Australia’s cost recovery arrangements for export ...data.daff.gov.au/data/warehouse/9aap/2015/craecd9...estimating impacts of cost recovery charges for export certification on the

Australia’s cost recovery arrangements for export certification: implications for Australian agriculture Linden Whittle, Kyann Zhang, Kasia Mazur, Maggie Skirtun, Donkor

Addai, Emily M Gray and Alistair Davidson

Research by the Australian Bureau of Agricultural

and Resource Economics and Sciences

ABARES Research Report 15.8 October 2015

© Commonwealth of Australia 2015

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Whittle, L, Zhang, K, Mazur, K, Skirtun, M, Addai, D, Gray, EM and Davidson, A 2015, Australia’s cost recovery arrangements for export certification: implications for Australian agriculture ABARES research report 15.8, Canberra, October. CC BY 3.0.

ISSN 1447-8358 ISBN 978-1-74323-252-1 ABARES project 43530

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Australia’s cost recovery arrangements for export certification: implications for Australian agriculture is available at agriculture.gov.au/abares/publications.

Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES)

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The Australian Government acting through the Department of Agriculture and Water Resources, represented by the Australian Bureau of Agricultural and Resource Economics and Sciences, has exercised due care and skill in preparing and compiling the information and data in this publication. Notwithstanding, the Department of Agriculture and Water Resources, ABARES and its employees and advisers disclaim all liability, including for negligence and for any loss, damage, injury, expense or cost incurred by any person as a result of accessing, using or relying on information or data in this publication to the maximum extent permitted by law.

Acknowledgements

The authors would like to acknowledge the contribution of many Department of Agriculture and Water Resources officials who provided advice and assistance—in particular David Cui and Peter Gooday (ABARES); Brendan Finch, Josh Francis, Julie Gaglia and Cameron McDonald (Cost Recovery Taskforce); Sue Cooper and Rachel Mealing (Trade and Market Access Division); and Nora Galway and Edwina Mulhearn (Exports Division). The authors would also like to thank officials in the Department of Foreign Affairs and Trade, overseas posts and foreign national authorities and industry organisations who provided information and assistance.

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Cost recovery arrangements for export certification and Australian agriculture ABARES

ii

Contents

Summary 1

1 Introduction 4

Scope 4

Report outline 5

2 Cost recovery arrangements 6

Australia’s cost recovery arrangements for export certification 6

Cost Recovery arrangements in other countries 7

3 Impacts on trade competitiveness 22

Scenarios 22

Approach 22

Results 25

4 Discussion 34

Appendix A: Industry profiles 36

Beef 36

Sheep meat 37

Live cattle exports 38

Wool 40

Dairy 42

Wheat 44

Coarse grains 45

Seafood 45

Appendix B: Sensitivity analysis 49

Variable export prices 49

Fixed export prices 55

Appendix C: Questionnaire 61

Glossary 62

References 63

Tables

Table S1 Change in value of exports under full cost recovery compared with

alternative scenarios 3

Table 1 Commodities and major competitors considered 4


iii

Table 2 Cost recovery charges collected for export certification services in 2013–

14 8

Table 3 Countries considered in review of cost recovery arrangements 8

Table 4 Tariffs charged per box, Chile Agricultural and Livestock Service 15

Table 5 Fee breakdown by cost components, Netherlands Food and Consumer

Product Safety Authority 18

Table 6 Description of scenarios 22

Table 7 Summary of key data, by commodity 24

Table 8 Estimated potential impacts under full cost recovery compared with

Scenario 1, assuming variable export prices 28

Table 9 Changes in farmgate prices under full cost recovery compared with

Scenario 1, assuming 100 per cent pass-back of export certification

costs to producers 31

Table 10 Change in value of broadacre and dairy farm receipts in 2013–14 under

full cost recovery compared with alternative scenarios, $ a farm and per

cent of farm receipts a,b 32

Table 11 Change in value of average farm receipts for selected horticulture

products under full cost recovery compared with alternative scenarios,

$ million a farm 33

Table A1 Imports of fresh, chilled and frozen southern bluefin tuna into Japan 46

Table A2 Imports of fresh, chilled and frozen Atlantic and Pacific bluefin tuna into

Japan 46

Table A3 Top export destinations for Australian abalone by commodity type 47

Table A4 Imports of abalone into China, Hong Kong, Japan and Singapore, 2012 47

Table A5 Top export destinations for Australian unfrozen rock lobster 48

Table B1 Estimated potential impacts under full cost recovery compared with

scenario 1, assuming variable export prices 49





Table B4 Changes in farmgate prices under full cost recovery compared with

alternative scenarios, assuming variable export prices 52

Table B5 Change in value of broadacre and dairy farm receipts in 2013–14 under

full cost recovery compared with alternative cost pass-back rates and

alternative scenarios, assuming variable export prices, $ per farm and

per cent of farm receipts 53

Table B6 Change in value of average farm receipts for selected horticulture

products under full cost recovery compared with alternative cost pass-

back rates and alternative scenarios, assuming variable export prices,

$m a farm 54


Scenario 1, assuming fixed export prices 55


iv





Table B10 Changes in farmgate prices under full cost recovery compared with

alternative scenarios, assuming fixed export prices 58

Table B11 Change in value of broadacre and dairy farm receipts in 2013–14 under

full cost recovery compared with alternative cost pass-back rates and

alternative scenarios, assuming fixed export prices, $ per farm and per

cent of farm receipts 59

Table B12 Change in the value of average farm receipts for selected horticulture

products under full cost recovery compared with alternative cost pass-

back rates and alternative scenarios, assuming fixed export prices, $m a

farm 60

Figures

Figure 1 Change in value of exports under full cost recovery compared with

alternative scenarios 26

Figure 2 Change in value of exports under full cost recovery compared with

alternative scenarios, assuming fixed export prices 30

Figure A1 Value of Australian beef and veal exports, selected countries, 2005–06 to

2012–13 37

Figure A2 Volume of Australian lamb exports, selected countries, 2005–06 to

2012–13 38

Figure A3 Volume of Australian mutton exports, selected countries, 2005–06 to

2012–13 38

Figure A4 Australia live cattle exported ('000), selected countries, 2005–06 to

2012–13 39

Figure A5 Live sheep exported ('000), selected countries, 2005–06 and 2012–13 40

Figure A6 Value of wool exports, selected countries, 2005–06 to 2012–13 41

Figure A7 Value of Australian dairy product exports, selected countries, 2005–06

to 2012–13 42

Figure A8 Value of Australian fruit and nuts exports, 2005–06 to 2012–13 43

Figure A9 Volume of Australian wheat production and exports, 2005–06 to 2012–

13 44

Figure A10 Volume of Australian coarse grains production and exports, 2005–06 to

2012–13 45


1

Summary Most agricultural and fisheries products require certification for export from Australia. Export

certification verifies that the production, storage, handling and transport of products intended

for export meet Australian export controls. This facilitates their export from Australia.

Moreover, importing countries may require additional government certification to verify that

products comply with their import requirements, including for biosecurity and food safety.

The Australian Government Department of Agriculture and Water Resources assists exporters

to access overseas export markets by providing a range of export certification services,

including inspecting and certifying food, plant and live animal exports. The department aims to

recover in full the costs of providing export certification and related services to exporters. In

2013–14, the department recovered $112.4 million from industry.

The department determines the charges for providing export certification services using an

activity based cost model driven by forecast volumes of exports. The cost base underpinning the

cost model comprises three types of costs:

a) direct costs—these can be traced to the provision of an activity (for example,

undertaking an audit or issuing a certificate) such as staff salaries and supplier costs

b) indirect costs—these are not easily linked to an activity provided by the department.

Indirect expenses include corporate employee salaries and overheads (such as

information technology, finance and human resources costs)

c) capital costs—these include property and depreciation.

The department’s Cost Recovery Taskforce is redesigning cost recovery arrangements as part of

a funding strategy for biosecurity and export services. To support this process, ABARES has

analysed the impact of full cost recovery on the competitiveness of Australian agricultural and

fisheries exports by:

investigating cost recovery arrangements for export certification for selected countries and commodities

estimating impacts of cost recovery charges for export certification on the competitiveness of Australia’s major agricultural and fisheries exports.

ABARES investigated the cost recovery arrangements of New Zealand, the United States,

Canada, Chile, Thailand, the Netherlands, Germany, Ireland and Poland. All of these countries

have arrangements to recover some or all of the costs of providing export certification services.

However, arrangements differ across countries in relation to:

the types of services provided to exporters for which costs are recovered

the categories of costs (direct costs and overheads) recovered from exporters.

Some of Australia’s main competitors in export markets recover in full the costs of providing

export certification services. New Zealand competes with Australia in markets for sheep meat,

dairy products and wool. It recovers 100 per cent of the costs of providing export certification

services similar to Australia’s. The United States competes with Australia in markets for beef,

grains, dairy products and horticulture, particularly almonds. It is moving towards full cost

recovery of export services. Canada targets full cost recovery of export certification services

provided to grain exporters, and Chile recovers the full costs of all services provided to

horticulture exporters as part of its phytosanitary certification process.


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Other countries considered by ABARES indicated that their goal was full cost recovery but that

it was not necessarily realised in practice. For example, the Netherlands recovers around

85 per cent of all costs incurred in the export certification process and Poland does not recover

overhead costs. Germany indicated that costs were fully recovered from exporters, but ABARES

was unable to determine if this included overhead costs or if exporters were only charged for

services (such as inspection and certification) provided directly to individual exporters.

Thailand competes with Australia in live cattle export markets in Malaysia and Vietnam. It

recovers from exporters at least some of the costs of export controls (such as inspections)

through fees for export of live cattle.

ABARES analysed the impact of export certification cost recovery charges on trade competitiveness

by comparing the value of exports under full cost recovery with the estimated value of exports

under alternative cost recovery scenarios that broadly capture observed differences between

Australia and other countries. ABARES considered the commodities beef, sheep meat, live cattle and

sheep, wool, table grapes, oranges, grains, macadamias, almonds, processed dairy products, prawns,

tuna, rock lobster and abalone. Specifically, ABARES compared the value of exports of these

commodities under full cost recovery with the estimated value of exports if the department were to

recover:

no costs (scenario 1)

only costs of services provided directly to individual exporters or businesses at their request (inspection and certification services) plus property and depreciation expenses incurred in operating the export certification system (scenario 2). In this scenarios, the department does not recover the costs of ‘all-of-industry’ services (that is, managing and administering the export system).

only the costs of providing export certification services (direct costs of inspection and certification services, and costs of managing and administering the export system) (scenario 3). In this scenarios, the department does not recover property and depreciation expenses in operating the export certification system.

