PAPER TO THE BEEF GENETICS HORIZONS WORKSHOP, ROCKHAMPTON, AUGUST 2004

by Dr. P. A. Rickards, OAM, Managing Director, 
Agricultural Business Research Institute,
Armidale, New South Wales,

1. AUSTRALIA’S REGISTERED BEEF CATTLE SEEDSTOCK INDUSTRY

Australia’s registered beef cattle seedstock industry has been on a serious slide for the past 13 years. In 2003 registrations hit their lowest point in the last two decades. Figure 1 shows a graph of registrations since 1990. The loss of registrations has been 28.3% in 13 years. Unfortunately, these statistics project an image of an industry rushing towards obsolescence.

Figure 1: National Beef Cattle Registrations, 1990 to 2003

Source: Australian Registered Cattle Breeders’ Association

Frankly, I cannot imagine a more ridiculous situation. Australia’s beef cattle seedstock breeders have enormous advantages over many of their overseas counterparts, including:

• “home ground” advantage in access to the world’s best genetic evaluation technology in BREEDPLAN,
• first access to a range of innovative technology coming out of the beef quality CRC,
• freedom from most of the serious and infectious animal diseases, and 
• a low cost of production.

So why are they continuing to lose ground?

2. STRATEGIC ISSUES

Despite the unflattering statistics in figure 1, it has to be said that at a corporate level, the registered beef industry thankfully does not have its head in the sand (though many individual breeders may be guilty of this sin).

Over the last two years, the industry has been involved in a serious strategic planning exercise through its peak Council — the Australian Registered Cattle Breeders’ Association (ARCBA).

As the principal author of the ARCBA issues paper, I have reached the firm conclusion that the initiative that will contribute most to restoring growth in the registered beef cattle breeding industry will be to develop a strong export market for beef cattle genetics and associated support services.

The need of the cattle genetics industry for export sales should be self evident. The commercial beef industry routinely exports over 60% of its product. Our seedstock producers should plan on achieving a similar outcome.

3. HOW DOES AUSTRALIA PERFORM WITH BOVINE GENETIC EXPORTS?

A vigorous approach to the bovine genetics market would see a portfolio of exports develop including semen, embryos, live cattle (for breeding) and accompanying technical services to ensure that the genetics we export add value to the production systems of our customers.

Most statistics do not differentiate between beef and dairy genetics, but by combining these we can still get a very good picture of how pathetic our export performance has been. Figure 2 shows the value of bovine semen exports from the USA and Canada over three recent years.

Figure 2: Value of Semen Exports from US and Canada

Canada is a star performer exporting around A$50M of semen per year. Canada only has 13.4 M cattle, about half the number in Australia. Statistics are limited but my best estimate is that Australia exports around $0.6M to $1M of bovine semen per year. That is, after adjusting these exports for the size of the cattle industry in Canada relative to Australia, Canada is outstripping Australia as an exporter by about 170:1. When BSE was discovered in Canada and it lost important markets for live cattle, it redoubled its efforts and was successful in exporting semen to 20 new countries.

Table 1 shows the value of bovine semen exports from the USA in 2001.

Table 1: Value of semen exports from the USA in 2002 in A$ to top ten importers

EXPORTED TO:	VALUE A$M
Mexico	8.65
Japan	6.14
Canada	5.43
Netherlands	5.30
Italy	3.72
UK	3.289
Germany	3.269
Brazil	2.987
Saudi Arabia	2.959
Australia	2.787
Average top 10 countries	4.453
Compared with:
Austrlia to the rest of the world, est.	0.60-1.0

The USA has about 3.5 times the number of cattle that are in Australia. However, the top ten importers of bovine semen from the USA buy, on average, 7.4 times more semen per year than Australia sells per year to all of its export clients!

One of the reasons that the US livestock industry is so successful with its exports is that it has established the US Livestock Genetics Export Inc. which has a goal of increasing the international demand for US livestock genetics.

Importantly it backs this goal with $s , by providing exporters with 50% of the costs for international advertising, translation, distribution of promotional materials and foreign trade shows. In 2002/03Australia imported 1,418,791 straws of bovine semen while we exported only about 150,000 straws. That is, we have a seemingly insatiable appetite for imported genetics – bringing in around ten straws for every one we export.

We are progressively improving our semen export performance in some markets. Table 2 shows the straws of semen exported to Argentina from the USA and Australia in 1999 and 2003. The USA outperformed Australia by 948:1 in 1999, but by 2003 this difference had reduced to 54:1. A better performance but still not good enough.

