QUESTIONS are being raised about how producers will be compensated for stock losses in the event of a foot and mouth disease outbreak.
Prominent meat industry analyst Simon Quilty, Global Agritrends, says industry and government agreements will mean compensation will assist only a few and its impact and assistance will be short-lived as Australia looks to regain market access around the world over the following years.
Under the Austvetplan document, which outlines the nationally-agreed approach for the response to emergency animal disease, the value of the affected animals - and thus the compensation paid - would be determined by prices at the closest two previous sales to the farmer.
Mr Quilty suggests it would be in the interest of farmers that cattle and sheep sales stop once an outbreak occurs so that the measurement point is based on pre-FMD livestock values.
Should livestock sales recommence at considerably lower values - analysts believe the market could drop by as much as 80pc overnight - then any new compensation cases would be based on massively reduced prices, he said.
It would almost be a case of producers wanting to be among the first to have the disease, not the last, Mr Quilty told the RMA Network conference on the Gold Coast this week.
"No livestock owner, whether a feedlotter, farmer, meat processor or backgrounder, would want to take such a significant hit in their valuation, so the reality is livestock sales would likely stop until the disease is under control," Mr Quilty explained after his presentation.
That might take months, which would mean meat supplies would come to a halt.
"Australia's domestic market heavily depends on selling fresh manufacturing meat every day, whether to supermarkets, retail butchers or grinding meat facilities," Mr Quilty said.
"The estimated quantities sold in fresh bins are close to 200,000 tonnes shipped weight annually. This is half of Australia's total domestic beef production."
The manufacturing meat is used to produce ground beef, sausages, diced beef and hamburgers, with supermarkets taking the lion's share.
"It would be crucial during an outbreak to win back consumers, given the likely bad publicity," Mr Quilty said.
"There would be a need to ensure domestic supplies are not disrupted and remain open to trade to ensure that consumers remain faithful to consuming red meat."
The solution
An agreed national pre-FMD period in which all compensated livestock in Australia were valued would be a way around the issue, Mr Quilty said.
He urged agents at the conference to talk to their local politician and get this flaw corrected.
Mr Quilty also raised the issue of acquiring quality livestock sale data to underpin compensation claims.
He said several categories of livestock reporting, particularly on the quality end, had ceased in Meat & Livestock Australia services.
Categories such as Wagyu and high-end Angus were particularly low on market information, he said.
Further, the kitty for compensation was limited, Mr Quilty said.
Under Austvetplan, 2pc of the gross value product would be put aside for compensation, in this industry's case that is around $700m. Once it meets that threshold, it is then reviewed.
"Maybe that threshold is too low when you consider only an estimated 42,000 head of cattle would be covered initially," Mr Quilty said.
Head of the federal government's national animal disease taskforce Dr Chris Parker told another industry webinar this week contingencies existed within treasury to cover compensation requirements in the event of an FMD outbreak.
That webinar, hosted by the Victorian Farmers Federation, was also told it was very unlikely insurance would cover stock losses from an FMD outbreak but producers should check with their individual suppliers.
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