Table S1 shows that export certification costs have a small impact on trade competitiveness,

measured as a change in value of exports. When compared with value of exports without cost

recovery (scenario 1), the fall in value of exports is less than 1 per cent for each of the

commodities considered. The largest declines occur in values of beef and sheep meat exports,

which are estimated to fall by 0.79 per cent and 0.54 per cent respectively. This is in part

because meat producers face the highest industry costs of export certification (0.79 per cent of

the value of exports). Although the value of nut exports marginally increases, this does not

imply that certification has necessarily improved its export competitiveness. It simply reflects

an assumption that Australian nut exporters have greater scope to pass on the cost of export

certification compared with exporters of other commodities.

The estimated decline in value of exports was smaller when full cost recovery was compared

with cost recovery arrangements that broadly captured observed differences between

Australia’s arrangements and the arrangements of other countries—that is, arrangements

where only the costs of providing inspection and certification services are recovered from

exporters (scenario 2) or where the department’s overhead costs beyond the export

certification system are not recovered from exporters (scenario 3). For these scenarios, decline

in value of exports was estimated to be less than 0.1 per cent for all commodities except beef.

This also reflected the higher cost of export certification faced by meat exporters.


3

In Australia, most cost recovery charges for export certification are charged to exporters and

processors. Part or all of these costs may be passed back to producers. ABARES modelled the

impact on farmgate receipts for the scenario where all export certification cost recovery charges

that are not passed on to importing countries are passed back to producers by the exporters and

processors who pay them.

Compared with no cost recovery, livestock producers’ farmgate receipts are estimated to fall by

between 0.57 to 0.74 per cent: in dollar terms, the impacts range from $1 509 for a typical sheep

farm to about $2 440 for a typical sheep–beef farm. The farmgate receipts are estimated to fall

by up to 0.10 per cent for dairy producers and by up to 0.23 per cent for wheat producers. In

dollar terms, the impacts range from $648 for a typical dairy farm to $1 884 for a typical wheat

and other crops farm. The estimated declines in horticulture receipts range from 0.11 per cent

for an almond farmer to 0.38 per cent for a table grape producer: in dollar terms, the impacts

range from $425 for a macadamia farmer to $2 417 for an almond farmer.

Table S1 Change in value of exports under full cost recovery compared with alternative scenarios

Commodity Scenario 1: no costs recovered (% change)

Scenario 2: full cost recovery less costs of managing and

administering export system (% change)

Scenario 3: full cost recovery less property and

depreciation costs (% change)

Abalone –0.08 –0.02 –0.02

Almonds 0.02 0.00 0.00

Beef –0.79 –0.07 –0.12

Dairy –0.04 –0.01 –0.01

Grains –0.11 –0.02 –0.01

Live cattle –0.13 –0.04 –0.05

Live sheep –0.13 –0.04 –0.05

Oranges –0.13 –0.05 –0.03

Macadamias 0.03 0.01 0.00

Prawns –0.18 –0.05 –0.04

Rock lobster –0.03 –0.01 –0.01

Sheep meat –0.54 –0.04 –0.08

Table grapes –0.09 –0.03 –0.02

Tuna –0.02 0.00 0.00

Wool –0.04 0.00 –0.01


4

1 Introduction The Department of Agriculture and Water Resources is redesigning the structure of fees and

charges for export certification services, as part of a wider review into cost recovery

arrangements for agriculture. The department’s export programmes provide exporters with

numerous services that support market access for agricultural products. These include

inspection, auditing and certification services for food, plant and live animal exports. Since 2011

the department has recovered the cost of providing these services in full, through fees and

charges collected from service recipients.

The rationale for full cost recovery of export certification is widely accepted—that is, individual

and business recipients of government services should contribute to the cost of providing them.

The department’s export programmes provide numerous services to industry to ensure that

exports meet the requirements of importing countries. The department also works to create

new market opportunities and to maintain existing market access arrangements.

However, some industry stakeholders have suggested that government recovering the full cost

of export certification services is affecting the international competitiveness of Australia’s

agricultural exports. Cost recovery charges for export certification services are a cost of doing

business for Australian exporters. If Australian exporters face higher export certification costs

than exporters in other countries, this may reduce their competitiveness in export markets.

In light of these concerns, the Cost Recovery Taskforce asked ABARES to analyse the effect of

government recovering the cost of export certification services on the competitiveness of

Australian agricultural exports. It asked ABARES to:

investigate the cost recovery arrangements for export certification for selected countries and commodities

impacts of cost recovery charges for export certification on the competitiveness of Australia’s major agricultural and fisheries exports.

Scope

ABARES undertook the analysis based on cost recovery arrangements and expenditures

recovered from users in 2013–14 (the latest year for which data are available). The analysis did

not examine the implications of changes to cost recovery arrangements implemented in 2014–

15 or the changes currently being considered.

The scope of the analysis is confined to the agricultural and fisheries commodities listed in

Table 1. ABARES identified Australia’s main competitors in agricultural export markets in

consultation with the department’s Cost Recovery Taskforce and Plant Export Operations

Branch.

Table 1 Commodities and major competitors considered

Commodity Major competitors

Abalone a —

Almonds United States

Beef United States

Grains Canada, European Union c and


5

Commodity Major competitors

United States

Live cattle Thailand

Live sheep a –

Macadamias a –

Oranges Chile

Prawns a –

Processed dairy products New Zealand, European Union b and United States

Rock lobster a –

Sheep meat New Zealand

Table grapes Chile

Tuna a –

Wool New Zealand

a Country comparisons were not made for live sheep, macadamias and seafood commodities because information was not available within the project time frame. b Export certification cost recovery arrangements for dairy products originating in Germany, Poland, Ireland and the Netherlands are described in this report. c Export certification cost recovery arrangements for grain originating in Germany are described in this report.

Report outline

Chapter 2 provides an overview of the export certification services the department provides to

exporters and the cost recovery arrangements for those services. It outlines the cost recovery

arrangements for export certification for New Zealand, the United States, Canada, Chile,

Thailand, the Netherlands, Germany, Ireland and Poland.

Chapter 3 analyses the impact of full cost recovery of export certification services on trade

competitiveness of beef, sheep meat, live cattle and sheep, wool, table grapes, oranges, grains,

macadamias, almonds, processed dairy products, prawns, tuna, rock lobster and abalone. The

first part estimates change in value of exports under full cost recovery relative to three

scenarios that broadly capture observed differences between Australia’s cost recovery

arrangements and the arrangements of the countries in Table 1. The second part of the chapter

estimates the impact on farmgate receipts if all export certification costs that are not passed on

to importing countries are passed back to producers by the exporters and processors who pay

them.

Chapter 4 concludes the report. It discusses the impact of Australia’s arrangements compared

with the impact of its competitors’ arrangements.


6

2 Cost recovery arrangements

Australia’s cost recovery arrangements for export certification

The Department of Agriculture and Water Resources’ commodity export programmes provide a

range of export certification services to assist exporters in accessing overseas export markets.

Exports of most agricultural and fisheries products are prohibited without an export permit,

because of the biosecurity risk they may pose to the importing country. Moreover, overseas

government authorities may need additional export certification (for example, phytosanitary,

health or veterinary certificates) to verify that Australian exports comply with their import

requirements (Department of Agriculture 2014, 2015a). By providing inspection, audit and

certification services, and policy and technical support, the department helps maintain export

eligibility of Australian agricultural products.

Export programme services

The department’s export programme services and activities vary across commodities (as outlined

in previous export programme cost recovery impact statements, see DAFF 2010). In general, they:

provide inspection and auditing services

issue export permits, certificates and other documentation

manage and administer the export system.

The department provides inspection and auditing services to ensure that production, storage,

handling and transportation of products intended for export meet prescribed conditions of the

Australian export controls and any additional importing country requirements. The type of

inspection depends on the commodity and the importing country’s requirements, but most

agricultural and fisheries products must undergo some form of inspection to verify that they are

safe and accurately described and that they meet Australian, international and importer

requirements (Department of Agriculture 2015a). The department also routinely audits

establishments to ensure that facilities and processes meet standards required by Australia’s

trading partners.

The department issues export permits, certificates and other documentation to facilitate export

from Australia and to confirm that a product complies with any additional requirements of the

importing country. It issues documents for particular export consignments, electronically or

manually.

The department provides inspection, auditing, certification and documentation services directly

to individual exporters or businesses at their request. However, its export system management

and administration activities are ‘all-of-industry’ services—that is, it provides these services to,

and they benefit, participants in the relevant export industry as a whole.

The department’s export system management and administration activities benefit exporting

industries by maintaining eligibility of commodities for export from Australia and access to

markets. The department develops, implements and monitors the operational policy and

systems that help ensure products comply with Australian export controls and any additional

importing country requirements. In addition, the department:


7

provides policy, procedure and technical advice to registered establishments on changes to importing countries’ requirements, national phytosanitary and food safety issues, supply chain traceability and regulation, inspection and verification requirements for exported products, and export certification

maintains and demonstrates training programmes for programme staff

negotiates and organises direct audits of the export certification system by Australia’s trading partners, and collects and maintains performance data to facilitate these audits

registers and maintains records of establishments involved in the production, preparation, handling and storage of products for export (DAFF 2010).

Cost recovery arrangements

Consistent with the Australian Government’s cost recovery principles (Department of Finance

2014), the department provides export certification services to industry on a fully cost recovered

basis. The department recovers the full cost of providing export certification services through fees

and levies collected from exporters. The department charges fees for services provided directly to

specific individual exporters or businesses and levies for services provided to a group of

individuals or businesses (for example, the exporting industry). Specific user charges include:

fixed annual establishment registration levies and, for some commodities, quantity charges to recover the costs of activities that benefit exporting industries as a whole (that is, export system management and administration activities)

fees-for-service for inspections and audits provided directly to individual exporters or businesses, in relation to the time taken to provide the service

fees for export permits, certificates and other documentation (DAFF 2010, Department of Agriculture 2015a).

Cost recovery charges reflect the direct and indirect costs incurred by the department in

providing export certification services. The department determines the charges for providing

export certification services using an activity based cost model driven by forecast export

volumes. The cost base underpinning the cost model comprises three types of costs.

a) Direct costs can be directly traced to the provision of an activity, for example, undertaking

an audit or issuing a certificate. They include staff salaries and supplier costs.

b) Indirect costs are not easily linked to an activity provided by the department. They

include corporate employee salaries and overheads (such as information technology,

finance and human resources costs).

c) Capital costs, which include property and depreciation.

Total costs recovered

Table 2 shows the total costs recovered from each industry for export certification services in

2013–14, the latest year for which data on export programme costs are available. Estimates of

costs incurred in managing and administering the export system and estimates of overhead

costs are also shown. The total cost recovered from industry in 2013–14 was $112.4 million.

Cost Recovery arrangements in other countries

Some industry stakeholders have suggested that recovering the full cost of export certification

services disadvantages exporting agricultural industries. Anecdotal evidence suggests that,

among major agricultural exporters, only New Zealand fully recovers costs for a similar set of


8

services to those provided in Australia. If Australian exporters face higher export certification

costs than their competitors, this may reduce their competitiveness in export markets.

