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Rural and Regional Affairs and Transport Legislation Committee
22/05/2012
Estimates
AGRICULTURE, FISHERIES AND FORESTRY PORTFOLIO
Australian Pork Limited

Australian Pork Limited

[19:47]

CHAIR: We will now call Australian Pork Ltd. I do not think there is a food group we have missed through these Senate estimates rounds, is there? Have we got everyone? Welcome. Questions, Senator Rhiannon?

Senator RHIANNON: Thank you, Mr Chair. It is probably good timing, after the big announcement that came out of Tasmania about moving to ban sow stalls by 2015, three years before the rest of Australia. They have put in quite a bit of money and I just wanted to give a bit more context. The Australian national standards, reviewed in 2007, do not support banning and will only limit, by 2017, the amount of time a sow can spend in a sow stall, during each pregnancy, to six weeks. I would like to ask: why do you judge that the federal government is lagging behind industry on sow stalls? Has there been a failure of the animal welfare codes of practice review process for pigs? Considering there is a gap here, with you giving more leadership, I am interested in your understanding of how this has come about.

Mr Spencer : My name is Andrew Spencer. I am the CEO of Australian Pork Ltd and I am joined this evening by Kathleen Plowman, who is our general manager of policy. I pass on the apologies of our chair, Mr Enzo Allara, who unfortunately had prior appointments this evening.

There is a lot behind your question, Senator. We do not believe the government has necessarily been running a poor standards and guidelines process. We were very much engaged in that process leading up to the 2007 model code, but the industry has changed in the ensuing years. What happened back in 2010 was that we decided that we did not believe the community would accept the use of sow stalls on an ongoing basis for our industry. That coincided with the realisation that technology and research and development had allowed us to look at other options for how we manage the housing of sows. So those two things happening at the same time meant that the industry could really look seriously at taking a position around the future of sow stalls and their use. We did that through a very long consultative process and we decided as an industry it was in our interests to voluntarily pursue the phasing out of the use of sow stalls. Of course, that is a difficult position to come to. There is a lot of investment required—we estimate something like $50 million—to change the situation, to move from using sow stalls to not using them. There is also a productivity impact, so it is a risky position taken by the industry and our aim is to make sure that in 10 years time we look backwards and see that as a really positive and important decision for the industry.

Senator RHIANNON: Could the government do anything more, in terms of funding and support, to assist APL to reach its 2017 goal quicker?

Mr Spencer : As I mentioned, it is a very serious challenge for the industry. It is going to cost us a lot of money and it is going to cost us productivity and potential competitiveness. When you understand that about two-thirds of all the bacon and ham consumed in Australia today is being made from imported pork, then it is clear that we do suffer from import competition, and if we suffer in terms of productivity and competitiveness, that makes imports look more attractive to consumers.

We very much believe that government are a stakeholder in the success of the initiative and we have spoken to government about that and I think they agree with that. We believe the community is a stakeholder. The retailers are all stakeholders. We all want this initiative to be successful and the industry is trying to work with government, retailers and the community generally to find ways that we can all contribute to that success.

We have been talking about things like country of origin labelling, where the present laws allow for imported bacon to be labelled as made in Australia and of course consumers do not really understand what that means in terms of where the pigs came from. There are also issues around finances and the amount of money it is going to cost our producers. We have talked about the potential for programs around accelerated depreciation, about marketing and promotional contributions or help in certain areas. We have talked about whole-of-government planning approaches around the changes required on piggeries so that we do not run into red tape issues to make this change. There has been a diverse range of issues we have talked to government about—some with financial impacts; some not necessarily, just with policy changes—that can really contribute to the success of this initiative.

Senator RHIANNON: Could you elaborate more on the labelling? That does come up a lot in representations that are made to our office, mainly consumers not being clear but a little bit from industry, so I was interested in what more could be done in relation to labelling the products as Australian and also possibly distinguishing organic or free-range. I wanted to come on to those issues. But, mainly, what needs to be done to make the labelling clearer so we have truth in labelling?

Mr Spencer : The present labelling laws state—I am just trying to get my memory right here—that there is a proportion of value-add: if it is above 50 per cent that occurs within Australia, then the term ‘made in Australia’ can be used. When you import cheap pork and it is locally processed—thawed, processed, cooked, cured, smoked, packaged, sliced et cetera—often imported pork, by the time it is turned into bacon or ham, can satisfy those criteria; therefore, it ends up being labelled ‘made in Australia’.

When you ask a consumer what they believe ‘made in Australia’ means on a packet of bacon, they say, ‘That means the pigs were Australian,’ which of course is not the case. This is where we run into a difficulty with giving our consumers informed choice. There are many consumers out there who believe our industry has taken responsible, positive decisions. They want to support us. But when it comes to them being able to find Australian product on the shelf, today’s labelling laws do not necessarily help them. That is not to say that it is an easy fix. There are a lot of very complex issues around food labelling and the reaction of the industry to this has been to invest a lot of time and money in our own country of origin mark or device that we are licensing out to processors to try to alleviate that difficulty for our industry.

Senator RHIANNON: What could the government do to assist this to move forward?

Mr Spencer : We have talked to government about forming a joint position with a number of other food based industries and perhaps the Australian Food and Grocery Council. If we can come to a position that we believe would be an improved system that would better represent what consumers believe country of origin labelling should do, then I believe government would listen to that very intently. I think government is seeking solutions here, not just for industries, to point out problems with the system.

