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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.
© Australian Farm Institute, August, 2015

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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


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 productivity-
enhancing 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
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.

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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
Table of Contents

Foreword. ................................................................................................................................ i
Executive Summary ...............................................................................................................ii
Table of Contents .................................................................................................................. iv
Index of Figures ..................................................................................................................... v
Index of Tables ....................................................................................................................vii
1. Introduction ........................................................................................................................ 1
2. Livestock industry overview. ............................................................................................. 3
3. The beef industry. ............................................................................................................ 11
4. The sheep industry. .......................................................................................................... 18
5. The dairy industry. ........................................................................................................... 26
6. The pork industry. ............................................................................................................ 33
7. The poultry industry. ........................................................................................................ 35
8. The post-farm sectors associated with the livestock industries. ...................................... 40
9. Livestock diseases and industry costs. ............................................................................. 47
Cattle diseases and health .................................................................................................... 49
Goat diseases and health ...................................................................................................... 66
Pig diseases and health......................................................................................................... 68
Poultry diseases .................................................................................................................... 69
10. The potential cost of future foreseeable diseases .......................................................... 71
11. Current Australian expenditure on livestock health...................................................... 77
12. Discussion and conclusions .......................................................................................... 81
13. References ..................................................................................................................... 83
Appendix 1. .......................................................................................................................... 88

Page iv
Index of Figures

Figure 1 Commodity share of gross value of farm production. ................................................. 3


Figure 2. Index of the volume of annual farm production. ........................................................ 4
Figure 3. Index of the value of annual farm production. ........................................................... 4
Figure 4. Gross value of Australian livestock slaughterings. .................................................... 5
Figure 5 Employment on Australian livestock farms. ............................................................. 10
Figure 6. Australian beef cattle numbers and annual production. ........................................... 11
Figure 7. Gross value of production of beef and veal, Australia. ............................................ 12
Figure 8 Value of Australian beef and live cattle exports. ...................................................... 12
Figure 9 . Export destinations for Australian beef and veal. ................................................... 13
Figure 10. Export destinations for Australian live cattle. ........................................................ 13
Figure 11. Gross value of cattle production by state. .............................................................. 14
Figure 12 Number of beef cattle farms by state. ...................................................................... 14
Figure 13. Distribution of beef cattle farms by value of output 2010-11. ............................... 15
Figure 14 Distribution of beef cattle businesses by land area managed 2010-11 .................... 15
Figure 15. Changes in the average value of land and fixed improvements for beef farms. .... 16
Figure 16. Changes in average debt levels of beef farm businesses. ....................................... 17
Figure 17. Changes in average farm cash income of beef farm businesses. ............................ 17
Figure 18. Australian lamb production and markets. .............................................................. 18
Figure 19. Australian sheepmeat production and markets. ...................................................... 19
Figure 20. Gross value of sheep and wool production............................................................. 19
Figure 21. Value of Australian sheep industry exports............................................................ 20
Figure 22. Destination of Australian lamb exports .................................................................. 20
Figure 23. Destination of Australian mutton exports............................................................... 21
Figure 24. Destination of Australian live sheep exports. ......................................................... 21
Figure 25. Value of sheep industry output, by state, 2012-13 ................................................. 22
Figure 26. Number of sheep farms by state. (2012-13) ........................................................... 22
Figure 27. Size distribution of sheep farms. (2010-11) ........................................................... 23
Figure 28. Distribution of livestock farm types by land area. ................................................. 23
Figure 29. Real value of land and fixed improvements – Australian sheep farms. ................. 24
Figure 30 Real level of farm business debt, Australian sheep farms. ...................................... 24
Figure 31 Real farm cash income, Australian sheep farms. .................................................... 25
Figure 32. Number of dairy farms in Australia by state. ......................................................... 26
Figure 33. Size of the Australian dairy herd and annual milk production. .............................. 27
Figure 34. Average milk yield per cow per annum. ................................................................ 27
Figure 35. Value of annual dairy production. .......................................................................... 28
Figure 36. Destination of Australian dairy exports. ................................................................. 28
Figure 37. Value of dairy production by state (2012-13). ....................................................... 29
Figure 38. Size distribution of Australian dairy farms. ........................................................... 29
Figure 39. Employment on dairy farms in Australia. .............................................................. 30
Figure 40 Real value of land and fixed improvements, Australian dairy farms. ..................... 31
Figure 41. Farm business debt, Australian dairy farms. .......................................................... 31
Figure 42. Real farm cash income – Australian dairy farms. .................................................. 32

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Figure 43. Australian pigmeat production and trade. .............................................................. 33
Figure 44. Australian pig numbers by state. ............................................................................ 33
Figure 45. Gross value of production, pigs. ............................................................................. 34
Figure 46. Value of Australian pigmeat exports. ..................................................................... 34
Figure 47. Distribution of pig farms by value of output. ......................................................... 35
Figure 48. Annual value of production of chicken meat and eggs. ......................................... 36
Figure 49. Chicken meat production in Australia. ................................................................... 37
Figure 50. Changes in efficiency of chicken meat production in Australia............................. 37
Figure 51. Distribution of chicken meat and egg farms by state. (2012-13) ........................... 38
Figure 52. Gross value of chicken meat and egg production by state. (2012-13) ................... 38
Figure 53. Distribution of annual farm output, chicken meat and egg farms. ......................... 39
Figure 54. Employment on Australian poultry farms, 2012. ................................................... 39
Figure 55. Major inputs utilised by the meat processing sector. ............................................. 44
Figure 56. Major inputs utilised by the dairy processing sector. ............................................. 44
Figure 57. Value added by the Australian food manufacturing sector, 2012-13 ..................... 45
Figure 58: Total factory gate sales of animal health products in Australia ............................. 49
Figure 59: Annual costs of diseases and health in the Australian beef industry...................... 50
Figure 60: Areas infected by cattle tick in Australia ............................................................... 51
Figure 61: Annual costs of diseases and health in the Australian sheep industry ................... 58
Figure 62: Economic loss due to footrot in Australian sheep in 2006. .................................... 65
Figure 63: Economic impact of selected diseases in different regions of the world ............... 71
Figure 64: Economic impacts from a Foot and Mouth Disease outbreak................................ 73
Figure 65: US bovine-related export trends 2002 –2008 ......................................................... 74

Page vi
Index of Tables

Table 1. Volume and value of livestock production, Australia. ................................................ 6