Table 2 Cost recovery charges collected for export certification services in 2013–14

Industry Direct costs ($ million)

Cost of managing and administering export system ($ million)

Overhead costs ($ million)

Dairy 2.0 0.6 0.5

Fish and eggs a 3.2 0.8 0.6

Grains and plants 20.1 4.4 2.1

Horticulture 7.1 2.6 1.4

Live animal exports 9.8 3.5 2.8

Meat 68.3 5.6 10.7

Non-prescribed goods b 1.9 0.0 0.4

a Estimated costs for seafood only ($2.9 million) used in the analysis were derived using financial transactions data for 2013–14, excluding costs associated with accounts paying egg related registration charges. b Total costs for wool could not be separated from those of other non-prescribed goods. Therefore, estimated costs and impacts of export certification for wool alone will be overstated.

ABARES investigated cost recovery arrangements for export certification services of several

major agricultural exporters (Table 3). These countries’ cost recovery arrangements—and costs

borne by their exporters to achieve export certification—differ from Australia’s for several

reasons, which made detailed comparisons difficult. For example, countries’ arrangements may

differ as a result of their approaches to cost recovery, the range of services they provide to

exporters and the service delivery model employed. ABARES took Australia’s cost recovery

arrangements as a starting point for comparison. It focused on:

export certification activities and services provided to exporters

whether and to what extent costs are recovered

how costs are recovered.

Table 3 Countries considered in review of cost recovery arrangements

Countries Commodities

Canada b Grains

Chile c Oranges and table grapes

Germany c Dairy and grains

Ireland c Dairy

New Zealand a Dairy, sheep meat and wool

Poland c Dairy

Thailand d Live cattle

The Netherlands a Dairy

United States a Almonds, beef, dairy and grains

a Information on countries’ cost recovery arrangements is based on responses to ABARES questionnaire sent to foreign national authorities responsible for providing export certification service, and on information publicly available from authorities’ websites and regulations. b Information on cost recovery arrangements is based only on information available on authorities’ websites. c Information on cost recovery arrangements is based only on responses to ABARES questionnaire. d Based on information provided in response to ABARES questionnaire by the Thai Director of the Division of Veterinary Inspection and Quarantine (compiled by Department of Agriculture and Water Resources Bangkok post). Note: Countries listed in the table responded to ABARES questionnaire.


9

ABARES used information obtained from several sources, including responses to a

questionnaire sent to officials in the foreign national authorities responsible for export

certification (Appendix C) and information available on those authorities’ websites. Unless

otherwise indicated, information presented in the country descriptions is based on

questionnaire responses (as translated by embassy officials and/or interpreted by ABARES).

New Zealand

New Zealand competes with Australian agricultural exports in several markets, particularly

sheep meat, beef, dairy products and wool (Appendix A). New Zealand recovers 100 per cent of

costs for a set of export certification activities and services similar to those Australia provides.

Overview of export certification services

New Zealand’s Ministry for Primary Industries (MPI) primarily provides export certification

services for sheep meat, beef, dairy products and wool. Third parties provide some verification

services (for example, audits and inspections). The MPI:

sets New Zealand’s export standards and provides guidance

facilitates exports (including by issuing official assurances)

provides approvals, exporter registrations, listings and recognition

manages event and emergency responses

manages compliance, which covers monitoring (for example, for residues) and audits, investigations and enforcement

provides policy advice (including technical input)

provides verification services to processing businesses

provides export certification.

MPI provides verification services (inspections and auditing) for meat exports. Third party

agencies may provide verification for exports of other animal products (not dairy), but this is

generally provided by MPI. MPI and third party agencies provide verification for dairy exports.

MPI provide certification, but third party agencies provide some supporting information.

Total annual cost of providing export certification services is around NZ$33 million for the meat

sector and NZ$8 million for the dairy sector. This does not include verification fees paid to third

party agencies by the dairy industry. Total cost for electronic certification for all animal

products is around NZ$3.8 million.


MPI recovers 100 per cent of the costs of providing export certification services on the grounds

that these services are private goods and industry (or ‘club’) goods, rather than services that

provide a benefit to the general public. MPI recovers direct and indirect costs. Direct costs

include personnel and operating costs, both fixed and variable. Indirect costs include

management and support services costs; corporate overhead costs such as accommodation,

equipment and communications; and other costs that represent a fair usage of a particular

function or service of the ministry (MPI 2014b). The costs of maintaining and managing MPI’s

electronic certification (E-cert) system are also met by the users of those systems (MPI 2014a).

Costs are recovered from processors, exporters, laboratories, verifying agencies and recognised

people, through numerous charging methods: fixed fees or charges; fees or charges based on a


10

scale formula; fees or charges based on a time or unit basis; actual or reasonable costs

associated with the performance of a service or function; and fees or charges imposed on users

of services or third parties levies, such as animal products levies (MPI 2014b). In particular, MPI

recovers costs through:

fees for registration, approval, listing and recognition of businesses, exporters, agencies and persons

fees to recover the costs of developing standards, monitoring programmes, system audits, facilitating exports and providing technical advice

fees for providing verification of businesses, where fees include travel costs and actual and reasonable expenses

fees for establishment and disestablishment of full-time veterinarians

fees for providing official assurances.

New Zealand is reviewing its fees and charges for export certification services, as part of a wider

review into cost recovery regimes for biosecurity, animal products, agricultural compounds and

veterinary medicines, wine and animal welfare. See MPI (2015a) for full schedule of current and

proposed fees for the meat and dairy sectors.

MPI (2015a, 2015b) applies various fees and charges to the meat export sector. For example,

exporters pay a fixed application fee of NZ$210.45 for new (or to renew) registration (plus

NZ$140.30 per hour after the first hour of assessment). Charges for verification services (for

example, veterinary inspections) include a programme charge of NZ$41.04, which represents

MPI’s indirect and overhead costs, and an hourly rate of NZ$68.12, which represents MPI’s

variable costs. Overtime and penalty rates also apply. Meat processors also pay levies to cover

the cost to MPI of developing requirements and standards for the meat industry. Rates are set at

NZ$0.76 per head for cattle and NZ$0.11 per head for sheep. MPI also applies a fixed charge of

NZ$36.80 per application for issuing official assurances.

Similarly, a range of fees and charges apply in the dairy export sector (see MPI 2015a, b). For

example, dairy exporters pay similar fees to the meat export sector for new (or renewed)

registration. Exporters pay an annual fee of NZ$416.00 for MPI’s residue monitoring

programmes. MPI’s base rate charge for verification, inspection and auditing services is

NZ$188.60 an hour. The cost to MPI of developing and maintaining standards (domestic and

export), and performance monitoring, is covered through a quarterly specified fee to large dairy

processing businesses and an annual flat fee to each registered manufacturing premises

receiving less than 316 000 kilograms of raw milk solids.

United States

The United States competes with Australia in several export markets, including beef, grains,

dairy and almonds. Australia also exports beef and lamb to the United States (Appendix A). The

United States is moving towards full cost recovery of export services and activities.


Several agencies of the United States Department of Agriculture (USDA) are responsible for

providing export certification services for animal and plant products exports (such as beef,

almonds, dairy and grains). Several agencies may provide different export certification services

for a given commodity. Key agencies are:


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Animal and Plant Health Inspection Service (APHIS)—responsible for protecting and promoting US agricultural health, including certifying that US agricultural and food exports meet importing countries’ requirements

Grain Inspection Packers and Stockyards Administration (GIPSA)—provides a range of official inspection and weighing services and other related services for grains exports

Food Safety and Inspection Service (FSIS)—provides a range of voluntary inspection, certification and identification services to meat, poultry and egg product exporters, in addition to mandatory inspections to ensure compliance with US food safety requirements

Agricultural Marketing Service (AMS)—provides voluntary quality grade standards, grading, certification, auditing, inspection and laboratory analysis for a range of commodity areas, including animal and dairy products.

In addition, the Food and Drug Administration (FDA) regulates conventional foods (such as

dairy products) and seafood for human consumption.

For exports of plants, such as almonds and grains, export certification services are primarily

provided by APHIS and GIPSA. APHIS Plant Protection and Quarantine undertakes numerous

export-related activities (APHIS 2011a). These include:

providing information on plants and plant products, including on importing country requirements, changes in export requirements and necessary documentation

inspecting and approving export facilities and establishments

providing phytosanitary certification (APHIS 2015a).

GIPSA’s Federal Grain Inspection Service (FGIS) provides official export inspection and

weighing services for grains exports (mandatory for commercial establishments exporting more

than 15 000 short tons per year). At completion, FGIS certifies the quality and weight of all

export shipments of grain (GIPSA 2014a,b).

For meat exports, various export certification services are provided by the FSIS, AMS and APHIS.

Services include provision of verification (inspection) services, export certificates and

information for the export of animals and animal products.

FSIS provides a range of inspection, certification and identification services to exporters to

verify public health and safety requirements additional to those required for the US domestic

market. For some export markets, FSIS will only issue an export certificate for products

produced under an approved USDA AMS Export Verification Program (AMS 2015a). However,

for many countries, all USDA federally authorised meat establishments are eligible to export

provided all the requirements of the importing country are met (FSIS 2015a).

More generally, AMS provides auditing, certification, inspection, laboratory analysis and

voluntary quality grade standards for animal products (and other commodities). For meat

exports, AMS only provides these verification services when export markets have additional

requirements of compliance beyond that provided by FSIS.

AMS provides certification services to assist in export of dairy and related products. For eligible

dairy plants, the AMS export certification programme provides certification services, such as

sanitary certificates. Only dairy products manufactured in facilities complying with USDA


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inspection requirements are eligible to be graded against official quality standards and

specifications established by AMS (AMS 2015b). In addition, FDA issues export certificates

(certificates of free sale) to US manufacturers exporting their products to foreign countries that

require these certificates. These certificates state that the products presented by the US

manufacturer can be marketed in the United States and comply with FDA laws and regulations

governing food safety.


US Government agencies are required to recover 100 per cent of costs incurred to convey a

special benefit to recipients beyond those accruing to the general public, to ensure all legitimate

costs are passed on to such customers or co-operators. The US Government defines ‘full cost’ as

‘all direct costs and indirect costs to any part of the Federal Government for providing a good,

resource or service’ (OMB 1993).

The United States is moving towards full cost recovery of export services—that is, inspection

and certification services additional to those required for the US domestic market. Several

agencies have revised fees in recent years to better reflect costs incurred in providing services

(for example, APHIS 2009). Detailed information on U.S. export certification services can be

found on Agency websites provide detailed information on US export certification services. The

US Government publishes information on agencies’ cost recovery arrangements, user fees and

formulas for calculating fees in its Federal Register (OFR 2015).

APHIS funding for phytosanitary certification is generated directly by user fees (APHIS 2010).

