of death for beef and dairy cows over the past 40 years. The disease is associated with low levels of magnesium in the blood and cerebrospinal fluid around the brain. Incidence varies between seasons and location however most clinically affected cows die (DEPI VIC, 2007). It is estimated grass tetany costs the beef industry $24.3 million a year, with costs arising due to prevention methods that are labour Page 55

65 intensive and the cost of treatment products. It has also been noted this can often lead to inflation in supplementary feed costs with the addition of magnesium oxide (Sackett et al, 2006). Due to the prevalence of this animal health issue in Victoria, most surveys of the cost of this cattle health problem have been done in that state where, in bad years, up to 42% of herds can be affected. There has also been research indicating that there is a relationship between the use of potassium and nitrogen fertiliser and the incidence of grass tetany (DEPI VIC, 2015). This means that some farmers may have to compromise on potassium and nitrogen fertiliser application, which can constrain cattle productivity and therefore farm profitability. Bovine Johne s Disease Bovine Johne s Disease (BJD) is caused by a bacterium (Mycobacterium paratuberculosis) that lives mainly in the intestines of infected animals. It causes the intestinal wall to thicken and reduces the normal absorption of nutrients from grazing, so the animal can eventually starve to death. BJD is more common in dairy herds in Australia than beef herds, but the disease is also of significance to the beef industry. The total cost of BJD to the cattle industry is estimated at $2.8 million a year, with $2.5 million of this cost concentrated in southern areas (Lane et al, 2015). This estimate was based on the assumption of only 5% herd infection rates in southern cattle enterprises, and 1% in northern cattle herds. The generally low prevalence of BJD in Australian beef herds is internationally recognised, however potential outbreaks have been estimated to be extremely costly for the sector. In 2014, the Department of Agriculture, Forestry and Fisheries (DAFF Qld) assessed the impact of BJD in Queensland and estimated the cost of maintaining the Protected Zone status to be over $6 million for the original single infection node, approximately split between industry ($2.7 million) and DAFF Qld ($3.6 million). The estimated costs for destocking of infected properties were $1.5 million per commercial beef property, with a stud likely to incur substantially higher costs. In the scenario of an outbreak, the economic impact on live cattle exporters was estimated to be between $10 and $15 million per annum; not considering annual costs of vaccination of between $2 and $2.4 million and reduction in farm gate price across the industry which would reduce annual returns by around $16 million (DAFF Qld, 2014). Australian beef exports generally do not have to meet any importing country requirements regarding BJD, with the exception of Japan. This is an important and valuable market for Australian beef, and it has been estimated that a 10% redirection of beef exports away from Japan could cost the industry $9 million per annum based on current prices and estimated values (Department of Agriculture, 2014). Research by ABARES (2013) found that assuming a disease spread rate of 2 per cent per year between properties, the cost of BJD could be up to $260 million over the next 20 years. This is made up of $106 million loss in productivity and live cattle export sector losses and $155 million in losses associated with livestock selling restrictions. Page 56