Table 2: Exports of straws of semen from the USA and Australia to Argentina in 1999 and 2003 (beef and dairy).

ORIGIN	1999	2003
USA	1327888	852143
Australia	1400	15900
Ratio USA:Australia	948:1	54:1

Against this background, it is difficult to conclude other than that Australia has been in a deep sleep in regard to its market opportunities for semen exports.

As with the US livestock genetics industry, we need a “kick start”. Initiatives to achieve this are being frustrated as I will demonstrate later in this paper.

4. ARE AUSTRALIA’S BEEF GENETICS COMPETITIVE?

Our obsession about having cattle with IMP after their names in our pedigrees does not do justice to our local genetics. 

Some of the fancy beef sires from the USA may have extreme EPDs but are they the best choice for improving the profitability of Australian beef cattle herds? 

The World Hereford Genetic Linkage Project ran the progeny of some top North American Sires and Australian sires as contemporaries and calculated their EBVs in the Australasian GROUP BREEDPLAN.

A summary of some of the key EBVs and the Breed Object index for the Australian Short-Fed (100-150 day) market is given in Table 3.

In this small sample of seven sires, it was the North American sire Feltons Endurance 745 that had the highest $Index. The next four places were held by balanced Australian sires. The sire with the lowest $Index was a North American sire with extreme EPDs that do not meet the requirements of Australia’s commercial cattle breeders.

In this example, the Australian sires were very competitive for overall balance as reflected in the BreedObject index. They would probably also be very competitive if they could be compared across the whole population of North American sires on a BreedObject system – but such a facility has not yet been taken up by North American Hereford breeders.

5. LIVE CATTLE EXPORTS

Australia has a very strong trade in live cattle for export. The average annual number of live cattle exported since year 2000 has been in excess of 900,000 head. 

The majority of these cattle are for slaughter but there has been a growing interest in cattle for breeding as shown in Table 4.

These figures need qualification because of the likelihood that many of the cattle destined for breeding are actually coded as for slaughter. For example, in 2002 when the ABS recorded 16,832 as the exports of breeding cattle to all markets, a phone survey of exporters revealed that 42,900 dairy heifers were exported. Likewise, the 21,502 recorded in 2003 as beef cattle exported to the Philippines for breeding is probably a coding anomaly. It is disappointing that the live cattle for breeding export industry is not serviced by more reliable statistics – given its strategic importance and growth potential.

Table 3: A sample of EBVs and the Short-Fed BreedObject $index for sires included in the World Hereford Genetic Linking Project

SIRE	COUNTRY	BIRTH WT KG	600 DAY WT KG	SCROTAL SIZE CM	EBVS RETAIL BEEF YIELD %	IMF %	$INDEX
Feltons Endurance 745	N Am.	+2.6	+56	+3.3	-1.4	+1.1	61
Yarram Hot Shot P028	Aus.	+5.8	+69	+0.1	+0.8	+0.3	49
Heatherdale Opium U78	Aus.	+3.5	+44	+0.9	+0.2	+1.0	48
Injemira Advance U118	Aus.	+4.7	+65	+1.8	-0.4	+0.8	42
Mt Difficult Unsworth	Aus.	+4.1	+67	+2.8	+2.4	-0.8	37
Remittall Governor 236G	N Am.	+5.7	+69	+1.8	+2.4	-0.5	29
MHFX160 Reform 77H	N Am.	+8.3	+99	+2.6	+2.4	-1.2	27

Table 4: Exports of live cattle for breeding by major markets

DESTINATION	2001	2002	2003*
	all	all	beef	dairy	all
China	–	4866	6050	34688	40738
Egypt	–	1081	–	–	–
Indonesia	1797	3384	8112	3218	11330
Israel	2332	–	–	–	–
Kuwait	1406	503	149	1040	1189
Malaysia	394	356	1304	172	1476
Mexico	17657	4917	–	2331	2331
Philippines	30	30	21502	–	21502
UAE	249	1089	890	1159	2049
Vietnam	–	–	1836	1872	3708
Other	702	606	528	–	528
Total	24567	16832	40371	44480	84851

*Based on Australian Bureau of Statistics. The data collection changed in 2003 to distinguish between beef cattle and dairy cattle exports.