Fees are calculated to cover the full cost of providing the service, including direct labour, local

support costs, agency overheads and USDA charges. For example, the USDA APHIS recovers

costs for issuing phytosanitary certificates through user fees per certificate. It charges a US$106

user fee for export certification of commercial shipments (shipments with a value of more than

US$1 250). This includes built-in components to account for overhead costs (at 16.15 per cent of

net costs) and USDA charges (at 3.38 per cent of net costs) (APHIS 2007, 2009). A USDA

administrative fee also applies, which is charged at US$6 per certificate if the Phytosanitary

Certificate Issuance and Tracking System is used and US$12 if it is not used.

GIPSA charges fees to cover the costs of providing official inspection and weighing services,

including administrative and supervisory costs. The standard fee for inspection and weighing

services is currently set at US$39.40 an hour (APHIS 2013a). Commercial establishments

exporting more than 15 000 short tons per year also pay a mandatory annual registration fee.

FSIS mandatory inspections and certifications of meat products for the domestic market are

funded through federal tax revenue (see Box 1). However, FSIS charges fees to exporters for

voluntary inspection, identification and certification services provided for marketing purposes

and for inspections services performed on holidays or on an overtime basis. Where fees apply,

they reflect the direct and overhead costs of providing inspection services. Direct costs include

salaries, employee benefits, travel and operating costs, and overhead costs include costs for

programme and agency activities that support food inspection services and information

technology (APHIS 2011b, APHIS 2015b). For example, the overtime hourly rate for inspection,

identification and certification services is US$70.28 (APHIS 2015b).

AMS charges fees for voluntary grading, inspection, certification, auditing and laboratory

services to exporters, including meat establishments and dairy processors. Fees account for all

costs, including direct and overhead costs. Rates differ according to activities performed and

programme costs (APHIS 2014). For example, the base rate for voluntary federal dairy grading


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and inspection services is US$76 an hour (APHIS 2013b). AMS also charges applicants an

administrative fee of US$164 for each export certificate requested by fax. In comparison, the fee

for certificates requested through the AMS Electronic Document Creation System is US$82.

The FDA (2014) charges a minimal fee of US$10 for each Certificate of Free Sale which, among

other things, indicates that the particular products is eligible for export.

Box 1 Comparing US and Australian cost recovery arrangements

Australia and the United States recover the full costs of export certification services. Similar to the Australian Government Department of Agriculture, US Department of Agriculture agencies that provide export certification services recover the full cost (direct costs and overheads) of verification and certification services provided directly to exporters. Agencies’ also recover export programme support costs, and programme and other costs at the USDA department level, through user fees for export services.

In the United States, federal tax revenue funds public health regulation activities—for example, food safety inspection activities carried out at meat and dairy establishments. Food Safety and Inspection Service mandatory inspections for wholesomeness of meat exports are taxpayer funded (FSIS 2015b). However, exporters are charged fees for AMS export verification services. These include AMS Export Verification Program audits, which are required for some FSIS export certificates to be issued (AMS 2012).

The Australian Government Department of Agriculture and Water Resources is the competent authority for export certification against export standards. Exporters are charged fees and levies for all export certification services provided by the department to verify compliance with Australia’s export legislation and, similar to the United States, compliance with importing country requirements. However, the states and territories are responsible for domestic food regulation, which is administered by the appropriate state regulatory authority (SRA). Most state governments charge fees for licensing and registration and recover (to some extent) the costs of verification activities through fees for inspections and audits.

The department has regulatory oversight service delivery arrangements with the appropriate SRAs for most states and most commodities to minimise regulatory burden on establishments that produce for both export and domestic markets (Department of Agriculture 2015b). For example, an SRA may enter into an arrangement with the department (and the department with an SRA) to manage audits for compliance with export legislation and importing country requirements, in addition to auditing for compliance with domestic legislation. These arrangements reduce the cost to exporters of complying with domestic and export requirements. However, the SRA and the department will charge their respective licence and registration fees.

Australian meat exporters to the United States may face higher costs than US domestic suppliers as a result of differences in cost recovery arrangements for domestic food safety oversight. This is because food safety inspection activities carried out at US meat establishments to verify compliance with domestic requirements are government funded. However, understanding the extent to which different cost recovery arrangements for domestic food safety oversight represent additional costs for Australian exporters would require a more detailed assessment of the requirements of US food safety laws and Australian export legislation.

Canada

Canada is a significant exporter of grains (including wheat). It competes with Australia for

wheat markets in South-East Asia (specifically Indonesia and Vietnam) and North Asia

(specifically China, Japan and Republic of Korea) (Appendix A). Canada targets 100 per cent cost

recovery for services provided to grains exporters.


The Canadian Food Inspection Agency (CFIA) and the Canadian Grain Commission (CGC)

provide export certification services for grain. The CFIA is responsible for issuing phytosanitary

certificates for grain exports, based on inspections of facilities, stored products, transportation

vehicles and ships (CFIA 2013b). The CGC regulates grain handling in Canada and is responsible

for officially certifying the quality, safety and quantity of export shipments of Canadian grain.

The CGC inspects and weighs grain before export and issues a Certificate Final once it


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determines a shipment meets Canada’s grain standards. The Certificate Final is the buyer’s

independent assurance of grain quality from the Canadian government (CGC 2015).


Both the CFIA and the CGC charge user fees to recover the costs of inspection and certification

services provided to exporters. To set the proportion of costs to be recovered from users, both

agencies consider where the service or activity falls along the public–private benefit continuum.

Agencies recover costs of activities that provide benefits beyond those received by the general

public. The CFIA and the CGC set user fees after taking into account direct and overhead costs of

providing a service.

The CFIA targets 100 per cent cost recovery for services it provides to exporters to ensure that

Canadian exports meet the requirements of importing countries (CFIA 2013a).

The CFIA charges fees-for-service for inspections and phytosanitary certificates (see CFIA

2011). Fees recover direct and overhead costs of all resources used to deliver a specific service,

which normally includes: programme delivery (including laboratory tests if applicable),

employee benefit plans, programme support, internal services, accommodation, amortisation

charges and services provided by other government departments (see CFIA 2011). The CFIA

charges for each inspection by lot (C$15 a lot for inspection of grains presented for export) or

by hour (C$86 an hour or part of an hour for inspection of a facility, conveyance or thing).

Phytosanitary certificate fees are C$17 for shipments valued at over C$1 600 and C$7 for

shipments below this value.

The CGC changed its services and fees in 2013. It now recovers around 91 per cent of total

activity costs from users, projected to be approximately C$60 million in 2014–15. Appropriation

funding of around 9 per cent reflects the public benefit generated from the CGC’s grain quality

and safety assurance activities. Previously, it recovered around 50 per cent of total activity costs

from industry.

The CGC also charges fees for outward inspection to recover the costs of core activities such as

grain quality functions, research and standard setting (CGC 2015c). Charge for outward official

inspection of ships was C$1.65 per tonne in 2015–16 (CGC 2015b). The CGC does not charge an

additional fee for the Certificate Final. In 2015–16, exporters pay a license fee of C$285 a month

for a full-term licence (CGC 2015a) and C$364 a month for a short-term licence (CGC 2015d).

Chile

Chile shares the southern hemisphere production season for oranges and table grapes with

Australia and is a key competitor for export markets in the northern hemisphere (Asia and the

United States) (Appendix A). Chile sources all funding for the export certification services

provided by its phytosanitary certification system from fees-for-service.


Chile’s Agricultural and Livestock Service (SAG) is responsible for issuing export certificates for

forestry and agricultural products. The SAG phytosanitary certification system determines the

requirements for each export consignment, according to product and market destination, and

ensures compliance with phytosanitary import requirements set by the destination country.

The SAG also determines procedures and guidelines to achieve certification (and ensure

exported products comply with importer requirements) using an ISO 9001:2008 certification

scheme.


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For the phytosanitary certification process, SAG:

obtains information on phytosanitary requirements from importing countries, by product

maintains a computer system for phytosanitary certification

samples and inspects each lot exported

samples and undertakes laboratory analysis when needed

undertakes field inspections, especially of propagation material for export (plants, plant

parts and seeds)

performs treatments or supervises the performance of treatments

issues phytosanitary certificates.

In 2013 the annual cost of the phytosanitary certification system was around US$22.4 million

(calculated using average US$ value in December 2013, US$1 = CLP529.45). The phytosanitary

certification system provides export certification services for horticultural (fruit) and forest

products (plants, plant parts and seeds) exports. The estimated annual cost includes the costs of:

SAG certifying the phytosanitary condition of horticultural products at their source

SAG/USDA certifying horticultural products

SAG certifying the phytosanitary condition of propagation material, forest products and wood packaging for exports

SAG agricultural laboratory analysis.


SAG recovers the costs for all services provided through its phytosanitary certification system

through fees-for-service (tariffs) to exporters and customs agencies. It has no other source of

funding. SAG applies two tariffs to exports. It indicates these have been set to recover the full

costs incurred in providing export certification. Full costs include labour, materials, equipment

and dedicated facilities—for export certification activities and related labour and support.

Tariffs are charged:

by box, where the rate depends on the size of the box (Table 4)

by time, applied at a rate of 0.5 unidad tributaria mensual (monthly tax unit) per hour (approximately US$35.30) for each function.

SAG recovers most costs incurred in the export certification process through the tariff per box.

It applies the tariff per unit of time if it undertakes additional activities—for example, as a result

of changes in requirements for different market destinations.

Table 4 Tariffs charged per box, Chile Agricultural and Livestock Service

Weight range (kg) Current tariff value (UTM) US$ equivalent a

0 to 5 0.00074 0.052

5 to 10 0.00077 0.054

More than 10 0.00082 0.058

a Figures calculated on average exchange rate between 1 and 9 December 2014, 1 USD = 611.40 Chilean peso. UTM Unidad tributaria mensual (monthly tax unit) is a resettable index. Value for December 2014 was CLP$43 198 Chilean pesos (approximately US$70.65). Source: Llacolen Lefever Schmauk (Chile’s Agricultural and Livestock Service) 11 December 2014


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Thailand

Australia is the only supplier of live cattle to Indonesia, but it faces competition from Thailand

for market share in South-East Asia. Thailand primarily exports live cattle to Malaysia and

Vietnam. In 2013–14 Malaysia accounted for 5 per cent of Australia’s live cattle exports and

Vietnam accounted for 13 per cent (by volume) (Appendix A). It does not charge exporters for

animal health certificates and inspections specifically, but it recovers at least some costs of

export controls from exporters through fees that apply to the export of live cattle.


The Division of Veterinary Inspection and Quarantine in the Department of Livestock

Development (Ministry of Agriculture and Cooperatives) is responsible for livestock imports

and exports, and for the export of live cattle. This includes inspections and the issuing of export

licenses and animal health certificates (Department of Livestock Development 2012).