66 Bovine Genital Campylobacteriosis (Vibriosis) Vibriosis is a leading cause of cattle abortion and infertility, costing the industry $21 million a year (Lane et al, 2015). The condition is spread by mating infected bulls to susceptible cows and is found in all states of Australia. It was particularly widespread in NSW in the 1990s with research revealing 46% of beef cattle with infertility had vibriosis (Hum, 2007). For an infected female herd, abortion rates are around 12%, conception rates can drop by 50% and permanent infertility can increase by 11%. There is a large financial loss for farmers, particularly in the first year of infection where gross margins can be reduced by as much as 65% (Hum, 2007). Once the disease becomes established in a herd, gross margins have been estimated to be 36% below those of uninfected herds. There are limited preventative methods against vibriosis in cattle herds. Vaccination of bulls costs on average $12.50/year including labour to administer, however its efficacy is not clear. McGowan et al (2014) reported that 68% of north Australian cattle enterprises vaccinated bulls against vibriosis. Clostridial diseases Clostridial diseases are caused by bacteria of the genus Clostridium. Clostridia are widespread in the environment and are normally found in soil and faeces. The main clostridial diseases of relevance to cattle in Australia include Tetanus, Malignant Oedema, Blackleg, Enterotoxaemia and Black disease (MLA, 2015). Routine vaccination of young and susceptible cattle with a 5-in-1 vaccine is the main measure adopted to control these diseases in cattle. It is also recommended that the dosage and administration of the 5-in-1 vaccine involves an initial dose followed by a second dose four to six weeks later along with annual boosters being required to maintain immunity against black disease and malignant oedema (Zoetis, 2015). The disease is primarily distributed in southern farming regions of the country and is an inherent risk to all cattle enterprises. Cost estimates of the economic impact of clostridial diseases are concentrated on southern regions at $6.7 million a year, with $2 million due to prevention costs and $4.7 million due to production losses (Lane et al, 2015). Sheep diseases and health There have been various estimates of annual economic costs of sheep diseases over recent decades. Most studies have concluded that the largest cost for a disease or animal health issue in the Australian sheep industry is the cost associated with internal parasites (see Table 6 and Figure 4). Page 57

67 Table 16: Annual costs of diseases and health issues in the Australian sheep industry Disease National economic cost (million) 2006 (Sackett et al) 2015 (GHD Pty Ltd) Internal parasites (e.g. worms) $369 $436 Flystrike $280 $173 Lice $123 $81* Footrot $18 $32.3 Ovine Johne s Disease $4 $35 *the reduction in cost of lice is consistent with reduced sheep numbers in Australia. Source: Lane et al (2015) Figure 61: Annual costs of diseases and health in the Australian sheep industry Source: Sacket el al (2006) Internal parasites Internal parasites are considered to be the most important livestock disease of the Australian sheep industry. The value of lost production due to common internal parasites such as Barber's pole worm (Haemonchus contortus), Black scour worm (Trichostrongylus colubriformas), Small brown stomach worm (Ostertagia spp) and Liver fluke (Fasciola hepatica) has been estimated to be over $341 million per year, while the cost of drenches and other prevention methods are estimated to exceed $93 million per year (see Table 7). Page 58

68 Table 17: Annual cost of internal parasites in sheep Category National economic cost (million) Treatment $0 Prevention $93.77 Production losses $ Total $ Source: Lane et al (2015) Over time, there has been a range of estimates of the economic impact of internal parasites (McLeod 1995 and Sackett et al 2006). All studies ranked gastro-intestinal parasites as the most costly animal health disease to the Australian sheep industry, and agreed the largest costs were attributed to loss of production rather than prevention or treatment costs. Another threat in high rainfall areas is the accumulation of dag on breech wool. In addition to direct costs associated with crutching, dag is also a major risk factor for breech strike in these regions (Tyrell et al, 2014). However, modelling the impact of internal parasites is problematic as the prevalence of many of the parasites is correlated with annual rainfall patterns, which results in large variations of incidences from year-to-year. A major challenge associated with internal parasite control in sheep is the increasing resistance of worm populations to available treatment products (see Table 8). A research report by the NSW Department of Agriculture (2011) identified that for some of the more common sheep drenches, more than 90% of surveyed sheep farms had resistant worm populations present. Research concluded that the lack of availability of effective new drenches was a major factor contributing to increases in the prevalence of resistant internal parasite populations. However, in recent years there have been two new drenches developed for treating internal parasites; (1) monepantel which was introduced in 2010 and (2) the active ingredient derquantel combined with abamectin which was submitted for chemical registration in Australia in 2013 (Playford et al 2014). Notwithstanding, Playford et al (2014) argued that Australian sheep producers were likely to continue to rely heavily on the older classes of drench for some years to come. Page 59