Having said that, most industry sources agree that the dairy heifer trade in 2003/04 has exceeded 60,000 head worth over $100M, with China the major destination. Significantly, the FOB price of dairy heifers has averaged A$1697 in 2003 versus A$628 FOB for all live exports. This means that live cattle for breeding now represent around 15% of the total value of live cattle exports.

The beef seedstock industry could learn a lot from Australia’s experience in export of dairy heifers. A number of exporters still treat seedstock as a commodity to be acquired in bulk for the lowest possible on-farm price and delivered with little commitment to the after sales service that is required to ensure that the customers add value to their respective breeding operations.

The Holstein-Friesian Association of Australia (HFAA) found that it had to be proactive in order to protect the reputation of Australian Holstein heifers. They have instituted a pre-embarkation type classification aimed at ensuring the quality of heifers that fill export orders. HFAA has signed off a Memorandum of Understanding with the Dairy Association of China (DAC) regarding the dairy export trade.

This defines three categories of Holsteins for export:

At this stage DAC has expressed a preference for registered dairy heifers but there are no facilities to recognise such cattle in China. To overcome this, the ABRI will be extending its Internet Solutions service to DAC. This will be in two areas as outlined below and shown in Figure 3:

• the DAC will be able to research the HFAA’s database using screens carrying Chinese script, and
• the DAC will be able to register the progeny of registered Holsteins in China using the Internet Registration feature that ABRI has developed.

Further down the track these services may be extended to dairy herd recording.

Figure 3: How HFAA plans to service Chinese Importers of Dairy Heifers

The HFAA has invested heavily in a range of quality control and infrastructure issues for dairy heifer trade to China. It is now starting to see the rewards. Since 2000, the Australian dairy industry has been devastated by a range of issues including:

• industry deregulation,
• low commodity prices due to a rampant A$ in recent times,
• the worst drought in living memory,
• low quotas of water in irrigation areas, and
• collapse and/or closure of some processing facilities.

Most industry forecasters thought that this would cause a downward spiral in registrations. This has not occurred. Registrations of Holsteins are buoyant due mainly to the vigorous export demand.

The on-farm price of dairy heifers has risen from $400/head to around $900/head for those meeting export requirements – pouring around $30M of additional income into the dairy breeding industry.

Local reaction to the MOU has been varied. Some exporters have applauded it, others have vigorously opposed it.

As beef cattle breeders, we cannot ignore what is happening with dairy heifer exports. If Australia’s reputation as an exporter of dairy genetics is good, our chances of developing a vibrant live export trade in beef genetics will be enhanced. We need the dairy program to be successful.

6. EXPORTING GENETICS AND GENETIC TECHNOLOGY IS NOT ROCKET SCIENCE

In many ways the ground has already been prepared for a successful market in the export of beef cattle genetics. In just over ten years, Australia’s BREEDPLAN has become the most widely used beef cattle genetic evaluation system in the world. Figure 4 shows the countries in which it is used.

Figure 4: Countries using BREEDPLAN Technology

The market success is outlined below:

COUNTRY	BREEDPLAN USE
Australia	National
New Zealand	National
Thailand	National
Philippines	National
Namibia	National
Hungary	National
USA	6 breeds
Canada	5 breeds
South Africa	46% of market
UK	44% of market
Argentina	Say 30%
Uruguay	Expect 40%

If these countries have made a strong commitment to the BREEDPLAN genetic evaluation system, it follows that they are likely to be very receptive to importing Australia’s beef genetics — particularly genetics that have been evaluated in BREEEDPLAN and offer predictable herd improvement opportunities.

No country other than Australia can offer to package its export genetics with an internationally accepted genetic evaluation system.

The key ingredients of the success in marketing BREEDPLAN are:

• it is a good product, 
• there is a single and highly motived marketing desk, and
• ABRI provides good after sales service.

Genetic Solutions and its agents are marketing Australia’s gene marker technology. They have only been doing this for a short time but already they have made sales in:

• Australia
• New Zealand
• USA
• Canada
• South Africa
• UK
• Continental Europe
• Brazil
• Argentina
• Chile
• Korea
• Japan

7. HOW DOES THIS RELATE TO THE WORLD OF OPPORTUNITIES FOR AUSTRALIA’S BEEF GENETICS

In its beef genetics strategic plan, the MLA’s Vision Statement includes seeing Australia emerge as “a net exporter of beef cattle genetics material”.

In the absence of a serious commitment to make this happen, the vision is of no consequence.