The Department of Livestock Development does not have cost recovery arrangements

specifically for export certification services. However, trade in animals and fees for the export of

live cattle from Thailand are regulated under the Animal Epidemics Act 1956 (Thai) as amended.

Fees for export of live cattle from Thailand include (where AU$1 is approximately THB25):

animal export licence, THB50 per head of cattle

charge for lodging house for animal to be exported, THB50 per head of cattle

annual business license for export of cattle, THB2000.

The animal export licence is required to export animals. It is not equivalent to the animal health

certificate or any document required by the importing country. Exporters are not charged for

animal health certificates. However, under the Animal Epidemics Act, 50 per cent of all lodging

house charges are retained as a fund for expenses in the control or exportation of animals (section 37). As a result, the lodging house charge is comparable to an inspection fee because

inspections occur at the lodging house.

European Union

The European Union is a major agricultural exporter. Australia faces competition from the

European Union in markets for dairy and grains and other commodities. In 2011–12 the

European Union exported around 1.3 million tonnes of cheese and skim milk powder, compared

with Australian exports of 188 000 tonnes (ABARES 2014d). The European Union is also a

significant exporter of coarse grains, competing with Australia for markets in China, Japan and

Saudi Arabia (Appendix A). ABARES contacted several significant dairy and grains producing

and exporting countries in the European Union and received responses from Germany, Ireland,

the Netherlands and Poland. These countries are among the main EU dairy producers. Germany,

France, the United Kingdom, the Netherlands, Italy and Poland together account for more than

70 per cent of EU production.

Exports of food from the European Union must comply with EU food legislation unless

otherwise requested by the authorities of the importing country or established by the

provisions applicable in the importing country. However rules for cost recovery set out in EU

regulations do not distinguish between domestic markets, EU markets and exports to third

countries (see Box 2). These sections describe cost recovery arrangements in the Netherlands,

Germany, Ireland and Poland, focusing on certification of exports to third countries.


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Box 2 EU legislation

Exports must comply with EU legislation unless they must meet other requirements requested by the importing country. EU legislation that is relevant to export certification for food products includes:

Regulation (EC) No. 178/2002 General Food Law Regulation, which, among other things, lays down the general principles and requirements of European food law

Regulation (EC) No. 882/2004 on official food and feed controls, which describes in more detail how these principles must be interpreted and implemented by member states’ authorities.

Under Regulation (EC) No. 178/2002, foodstuff exported from the European Union intended for market in a third country must comply with the relevant requirements of the European food law under Article 12, unless otherwise requested by the authorities of the importing country or established by the provisions applicable in the importing country.

Regulation (EC) No. 882/2004 provides principles to be followed by competent authorities in the enforcement of official food and feed controls and specifies action they should take to check businesses’ compliance with rules and to address breaches when found. It defines official controls as ‘any form of control performed by the competent authority or by the European Community for the verification of compliance with feed and food law, as well as animal health and animal welfare rules’. Under Article 3.4, official controls must be applied with the same care to exports outside the European Union.

Articles 26 to 29 of Regulation (EC) No. 882/2004 also set out cost recovery rules in the European Union for food hygiene inspection charges. These rules do not differentiate between official controls for the domestic market, the EU market and those to meet the requirements of importing third countries.

Member states have a general obligation to ensure that official controls are properly financed. Regulation (EC) No. 882/2004 specifies mandatory minimum fees in some sectors (meat slaughter inspection and milk production). Fees are not mandatory for products of non-animal origin. Annex IV the Regulation sets out minimum rates for fees or charges for the meat and milk sectors—for slaughter, cutting operations and cold storage of meat, and milk production.

Annex VI Regulation (EC) No. 882/2004 also sets out the criteria for consideration in fee calculation. These are:

salaries of staff involved in official controls

costs for staff involved in official controls, including facilities, tools, equipment, training, travel and associated costs

laboratory analysis and sampling costs.

A GHK Consulting Ltd report for the European Commission Directorate General for Health and Food Safety (DG SANCO) found that that these rules were not necessarily followed and that diverse arrangements were in place (see European Commission 2013). The report found that Member States appeared to differ in terms of whether mandatory fees were imposed, the categories of costs that were recovered, and the proportion of costs recovered. For example, it was not clear whether the actual costs included in the calculation of fees and charges respect the criteria of Annex VI (staff salaries, staff costs including overheads, lab analysis and sampling).

Sources: European Commission 2013; European Union 2013

The Netherlands

The Netherlands is a significant agricultural exporter, including of dairy products. The

Netherlands has arrangements in place to recover the majority of costs (around 85 per cent)

incurred in providing export certification services.


Several Netherlands agencies provide export certification services. The Netherlands Food and

Consumer Product Safety Authority (NVWA) is an independent agency in the Ministry of

Economic Affairs (MEA). It provides export certification services for all agricultural

commodities, except dairy products and is responsible for:

providing inspection and auditing services


18

operating and managing the certificate database and IT system for obtaining export certificates (CLIENT Export)

solving problems with export consignments when necessary.

The Netherlands Controlling Authority for Milk and Milk Products (COKZ) provides inspection

and auditing services for the dairy industry, under NVWA supervision. The NVWA is responsible

for issuing export certificates, but the COKZ is authorised to issue health and other certificates

for the export of Netherlands dairy products. Exporters can apply for veterinary certificates

through the COKZ (COKZ 2013).


Both the NVWA and the COKZ have arrangements in place to recover the majority of costs

incurred in providing export certification services. The MEA indicated that the largest share of

costs came from the working hours of NVWA and COKZ personnel in providing auditing,

inspection and certification services and the costs of operating and managing CLIENT Export (Table 5). The MEA estimates that NVWA and COKZ recover from business around 85 per cent of

the costs it incurs in providing:

inspections and audits

approvals for export (and maintenance thereof)

certification.

The NVWA’s fees-for-service do not distinguish between domestic and export markets. They are

set according to time spent on a service. The MEA (2014) publishes the NVWA’s fee schedule

(untranslated). For example, exporters pay an up-front tariff and then a tariff for every 15

minutes for inspection and auditing services. Fees include a component to recover direct and

overhead costs, including travel expenses, accommodation costs, depreciation costs and overheads (Table 5). COKZ fees for export certification services are not publicly available.

Table 5 Fee breakdown by cost components, Netherlands Food and Consumer Product Safety Authority

Percentage distribution of costs on product cost control %

Official staff salaries of employees providing direct services 55

Official staff salaries of employees in support services (including management overheads) 14

Information and communications technology 7

General expenses (for example, company cars, personnel services and postage and couriers) 4

Depreciation costs 3

Accommodation 3

Travel expenses 3

Practitioners 3

External contractors 3

Specific costs (for example, certificates and uniforms) 2

Training costs 1

Agency fee 1

Other expenses (other personnel, facilities grants and interest) 1

Total 100

Source: Frank Jan van der Valk (MEA) response to ABARES survey, 21 January 2015


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The Netherlands Government bore the costs of developing the CLIENT Export system, but the

MEA recovers the costs of maintaining and further developing the system from users. It charges

a separate fee of €5 for all export certificates issued through CLIENT Export, which it is uses for

technical support.

Government also bears the costs of preparatory work for exports. This includes negotiating,

developing veterinary requirements, official letters, planning of incoming/outgoing veterinary

missions and travel costs. The Office of the Chief Veterinary Officer, MEA, is responsible for

negotiating export certificate requirements with countries and for managing veterinary

requirements with third countries.

Germany

Germany is a significant exporter of dairy products and grains. Exporters bear all costs incurred

for export certification services. However, ABARES was unable to determine whether this

included overhead costs or was limited to services (such as inspection and certification)

provided directly to individual exporters or businesses.


Export certification services for crop products and products of animal origin (products that are

under veterinary legislation) are the responsibility of the federal Länder (states), rather than

the Federal Ministry of Food and Agriculture (BMEL) or another central government agency.

The states’ official plant protection services are responsible for inspecting plants and plant

products for exports and for issuing phytosanitary certificates for plant (crop) products.

Exporters must apply for a phytosanitary certificate and submit the required documentation

and information. The Julius Kühn Institute (JKI), the Federal Research Centre for Cultivated

Plants, provides additional risk analysis if required by the importing third country. The JKI also

provides exporters with information on third-country phytosanitary requirements (JKI 2014).

The official veterinarian is responsible for issuing veterinary certificates for exports of products

of animal origin for each rural district.


The BMEL indicated that exporters were in charge of ensuring compliance with importing

countries’ requirements. As a result, exporters bear all costs incurred for export certification

services. However, ABARES was not able to determine whether in practice this included

overhead costs and applied to ‘all-of-industry’ services (such as maintaining information on

third-country import requirements). This is because fees collected generally flow back into

federal Länder budgets without being earmarked for official controls.

The official plant protection services and district veterinary offices charge fees-for-service for

export certification services. They charge fees-for-service for the issue of phytosanitary

certificates for exports of crop products. A scale of charges governs fees-for-service for other

services, according to the complexity of the individual application and the importing country’s

requirements. The Chamber of Agriculture of North Rhine–Westphalia (CANRW 2015) provides

an untranslated schedule of fees for the plant protection service for this state. Fees for grains

exports also depend on the importing country requirements, such as whether additional JKI risk

analysis is required. The JKI also charges a fee for its risk analysis service.


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The exporter bears entirely the costs incurred for authorised veterinarians to issue veterinary

certificates for exports of products of animal origin. The district veterinary office charges the

official veterinarian’s activities to the export holding according to a scale of charges established

by rural districts.

Ireland

Ireland exports around 85 per cent of its dairy outputs annually, approximately €3 billion in

2013. Ireland does not directly charge a fee to certify dairy exports, it fully recovers the cost of

providing export certification services through a fee for the food hygiene inspection service.


The Dairy and Veterinary Public Health Inspectorate, Department of Agriculture, Food and the

Marine, certifies dairy exports in accordance with the provisions of Article 30.2 of Regulation

(EC) No. 882/2004.

The Dairy and Veterinary Public Health Inspectorate carries out risk-based official controls at

food business operators (FBOs) approved by the department to verify that the FBO adheres to

the regulations. Official control methods include:

inspection of the infrastructure, hygiene, equipment, facilities, labelling and handling of ingredients and final products and prerequisite programmes

audit of the prerequisite programmes and Hazard Analysis and Critical Control Point systems

additional controls, such as analysis, enforcement and sampling.

Official controls may be planned (such as risk-based inspections and audits) or reactive (such as

following official requests, including export certification).


The Department of Agriculture, Food and the Marine does not directly charge a fee to certify

dairy exports. However, it fully recovers the cost of providing export certification services

through a fee of €0.001 per litre imposed on all milk for manufacturing or drinking milk. This

fee is set to recover the costs of providing the food hygiene inspection service and includes

certification of dairy exports. Costs recovered include those for staffing, overtime, overheads,

laboratory and administration. In 2013 the department collected around €5.5 million in dairy

inspection fees.