69 Table 18: Prevalence of resistant worm populations in sheep flocks Drench or drench group Prevalence of resistance Benzimidazole (BZ, white ) Levamisole (LEV, clear ) BZ + LEV combination Macrocyclic lactone (ML, -ectin); Avermectins (ivermectin, abamectin) and milbemycins (moxidectin) Napthalophos Closantel Triclabendazole Approximately 90% of properties. Approximately 80% of properties (resistant scour worms); resistance no longer rare in Haemonchus. Approximately 60% of properties (resistant scour worms). No common. 70% of sheep farms in WA have ML (ivermectin)-resistant Teladorsagia (Ostertagia). ML (ivermectin)-resistant Haemonchus in northern NSW and southern Queensland are common (70+% of farms; possibly 30+% of farms in parts of southern NSW and other non-seasonal to winter rainfall areas of south-eastern Australia. Confirmed resistance rare. Two recorded cases in Australia (goats, Queensland) Green et al (1981) (Haemonchus), Le Jambre et al (2005) (Trichostrongylus). Resistance in Haemonchus is common (80+% of farms in some areas) in northern NSW and south east Queensland. Many isolates are also ML-resistant. Small number of closantel-resistant strains of liver fluke in Australia. Small number of resistant strains of liver fluke in Australia. Source: NSW Department of Agriculture, (2011) Flystrike Flystrike is a major problem for the Australian sheep industry, with wool producing flocks commonly being most affected. A flystrike incidence can be a result of integrated effects of fly abundance, weather variables and sheep susceptibility. However, these effects can be reduced through management practices such as shearing, crutching and jetting (Wardhaugh et al 2001). Weather conditions associated with moisture and warmth with prolonged wet conditions with susceptible sheep often results in a flystrike wave across the sheep flock. Recent assessments estimate that all forms of flystrike result in an economic loss of $173 million to the Australian sheep industry each year (see Table 10). This consisted of $105 million in production losses and $57 million in prevention costs. Sackett et al (2006) found the most costly flystrike to be breech strike representing the greatest loss followed by body strike and then pizzle strike. Page 60

70 Table 19: Annual costs of all forms of flystrike in sheep Category National economic cost (million) Treatment $11.34 Prevention $57.30 Production losses $ Total $ Source: Lane et al (2015) In the late 1980s, it was estimated that around three million sheep per year died as a result of flystrike in Australia (Wardhaugh and Morton, 1990) while many more were affected by nonfatal strikes, and suffered some loss of production as a consequence. Wardhaugh et al (2001) discussed the results of a study at Inverell during 1990/91 which estimated 0.34% of a sheep flock surveyed was effected by flystrike, but the level of incidence increased to 0.59% of the flock when comparing the actual number of sheep that were considered susceptible. The variation in some estimates is also due to the correlation between climatic conditions in individual years and the diseases prevalence. The main preventative measure for flystrike is the use of chemical treatments applied to the wool. These chemicals are routinely used in conjunction with specific animal husbandry practices (such as lamb marking and shearing), and also applied to sheep during periods when the risk of flystrike is high. As is the case for internal parasites, the increase in the resistance of fly populations to commonly used chemicals is a growing challenge. Table 9 lists the insecticide classes where resistance has been detected in Australian sheep blowfly populations. Page 61