Table 2. Number of livestock farms, by state, 2010-11. ............................................................ 7
Table 3. Source and value of inputs to the farm sector, 2012-13. ......................................... 9
Table 4. Livestock industry employment, 2011....................................................................... 10
Table 5 Methods of selling Australian livestock. .................................................................... 41
Table 6 Location of Australian livestock saleyards. ................................................................ 41
Table 7 Australian accredited meat processing facilities. ........................................................ 42
Table 8 Employment in food manufacturing, Australia, 2011-12. .......................................... 43
Table 9 Industry value-added, livestock processing sector. ................................................... 43
Table 10 Employment in food and grocery retailing in Australia. .......................................... 46
Table 11 Annual costs of major health issues in the cattle industry ........................................ 50
Table 12 Annual costs of the cattle tick in Australia by region ............................................... 51
Table 13: Annual costs of Bovine Ephemeral Fever for at-risk cattle herds in Australia ....... 53
Table 14: Annual costs of cattle bloat in the Australian beef industry – southern regions ..... 54
Table 15: Annual economic loss due to worms in beef cattle - southern regions ................... 55
Table 17: Annual costs of diseases and health issues in the Australian sheep industry .......... 58
Table 18: Annual cost of internal parasites in sheep ............................................................... 59
Table 19: Prevalence of resistant worm populations in sheep flocks ...................................... 60
Table 20: Annual costs of all forms of flystrike in sheep ........................................................ 61
Table 21: Insecticides and resistance development in Australian sheep blowfly populations 62
Table 22: Annual costs of lice in sheep ................................................................................... 63
Table 23: Chemicals registered to treat lice and flystrike........................................................ 64
Table 24: Annual economic cost of footrot in sheep ............................................................... 65
Table 25: Annual costs for major animal health issues in the goat industry ........................... 67
Table 26: Annual economic cost of internal parasites in goats ............................................... 67
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. ............................. 72
Table 29: Total compensation costs for a Foot and Mouth Disease outbreak. ........................ 73
Table 30: Annual costs of major diseases, pests and health issues in Australia. ..................... 77
Table 31: Cattle disease where available technology would reduce annual costs ................... 78

Page vii
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 sub-
sectors 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 productivity-
enhancing 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
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
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%).

Eggs wool
wheat Agricultural
Poultry 1% 5%
16% commodities Gross
5% value: $48,048
Pigs… million
Sheep and lambs
(a)
coarse grains
5%
7%

oilseeds
Cattle and calves 5%
17% cotton
4%
rice
pulses 1%
2%
sugar cane
Whole milk Fruit and nuts grapes 2%
8% Vegetables (excl. grapes) 3%
8% 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
200.0
180.0
160.0
Index: 1997-98 = 100 140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0

Crops Livestock

Figure 2. Index of the volume of annual farm production.


(Source: ABARES)

200
180
160
Index: 1997-98 = 100

140
120
100
80
60
40
20
0

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
14,000

12,000

10,000

$ millions 8,000

6,000

4,000

2,000

2001–02
1988–89
1989–90
1990–91
1991–92
1992–93
1993–94
1994–95
1995–96
1996–97
1997–98
1998–99
1999–00
2000–01

2002–03
2003–04
2004–05
2005–06
2006–07
2007–08
2008–09
2009–10
2010–11
2011–12
2012–13
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 2014-15.

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
Table 1. Volume and value of livestock production, Australia.
Volume of production unit 2009–10 2010–11 2011–12 2012–13 2013–14 f 2014–15 f
S laughterings
Cattle and calves ’000 8,364 8,097 7,873 8,457 9,580 9,000
Lambs ’000 19,478 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 ’000 871 728 579 513 990 990

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 413 391 419 457 471 440
M utton kt 162 123 120 183 226 159
Pig meat kt 331 342 351 356 360 364
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 423 429 411 435 421 400

M ilk ML 9,023 9,100 9,480 9,201 9,130 9,300

Butter kt 128 122 120 118 100 100


Cheese kt 350 339 347 338 303 310

Casein kt 8 5 5 5 4 4

Skim milk powder kt 190 222 230 224 215 220


Whole milk powder kt 126 151 140 109 125 130

Buttermilk powder kt 13 12 11 11 11 11

Gross value of production 2009–10 2010–11 2011–12 2012–13 2013–14 f 2014–15 f


S laughterings
Cattle and calves $m 6,567 7,164 7,134 7,136 7,812 8,153
Sheep $m 499 484 419 329 584 476

Lambs $m 1,832 2,029 2,136 1,696 2,238 2,200

Pigs $m 965 919 934 934 1,011 1,012

Poultry $m 1,785 2,077 2,078 2,214 2,313 2,414


Live exports
Cattle exported live $m 701 660 651 589 1,041 1,075
Sheep exported live $m 298 348 345 194 186 230
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 428 572 583 653 670 690

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
Table 2. Number of livestock farms, by state, 2010-11.
NSW Vic. Q ld SA WA Tas. NT ACT Aust.

Sheep Farming (Specialised) 4,266 3,173 258 1,624 1,393 497 0 9 11,221
Beef Cattle Farming (Specialised) 13,246 8,010 12,477 1,357 2,007 1,139 197 19 38,452
Beef Cattle Feedlots (Specialised) 103 50 195 18 95 6 4 0 470
Sheep-Beef Cattle Farming 3,234 1,643 440 713 330 250 0 14 6,624
Broadacre livestock 20,849 12,876 13,370 3,712 3,825 1,892 201 42 56,767

Grain-Sheep or Grain-Beef Cattle Farming 4,130 2,359 1,037 2,046 2,501 31 2 1 12,108
Total crop/livestock 4,130 2,359 1,037 2,046 2,501 31 2 1 12,108

Dairy Cattle Farming 1,049 4,835 664 320 223 471 0 0 7,562
Poultry Farming (Meat) 298 224 111 62 51 19 0 0 766
Poultry Farming (Eggs) 144 79 49 25 33 10 0 1 340
Pig Farming 159 135 177 103 72 17 0 0 663
Intensive livestock 1,650 5,273 1,001 510 379 517 0 1 9,331
Total livestock farms 26,629 20,508 15,408 6,268 6,705 2,440 203 44 78,206

Source: ABS. Statistical publication No.7121.0

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
domestic market and is not a major exporter, although unlike the pork industry the chicken-
meat 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
Table 3. Source and value of inputs to the farm sector, 2012-13.
Agriculture sector using
Sheep, Poultry and Other Total
Grains, Beef Other Agriculture agriculture
and Dairy Livestock
Supplying sector. Cattle
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, 2012-13.

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
Table 4. Livestock industry employment, 2011.
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 2011.

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 2002-03 and subsequent years.

300

250

200
Thousands

150

100

50

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
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
Kilotonnes

1,500 15,000,000

1,000 10,000,000

500 5,000,000

0 0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012

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
cattle exports. The annual value of production has ranged between $$7.3 billion and $8
billion over the past decade.

$8,500
Gross value of production ($ million)

$8,000

$7,500

$7,000

$6,500

$6,000

$5,500

$5,000
2006

2007

2008

2009

2010

2011

2012

2013
Figure 7. Gross value of production of beef and veal, Australia.
(Source: ABS)

$6,000

$5,000

$4,000
$ millions

$3,000

$2,000

$1,000

$0
2005–06

2006–07

2007–08

2008–09

2009–10

2010–11

2011–12

2012–13

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
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
$ millions (fob)

3,000

2,000

1,000

0
2005–06

2006–07

2007–08

2008–09

2009–10

2010–11

2011–12

2012–13
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
$'000 AUD nominal

$600,000

$500,000

$400,000

$300,000

$200,000

$100,000

$0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012

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
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
Gross vaue of production

$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
Total meat cattle buisnesses (no.)