Poland

Poland is a significant dairy exporter. It recovers around 80 per cent of the costs of providing

export certification services to exporters. However, fees mainly recover the direct costs of

providing export certification.


Poland’s Chief Veterinary Inspectorate provides export certification services for food products

of animal origin, including milk and dairy products. For exports to third countries, the Chief

Veterinary Officer is responsible for negotiating veterinary requirements with authorities in

importing countries where those requirements are not defined in EU regulations. Regional

veterinary officers (RVOs) provide official veterinary controls before and during the loading of

products for export, to confirm products meet the importer’s requirements, and issue

veterinary certificates.


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For exports of food products of animal origin for which there is a bilaterally established

veterinary certificate (that is, between Poland and the importing third country), export

certification is based on:

regular RVO inspections

results of laboratory analyses

information stored in information technology systems

assessment of quality assurance procedures in place in a factory, combined with assurance of compliance with importing third country requirements.

For exports of food products of animal origin for which a veterinary certificate has not been

established bilaterally, the exporter must present a certificate specimen (for example, of a

certificate that is accepted by the relevant authority in the importing country). The RVO is

authorised to issue a health certificate after verifying that the consignment meets the

requirements in the certificate.


The Chief Veterinary Inspectorate recovers some costs of providing export certification services

to exporters. No data were available on the annual cost of the programmes that inspect and

certify agricultural products. The Chief Veterinary Inspectorate estimated that it recovers

approximately 80 per cent of costs incurred in providing export certification services for milk

and dairy products (based on official fee regulations). The inspectorate recovers approximately

80 per cent of costs incurred in certifying fish and aquaculture products and approximately

90 per cent of costs incurred in certifying meat and meat products.

It recovers costs from exporters and other businesses through fees-for-service for veterinary

examinations, supervision and issuing veterinary certificates. Fees mainly recover the direct

costs of those activities, including for office, staffing, and travel.

Summary

All countries considered by ABARES have arrangements in place to recover some or all of the

costs incurred in providing export certification services. Countries had differences in:

proportion of costs recovered from exporters

range of services provided to exporters for which costs were recovered (for example, those provided directly to individual exporters or businesses, such as inspection and certification, compared to ‘all-of-industry’ services that are provided to, and benefit, participants in the relevant export industry as a whole)

categories of costs recovered from exporters (direct and overhead costs).

Many countries—including Canada, Chile, New Zealand and the United States—recover the

costs of providing export certification services in full. However, arrangements vary. ABARES

was not able to determine whether Australian exporters faced higher export certification costs

than exporters in other countries. However, the majority of countries considered recovered at

least direct costs of services provided directly to exporters. In Australia a minority share of total

costs that are recovered from industry relate to overheads and ‘all-of-industry’ services (Table

2). This suggests that in most cases differences between cost recovery arrangements in

Australia and its competitors are not significant.


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3 Impacts on trade competitiveness ABARES assessed the effects of export certification on trade competitiveness of Australia’s

agricultural export industries by:

designing scenarios to reflect alternative cost recovery arrangements for export certification services, based on the review of other countries’ arrangements

developing a partial equilibrium modelling framework

estimating changes in value of exports with a move to full cost recovery

inferring potential farmgate impacts based on estimated changes to commodity prices.

Scenarios

ABARES designed three scenarios to assess the possible impacts of cost recovery on Australian

agricultural exports, production and prices. Specifically, the scenarios consider the effects of

moving from various initial cost recovery arrangements to full cost recovery. Scenario 1 captures

the maximum impact of moving from no cost recovery to full cost recovery (Table 6). Scenarios 2

and 3 broadly reflect a shift to full cost recovery from the cost recovery arrangements operating in

some competitor countries. Although ABARES review of cost recovery arrangements operating in

other countries found some differences in the range of services and the categories of costs

recovered (Chapter 2), the majority of countries reviewed recover at least the costs of services

provided directly to exporters.

Table 6 Description of scenarios

Scenario Description

Scenario 1—No cost recovery

The department does not recover the costs of providing services directly to individual exporters, managing and administering the export system or property and depreciation expenses incurred in operating the export certification system.

Scenario 2—Full cost recovery less costs of managing and administering export system

The department recovers costs of services provided directly to individual exporters or businesses at their request (inspection and certification services) plus property and depreciation expenses incurred in operating the export certification system. The costs of ‘all-of-industry’ services (that is, managing and administering the export system) are not recovered.

Scenario 3—Full cost recovery less property and depreciation costs

The department recovers direct costs of providing export certification services (direct costs of inspection and certification services, and direct costs of managing and administering the export system). Property and depreciation expenses incurred in operating the export certification system are not recovered.

Note: No scenarios consider recovering the department’s overhead costs beyond the export certification system, which is precluded under the Australian Government’s cost recovery guidelines.

In these scenarios, ABARES assumes that cost recovery occurs at the point of export. Therefore,

results generally apply to the exported commodities (which may be processed) rather than at

the farm gate. The implications for farmers of full cost recovery are analysed at the end of this

chapter.

Approach

ABARES developed partial equilibrium models for these commodities: beef, sheep meat, live

cattle and sheep, table grapes, oranges, grains, macadamias, almonds, processed dairy products,


23

prawns, tuna, rock lobster and abalone. The framework captures the effect of cost recovery on

exporting producers’ costs and on how domestic and international consumers respond to this

change in costs. The models estimate changes in prices and in quantities produced and

consumed resulting from a change in costs of exporting goods.

To assess the impact of cost recovery on trade competitiveness, industry level analysis models

the domestic export supply chain as a single, vertically integrated industry. The analysis

estimates changes in prices of final commodities, which are then used to examine the potential

farmgate implications in the second part of this chapter. The effect on farmgate receipts of

export certification cost recovery charges is calculated by assuming that any costs not passed on

to importing countries are passed back to farmers by processors and exporters.

The framework used in this report has several limitations. It does not capture the effects of

structural changes or flow-on market effects outside commodity markets of interest. For

example, structural changes include the amalgamation of small exporters and processors in

response to an increase in fixed registration charges. Flow-on market effects include changes in

farmgate prices and changes in production and demand for some agricultural commodities

because of changes in markets for commodities of interest. Many of these effects are likely to

reduce some impacts of export certification costs on industry. In addition, the framework does

not capture the effects of changes in competitors’ cost recovery arrangements or agricultural

and trade policies as a result of full cost recovery in Australia.

Data

ABARES used these key data in the industry-level analysis for each commodity. It derived the

volume and value of exports from Agricultural commodities statistics (ABARES 2014d), the

United Nations Commodity Trade Statistics Database (UN 2014) and selected horticultural

industry publications and websites (see Almond Board of Australia 2014; Australian Macadamia

Society 2014). The degree to which cost recovery affects prices received by producers depends

in part on the share of exports in total Australian sales. Estimates of the share of production

exported were based on the most recent estimates of volume produced and exported. For some

commodities, estimates for 2012–13 or calendar year 2013 were used if estimates for 2013–14

were not available.

The average per-unit cost of export certification was calculated using the estimated value of

exports and the total value of cost recovery charges in 2013–14 (Table 2). The total value of cost

recovery charges in 2013–14 was derived from the Department of Agriculture and Water

Resources cost recovery reporting on the 2013–14 annual financial outcome.

Estimates of domestic and export demand elasticities and production elasticities were specified

as the average of estimates obtained from ABARES models and econometric studies in the wider

literature. Elasticity is the degree to which demand (or supply) is sensitive to changes in price

(or income). Demand elasticities depend on many factors, including the extent to which people

rely on a commodity, their income levels and the availability of substitutes. For example,

demand will be more elastic (that is, consumers will be more sensitive to price increases) for

commodities perceived as luxuries (such as meat and seafood) than staples (such as wheat).

Long-run production elasticity (that is, sensitivity of production to price changes) depends on

industries’ capacity to access additional resources (such as land) and use spare capacity.

Table 7 presents a summary of key data used in the industry level analysis. It includes export

certification costs expressed as a percentage of the value of exports, export demand elasticities

and domestic demand and production elasticities.


24

Table 7 Summary of key data, by commodity

Industry Commodity Export certification costs

(% of value of exports)

Share of production

exported (%)

Export demand

elasticity (%)

Domestic demand

elasticity (%)

Production elasticity

(%)

Dairy Processed dairy products

0.07 64 –3.3 –0.2 0.5

Grains and plant products

Grains 0.15 74 –6.6 –0.1 0.6

Macadamias 0.15 44 –0.7 –0.1 0.4

Almonds 0.15 75 –0.7 –0.1 0.4

Horticulture Grapes 0.56 65 –1.3 –0.1 0.6

Oranges 0.56 32 –1.3 –0.1 0.6

Meat Beef 0.79 50 –3.3 –0.6 0.8

Sheep meat 0.79 59 –3.9 –0.8 0.3

Live exports Live cattle 0.68 100 –4.2 na 0.4

Live sheep 0.68 100 –4.2 na 0.4

Seafood Abalone 0.25 54 –3.0 –0.5 0.0

Prawns 0.25 28 –3.0 –0.5 0.0

Rock lobster 0.25 81 –3.0 –0.5 0.0

Tuna 0.25 90 –3.0 –0.5 0.0

Wool Wool 0.07 99 –4.5 –0.0 0.9

na not applicable. Note: Export certification costs for live cattle and sheep include the costs of export certification for slaughter and breeding livestock. Therefore, estimates likely overstate the costs of certification for slaughter cattle and sheep. Total value of cost recovery charges in 2013–14 was derived from Department of Agriculture and Water Resources cost recovery reporting on 2013–14 annual financial outcome. Sources: ABARES (2014d); Almond Board of Australia (2014); Australian Macadamia Society (2014); UN Comtrade (2014)

Measuring trade competitiveness

Impact on trade competitiveness is measured as change in value of Australian exports arising

from government recovering the costs of providing export certification services. Value of

exports is the quantity exported multiplied by the export price.

Cost recovery of export certification services imposes a direct cost on Australian agricultural

exporters. Production costs of exported goods would increase as a result of export certification

cost recovery charges and could reduce global demand for Australian exports. Domestic prices,

sales and production would also change as a result of changes in export volumes and prices.

Producers would attempt to make up for lost exports by increasing sales in domestic markets

where possible. The cost of supplying goods to the domestic market would be unchanged, but

the price received by producers (and therefore the price paid by domestic consumers) would

fall as supplies to the domestic market increased. Declining domestic prices may increase

demand, but the extent to which the domestic market could absorb this would vary across

commodities.

The analysis above assumes that the price of Australian exports may change in response to

changes in Australian supply. As a result, a small proportion of export certification costs may be


25

passed on to importing countries by Australian exporters, through a higher price paid for

Australian exports.

