Chair's report

Board business, industry trends and outlook

Michele Allan

I’m pleased to present MLA’s Annual Report 2017–18. With many of the Australian red meat and livestock industry’s key supply regions in the grip of drought, 2017–18 has been a challenging year for many of MLA’s stakeholders.

Seasonal conditions will always have implications for national herd size, slaughter numbers, supply chain profitability, export volumes, domestic pricing and consumption – but it’s a continuing testament to our industry’s resilience that these impacts do not alter its overall progress.

MLA has worked hard to keep Australian beef, sheepmeat and goatmeat at the forefront of consumers’ minds in an increasingly competitive global market. Through investment in both domestic and international marketing, red meat has firmly held its place at dinner tables and on menus this year. Despite intense competition from lower-cost alternatives such as chicken and pork, our products still account for around 50% of Australian fresh meat retail sales in value.

In research and development, MLA has continued to build strategic partnerships and invest in initiatives that deliver practical outcomes to our levy payers. 2017–18 presented more innovation opportunities than ever before, highlighting the demand for collaboration across the value chain.

Cattle and beef market

Key trends:

The severe drought conditions experienced across most of eastern Australia in 2018 have put a hold on many producers’ intentions to expand their herds. It’s projected that the national herd will contract going into 2018–19, with some good rainfall and a return to average seasonal conditions needed for the rebuild to start up again.

Young cattle prices have been under pressure as the poor conditions worsened throughout the year and restocker activity has stagnated. The finished market, however, has performed reasonably well, with strong international demand and favourable exchange rate movements holding up prices.

Australian beef exports continue to experience intense competition in many international markets, particularly from key global suppliers in the US and Brazil. The US has just come out of a herd rebuilding phase and production is expected to reach record levels in 2018. While US domestic consumption is soaking up some of this supply, their exports into Australia’s key markets, such as Asia, have continued to grow.

Beef and cattle market charts

Sheepmeat market

Key trends:

Sheepmeat production is picking up despite the drought continuing to have a significant impact on the flock across Australia. Lamb production has been increasing gradually along with carcase weights in recent years. Increasing slaughter will see this accelerate even further in 2018. Historically, mutton production has been volatile and this has continued this year with a large spike in slaughter due to the seasonal conditions. The increase in sheep turn-off is likely to have a negative impact on the supply and production of sheepmeat next year.

This growth in production is translating into increased exports, with lamb exports expected to surpass last year’s record numbers. The global demand for Australian lamb remains strong, helping to drive up prices despite the increases in supply. This demand from international markets will be crucial in supporting sheepmeat prices over the next year.

Sheep market charts

Goat market

Goat over-the-hooks indicatorKey trends:

Goat supply is expected to come down from last year’s levels, with Victoria and SA (Australia’s major goat processing states) experiencing the largest declines year-on-year.

Exports have tended to follow the seasonal trend in 2018 with a decline in winter, although volumes are slightly lower than the five-year average. Australian goatmeat’s largest export market, the US, has seen the biggest declines.

The over-the-hooks goat price indicators have continued on an upwards trajectory throughout the winter months of 2018, with prices increasing to levels seen in mid-2016.

Board business

The main priority of the Board is to ensure MLA is driving industry profitability, global competitiveness and sustainability in accordance with our Strategic Plan 2016–2020. This also applies to MLA’s two subsidiaries – Integrity Systems Company (ISC) and MLA Donor Company (MDC).

ISC continues to assist the Australian red meat and livestock industry’s commitment to uphold our product’s superior reputation on the global stage. Our industry’s integrity systems, including Livestock Production Assurance, National Vendor Declarations and the National Livestock Identification System, all play an important role in assuring MLA levy payers can stand by what they sell.

MDC has also been instrumental in positioning Australian red meat as a world leader, particularly in regard to ag-tech and food-tech innovations. In 2017–18, MDC’s investment portfolio surpassed the $100 million target set by the Board just 12 months ago. The increasing number of initiatives funded by MDC are crucial in building the innovation capability of Australian red meat enterprises.

At MLA’s 2017 Annual General Meeting, members voted on the election of two first-time Board Directors – Queensland beef producer Russell Lethbridge and South Australian sheepmeat and wool producer Andrew Michael. Both Directors have been a welcome addition to MLA’s skills-based Board and are a credit to the Board Selection Committee process.

Looking ahead to 2018–19, one of the challenges our sector faces is an unpredictable global trade environment. The Australian red meat and livestock industry serves more than 100 international markets, but new barriers are impacting some trade flows and there’s a constantly changing geopolitical landscape. In response, MLA’s focus will be on existing markets as well as helping to secure new trade opportunities.

The Board will continue to invest in research, development and marketing initiatives that grow demand for red meat both at home and overseas. Enhancing beef, sheepmeat and goatmeat’s position in the global marketplace is vital in fostering the prosperity of our industry. You can have every confidence the MLA Board and employees have the skills, knowledge and dedication needed to maintain our product’s outstanding reputation.

Michele Allan

Dr Michele Allan