In my opinion, it is not particularly useful to separate beef and dairy genetics exports, they should be approached jointly.

Australia has NEVER had a better opportunity to achieve very substantial increases in the international market for bovine genetics. This is because the USA and Canada have been two of the most successful exporters of bovine genetics and they have both had their markets substantially reduced by BSE outbreaks. 

At the request of ARCBA, I wrote to the MLA and Dairy Australia in August, 2003 to ask them to each contribute $22,500 each to the completion of a feasibility study that would provide a blueprint for how Australia could position itself for a bovine genetics export market which at the time (prior to USA having BSE) I estimated could exceed $100M pa in a short space of time.

In MLA’s case, this contribution to the feasibility study would represent 0.02 of 1% of their annual budget. Both MLA and Dairy Australia advised me politely that this type of funding could not be provided because there was no evidence of market failure! 

If achieving about 0.5% of our international potential for bovine semen sales is not significant market failure, I don’t know what is! 

My current estimate of the achievable value of bovine genetic export sales and support services is now in excess of $150M pa.

Let me move on from our livestock industry bureaucrats to those who pose as our political leaders. Following the Keniry Report, the Minister for Agriculture, the Hon. Warren Truss MP advised that a new compulsory R&D levy would be placed on live exports to be matched dollar for dollar by the Government.

So far so good. And then he advised that these funds would be provided to LiveCorp.

In the context of genetic exports, this is a bit like employing Mark Latham to undertake Occupation, Health and Safety courses to Sydney cab drivers.

Ladies and Gentlemen, there is no question in my mind that Australia could be the bovine stud farm of the world. The MLA is to be commended for investing heavily in creating world class beef genetics, with projects such as:

• BREEDPLAN, BreedObject and the Beef CRC,
• Hereford Genetic Linkage Project,
• Durham project,
• Angus Elite progeny testing program, and 
• Angus Young Sire Program.

But producing a world-class product is not an automatic entitlement to a sales bonanza. Successful marketing does not just happen – it is the result of very careful strategic and business planning. We are not doing this planning.

For example, when the notice below appeared on the USDA Foreign Agricultural Service on December 29, 2003 did Australia have a well oiled national taskforce that slipped immediately into gear to offer to replace US genetic exports, not just to China but globally, with Australian product? No! What has been the opportunity cost of not doing this? Enormous! 

Unfortunately, our bovine genetics export industry is bereft of national leadership. That leadership must start with MLA and Dairy Australia working in concert. They need to develop a highly motivated Secretariat to develop all components of the international market for bovine genetics and related services. This Secretariat should not be an exporter in its own right, but it should be like the coach of a good rugby team. It should create opportunities for the players (the exporters) to win long-term repeat business. It would cost about $400,000 pa to run which could be provided by appropriate application of levy funds. The MLA/Dairy Australia may well decide to sub-contract the operation of the Secretariat to a third party under strict performance guidelines. In fact, this would probably be a preferred outcome.

In the last 12 months, there have been independent missions to China by MLA, Don Nicol, the Holstein Friesian Association, the Angus Society and the Shorthorn Society and Lowlines have been to China twice.

I commend these organizations for taking the initiative to make the visits. However, I make the point that having independent mission after independent mission is NOT the way the Canadians would approach a new market. And as the Canadians are world leaders in terms of genetic exports we could benefit from looking at their national model.

Unless the bovine breeding industry in Australia has the passion and determination to make the representations to ensure that this restructuring happens, we will continue as a laughing stock in the international genetics market.

USA and Canada will recover from their setbacks and Australia will be marginalised. A $150M+ pa opportunity will fly out the window and the next time we meet our combined national beef cattle registrations may be struggling to reach 100,000 p.a.

Unfortunately these vital considerations are being compromised by a coterie of bureaucrats, politicians, and so-called industry leaders who appear to be asleep at the wheel.

To its credit, the Cattle Council of Australia has very recently taken action which has led to a broadly-based Working Group being established to examine some of the issues involved in the live export trade for breeding purposes. 

Let’s hope they come up with an improved national strategy.

The bottom line is that:

• GENETIC EXPORTING offers the best chance to grow our beef seedstock industry.
• This requires a National strategy to be developed promptly together with the dairy industry.
• Adequate funding must be provided via industry levies.
• With imagination and determination 

we should be targeting a 50% growth in your seedstock business in the next 5 years.