71 Table 20: Insecticides and resistance development in Australian sheep blowfly populations Insecticide class Organochlorine (OCs) Examples of insecticides in this class Aldrin, Dieldrin, BHC, DDT Year introduced for use on sheep Year resistance detected in blowfly Practical effect of resistance Flystrike protection completely lost. OCs were banned because of residues in meat. Carbamate Butacarb Product withdrawn in Cross resistance to Ops and probably benzoyl phenyl ureas. Organophosphate (OPs) Benzoylphenyl ureas Source: Sheep CRC, 2010 Diazinon, Chlorfenvinphos, Fenthionethyl, Fenchlorvos, Carbophenothion, Malathion, Trichlorfon Diflubenzuron, Triflumuron 1957-some still available 1965 Flystrike protection reduced from approximately 18 weeks to only 2-4 weeks. Effectiveness of fly oil type flystrike dressings greatly diminished Flystrike protection completely lost. Products withdrawn from use as flystrike preventatives. A range of different management options are also effective in reducing the risk of flystrike, including internal parasite control to reduce scouring, and strategic timing of crutching and shearing. There has also been an increased focus on genetic selection of sheep that are less susceptible to flystrike as well as careful selection of rams with low wrinkle and low dag scores in the Australian Sheep Breeding Values (Sheep CRC, 2014). One commonly used measure to reduce flystrike risk is the practice of cutting away wool bearing skin from the breech areas of sheep referred to as mulesing. The mulesing operation, predominantly carried out at lamb marking, results in wound sites on lambs that rapidly heal and result in bare skin which minimises the retention of fly-attracting faeces in the sheep s wool. There has been increased criticism of mulesing in Australia since the early 2000 s, largely because the operation initially results in a bloody and unsightly wound site on the breech of treated lambs. Despite animal rights organisations campaigning against the practice, the industry still advocates that mulesing remains the most effective practical way to reduce the risk of flystrike in sheep. Even with the widespread use of this practice, there is still a significant loss of wool and meat production each year due to flystrike. Research is continuing into alternatives for preventing flystrike including vaccines, clips that mimic the effect of the mules operation, needleless intradermal injections and the use of genetically resistant sheep (RSPCA 2011). Integrated Pest Management (IPM) is also an approach to controlling flystrike which includes four main elements. These elements include selective and effective use of chemicals, management options such as matching shearing/crutching with increased fly activity, genetic improvement by selecting sheep for Page 62

72 resistance of fleece rot and less wrinkle and utilising the blowfly life cycle such as monitoring blowfly populations with fly traps (Joshua & Turnbull 2012). Lice Lice are estimated to cost the Australian sheep industry $81 million yearly (see Table12). A recent survey (Reeve et al, 2006) indicated that since 2011, 23% of sheep producers reported seeing live lice in their flocks, while 27% reported some sheep rubbing and 54% reported no evidence of lice in their flock. Compared to current conditions, the estimated cost of lice to the Australian sheep industry was relatively higher at $123 million a year (Sackett et al, 2006). The reduction in annual costs to $81 million is consistent with the decrease in sheep numbers in Australia and does not necessarily indicate a marked improvement in lice control. Category Table 21: Annual costs of lice in sheep National economic cost (million) Treatment $3.77 Prevention $41.19 Production losses $25.54 Total $81.08 Source: Lane et al (2015) Lice have been controlled for most of the last century almost exclusively by the use of chemicals and regulatory controls over the movement of sheep from infected flocks. However in response to emerging concerns about chemical residues in wool and meat, occupational health and safety concerns associated with chemical use, the development of resistance and continuing cost of production pressures many woolgrowers are modifying their lice control programs. Two changes have been noted; (1) a move away from routine annual treatment to a treatment on detection regime and (2) the use of chemicals which constitute a lower residue risk (James et al, 2001). Table 11 lists the different chemical groups used for lice control and the level of risk for raw wool residues. Page 63