25,000

20,000

15,000

10,000

5,000

Figure 12 Number of beef cattle farms by state.


(Source: ABS)

Page 14
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
no. of buisnesses

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 2010-11.


(Source:ABS)

16,000
Number of agricultural buisnesses

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 2010-11


(Source:ABS).

Page 15
The financial performance of Australian beef farms over the past decade has been impacted
by the extended drought that occurred in southern Australia from 2002-3 to 2009-10, 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
2009. 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
$ 2013

$6,000,000

$4,000,000

$2,000,000

$0
2002

2005
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001

2003
2004

2006
2007
2008
2009
2010
2011
2012
2013

$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
$2,500,000

$2,000,000

$1,500,000
$ 2013

$1,000,000

$500,000

$0
1991

2006
1990

1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005

2007
2008
2009
2010
2011
2012
2013
$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
$ 2013

$200,000

$100,000

$0

-$100,000
2012
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

2013

$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
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.

500 25,000
450
400 20,000
350
Slaughterings (,000s)

300 15,000
250
Kilotonnes

200 10,000
150
100 5,000
50
0 0
1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

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
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.

450 20 000
400 18 000

350 16 000
14 000

Slaughterings (,000s)
300
Kilotonnes

12 000
250
10 000
200
8 000
150
6 000
100 4 000
50 2 000
0 0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

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
$ million

$1,500

$1,000

$500

$0
2006

2007

2008

2009

2010

2011

2012

2013

Sheep and lambs (a) wool

Figure 20. Gross value of sheep and wool production.


Source data: ABS catalogue 7503; issue 2006-2013.

Page 19
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
$ million

$2,000

$1,000

$0
2006

2007

2008

2009

2010

2011

2012

2013
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

1,000

800
$ million fob

600

400

200

0
2005–06

2006–07

2007–08

2008–09

2009–10

2010–11

2011–12

2012–13

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
600

500

400
$ millions fob

300

200

100

0
2005–06

2006–07

2007–08

2008–09

2009–10

2010–11

2011–12

2012–13
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
$'000 AUD nominal

$400,000

$300,000

$200,000

$100,000

$0
1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

africa and middle east ASEAN


Central and south asia Europe
North america (NAFTA) Nth Asia
Oceania South and central america

Figure 24. Destination of Australian live sheep exports.


Source data: UN Comtrade HS96; 0104

Page 21
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
millions

$800
$600
$400
$200
$0

Sheep and lambs - Total disposals Wool - total

Figure 25. Value of sheep industry output, by state, 2012-13


Source data: ABS catalogue 7503; 2012-13

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
Numbre of buiisnesses

14,000
12,000
10,000
8,000
6,000
4,000
2,000
-

Figure 26. Number of sheep farms by state. (2012-13)


Source data: ABS catalogue 7121.0; 2012-13

Page 22
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 small-
scale 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 large-
scale machinery used in these enterprises.

3,000

2,500
No. of businesses

2,000

1,500

1,000

500

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. (2010-11)


Source data: ABS catalogue 7121.0; 2010-11

4,500
4,000
3,500
No. of buisnesses

3,000
2,500
2,000
1,500
1,000
500
-

Area of holding ha.

Sheep Farming (Specialised) Sheep-Beef Cattle Farming


Grain-Sheep or Grain-Beef Cattle Farming

Figure 28. Distribution of livestock farm types by land area.


ABS catalogue 7121.0; 2010-11

Page 23
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 1991. Overall sheep farm profitability was
quite subdued during the 1990s in comparison with the previous decade, and improved only
slowly until recovering strongly during 2000-01, 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 2002 – 2006, 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
$ 2013

$5,000,000

$4,000,000

$3,000,000

$2,000,000

$1,000,000

$0
1998

2003

2008
1990
1991
1992
1993
1994
1995
1996
1997

1999
2000
2001
2002

2004
2005
2006
2007

2009
2010
2011
2012
2013
$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
$ 2013

$1,000,000
$800,000
$600,000
$400,000
$200,000
$0
2011
2012
2013
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

$100-$200k $200-$400k $400k+

Figure 30 Real level of farm business debt, Australian sheep farms.


Source: ABARES annual farm surveys

Page 24
$350,000

$300,000

$250,000

$ 2013 $200,000

$150,000

$100,000

$50,000

$0

-$50,000 1993

2005
1990
1991
1992

1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004

2006
2007
2008
2009
2010
2011
2012
2013
$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 2008. 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
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 co-
operatives 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

NSW VIC QLD SA WA TAS

Figure 32. Number of dairy farms in Australia by state.


Source: Dairy Australia.

Page 26
4,000 12,000

3,500 10,000
Number of dairy cows (,000s)

Megalitres of milk
3,000 8,000

2,500 6,000

2,000 4,000

1,500 2,000

1,000 0
1976–77

1990–91

2004–05
1968–69
1970–71
1972–73
1974–75

1978–79
1980–81
1982–83
1984–85
1986–87
1988–89

1992–93

1998–99
2000–01
2002–03

2006–07
2008–09
2010–11
2012–13
1994–95
1996–97
Cows (LHS) Milk production (RHS)

Figure 33. Size of the Australian dairy herd and annual milk production.
Source data: ABARES Australian Commodity Statistics 2013

7,000
Litres per cow per annum

6,000

5,000

4,000

3,000

2,000

1,000

0
2000–01
1968–69
1970–71
1972–73
1974–75
1976–77
1978–79
1980–81
1982–83
1984–85
1986–87
1988–89
1990–91
1992–93

1998–99

2002–03
2004–05
2006–07
2008–09
2010–11
2012–13
1994–95
1996–97

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
$5,500

$ million $4,500

$3,500

$2,500

$1,500

$500

-$500 2006 2007 2008 2009 2010 2011 2012 2013

Figure 35. Value of annual dairy production.


Source data: ABS catalogue 7503; issue 2006-2013

$2,000
$1,800
$1,600
$1,400
$1,200
$ millions

$1,000
$800
$600
$400
$200
$0
2006–07

2007–08

2008–09

2009–10

2010–11

2011–12

2012–13

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
2,500

2,000
$ millions
1,500

1,000

500

Figure 37. Value of dairy production by state (2012-13).


Source data: ABS catalogue 7503; issue 2012-13

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.

2500

2000
no. of buisnesses

1500

1000

500

Estimated value of operations ($'000)

Figure 38. Size distribution of Australian dairy farms.


Source data: ABS catalogue 7121.0; 2010-11

Page 29
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.

45
40
35
30
'000 persons

25
20
15
10
5
0
1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013
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
2007-08. 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 2011.