Senator RHIANNON: I noticed in aussiepigfarmers.com it says that around five per cent of pigs grown in Australia are raised on free-range farms. Could you outline what you think are the barriers to free-range pig farming in Australia and is there a move towards free-range production?

Mr Spencer : It is probably fair to say there is an increased interest in free-range production, even from some of the larger retailers. Free-range production is a system that appeals to a lot of consumers, of course, but it does come with cost. It is not as productive a system as can happen indoors and there are midway systems that are often called free-range bred or outdoor bred that are much more productive, and therefore the product can be retailed at a more affordable price.

Senator RHIANNON: Sometimes there seems to be controversy, with what are called midway, about if there is an improvement for the animals. Is that your judgment?

Mr Spencer : Our responsibility as an industry is to make sure that all of our production systems can provide the welfare needs of the animal, and welfare depends much more on the quality of stock people and the individual circumstances than it does on the actual production system. There are many challenges to managing welfare in a free-range system, just as there are many challenges in an indoor system. They are different challenges. I do not think it would be correct to categorise one system as being more welfare-friendly by default than any other.

Senator RHIANNON: The budget statement provided for an increase in the pig slaughter levy from $1.35 to $2.25. Can you let us know what the levy increase will be used for?

Mr Spencer : That levy increase applies to what we call the non-R&D component of our levy, so that goes into those activities that are performed by Australian Pork Ltd that do not qualify as research and development. We are the body that is responsible for the promotional campaigns and marketing of pork in Australia and we are also the peak industry body representing pork producers. That is where those increased funds will go. In particular, through the consultation process, we pointed out to our producers that our advertising spend is slightly suboptimal. It is getting very good responses but we can have extremely good incremental returns on investment by increasing our investment in advertising and promotion.

Senator RHIANNON: Does that mean none of it goes on animal welfare or transitioning from sow stalls?

Mr Spencer : Most of our spend in the welfare area is actually within the research and development portfolio. Some of it is going through to our policy division where it is helping to form positions that the industry takes.

Ms Plowman : Those funds help us with our Australian Pork Industry Quality Assurance Program. We have a module in there around animal welfare which is based on the model code standards where we check compliance on an annual basis with farms. We make a big investment through QA into animal welfare.

ACTING CHAIR ( Senator Gallacher ): Senator Colbeck.

Senator COLBECK: You say that two-thirds of your product, the bacon and ham consumed in the country, is imported. Do you have any numbers on what proportion of that might be coming from sow stall type production?

Mr Spencer : The vast majority of that would be coming from sow stall systems. Nearly all of the imported product comes from Denmark, which is where all the bacon comes from, or Canada and the US, which is where all the ham comes from. There is a small part of the Danish industry just to provide some of the British sow-stall-free market. But nearly all of that product, you can assume, is going to be produced using sow stalls.

Senator COLBECK: We need to be careful we do not just export our problem.

Mr Spencer : That is absolutely true. If the industry is weaker as a result of our sow stall initiative, of course that is a disaster for everyone, including the pigs.

Senator COLBECK: Are there any global moves in relation to changing practices? Obviously it is an issue here in Australia and there is an element of it in the UK, as you say. Are there any broader global views in countries where you have environmental conditions which perhaps inhibit those potential changes—like Denmark and perhaps Canada?

Mr Spencer : On 1 January next year Europe will move to a system whereby they are limited to sows being in stalls for a maximum of four weeks per pregnancy. The Netherlands on the same day will move to stall-free, using a very similar definition to the one that we in Australia have adopted of what ‘stall-free’ means. In North America there is a widening gap between what their market is saying that over time they are going to need and what the producers are committing to. They are basically saying they are not going to move. Whilst there is a lot of discussion at the market end with some of the big retailers or big buyers—such as McDonald’s, Wendys, Burger King et cetera—they are talking about stall-free at some time in the future but the producers are not, so there is a bit of a conflict.

Senator COLBECK: Generally the market wins?

Mr Spencer : Ultimately the market wins.

Senator COLBECK: I think that covers those things. Do you have any sort of scale on the productivity changes around the three different systems you have talked about tonight?

Mr Spencer : We are gathering a lot of information about the changes to sow stall free and there is a great diversity in the ability of producers to manage that change. It comes down to the quality of the stock people. What is typically happening is there is, hopefully, a short- to medium-term impact on what we call the farrowing rate. That means that in the new systems the sows are not having as many litters as they would otherwise, because of some stressors at some points that we have to learn how to manage. We hope we get back to productivity indicators that are similar to a stall based system but that, in the short- to medium-term, may be an impact on productivity; a cost to production in the vicinity of 10 to 15 per cent. For free-range systems you can add to the most productive indoor system maybe 30 to 40 per cent in terms of cost to production.

Senator COLBECK: Thanks, Chair.

CHAIR: We are all out of pork talk?

Senator COLBECK: Perhaps not, but we are out of time.

CHAIR: Are you responsible for the ‘Put Pork on Your Fork!’ campaign?

Mr Spencer : We are responsible for that campaign, yes.

CHAIR: Just very quickly, how successful has it been?

Mr Spencer : It has been very successful. We have been tracking awareness of that general campaign and we have been correlating that to the increased market share. There is a very close correlation, so that means the advertising works.

CHAIR: It would be great if you could provide whatever information you have to the committee. We would appreciate that.

Mr Spencer : Okay.

CHAIR: Thank you very much. We will let you escape now.

Mr Spencer : Thank you.