73 Chemical group Table 22: Chemicals registered to treat lice and flystrike Raw wool residue risk level Organophosphate Synthetic Pyrethroids Diflubenzuron, Triflumuron Dicyclanil, Cyromazine Spinosyn Macrocyclic Lactones Magnesium Fluorosilicate Neonicotinoid Source: Joshua & Turnbull (2012) Low High in long wool (>6 weeks after shearing) Medium in long wool (>6 weeks after shearing) Medium in long wool (>6 weeks after shearing) Low Low Low Low The common range of treatment methods used in cost estimations vary from off-shears back lining, short wool dip and long wool back lining (Lane et al 2015). The average treatment cost is approximately $1.42/adult, while average prevention costs are approximately $0.85/adult (Liceboss, 2014). Footrot Footrot is a contagious bacterial disease caused by the organism Dichelobacter nodosus in association with a number of other bacteria. Infection can cause varying degrees of damage to the horn of the foot leading to lameness and significant loss of body weight and wool production in affected animals. There have been limited recent studies that have assessed the economic impact of footrot on the Australian sheep industry. Modelling and accurate information about the incidence of infected flocks is difficult to obtain as the disease is under-reported due to potential regulatory restrictions, and the correlation between the incidence of this disease and annual rainfall means that incidence varies annually. The extended droughts of the first decade of the 2000s undoubtedly reduced the incidence of footrot, but this has likely reverted over recent years, and especially years with wetter-than-normal summers in southern Australia. A common treatment for footrot is to stand sheep in footbaths containing zinc sulfate or formalin, although severe case require foot paring and topical treatment (DEPI 2009). It has long been recognised that the presence of footrot can have a significant effect on sheep bodyweight, wool quality, fleece weight, and reproduction performance (Gregory 1939, Beveridge 1941, Marshall et al 1991). Allworth (1990) estimated the cost of footrot in an infected merino flock, exercising control over the infection and vaccinating all sheep twice, to be $9.90 per head. Sackett et al (2006) calculated live to cost the Australian sheep industry $123 million yearly, with around 68% ($84 million) due to increased costs associated with chemicals and labour for treatment. More recently however, the national economic cost has been estimated to be just over $44.38 million per year (see Table 13). This consisted of Page 64

74 virulent footrot in sheep estimated to be $32.28 million and benign footrot cases, which estimated to cost the industry $12.1 million a year. Table 23: Annual economic cost of footrot in sheep Category National economic cost (million) Virulent $32.28 Benign $12.10 Total cost $44.38 Source: Lane et al (2015) Sackett et al (2006) estimated that economic costs differ between flocks in which the disease is endemic, and flocks in which the disease is newly introduced. In disease-free flocks where the disease is newly introduced, the spread of disease can be very rapid and the impact on the sheep flock can be quite high. Alternatively, in flocks where the disease is endemic and regular treatment is implemented, the costs can be quite low (see Figure 5). Commercial footrot vaccines are no longer available in NSW, however MLA is currently funding a research project to develop a new vaccine that will protect against all Australian strains of virulent footrot (Allan, 2014). Figure 62: Economic loss due to footrot in Australian sheep in Source: Sackett et al (2006) Page 65

75 Ovine Johne s Disease (OJD) OJD is an incurable, infectious wasting disease of sheep caused by the sheep strain of the Mycobacterium paratuberculosis bacterium which leads to the intestinal wall thickening, resulting in reduced ability to absorb nutrients. OJD infection has been estimated to result in an average 6.4% reduction in expected farm gross margin, for affected sheep farms (MLA, 2005). Research concluded that the average annual economic loss due to OJD infection on farms was $7.68 per DSE (dry sheep equivalent) or $65.92 per hectare. These figures represent the cost of premature sheep deaths, and lost wool and lamb production. There was substantial variation between farms, with some properties losing as much as $ per hectare (MLA, 2005). These estimations do not account for variable input costs and trading restrictions so the real cost of the disease may be considerably higher, depending on the enterprise. It is not only sheep farmers that experience this financial burden; the Australian Meat Processor Corporation (AMPC) estimated that the total cost of OJD to the processing industry as a whole is $4.41 million a year. The management of OJD in the sheep industry has been a controversial issue for some time. Initial control strategies involved zoning and movement restrictions for affected flocks, although these resulted in significant financial impacts for stud and breeding flocks, which many considered out of proportion to the overall impact of the disease. The approach has now been modified in some states. In particular, the availability of the Gudair vaccine has provided the owners of affected flocks with improved management options (although it does not result in the elimination of the disease). However, the Gudair vaccine does involve some occupational health and safety issues for sheep farm businesses. In humans, accidental selfinjection with Gudair vaccine may result in a severe, intense and persistent granulomatous reaction at the site of the injury, and therefore the vaccine should be used with caution to avoid accidental self-injection (Zoetis, 2015). On-field trials of the Gudair vaccination proved to reduce sheep mortalities due to OJD by 90% and delayed faecal shedding for the first year post-vaccination (Reddacliff et al, 2006). This research underpins the important role Gudair has played in the adoption of OJD management strategies. Goat diseases and health The Australian goat industry is continuing to grow and evolve to meet increasing global demand for goat meat, dairy products and fibre (GICA, 2015). Many farmers co-graze their sheep and goats which is often a risk factor with diseases as they can be easily transmitted between animals. Page 66