If a change in Australian supply is assumed to have no impact on export prices (a common

assumption), the estimated fall in volume of exports would be larger. To account for this, a

second set of estimates are presented in Appendix B; commodity export prices are assumed

fixed for all commodities.

Export certification costs comprise only a small share of the total value of exports (less than

1 per cent for all commodities considered in this report (Table 7). Box 3 shows that export

certification costs are small when compared with other agricultural commodity export costs,

such as transport. As such, any changes in export prices and volumes would be expected to be

small.

Box 3 Export certification charges in broader context

Obtaining export certification is a necessary expense for Australian agricultural exporters, but it is not the largest cost of participation in international markets. The Australian Farm Institute commissioned a case study analysis of transport costs for selected commodities exported to selected destinations (Goucher 2011). Their results demonstrate that total transport costs are variable, but large (13 per cent or more of farmgate value) compared with the costs of export certification (less than 0.8 per cent of export value for commodities considered for this analysis).

Transport costs for Australian agriculture as a proportion of farmgate value

Commodity (%)

Grain a 40.5–48.5 Beef b 13.1–21.5 Live exports (cattle) from the Northern Territory to Indonesia 29.7 Table grapes from Victoria to Singapore 33.8

Note: Definition of transport costs varies between commodities but may include storage, road, rail, port charges, shipping, refrigeration and cost of regulation as appropriate. See Goucher (2011) for details. a Study includes two examples of grain exports—from New South Wales to Japan and from Western Australia to Egypt. b Study includes three examples of beef exports—from Victoria, Queensland and Western Australia to Japan.

Results

Impact on trade competitiveness

Figure 1 shows how full cost recovery affects trade competitiveness, measured as the

percentage change in value of exports, for scenario 1 (full cost recovery compared with no cost

recovery), scenario 2 (full cost recovery compared with recovering the cost of inspection and

certification services only) and scenario 3 (full cost recovery compared with only recovering the

direct costs of export certification services). Table 8 presents full results for scenario 1,

including estimates of associated changes in prices and quantities produced, consumed and

exported from Australia. Full results for scenarios 2 and 3 are given in Appendix B (Table B2

and Table B3).


26

Figure 1 Change in value of exports under full cost recovery compared with alternative scenarios

Note: Almond and macadamia export values were estimated to increase by 0.02 per cent and 0.03 per cent, respectively, under scenario 1. Under scenarios 2 and 3, the estimated increases were less than 0.01 per cent. Source: ABARES estimates

The value of exports is estimated to decrease for all commodities except almonds and

macadamias. The fall is less than 1 per cent for all commodities under scenario 1, and less than

0.12 per cent for scenarios 2 and 3. This is because the difference in export certification costs

(compared with full cost recovery) is smaller under scenarios 2 and 3 than in scenario 1.

Differences in impacts between commodities are primarily the result of differences in industry

costs of export certification relative to total value of exports. The commodities with the highest

industry costs of export certification, beef and sheep meat (0.79 per cent of the value of

exports), are estimated to have the largest declines in export values under full cost recovery—

0.79 and 0.54 per cent, respectively. Dairy and wool face the smallest industry costs of export

certification and are estimated to have the smallest falls in export values of the agricultural

commodities (excluding nuts). The value of live animal exports is estimated to fall by only

0.16 per cent.

Estimated impacts also differ between the broad groups of commodities, such as beef and sheep

meat. These arise because of differences in demand and production elasticities. For example,

value of beef exports falls by relatively more than value of sheep meat exports because beef

production is more sensitive to price change (production elasticity of 0.8) than sheep meat

production (production elasticity of 0.3). When production is relatively sensitive to price

changes, industry is less able to bear cost increases. As a result, a higher proportion of export

certification costs are passed on to importing countries, all other things being equal.

The share of Australian production exported also affects the results. For example, all seafood

commodities have export certification costs of 0.25 per cent and are assumed to have the same


27

elasticities of production, domestic demand and export demand. However, the value of exports

falls by relatively more for prawns than for other seafood commodities because prawn exports

are small relative to the other seafood exports.

In contrast to other commodities, the value of almond exports under full cost recovery remains

largely unchanged and the value of macadamia exports increases marginally. This is because

export demand for these products is relatively insensitive to prices. As a result, estimated

increases in export prices marginally outweigh estimated decreases in export volumes.

Changes in prices

Estimates of changes in prices under full cost recovery compared with under no cost recovery

(scenario 1) are given in Table 8. The ‘producer price’ (or domestic price) is the price producers

receive after paying for export certification (noting that the analysis models the domestic export

supply chain as a single, vertically integrated industry). The ‘export price’ is the price paid by

the importing country. The combined change in producer and export prices (in absolute terms)

is equal to the per unit value of export certification cost recovery charges.

Export demand elasticities determine the extent to which the increase in an industry’s cost of

export certification is passed on to importing countries through an increase in export price or

borne by the industry through a decrease in the producer price. For commodities where export

demand is relatively elastic (more sensitive to prices), such as because importing countries can

substitute exports from other countries for exports from Australia, increases in export prices

are small relative to decreases in export prices. For example, increases in export prices for live

animals and grains are small relative to decreases in producer prices because demand for

Australian exports of these products is highly sensitive to prices. In contrast, increases in export

prices for table grapes and oranges are the same as, if not larger than, decreases in producer

prices because demand for these exports is relatively insensitive to prices.

Changes in the volumes of production, consumption and exports

Estimated increases in export prices reduce Australia’s competitiveness in the global market

and reduce export volumes for all commodities. The volume of beef exports is estimated to fall

by the largest percentage (1.1 per cent) as a result of a relatively large change in export price

and relatively high export demand elasticity. In contrast, wool and dairy export volumes fall by

around only 0.05 per cent, reflecting the relatively small price increase and low export demand

elasticity.

As exports fall, producers will seek to sell products into the domestic market. Domestic sales of

all commodities are expected to remain steady or increase in volume terms. Domestic sales of

sheep meat are expected to increase by 0.52 per cent and domestic sales of grains and nuts to

remain unchanged.

The fall in exports will outweigh the increase in volume of domestic sales, which will lead to a

decline in production of all commodities. However, differences between commodities within the

broad industries will arise because of differences in production and demand elasticities. For

example, the expected 0.40 per cent decline in beef production is almost double the decline in

sheep meat production.

C

ost reco

very arrangem

ents fo

r expo

rt certification

and

Au

stralian agricu

lture

A

BA

RE

S

28

Table 8 Estimated potential impacts under full cost recovery compared with Scenario 1, assuming variable export prices

Market impacts Beef Sheep meat

Live cattle

Live sheep

Table grapes

Oranges Grains Maca-damias

Almonds Dairy a

Prawns Tuna Rock lobster

Abalone Wool

Relative change in unit prices

Producer price (%) –0.48 –0.63 –0.62 –0.62 –0.34 –0.22 –0.15 –0.06 –0.08 –0.06 –0.17 –0.24 –0.24 –0.22 –0.06

Export price (%) 0.31 0.17 0.06 0.06 0.23 0.34 0.02 0.09 0.07 0.01 0.08 0.01 0.01 0.03 0.01

Relative change in volumes

Domestic production (%)

–0.40 –0.21 –0.25 –0.25 –0.19 –0.13 –0.09 –0.03 –0.04 –0.03 –0.01 –0.01 –0.01 –0.01 –0.05

Domestic sales (%) 0.31 0.52 na na 0.04 0.02 0.02 0.01 0.01 0.01 0.09 0.12 0.12 0.11 0.00

Exports (%) –1.10 –0.70 –0.25 –0.25 –0.31 –0.47 –0.13 –0.07 –0.05 –0.05 –0.25 –0.02 –0.04 –0.11 –0.05

Relative changes in values at market prices b


–0.49 –0.36 –0.20 –0.20 –0.16 –0.18 –0.12 –0.02 0.00 –0.04 –0.11 –0.03 –0.04 –0.09 –0.04

Domestic sales (%) c –0.17 –0.11 na na –0.30 –0.20 –0.13 –0.05 –0.07 –0.05 –0.09 –0.12 –0.12 –0.11 –0.06

Exports (%) –0.79 –0.54 –0.20 –0.20 –0.09 –0.13 –0.11 0.03 0.02 –0.04 –0.18 –0.02 –0.03 –0.08 –0.04

Absolute change in values at market prices b

Domestic production ($m)

–60.6 –13.6 –1.5 –0.4 –0.5 –0.7 –12.7 0.0 0.0 –1.8 –0.4 0.0 –0.3 –0.3 –1.2

Domestic sales ($m) –10.8 –1.6 na na –0.3 –0.5 –3.5 –0.1 –0.1 –0.8 –0.2 0.0 –0.2 –0.2 0.0

Exports ($m) –49.8 –12.0 –1.5 –0.4 –0.2 –0.2 –9.2 0.0 0.1 –1.0 –0.2 0.0 –0.2 –0.1 –1.2

a Producer prices are defined in 2013–14 dollars and refer to price received by producers, including any implicit subsidy due to partial cost recovery only. b Export prices are defined in 2013–14 Australian dollars and refer to the fob price paid by importing countries. c Changes in market value of production are based on change in market value of exports and domestic sales. d Changes in market value of domestic sales are based on change in domestic sales and change in producer price. e Changes in market value of exports are based on change in volume of exports and change in export price. f Absolute changes in values are measured in $million 2013–14 AUD. na not applicable. Note: Scenario 1 compares full cost recovery with no cost recovery. Source: ABARES estimates


29

Absolute changes in values of exports and production

Changes in values of production are largely determined by changes in values of exports. The

meat and grains industries are the most affected industries, in values of production and exports.

For example, the values of beef production and export are estimated to be around $60 million

and $50 million lower, respectively, under full cost recovery (compared with no cost recovery).

Production and exports of sheep meat are estimated to fall by around $13.5 million and

$12 million, respectively. Grain production and exports are estimated to fall by around

$12.5 million and $9 million, respectively.

In contrast, the estimated decrease in value of live animal and horticulture exports is small. Live

cattle and sheep exports are estimated be $1.5 million and $0.4 million lower under full cost

recovery, while the combined decrease in value of horticultural exports is estimated to be

around $0.3 million. These impacts reflect the lower value of these exports relative to other

commodities and the modest contribution of export certification costs to overall costs of

production for the horticulture industry.

Assuming fixed export prices

This standard analysis assumes that export prices are not fixed—that is, the price of Australian

exports may change in response to changes in Australian supply. Under this assumption,

Australian exporters may pass on a small proportion of export certification costs to importing

countries through a higher price paid for Australian exports. If export prices are fixed, and

Australian exporters are unable to pass on any costs of export certification to importers, full cost

recovery may have a larger impact on value of exports.