Page 30
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
$ 2013

$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-
1992

1999
1990
1991

1993
1994
1995
1996
1997
1998

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
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
$ 2013

$500,000
$400,000
$300,000
$200,000
$100,000
$-
1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

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
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 2013.

$250,000

$200,000

$150,000
$ 2013

$100,000

$50,000

$-
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Australia NSW Victoria

Figure 42. Real farm cash income – Australian dairy farms.


Source: ABARES farm surveys.

Page 32
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
1970-71, it was estimated there was 40,000 pig farms in Australia, a number which has
reduced to around 1,500 farms in 2014. 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.

450 3,000
400 2,800
350 2,600
300 2,400

Thousands
Kilotonnes

2,200
250
2,000
200
1,800
150 1,600
100 1,400
50 1,200
0 1,000
2005

2006

2007

2008

2009

2010

2011

2012

Production Imports Exports Pigs (RHS)

Figure 43. Australian pigmeat production and trade.


Source data: ABARES Commodity Statistics 2013

3,500
3,000
2,500
2,000
1,500
Thousands

1,000
500
0

NSW Vic Qld SA WA Tas

Figure 44. Australian pig numbers by state.


Source data: ABARES Commodity Statistics 2013

Page 33
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
$ million

$850
$800
$750
$700
$650
$600
2006

2007

2008

2009

2010

2011

2012

2013

Figure 45. Gross value of production, pigs.


Source data: ABS catalogue 7503; issue 2006-2013

$200
$180
$160
$140
$120
$ million

$100
$80
$60
$40
$20
$0
2006

2007

2008

2009

2010

2011

2012

2013

Figure 46. Value of Australian pigmeat exports.


Source data: ABARES Australian Commodity Statistics 2013

Page 34
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 mid-
sized farm operations.

120

100

80

60
number of farms

40

20

Estimated value of output ($'000)

Figure 47. Distribution of pig farms by value of output.


Source data: ABS catalogue 7121.0; 2010-11

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
$2,500

$2,000

$1,500
$ million

$1,000

$500

$0
2006 2007 2008 2009 2010 2011 2012 2013
year

Poultry Eggs

Figure 48. Annual value of production of chicken meat and eggs.


Source data: ABS catalogue 7503; issue 2006-2013:

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 2018. 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
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
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 state-
by-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
buisnesses (no.)

1,500

1,000

500

Meat chickens Eggs

Figure 51. Distribution of chicken meat and egg farms by state. (2012-13)
Source data: ABS catalogue 7121.0; 2012-13

$800

$700

$600

$500
$ million

$400

$300

$200

$100

$0
New South Victoria Queensland South Western Tasmania Northern Australian
Wales Australia Australia Territory Capital
Territory

Poultry - total disposals - value ($) Eggs - value ($)

Figure 52. Gross value of chicken meat and egg production by state. (2012-13)
Source data: ABS catalogue 7503; 2012-13

Page 38
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.

300

250
no. of buisnesses

200
150
100
50
0

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 7121.0; 2010-11

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.

12

10
Thousands

0
1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Figure 54. Employment on Australian poultry farms, 2012.


Source data: ABARES Commodity Statistics 2013.

Page 39
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 2012-13.

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
Table 5 Methods of selling Australian livestock.

Market system Species Utilisation


Saleyards Cattle, sheep, pigs (store and Significant for cattle and
slaughter), goats sheep in southern Australia.
Limited use of saleyards by
pig producers, northern beef
producers.
Over-the-hooks Cattle, lambs (slaughter) – Common for cattle in
livestock sold on a carcass- northern Australia.
weight basis.
Direct sale (paddock sale) Cattle, Sheep, lambs (store Common for store stock
and fat), pigs, goats sales and for pigs, and for
cattle in northern Australia
Contract supply Cattle, sheep, lambs, pigs, Common for beef feedlots,
(slaughter, but also feeder sheep destined for live
cattle for feedlots) exports, larger-scale lamb
production and pig
production.
Electronic sale Cattle, sheep, trade lambs Growing in significance,
(store) 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
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 Export Domestic Domestic
Abattoir Boning room Abattoir Boning room Total
VIC 19 8 5 2 34
QLD 18 6 4 1 29
NSW 16 5 0 5 26
WA 12 2 3 2 19
SA 5 0 0 2 7
TAS 3 0 1 0 4
NT 0 0 0 2 2
Australia 73 21 13 14 121

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
Table 8 Employment in food manufacturing, Australia, 2011-12.
NSW VIC Qld SA WA Tas NT Australia
Meat and meat products 15,750 11,750 14,500 5,250 5,000 500 na 52,750
Dairy products 4,250 11,000 1,250 na 750 1,000 na 18,250
Fruit and vegetable processing 1,750 2,000 750 750 250 1,000 na 6,500
Oil and fats 750 na na na na na na 750
Flour and cereals 1,500 1,250 250 750 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 2,250 750 500 na 21,000
Beverage and malt 6,500 12,000 3,000 7,500 2,500 500 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 5,500 - 208,250
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, 2011-12. ABARES.

Total value added for the meat and dairy processing sectors for 2012-13 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 (2012-13) 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; 2012-13

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
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
$-

$2,000

$4,000

$6,000

$8,000
Figure 55. Major inputs utilised by the meat processing sector.
Source: ABS Input/Output tables 2010-11

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
$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

Figure 56. Major inputs utilised by the dairy processing sector.


Source: ABS Input/Output tables 2010-11

Page 44
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
Poultry processing
manufacturing

Cured meat and


smallgoods
manufacturing

Milk and cream


processing
Ice cream
manufacturing

Cheese and other


Bakery product
dairy product
manufacturing
manufacturing

Seafood processing

Fruit & vegetable


Grain mill and cereal
processing
product Oil & fat
manufacturing manufacturing

Figure 57. Value added by the Australian food manufacturing sector, 2012-13
Source: ABS

Food retailing.

The total value of retail food sales (including supermarkets, takeaway foods and cafes and
restaurants) in 2011-12 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
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 2,000 750 66,250
Supermarket and grocery 76,750 67,000 60,500 23,500 29,250 7,500 3,500 268,000
Specialised food retail 39,000 26,000 21,250 9,750 9,750 2,000 750 108,500
Food retailing, other 1,250 250 1,000 500 500 3,500
Café, restaurant,takeaway 159,250 139,000 96,500 34,250 52,250 11,000 4,000 496,250
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 1,750 250 250 57,500
Food and beverage other. 250

Total 364,000 273,000 225,500 86,250 110,500 25,750 10,250 1,095,000

Source: Australian Food Statistics, 2011-12. 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
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
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.

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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).

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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 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
$40
(Feedlots)
Internal parasites (e.g. worms) $39 $93.6
Grass tetany $12 $24.3
Source: Sackett et al (2006), Lane et al (2015)

A description of the major cattle diseases and other animal health issues, along with further
information on the national economic costs, is provided below.

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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

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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).