76 Table 24: Annual costs for major animal health issues in the goat industry Disease Source: Lane et al (2015) Internal parasites National economic cost (million) Internal parasites (e.g. barber s pole worm) $2.54 Enterotoxaemia $0.35 Lice $0.34 Pregnancy toxaemia $0.10 Caseous lymphadenitis $0.11 The most economically important internal parasites in high summer rainfall zones are predominately barber s pole worm and the nodule worm. In areas that typically receive winter rainfall, the most common internal parasites for goats include the brown stomach worm and the scour worm. The economic impact of internal parasites for the goat industry is estimated to be $2.54 million annually (see Table 15). A majority of the economic cost associated with internal parasites is due to the impacts related to production losses ($1.83 million), although prevention costs are also substantial (Lane et al, 2015). Goats are often cograzed with sheep but tend to carry heavier worm burdens and suffer more pathology than sheep (Sangster 1990). Prevention methods involve annual drenching at $1.50 per head a year, including cost of drench and labour. Table 25: Annual economic cost of internal parasites in goats Category National economic cost (million) Treatment $0 Prevention $0.71 Production $1.83 Total $2.54 Enterotoxaemia Source: Lane et al (2015) Enterotoxaemia is a clostridial disease manifesting as diarrhoea and/or rapid death. The economic cost of enterotoxaemia in goats in Australia is estimated to be $0.35 million, with 97% ($0.34 million) of these costs due to prevention methods. Vaccinations for goats are required more frequently than sheep, and some vaccine site reactions develop into abscesses. Page 67

77 However, these abscesses rarely affect carcase trim or causes hide damage. It is estimated that 95% of herds are vaccinated using 5-in-1 costing around $0.30 per head (Lane et al 2015). Lice The most common external parasite for goats are lice, causing the animal to itch and rub. These actions can be particularly damaging in goats that produce fibre with a significant reduction in mohair and cashmere reducing the quality and market value of the fibre (MLA, 2007). Lice causes an estimated $0.34 million a year to the goat industry, however there is little data on the prevalence or robust economic impact of lice in goats (Lane et al 2015). Similar to sheep prevention methods, goat farmers use a wide range of chemicals such as backline pour-ons, injection, spray, dip and dusting. There may be other additional costs associated with these treatments to meet live export, interstate movement or show entry protocols even if goats are free of lice (Lyndal-Murphy et al, 2007). The average prevention costs are estimated to be $1 per goat, which is slightly higher than sheep. Pig diseases and health Pig meat is one of the most important protein sources for the Asian region, where 65% of the world pig population is located (OIE, 2012). By contrast, pig meat has not traditionally been as important in the average Australian diet, although its consumption is growing relative to red meats such as beef and sheepmeats. The pig industry in Australia is relatively small compared to other livestock industries and has traditionally had a domestic rather than an export focus, although this is beginning to change. One of the great strengths of the Australian pig industry is the relatively disease-free status of the national herd, which enables Australia to export high-quality and disease-free pork directly into high value markets. Swine dysentery Swine dysentery has long been recognised as a major cause of production loss for pig industries around the world. Swine dysentery is the most costly disease to pig producers and the industry (APL, 2012). Swine dysentery (SD), is caused by a spirochaetal bacterium called Brachyspira hyodysenteriae. This organism causes a severe inflammation of the large intestine with a bloody mucous diarrhoea (i.e. dysentery). The disease is estimated to reduce net revenue by more than $50 per sow per year. These losses are the result of decreased growth, decreased feed conversion efficiency, increased variation in carcass size and backfat thickness P2 position (6-8 cm away from body midline at the last rib level), increased deaths and veterinary costs (mainly medication and vaccination). Disease treatment mainly involves the use of antibiotics that cost $0.75 per 40kg grower pig. The effectiveness of this treatment protocol is currently being review by global regulatory authorities due to the emergence of antimicrobial resistance (Spirogene Pty Ltd, 2010). Page 68

