The Department of Agriculture, Water and Environment recently confirmed upcoming legislative increases of between 6.2 and 7.1 per cent in its cost-recovered fees and charges for export meat inspection and certification at Australian export registered meat processing plants.
When implemented on July 1, the increase will lift the current cost from around $72 million per annum to an estimated $76 million, an impost that comes straight off the bottom line of export processing establishments.
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The debate over whether this is in fact a legitimate cost of government or whether export plants should have to bear the total cost for something they would argue has a broader community benefit, has been going on now for more than 40 years.
To export red meat from Australia that meets the health and hygiene requirements of more than 100 different importing countries requires a meat inspection system that meets if not exceeds each country's specific requirements. Certification of that system then needs to be provided by an Australian Government authority.
A processing plant only supplying the Australian domestic market does not have to pay these export fees and charges. Being able to export to the international market however delivers significant economies of scale to the whole Australian industry that creates thousands of extra jobs especially in rural communities that might not exist if we didn't export. It also generates enormous revenue streams for the Australian economy and by way of the multiplier effect, increased taxation streams for the government.
Our international competitors like Brazil and Argentina, receive their goverment's export meat inspection and certification free of charge, their respective governments appreciating the value of the export red meat sector to their national economies as well as the community benefit of providing a framework for ensuring there is an effective and high standard food production system in the country. In the United States the USDA meat inspection service is also provided to the US export meat processing sector free of charge. Only overtime is charged to the US industry and then some of that is subsidised.
In Australia however the cost of meat inspection and certification in export processing plants is recovered from the export processor.
Given there are only 80 or so export registered facilities in Australia, it doesn't take a high level of mathematics to work out that some of the larger plants in this country must be paying up to seven figure amounts each year to cover their meat inspection and certification costs.
The July 1 increase in meat inspection and certification costs to an estimated $76 million, would actually equate to $93 million without the Meat Modernisation program that the Australian Meat Industry Council continues to drive on behalf of its members.
The department continues to push for full cost recovery from the processing sector because of the decreasing appropriation for the program from the Federal Government, falling from just 7pc in 2021/2022 to 3pc in 2022/2023 and a proposed zero appropriation in 2023/2024.
Access to most export markets requires every Australian plant to have an Australian Government Veterinary Officer on the facility during production.
Each GVO costs the processor around A$264,000 over a 12 month period. A Government Food Safety Meat Assessor can cost an additional A$209,800 over the same 12 months. Run extra lines or shifts and the cost only increases.
Government audits of plants (an ATM audit) which can be up to four times a year are charged out at $96 a quarter hour.
On top of that there is a throughput charge on each plant and a range of extra costs for certification.
Before the recent Federal election, AMIC wanted to freeze any increase in goverment export inspection and certification charges in order to allow the industry to reinvest in their businesses and recover from the difficult trading conditions of recent times. The government did not agree and now the department is progressing with the July 1 increases that are well ahead of inflation.
The debate over the cost recovery of meat inspection and certification costs goes back to 1979 when the department (then AQIS) first moved to recover 50pc of the expenditure. By 1991 that had risen to 100pc. Total government inspection costs continued to escalate until meat inspection had risen to between 2 and 5pc of the total cost of production and reform became essential.
In 2001, after a couple of Productivity Commission reviews, the Federal Government accepted there was a community benefit from a national meat industry food safety and inspection system and agreed to contribute 40pc of the cost. In 2007 however the incoming government reversed that decision and removed their contribution on the basis of 'user pays' principles.
This position however appears in conflict with the user pays concept in ignoring the community benefit generated which suggests government should contribute. It could also be considered out-of-step with those principles when the government applies them to an export industry where they are competing against subsidised competitors.
The debate as to whether the cost of export meat inspection and certification should apply in part or in full on the export red meat sector or alternatively that it should be a legitimate cost of government, looks as though it will continue for the time being.
Presently it is another cost impost on export meat processing that reduces the ability of processors to reinvest in their business as well as to pay more to producers for their livestock.
Market Parameters
As part of its effort to combat food price inflation the Mexican Government has suspended import duties on pork, beef and poultry through the end of 2022. Mexico has previously opened duty free quotas for pork and poultry but this is the first time a blanket suspension has been ordered as inflation reaches a 21-year high in the country.
As Australian exporters contemplate greater access to the UK beef market when the new Free Trade Agreement with Australia comes into force later this year, it is interesting to note that the UK in the first quarter of this year imported 77,400 tonnes of beef, up 73pc on the same quarter last year.
Most of it was from Ireland but also saw increased import quantities from the Netherlands, Germany, France and Poland. In the same quarter the UK exported 30,800 tonnes of beef with their main markets, Ireland, France and the Netherlands but there were also increased exports to the US, China and Japan.
The new FTA with Australia will offer the first zero tariff access for Australian beef to the UK since the UK joined the EU in the 1970s.
Closer to home recent week national cattle slaughter settled at around 87,000 head with female slaughter in Queensland falling to a very low 31.5pc.
Total red meat supplies in US cold storage has inceased 16pc over last year with total beef supplies up 18pc, although this week's Memorial Day long weekend should have a positive impact on that.
USDA's indicator price for 90CL imported Australian boneless beef was at 288 US cents/lb ex-dock.
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