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Table 13: Annual costs of Bovine Ephemeral Fever for at-risk cattle herds in Australia
Zone Number of cattle at Increased Total cost
risk (million) expenses (million) (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

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 non-
chemical 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

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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 $3.1
Prevention $24.9
Production $48.8
Total $76.8
Source: Lane et al (2015)

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).

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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)

High Medium Low High Medium Low High Medium Low

Per head
$6.84 $5.40 $0.66 $5.10 $3.88 $3.37 $11.94 $9.28 $4.03
Per herd
$1,286 $1,016 $124 $959 $729 $634 $2,245 $1,744 $758
Total $42.4m $39.6m $82m
Source: Lane et al (2015)

Hypomagnesaemia (grass tetany)

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

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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.

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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).

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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).

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Table 17: Annual cost of internal parasites in sheep
Category National economic cost
(million)

Treatment $0

Prevention $93.77

Production losses $341.89

Total $435.92

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.

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Table 18: Prevalence of resistant worm populations in sheep flocks
Drench or drench group Prevalence of resistance

Benzimidazole Approximately 90% of properties.


(BZ, ‘white’)
Levamisole Approximately 80% of properties (resistant ‘scour’
(LEV, ‘clear’) worms); resistance no longer rare in Haemonchus.
BZ + LEV combination Approximately 60% of properties (resistant ‘scour’
worms).
Macrocyclic lactone No common. 70% of sheep farms in WA have ML
(ML, ‘-ectin); Avermectins (ivermectin)-resistant Teladorsagia (Ostertagia). ML
(ivermectin, abamectin) (ivermectin)-resistant Haemonchus in northern NSW and
and milbemycins southern Queensland are common (70+% of farms;
(moxidectin) possibly 30+% of farms in parts of southern NSW and
other non-seasonal to winter rainfall areas of south-eastern
Australia.
Napthalophos Confirmed resistance rare. Two recorded cases in Australia
(goats, Queensland) – Green et al (1981) (Haemonchus), Le
Jambre et al (2005) (Trichostrongylus).
Closantel 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.
Triclabendazole 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.

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Table 19: Annual costs of all forms of flystrike in sheep
Category National economic cost (million)

Treatment $11.34

Prevention $57.30

Production losses $105.53

Total $173.17

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 non-
fatal 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.

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Table 20: Insecticides and resistance development in Australian sheep blowfly populations
Insecticide class Examples of Year Year Practical effect of resistance
insecticides in introduced resistance
this class for use on detected
sheep in blowfly
Organochlorine Aldrin, Dieldrin, 1946-1958 1957 Flystrike protection completely
(OCs) BHC, DDT lost. OCs were banned because
of residues in meat.
Carbamate Butacarb 1966-1967 1967 Product withdrawn in 1967.
Cross resistance to Ops and
probably benzoyl phenyl ureas.
Organophosphate Diazinon, 1957-some 1965 Flystrike protection reduced
(OPs) Chlorfenvinphos, still from approximately 18 weeks
Fenthionethyl, available to only 2-4 weeks.
Fenchlorvos, Effectiveness of ‘fly oil’ type
Carbophenothion, flystrike dressings greatly
Malathion, diminished.
Trichlorfon
Benzoylphenyl Diflubenzuron, 1993 2001 Flystrike protection completely
ureas Triflumuron lost. Products withdrawn from
use as flystrike preventatives.
Source: Sheep CRC, 2010

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

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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.

Table 21: Annual costs of lice in sheep


Category 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.

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Table 22: Chemicals registered to treat lice and flystrike
Chemical group Raw wool residue risk level
Organophosphate Low
Synthetic Pyrethroids High in long wool (>6 weeks after shearing)
Diflubenzuron, Triflumuron Medium in long wool (>6 weeks after
shearing)
Dicyclanil, Cyromazine Medium in long wool (>6 weeks after
shearing)
Spinosyn Low
Macrocyclic Lactones Low
Magnesium Fluorosilicate Low
Neonicotinoid Low
Source: Joshua & Turnbull (2012)

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

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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 2006.


Source: Sackett et al (2006)

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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 $244.80 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 self-
injection 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.

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Table 24: Annual costs for major animal health issues in the goat industry
Disease 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


Source: Lane et al (2015)

Internal parasites

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 co-
grazed 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

Source: Lane et al (2015)

Enterotoxaemia

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.

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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).

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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 13 - 17 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.

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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 1991-1996, 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.

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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.

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Table 26: Economic costs of potential disease outbreaks in Australian livestock industries
Disease Total annual cost of outbreak

Foot and Mouth Disease $7,100 million

Classical Swine Flu $57 million

Avian Influenza (Global pandemic) 6.8% reduction in GDP


Source: Department of Agriculture 2015, Animal Health Australia 2012, Buetre et al, 2006.

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 2001 2007

Duration of the Outbreak 8 months 4 months

Animals Depopulated 6 million 2.160

Farms Depopulated 120,300 Less than 10

Suicides 60 0

Extent of Outbreak Widespread Localised

Cost in US dollars 6.9 billion 200 million


Time to regain normalisation of trade
18 months 2 months
following eradication of disease

Source: DEFRA (2010)

In 2010, both Japan and the Republic of Korea experienced large FMD outbreaks which
required extensive programs to control. The 2010–2011 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).

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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.

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Bovine Spongiform Encephalopathy (BSE or Mad Cow Disease)

BSE is a fatal nervous disease of cattle that is associated with the accumulation of abnormal
proteins, called prions, in the brain. The disease can be transferred to humans through
ingestion of food that has been contaminated through contact with the brain, spinal cord or
intestines of infected animals. In humans, it is known as new variant Creutzfeldt–Jakob
disease, which has resulted in over 200 deaths in the UK over the past decade.

Australia has been fortunate to have no recorded cases of BSE. Currently there is no
treatment or vaccines available to prevent or cure BSE in infected cattle.

Of the 188,686 cases recorded worldwide over the last 22 years, 97.5% (183,895) have been
in the UK. The epidemic peaked in 1993 when almost 1,000 new cases per week were
confirmed. This severely affected the UK economy, costing over $30 billion in financial
losses. Since then, around 5,000 cases of BSE have been diagnosed in other countries.
Significant numbers of cases have been recorded in Ireland, Portugal, France, Switzerland,
Germany, Spain, Italy and Belgium.

Several other European countries have recorded very small numbers of BSE cases. The only
countries outside Europe that have reported more than one or two BSE cases have been Japan
(34 cases), Canada (18 cases) and the USA (3 cases).

Although there has been no economic analysis of the impact of a BSE outbreak in Australia,
it is not unreasonable to assume it would be significant, given the experience of the US beef
industry. The disease was detected in the US in 2004, with the effect that US beef was
banned from a range of export markets. Considering the US only exports 10% of beef
production, compared to Australia where two thirds of production is exported, Australian
costs would be relatively greater than those incurred by the US beef industry, as shown in the
following figure.