78 Pig mange Pigs are susceptible to infection by a range of different external parasites including mange mites and lice. Infected animals have irritated skin which they rub, and which can result in production losses as well as damage to piggery facilities. Prevalence of this problem is generally higher in free-range pig herds that are potentially exposed to infected wildlife. Production losses from uncontrolled mange mite infestation has been estimated to be between $20 and $40 per annum per animal. Losses include reduced animal productivity, as well as potential penalties imposed by processors due to poor skin quality post-slaughter. There are a range of different injectable and topical treatments available to manage the problem, although they generally require a whole-herd approach in order to be successful. Enzootic pneumonia Enzootic pneumonia, caused by infection by the Mycoplasma hyopneumoniae organism (MH) is an economically important respiratory disease for the Australian pig industry. The most common effects of the disease are an adverse impact on food conversion efficiency and weight gain, and often high morbidity rates. MH was present in 86.5% of Australian piggeries prior to 2001 and was identified as a disease that was eradicable from pig herds (Cutler et al. 2001). MH is commonly contracted from feral and wild pigs, however, the rate of MH infection of feral pig populations has not been studied in Australia. Although there have been no estimates made about the cost of MH to Australian pig producers, vaccinating pigs for MH at four and days of age has been shown to increase profitability by approximately $5.13 per pig (Holyoake and Callinan, 2005). The overall cost for Australian pig producers would not be dissimilar to that of the UK where surveys have identified that the disease reduces growth by 40gm/day, resulting in additional feed costs of 1.23 (AUD $2.39) per day (White, 2015). Poultry diseases The poultry industry has been growing in importance in Australia, as poultry meat consumption has steadily increased at the expense of other meats. Despite the size and growth of the industry, it is still predominantly a domestic industry with little or no exports occurring. As is the case with the pig industry, the intensive nature of most poultry production facilities in Australia limits exposure to, and incidence of diseases in Australian poultry flocks. This is potentially changing as consumers and markets increasingly demand eggs and chicken-meat that has been produced in more natural and less intensive production systems. The two most serious disease risk for the Australian poultry industry are Newcastle Disease and avain influenza. These two diseases are not present in commerical poultry in Australia, however the poultry industry is at risk from their introduction. Page 69

79 Like many other meats, consumer demand for organic or free-range particularly with poultry has caused big changes in the production of chicken meat. Certified organic chicken meat means that the birds cannot be treated with routine vaccinations. There are some exceptions, such as where treatment is required by law or disease cannot be controlled with organic treatment. Newcastle Disease Newcastle Disease is probably one of the most important diseases in poultry in both commercial and backyard systems. There have been a number of outbreaks of Newcastle Disease in Australia, with the most recent being the 1998 detection in Peats Ridge, and 2002 outbreak in Sydney Basin, Tamworth areas and Meredith in Victoria. In each instance, the response to control and eradicate the disease was to slaughter out the affected flocks, at considerable cost to governments and poultry farmers. There have been no outbreaks of Newcastle Disease in Australia since compulsory vaccination was introduced in 2002, under a national plan to eradicate the disease. Over the last few years there have been moves to gradually reduce the requirement for flock vaccination in regions that are less susceptible to this disease. Marek s Disease Marek s Disease remains one of the most prevelant diseases of commerical poultry farms worldwide with an estimated economic impact of $US1-2 billion (Morrow and Fehler, 2004). After a prolonged outbreak of Marek s Disease in eastern Australia from , new vaccines were introduced to immunize layer and breeder chickens. Although these vaccinations reduced infection, the disease remains a serious economic threat mainly due to the periodic apperance of new strains of Marek s Disease against which existing vaccines produce only suboptimal protection (RIRDC, 2004). Intially, vaccinations provided a 97% protection rate under field conditions, however now many formerly successful vaccine programs seem to be reducing in effectiveness. Page 70

