Govt told live sheep industry needed 8-12 yrs to transition - it got four

The Episode 3 report, designed to outline strategies to target minimal impact upon farmers and supply chain participants, suggested that if the phaseout occurred over eight to 12 years, and damage to supply chain participants was mitigated, then Western Australia could end up with a more diverse and sustainable sheep and wool industry at the conclusion of the phaseout.

But they warned the transition could adversely impact the state's sheep and wool industry if undertaken too rapidly.

The release of the report follows Agriculture, Fisheries and Forestry Minister Murray Watt making the long-awaited announcement on Saturday that no live sheep will be exported by sea from Australia after May 1, 2028 and that legislation to enable the phaseout would be introduced into parliament before the next election.

The four-year timeline was one of 28 recommendations made in a report handed to the government last October by an independent panel formed to advise it on how and when to best phase-out the industry.

EP3 founders Matt Dalgleish and Andrew Whitelaw were contracted by the Department of Agriculture Fisheries and Forestry last June to assist the panel with expert economic analysis.

As part of the government's response to the panel report, $107m will be spent over five years, including $64.6m to assist all impacted parts of the sheep industry supply chain to prepare "for their adjustment away" from the trade.

It will also be used to cover expansion of domestic abattoir capacity, including cold storage options, expanding lines at existing processing facilities and installation of feedlots near processors.

Sheep producers and industry stakeholders slammed the announcement, saying the transition package was not enough to mitigate the devastation the industry would face.

Ep3 said the live sheep export industry expected the phaseout to be ordered to occur over up to 12 years based on stakeholder survey responses and the genetic shift required for profitability.

"The transition process is complex and involves several interrelated elements that utilises strategic planning and execution, including consultation with industry representatives regarding lamb feedlot expansion, processor capacity development, and logistics/growth in air or sea-freight capabilities," its report said.

Episode 3, who also stated that it did not support the government's policy, said 8 to 12 years would allow ample time for industry to adapt to the changes, explore alternative enterprise mix strategies, and find new opportunities for growth and development within the transformed landscape.

"By taking a well-considered and gradual approach, Episode 3 envisions the potential for a positive and successful transition towards a thriving sheep and wool industry in Western Australia," the report said.

However, the panel opted for a more fast-tracked transition, with recommendation 27 of the its report stating the May 1 date aligned with the Northern Hemisphere summer to minimise disruption and that 2028 recognises that planning and implementing adjustments take time, would allow for funding initiatives to roll out and a period of industry engagement.

"Ending live sheep exports by sea in 2028 balances the varied interests and steps required for change," the panel said.

The sheep and wool sector are a significant contributor to the WA economy, accounting for a production value of A$1.35 billion in FY2021/22, including A$82 million attributed to the live sheep trade.

An axe has been hovering above the industry since Labor first announced the policy in 2018.

Mr Watt said the government had taken time "to get this right", believing the approach strikes the right balance between industry and animal welfare concerns.

"This is a comprehensive package that will assist to strengthen supply chains, develop market opportunities and improve animal welfare," he said.

"We want to ensure those affected by the phase are well-positioned, resilient and ready when the trade ends in 2028."

Meanwhile, Ep3 found that while the live sheep by sea trade has been declining, largely due to a moratorium on shipping sheep during the Northern Hemisphere summer, the absence of the trade coupled with low prices for sheepmeat and wool would "severely impact" farmers and could trigger an industry exit.

The government was also told that a live export by sea ban would have a significant ripple effect across the supply chain, "affecting a range of other participants like rural merchandise stores, fuel suppliers, local mechanics, and transport operators".

However, the report did point out that while some businesses had closed due to the summer prohibition period, others had pivoted to cover the loss of revenue.

It said that increasing feedlot operations and some operators attempting to service other livestock and bulk haulage transport, for example, could soften the blow for transport companies. But, on the flipside, WA livestock road transport operators reported the ban could reduce their bottom lines by 40 per cent and lead to worker layoffs.

"Direct financial compensation, fuel rebates, tax breaks, or interest-free loans to retrofit trucks were suggested as mitigation strategies if the live sheep trade was phased out. Nevertheless, there were concerns over potential targeting by animal activists for long-haul sheep transport," the report said.

Interestingly on that point the government last week also said guidelines for sheep transport within Australia would be updated as part of the phase out.

Meanwhile, the northern summer shutdown has clearly impacted live export companies, but also contract balers, bale stackers, engineers, mechanics, and producers of grain, hay, and straw, along with property agents working for commissions.

Some veterinarians derive between 5 and 25pc of their income from the live sheep trade, with the report noting a potential downsizing of the state's flock could have reduce overall on-farm vet services.

The report also said shearing services feared a drop in WA's wool production volumes and revenues as a consequence of the ban and a shift in sheep variety, while some feed mills and fodder suppliers said more than 90pc of their revenue currently comes through the trade.

The report highlights that the live export sector serves as a channel to sell semi-finished stock, with aged wethers accounting for approximately two-thirds of live sheep export volumes to the Middle East.

However, local processors tend to discount these sheep on their grid pricing due to their characteristics and deviation from desired processor specifications.

The Ep3 report found that the situation had left WA sheep farmers fearing becoming "price takers to local processors".

It also said WA sheep meat processors faced recurring issues limiting its capacity and expansion, including a labour shortage, inadequate cold storage space, power, energy and water costs and logistical hurdles.

Its analysis also explored potential options for Western Australian farmers to adapt to the phaseout of live sheep exports by considering alternative livestock enterprises and cropping options.

Mr Watt also said on Saturday that $27m will be spent to maintain and develop international markets, including funding for Austrade and market analysis and livestock trade experts to negotiate potential adjustments in trade with the industry's biggest trading partners in the Middle East.

Government sources said the idea of the phaseout is to gradually ease producers and supply chain participants out of the industry, rather than a gradual reduction in trade with quotas and markets to remain at current rates until 2028.

Funding will be forward loaded through the Budget to encourage stakeholders to adopt the transition early to avoid oversupply issues in four years' time.

The government supported 23 of the report's 28 recommendations, with the other five noted and accepted where there is crossover between state and federal responsibility.

Another report recommendation was that the government announce the phaseout date in 2023.