Value of US beef exports


3.50
BSE occurred
on Dec. 23, 2003
3.00

2.50
(US$ billion)

2.00

1.50

1.00

0.50

0.00
2002 2003 2004 2005 2006 2007 2008

Figure 65: US bovine-related export trends 2002 –2008


Source: USDA ERS (2015)

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Australia’s restrictions on importing animals to Australia help protect livestock industries
from transmissible spongiform encephalopathies (TSEs), including BSE and scrapie in sheep.
The National TSE Surveillance Program is managed by Animal Health Australia with its
primary purpose to support trade by maintaining a surveillance system for TSEs that is
consistent with the OIE Terrestrial Animal Health Code. This program aims to assure all
countries that import cattle and sheep commodities that Australia remains free of these
diseases (Animal Health Australia, 2014).

Classical Swine Fever (CSF)

CSF is a highly contagious disease resulting in variable mortality rates and post-mortem
lesions which are not unique to CSF, thus making it a difficult disease to diagnose. According
to Animal Health Australia, outbreaks have occurred in Australia several times, however
most recently in 1943 and 1961 with the disease successfully eradicated in each case.

The 2012 AUSVETPLAN Disease Strategy for CSF assessed the potential economic impacts
of an outbreak on the Australian pork industry and its producers. It was concluded that an
outbreak of CSF in the Darling Downs area of southeast Queensland or an outbreak in
northern Victoria would result in at least a 28% loss in gross income for the regional pig
industry in these areas. An epidemic in either of these regions would cost, on average, $57
million or 9% of the annual gross income of the national pig industry. These losses would
increase substantially if the disease was to become endemic in either area.

There has been some research to assess the expected economic impact of CSF, Nipah virus
and porcine reproductive and respiratory syndrome disease on the pig industry of Australia
(Garner et al, 2001). Scenarios involving either an epidemic event, in which the outbreaks
were confined to selected regions and were eradicated, or an endemic situation, in which the
diseases became established in Australia, were analysed. Based only on loss of sales and
disposal costs, epidemics were projected to result in regional losses in income of the order of
$10 million to $30 million (16% - 37% of industry value) depending on disease and region. If
any of these diseases became established, opportunity losses in gross national pig income of
5%-11% per year would occur, with CSF the most serious of the three diseases.

Porcine Reproductive and Respiratory Syndrome (PRRS)

One of the most damaging diseases to pork industries around the world is porcine
reproductive and respiratory syndrome (PRRS). The total economic cost of PRRS to US
producers is estimated at US$664 million annually (Holtkamp et al, 2013). This disease is
endemic to almost every pork industry globally, including many which wish to export into
the Australian market. This poses a threat to any pig that may come in contact with uncooked
imported pork meat. Currently Australian pigs do not have PRRS and Australian Pork
Limited and pig producers are working hard to keep it that way.

Avian Influenza (bird flu)

Avian influenza (AI) is an infectious disease of birds caused by an influenza virus. The AI
virus is not the same as the human influenza virus that normally causes seasonal influenza in

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humans, particularly in winter. There are many different subtypes of the AI virus and only
rarely do any of these subtypes affect humans. There have been a number of outbreaks in
Australia that have been successfully eradicated. One particular sub-type, H5N1, is
particularly virulent and has also caused illness and deaths in humans in overseas locations.

There were major outbreaks of AI in Asia in 2003 and 2004. Authorities reacted by
eradicating millions of infected birds, which had substantial economic ramifications in
countries such as Vietnam, Thailand and China. Overall, the FAO estimated the H5N1 avian
flu led to the death of more than 200 million birds worldwide, resulting in economic losses of
over $20 billion (Harris, 2006).

There is a continuing concern of the possible emergence of bird flu in Australia and
appropriate responses to such a pandemic have been formulated. ABARES modelled the
potential economic impact of a global pandemic of the virulent strain of AI, which also
became established in Australia. A medium level outbreak of the virulent form of bird flu in
Australia (in conjunction with a global pandemic) was projected to result in an immediate
6.8% reduction in national GDP, and would involve an extended recovery period (Buetre et
al, 2006).

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11. Current Australian expenditure on livestock health
The total annual expenditure by Australian livestock farmers on animal health and veterinary
medicines is estimated to be approximately $1 billion, which is a substantial cost for a sector
with annual production valued at approximately $20 billion (ABARES, 2014). The total
annual expenditure on animal health and veterinary medicines also compares to other farm
input items such as fertiliser and crop chemicals (that are used in many different agriculture
industries not just livestock) which have annual costs of $2.1 billion and $1.5 billion,
respectively (ABARES, 2014). Furthermore, the cost of animal health and veterinary
medicines is only part of the total cost of disease and animal health deficiencies for the
sector, and does not include the cost of production losses.

There has been some economic modelling carried out to more fully estimate the total costs of
livestock diseases to the Australian economy (see Table 19). Research has highlighted that a
significant amount of the costs associated with livestock diseases are due to farmers not being
able to control diseases using current technology (see Table 20). Farmers may be unable to
control disease for two possible reasons – either currently available technologies and
remedies are ineffective or inadequately implemented, or they are simply not economical to
implement.

Table 29: Annual costs of major diseases, pests and health issues in Australia.
Livestock industry National economic cost of major diseases and
animal health issues (2013/14)

Beef cattle $535.2m

Sheep $757.3

Goat $3.44m
Source: Lane et al (2015)

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Table 30: Cattle disease where available technology would reduce annual costs
Disease Estimated cost due to failure to Estimated cost due to not being able
implement known management to control disease using current
strategies technology

Bloat $10.8m 23% $36.6m 77%

Buffalo fly $20.8m 27% $57.4m 73%

Tick Fever $8.9m 34% $17.1m 66%


Internal
parasites $4.8m 12% $33.8m 88%

Feedlot BRD $15.7m 39% $25m 61%


Source: Sackett et al (2006)

The cost of bloat in beef herds located in high-risk regions where managers do not implement
any control measures is estimated to be $17.69 per head (Sackett, 2006). In comparison, the
cost in the same herd where prevention strategies have been implemented was estimated to be
$11.72 per head per year. If farmers in high-risk areas adopted a recommended prevention
strategy, such as bloat capsules, it is estimated that the national cost of bloat would be
reduced by $10.8 million, a 23% cost reduction.

This is not necessarily the case for all livestock diseases. For example, cost-benefit estimates
for controlling a sheep lice infestation indicate it is not always economical to implement
treatment. Sackett et al (2006) argued that the lack of lice treatment in flocks was not due to a
lack of industry knowledge of available preventable systems, but rather that the overall
benefit achieved from treatment is often not financially justifiable for sheep producers.

In some instances, such treatment may be justified by an event that may have increased the
risk of lice so that treatment is used as a means of managing a possible outbreak. It should
also be noted that the withdrawal of the effective chemical diazinon due to occupational
health and safety issues from the market in 2009 and its replacement with less effective
products may have contributed to the increase in prevalence reported at the time (Lane et al,
2015).