80 10. The potential cost of future foreseeable diseases The potential cost of foreseeable diseases in farmed livestock industries of the Australian agriculture sector are significant and pose a high risk factor for the future viability of each industry. Australian livestock industries have historically experienced a low level of disease outbreaks when compared with some livestock industries based overseas, many of which have been severely impacted by disease outbreaks over the past two decades, as the following figure highlights. Figure 63: Economic impact of selected diseases in different regions of the world Source: Newcomb (2004) Some economic modelling has been carried out to estimate the potential cost of some of the more important livestock diseases that could conceivably occur in Australia. The projected costs of three of the major potential disease risks are displayed in Table 16, below. Page 71

81 Table 26: Economic costs of potential disease outbreaks in Australian livestock industries Disease Total annual cost of outbreak Foot and Mouth Disease Classical Swine Flu Avian Influenza (Global pandemic) $7,100 million $57 million 6.8% reduction in GDP Source: Department of Agriculture 2015, Animal Health Australia 2012, Buetre et al, Foot and Mouth Disease (FMD) Foot and Mouth Disease (FMD) is highly contagious and has the potential to have severe economic consequences if it were to be introduced into Australia. There have been a number of outbreaks in FMD-free countries that have had large socio-economic impacts. The 2001 outbreak in the UK caused losses of more than US$7 billion and a further significant outbreak in 2007 added to that cost. Table 27: Costs and duration of Foot and Mouth Disease outbreaks, UK. Foot and Mouth Disease Duration of the Outbreak Animals Depopulated Farms Depopulated Suicides 8 months 4 months 6 million ,300 Less than Extent of Outbreak Widespread Localised Cost in US dollars Time to regain normalisation of trade following eradication of disease 6.9 billion 200 million 18 months 2 months Source: DEFRA (2010) In 2010, both Japan and the Republic of Korea experienced large FMD outbreaks which required extensive programs to control. The Korean outbreak is estimated to have cost the government about $US2.7 billion. Considering the relatively similar agricultural regulations and practices in many of these countries, an outbreak of FMD would undoubtedly have equally devastating effects. Australia estimates that a small FMD outbreak, controlled in 3 months, could cost around $7.1 billion, while a large 12 month outbreak would cost $16 billion, depending on the response strategy used (Department of Agriculture, 2015). Page 72

82 Figure 64: Economic impacts from a Foot and Mouth Disease outbreak Source: ABARES (2013) There are likely to be a series of flow-on effects, as illustrated in the figure above. Over 10 years, minimal trade restrictions following a small outbreak would result in expected revenue losses of around $6 billion, compared with losses of up to $52 billion with extended trade restrictions following a large outbreak. On average, ABARES predicted compensation costs would vary between $6.3 million and $60.2 million, depending on the size and location of the outbreak and control strategy employed to eradicate the disease. Table 28: Total compensation costs for a Foot and Mouth Disease outbreak. Source: ABARES (2013) Clearly, the scale of the cost and impacts of an FMD outbreak in Australia would have the potential to dramatically reshape the entire livestock industries and their associated service sectors, and are the reason Australian governments expend considerable efforts on prevention and preparedness strategies. The investment in prevention and preparedness is an essential national insurance policy against such sizable potential losses. Page 73