Recovery for Australian Meat Processing Sector14 February 2015
A return to more favourable weather conditions has eased some long-term supply pressures for the meat processing sector in Australia, as cattle herds have been rebuilt.
According to industry research firm IBISWorld in its updated report on the industry in Australia, the Meat Processing industry faced challenging conditions early in the five-year period through 2014-15.
Poor agricultural conditions and the lingering effects of the global financial crisis weakened revenue growth.
According to IBISWorld industry analyst Ryan Lin: “The industry has been recovering since 2011-12 as weather conditions improved, which has reduced input costs such as animal feed.”
Production volumes for beef have risen over the past five years to meet increased global demand, as have industry exports.
Over 2014-15, industry revenue is forecast to grow by 0.5 per cent to $14.2 billion, assisted by continued demand for Australian exports and a depreciating Australian dollar.
Total revenue for meat processors is expected to grow at an annualised 2.2 per cent over the five years up to 2014-15.
Australia's meat processors export almost 65 per cent of production, competing with the United States, Brazil, New Zealand, Canada and Argentina for consumer demand.
Over the past five years, competition in some of the largest export markets, including Japan and South Korea, has increased.
New export markets, such as the Middle East and China, have been successful, as world demand for meat has grown.
However, “stagnation in domestic red meat consumption has adversely affected the industry,” said Mr Lin.
Poultry, the industry's largest competitor, has gained considerable market share over the past decade due to its image as a healthier, leaner source of protein.
A return to more favourable weather conditions has eased some long-term supply pressures as cattle herds have been rebuilt.
Over the five years through 2019-20, meat production volume is anticipated to trend upwards as farmers establish themselves in the market following favourable weather conditions.
Domestically, however, red meat consumption per capita is expected to grow only modestly, with most growth in organic and high-value meat.
Beef production is expected to increase, while lamb is expected to increase in value but decline in production.
The ability of meat processing companies to respond to changing national and international consumer trends, like halal and certified organic meat production, is expected to influence growth.
The Meat Processing industry exhibits low levels of market share concentration.
The largest firms are typically able to charge higher unit prices because of branding, high throughput of feedlot cattle, application of industry standards and the ability to target markets with higher prices through exports.
Over the five years up to 2014-15, concentration in the industry is expected to rise as a result of closures and acquisitions.
Larger processing companies have also been vertically integrating into beef production, feedlots and wholesaling.
Over the next five years, ongoing rationalisation and pressures to reduce costs are expected to result in more mergers among companies, increasing industry consolidation. This is consistent with industries in their mature life cycle stage.
The report says that the meat processing industry is in the mature phase of its life cycle.
Industry value added measures the level of input the meat processing industry has on the economy.
In the 10 years up to 2019-20, industry value added is expected to grow by an annualised 1.6 per cent. GDP is anticipated to grow at a faster rate of 2.7 per cent annualised, which suggests that the industry's contribution to the economy is declining.