Similarly, although cattle ticks are a manageable disease, management procedures are
extremely costly for cattle farmers. Research estimated that $16.8 million was spent on
tickicides nationally by beef producers in 2003 (Playford, 2005). Over the last decade, the
method of administration of tickicides has changed considerably, with a producer preference
now being for ‘pour-ons’ due to convenience once equipment is available. Playford (2005)
concluded however that the costs for these methods were approximately ten times more than
traditional dipping of cattle.

The cost of controlling an infestation of sheep lice in a flock is ranges from $7.14 per head in
high rainfall and severe infestations, to $1.44 per head in pastoral and controlled regions. The

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national cost of controlling and preventing sheep lice is estimated to be $45 million. These
cost estimates account for chemical treatments and labour, as well as labour for general
management associated with lice such as monitoring and fence maintenance.

The Australian goat industry has similar health issues to those of the sheep industry. Internal
parasites and their associated prevention and treatment methods cost the goat industry $0.71
million, mostly in the form of drenches that are estimated to cost $1.50/goat a year (Lane et
al, 2015). For enterotoxaemia, almost 100% of the annual costs are due to prevention costs,
totalling $0.34 million a year to the goat industry. Additionally, lice prevention methods on
average cost $1 per goat, totalling $0.23 million a year to the goat industry.

Animal health products that are currently restricted for use in Australia

Australian biosecurity, food safety and animal health systems have meant that the nation has
experienced relatively few major disease outbreaks, and virtually no zoonotic disease
outbreaks. It has also meant that the Australian livestock industries enjoy relatively
widespread access to international markets, on which many of these sectors depend.

However, the strict product registration processes and relatively high costs associated with
such processes mean that some animal health products that are available to livestock farmers
internationally are not available in Australia. This has the potential to reduce the
competitiveness of Australian livestock industries relative to the livestock industries located
in other nations.

Three livestock production technologies in particular that are widely utilised internationally
but not utilised at all, or to a much more limited extent, are hormonal growth promotants
(HGPs), antibiotics, and bovine somatotropin (rBST).

Hormonal Growth Promotants (HGPs)

HGPs increase the feed conversion efficiencies and growth rates of treated cattle by between
15% and 30% in the case of grain-fed cattle, and by 5% and 15% in pasture fed cattle (MLA,
2010). They are delivered to cattle in the form of a slow-release injectable pellet. The
hormones they contain are identical to the normal hormones produced by cattle, and are
undetectable. HGPs have been used in Australia since 1979, and are widely used throughout
the world (MLA, 2010). The EU has imposed a ban on the importation of beef produced with
HGPs, although the World Trade Organisation (WTO) found this ban to be not supportable
on the basis of available science. The United Nations Food and Agriculture Organisation
(FAO), the US Departments of health and agriculture and the Australian Department of
Health have all declared meat produced with HGPs to be safe for human consumption.

Despite the available science, the EU has maintained its ban on imports of beef produced
using HGPs, and Australian-based Coles supermarkets have also imposed a ban on the use of
HGPs in beef marketed by that company. In imposing the ban on HGPs, Coles claims it is
responding to the wishes of consumers.

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Antibiotics

The routine use of antibiotics as a feed additive for intensively-farmed livestock has been
found to improve livestock productivity, but the practice is viewed with some concern by
health authorities because of the fear that widespread use of antibiotics will accelerate the
emergence of antibiotic-resistant infectious species that can cause disease in humans. There is
widespread use of antibiotics in livestock production systems in the USA and other nations,
although their use has been much more tightly regulated in Australia.

Australian livestock industries such as the pig and chicken industries are only allowed to use
antibiotics that are not important for human health, and also restrict their use to situations
where treatment of an existing infection is required, or there is a specific situation where
antibiotic administration will prevent the outbreak of a specific disease. In the case of
antibiotics, careful regulation has meant that Australia has some of the lowest levels of
resistance in the world.

The US Food and Drug Administration (FDA) announced a program in 2012 to phase out
unsupervised drugs as feed additives and, on a voluntary basis, convert approved uses for
antibiotics to therapeutic use only, requiring veterinarian supervision of their use and
prescription.

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12. Discussion and conclusions
The Australian livestock industries, including the beef cattle, dairy cattle, sheep, pig and
poultry industries, have an enviable record of freedom from many of the disease and pests
that impact on the livestock sectors of overseas nations. However, the maintenance of the
disease and pest status of the livestock industries depends heavily on Australian biosecurity
standards, and the continuing access the sector has to the full range of preventative and
curative animal health products.

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 (ABARES, 2014).

These estimates are qualified by the fact that they rely on assumptions about the incidence
and prevalence of a disease within flocks or herds on individual farms, assumptions about
incidence and prevalence of disease between flocks or herds, and assumptions about the
likely trade or market responses to an outbreak of the disease in question.

There is obviously a significant margin for error in these estimates, as the current outbreak of
Avian Influenza in the USA has demonstrated. At the time this report was prepared, US
authorities were reporting that more than 40 million birds on almost 200 farms had been
slaughtered in an attempt to control the outbreak (USDA, 2015). This impact far exceeds the
impact of all previous outbreaks of the disease in the USA, and therefore any available
estimates of its likely cost.

The direct annual costs of livestock disease in Australia are able to be estimated more
accurately, based on industry statistics. In 2013, the direct cost of animal health products for
the treatment and/or prevention of pests and diseases in Australian livestock industries was
estimated to exceed $1 billion, with the majority of these costs incurred by the sheep and
cattle industries.

Compared to the sheep and cattle industries, the pig and poultry industries do not have the
same level of costs for preventing and treating animal health issues. However, these
industries are generally more intensive and when an outbreak of a disease or animal health
issue occurs there is a significant risk of an escalation in costs for treatment and/or
prevention.

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 81
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.

The approach taken by some market participants, who have banned the use of specific
products and technologies despite their proven safety and the benefits they provide for
livestock producers, and despite these being endorsed by relevant authorities, is an
unfortunate and short-sighted approach.

This approach not only disadvantages livestock producers who are unable to access the
technologies or products to enhance the productivity of their livestock, but also acts as a
dampener on the research and development investment by both the private and public sectors
to develop these and new technologies. If there is a significant risk that supply chain
participants may decide to ban the use of a new technology, there is little point proceeding
with the R&D investment required to bring that product to the market.

The end result of this is that the potential productivity gains that the technology may have
brought to the industry are not realised, and Australian livestock industries are disadvantaged
relative to their international counterparts.

This is not to argue that the perceived needs of consumers should be ignored. Consumers
should be offered the opportunity to exercise choice about the production systems that are
utilised to produce the food they eat, but this can be achieved by product segregation and
identification systems, rather than blunt and clumsy bans.

This issue is becoming even more critical, given the need for Australian livestock products to
be positioned in higher value markets that demand the highest quality, safety and integrity
standards, while at the same time needing to compete with developing nation agricultural
exports that are produced with much lower costs of production.

Page 82
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Appendix 1.

Table Australia’s status for OIE-listed diseases of terrestrial animals, 2013


Disease Status Date of last occurrence and notes

Multiple-species diseases

Anthrax Present Limited distribution


Aujeszky’s disease Free Never occurred
Bluetongue Viruses Present Restricted to specific northern
areas of Australia; sentinel herd
and vector monitoring program
Brucellosis (Brucella abortus) Free Australia declared freedom in
1989
Brucellosis (B. melitensis) Free
Brucellosis (B. suis) Serological Maintained in feral pigs in
evidence northern Australia; rare
occurrence in domestic pigs
Crimean Congo haemorrhagic Free Never occurred
fever
Echinococcosis/hydatidosis Present
Epizootic haemorrhagic disease Virus present Disease has not been reported
Equine encephalomyelitis Free Never occurred
(eastern)
Foot-and-mouth disease Free 1872; officially recognised by the
OIE as free without vaccination
Heartwater Free Never occurred
Japanese encephalitis Serological evidence Detected annually in Torres Strait,
and on Cape York in 1998 and
2004
New World screw-worm fly Free Never occurred
(Cochliomyia hominivorax)
Old World screw-worm fly Free Never occurred
(Chrysomya bezziana)
Paratuberculosis Present National control /management
programs
Q fever Present
Rabies Free 1867
Rift Valley fever Free Never occurred
Rinderpest Free 1923; with the global eradication
of rinderpest finalised in 2011, all
countries are free
Surra (Trypanosoma evansi) Free Never occurred
Trichinellosis Not reported
Trichinella spiralis not present
T. pseudospiralis present in wildlife
Tularaemia Free Never occurred
Vesicular stomatitis Free Never occurred
West Nile fever Australian variants present A previously unknown Australian
strain of West Nile virus was
identified following an outbreak
of neurological disease in horses
in 2011. No cases were reported in
2013

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Disease Status Date of last occurrence and notes

Cattle diseases
Bovine anaplasmosis Present Restricted to northern areas of
Australia
Bovine babesiosis Present Restricted to northern areas of
Australia
Bovine genital campylobacteriosis Present
Bovine spongiform Free Never occurred; National
encephalopathy Transmissible Spongiform
Encephalopathies Freedom
Assurance Programs includes
surveillance; official OIE
‘negligible risk’ status
Bovine tuberculosis Free Australia declared freedom in
1997; last case in any species
(including free-living) reported in
2002
Bovine viral diarrhoea Present Bovine viral diarrhoea virus
(BVDV) 1 — present; BVDV-2
— never occurred
Contagious bovine Present 1967; Australia declared freedom
pleuropneumonia in 1973; officially recognised by
the OIE as free
Enzootic bovine leucosis Very low prevalence in beef cattle Australian dairy herd achieved
freedom from EBL on 31
December 2012
Haemorrhagic septicaemia Free Never occurred; strains of
Pasteurella multocida present, but
not the 6b or 6e strains that cause
haemorrhagic septicaemia
Infectious bovine Present Bovine herpesvirus (BHV) 1.2b
rhinotracheitis/infectious pustular — present; BHV-1.1 and 1.2a —
vulvovaginitis never occurred
Lumpy skin disease Free Never occurred
Theileriosis Free Theileria parva and T. annulata
not present
Trichomonosis Present
Trypanosomosis (tsetse borne) Free Never occurred
Swine diseases
African swine fever Free Never occurred
Classical swine fever Free 1962
Nipah virus encephalitis Free Never occurred
Porcine cysticercosis Free Never occurred
Porcine reproductive and Free Never occurred
respiratory syndrome
Swine vesicular disease Free Never occurred
Transmissible gastroenteritis Free Never occurred

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Disease Status Date of last occurrence and notes
Sheep and goats diseases

Caprine arthritis–encephalitis Present Voluntary accreditation schemes


exist
Contagious agalactia Not reported Mycoplasma agalactiae has been
isolated, but Australian strains do
not produce agalactia in sheep
Contagious caprine Free Never occurred
pleuropneumonia
Enzootic abortion of ewes (ovine Not reported Never occurred
chlamydiosis)
Maedi–visna Free Never occurred
Nairobi sheep disease Free Never occurred
Ovine epididymitis (Brucella ovis) Present Voluntary accreditation schemes
in all states
Peste des petits ruminants Free Never occurred
Salmonellosis (Salmonella Free Never occurred; surveillance has
Abortusovis) shown no evidence of infection in
sheep
Scrapie Free 1952
Sheep pox and goat pox Free Never occurred
Avian diseases
Avian chlamydiosis Present
Avian infectious bronchitis Present
Avian infectious laryngotracheitis Present
Avian mycoplasmosis Present
(Mycoplasma gallisepticum)
Avian mycoplasmosis (M. Present
synoviae)
Duck virus hepatitis Free Never occurred
Fowl typhoid Free 1952
Highly pathogenic avian influenza Free as of 21 February 2014 Australia achieved freedom from
HPAI on 20 March 2013,
following an outbreak in
November 2012. Two outbreaks
were reported to the OIE on 16
and 25 October 2013. Destruction,
decontamination and disinfection
were completed on 21 November
2013
Infectious bursal disease Present Infectious bursal disease occurs in
(Gumboro disease) a mild form; very virulent strains
not present
Low pathogenic notifiable avian Occasional reports An outbreak was reported to the
influenza (poultry) OIE on 8 March 2013; the
outbreak was resolved on 27 June
2013
Newcastle disease in poultry Lentogenic viruses present Virulent Newcastle disease last
occurred in poultry 2002b
Pullorum disease Not reported Last reported in 1992. Salmonella
Pullorum has been eradicated from
commercial chicken flocks
Turkey rhinotracheitis Free Never occurred

(Source: Animal Health Australia, 2014)

Page 90
Australia’s status for other diseases of terrestrial animals that are reported to the OIE each
year, 2013

Disease Status Last occurrence


Actinomycosis Present
Avian encephalomyelitis Present
Avian leucosis Present
Avian salmonellosis (excluding Present
fowl typhoid and pullorum
disease)
Avian spirochaetosis Present
Blackleg Present
Botulism Present
Caseous lymphadenitis Present
Coccidiosis Present
Contagious ophthalmia Present
Contagious pustular dermatitis Present
Distomatosis (liver fluke) Present Restricted distribution
Enterotoxaemia Present
Equine coital exanthema Present
Filariosis Present
Footrot Present Restricted distribution
Infectious coryza Present
Intestinal Salmonella infections Present
Listeriosis Present
Melioidosis Present
Nosemosis of bees Present Restricted distribution
Salmonellosis (Salmonella Free Never reported
Abortusequi)
Sheep mange Free 1896
Strangles
Swine erysipelas Present
Toxoplasmosis Present
Ulcerative lymphangitis Free Never reported
Vibrionic dysentery Present
Warble fly infestation Free Never reported
Other clostridial infections Present
Other pasteurelloses Present
(Source: Animal Health Australia, 2014)

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