Under the alternative assumption of fixed export prices, estimated declines in value of exports

are larger for all commodities (Figure 2). For example, the decline in value of beef exports is

estimated to be 1.8 per cent when export prices are fixed, as opposed to 0.79 per cent when

exporters can pass some export certification costs on to importers (Figure 1). Falls in value of

exports of horticultural products such as macadamias and oranges are still small, but estimated

falls are several times larger under fixed export prices. For example, the estimated decrease in

value of orange exports is 1.19 per cent under fixed export prices (Figure 2), compared with

0.13 per cent under variable export prices (Figure 1).

With fixed export prices, Australian producers cannot pass any export certification costs to

importers. Therefore, the estimated decrease in volume of exports is lower than in the standard

scenarios for all commodities. With export prices fixed, domestic producers bear all of the costs

of export certification through lower producer prices. As domestic consumers respond to the

larger fall in prices, domestic sales increase by a larger degree than under the standard price

assumptions. The fall in exports outweighs the rise in domestic sales for all industries.

Finally, because of lower domestic prices and production volumes, changes in value of

production are negative for all commodities. In percentage terms, beef, oranges and sheep meat

are the most affected industries. With fixed export prices, the fall in values of beef and sheep

meat production is estimated to be 1.05 per cent and 0.58 per cent, respectively, under full cost

recovery (compared with 0.49 per cent and 0.36 per cent, respectively, under variable export

prices). The value of horticultural production is estimated to fall by between 0.51 per cent and

0.72 per cent under fixed export prices (compared with between 0.16 per cent and 0.18 per cent

under variable export prices). The value of production of other commodities falls by less than

0.20 per cent. Comprehensive results for scenarios 1 to 3, assuming fixed export prices, are

given in tables B7 to B9.


30

Figure 2 Change in value of exports under full cost recovery compared with alternative scenarios, assuming fixed export prices

Source: ABARES estimates

Farmgate implications

In the standard analysis, export prices rise marginally in all scenarios for all commodities. This

reflects the assumption that Australian exporters are able to pass on some of the costs of export

certification to importers.

This industry analysis does not provide insights into where along the domestic supply chain

export certification charges are absorbed. For example, data from the department’s cost

recovery reporting on the 2013–14 annual financial outcome suggest that the department

recovers the majority of export certification costs for meat exports from abattoirs but that

exporters pay the majority of costs for live animal exports, grains and dairy. However, it cannot

be assumed that abattoirs and exporters absorb all the costs of certification because abattoirs

may reduce receipts to farmers to partially or wholly recover export certification costs. The

potential for processors and exports to pass costs back to farmers also exists across supply

chains of other commodities.

The export supply chain is complex, so it was beyond the scope of this study to estimate the

extent to which costs may be distributed among primary producers, domestic processors,

transporters, handlers and exporters. However, potential impacts of passing a given proportion

of industry costs back to farmers, through lower prices paid for farm products, are estimated for

a range of potential scenarios.

Whittle et al. (2011) used a simple scenario analysis to estimate the implications of processors

passing back 0 per cent, 20 per cent, 60 per cent and 100 per cent of the carbon price to farmers.

The scenario analysis was applied to ‘typical’ broadacre and dairy farms, as defined in ABARES

farm surveys (ABARES 2011). This report takes a similar approach to estimating changes in


31

receipts for broadacre and dairy farms. Changes in boat receipts are not estimated for seafood

commodities because of difficulties in identifying typical producers.

Changes in farmgate prices

Table 9 shows estimated decrease in farmgate prices and prices for seafood, assuming that

100 per cent of losses to the domestic industry from full cost recovery are passed back to

producers through lower prices paid for goods. Losses to the domestic industry include export

certification cost recovery charges that are not passed on to importing countries and losses in

revenue in the domestic market resulting from lower domestic prices. Equivalent results, under

the assumption of fixed export prices, can be found in Table B11 in Appendix B.

Table 9 Changes in farmgate prices under full cost recovery compared with Scenario 1, assuming 100 per cent pass-back of export certification costs to producers

Commodity Change in farmgate price a ($)

Percentage change in farmgate price b (%)

Abalone $0.14/kilogram –0.22 c

Almonds –$5.43/tonne –0.11

Beef cattle for domestic slaughter –$6.66/head –1.01

Beef cattle for live export –$4.90/head –0.74

Grains –$0.44/tonne –0.22

Grapes (excluding wine) –$7.87/tonne –0.38 c

Macadamias –$4.44/tonne –0.15

Milk 0.04c/litre –0.10

Prawns $0.03/kilogram –0.17 c

Rock lobster $0.18/kilogram –0.24 c

Sheep for domestic slaughter –$1.07/head –1.32

Sheep for live export –$0.57/head –0.70

Tuna $0.03/kilogram –0.24 c

Wool 0.4c/kilogram –0.07

a Absolute changes in farmgate prices are calculated by dividing the total burden on industry by number of units produced domestically. Burden on industry includes costs of export certification not passed on to importing countries and losses on domestic sales resulting from lower domestic prices. b Estimated percentage change in price differs across farm types according to average price received. Estimates presented in this table are based on highest percentage change across the six farm types considered in the farm surveys. c These estimates use export prices as a proxy for farmgate or vessel prices. Where farmgate prices are lower than export prices, estimated percentage impacts on producer prices will be greater. Note: Changes in farmgate prices for scenarios 2 and 3 are presented in Appendix B. Source: ABARES estimates

Changes in farm receipts

Table 10 shows change in farm receipts assuming processors pass back 30 per cent, 60 per cent

and 100 per cent of costs to farmers. The extent of pass-back will depend on a variety of complex

and interrelated factors, including price sensitivity of demand by final consumers and

processors’ ability to absorb cost increases and remain profitable. The six broad industry

classifications—wheat and other crops, mixed livestock–crops, sheep, beef, sheep–beef and

dairy—are those used in ABARES farm surveys (ABARES 2011). Equivalent results, under the

assumption of fixed export prices, can be found in Table 10.


32

Table 10 Change in value of broadacre and dairy farm receipts in 2013–14 under full cost recovery compared with alternative scenarios, $ a farm and per cent of farm receipts a,b

Farm type Value of farm receipts ($)

30% cost pass-back

60% cost pass-back

100% cost pass-back

$ % $ % $ %

Scenario 1

Wheat and other crops 832 954 –565 –0.07 –1 130 –0.14 –1 884 –0.23

Mixed livestock–crops 427 458 –509 –0.12 –1 018 –0.24 –1 697 –0.40

Sheep 263 893 –453 –0.17 –905 –0.34 –1 509 –0.57

Beef 274 709 –621 –0.23 –1 242 –0.45 –2 070 –0.75

Sheep–beef 331 453 –732 –0.22 –1 464 –0.44 –2 440 –0.74

Dairy 622 934 –194 –0.03 –389 –0.06 –648 –0.10

Scenario 2

Wheat and other crops 832 954 –93 –0.01 –185 –0.02 –308 –0.04

Mixed livestock–crops 427 458 –63 –0.01 –126 –0.03 –211 –0.05

Sheep 263 893 –55 –0.02 –110 –0.04 –184 –0.07

Beef 274 709 –71 –0.03 –141 –0.05 –236 –0.09

Sheep–beef 331 453 –72 –0.02 –144 –0.04 –239 –0.07

Dairy 622 934 –57 –0.01 –115 –0.02 –191 –0.03

Scenario 3



Sheep 263 893 –90 –0.03 –180 –0.07 –300 –0.11

Beef 274 709 –113 –0.04 –225 –0.08 –375 –0.14

Sheep–beef 331 453 –119 –0.04 –238 –0.07 –397 –0.12

Dairy 622 934 –49 –0.01 –99 –0.02 –165 –0.03

a Figures are average value of farm receipts over 2008–09 to 2012–13 expressed in 2013–14 Australian dollars. Change in economic value of farm production is measured relative to these figures. b Pass-back is the extent to which the model assumes processors can pass back export certification costs to farmers. Note: Impacts of a decrease in demand for farm outputs, as a result of increases in export certification cost recovery charges, are not considered in these estimates. Source: ABARES estimates

The ‘typical’ farms presented in Table 10 reflect national averages for each farm type. In

practice, mix of activities, farm size and reliance on specific export markets throughout Australia

vary considerably. For example, beef cattle farms in northern Australia are likely to export a

higher proportion of cattle and to stock more cattle than farms in southern Australia. These

differences mean that overall impacts of export certification will also differ across farms.

Under scenario 1 (comparing full cost recovery with no cost recovery), and assuming that

100 per cent of export certification costs not passed on to importers are passed back to farmers

(an extreme scenario), farm receipts are estimated to fall by between 0.57 per cent and

0.75 per cent for livestock-dominated farms. The impacts range from about $1 510 to $2 440 for

typical sheep and sheep–beef farms, respectively. Were processors able to pass back 60 per cent

or less, farm receipts would be likely to fall by less than 0.45 per cent. In contrast, the fall in


33

receipts for farms dominated by cropping or dairy is likely to be lower—less than 0.40 per cent

with 100 per cent cost pass-back and less than 0.24 per cent with 60 per cent pass-back.

The farmgate results for the horticulture sector (Table 11) are presented differently from those

for broadacre and dairy. Horticulture results represent the effect of export certification for the

average volume of each product grown per farm, rather than for a typical farm. Equivalent

results, assuming fixed export prices, can be found in Table B10.

Table 11 Change in value of average farm receipts for selected horticulture products under full cost recovery compared with alternative scenarios, $ million a farm

Farm-type Value of receipts a

30% cost pass-back

60% cost pass-back

100% cost pass-back

$ % $ % $ %

Scenario 1

Almonds b 2 225 058 –725 –0.03 –1450 –0.07 –2417 –0.11

Macadamias c 281 696 –128 –0.05 –255 –0.09 –425 –0.15

Oranges d 290 527 –244 –0.08 –488 –0.17 –814 –0.28

Table grapes e 435 364 –491 –0.11 –982 –0.23 –1636 –0.38

Scenario 2

Almonds b 2 225 058 –157 –0.01 –315 –0.01 –525 –0.02

Macadamias c 281 696 –28 –0.01 –55 –0.02 –92 –0.03

Oranges d 290 527 –90 –0.03 –180 –0.06 –300 –0.10

Table grapes e 435 364 –181 –0.04 –362 –0.08 –604 –0.14

Scenario 3

Almonds b 2 225 058 –76 0.00 –153 –0.01 –254 –0.01

Macadamias c 281 696 –13 0.00 –27 –0.01 –45 –0.02

Oranges d 290 527 –50 –0.02 –100 –0.03 –166 –0.06

Table grapes e 435 364 –100 –0.02 –201 –0.05 –334 –0.08

a Value of farm receipts is based on average volume of each commodity grown per farm in 2012–13. b Each almond producing farm is assumed to grow 401.1 tonnes, with an average farmgate price of $5.55 per kilogram. c Each macadamia producing farm is assumed to grow 86.4 tonnes, with an average farmgate price of $3.26 per kilogram. d Each orange producing farm is assumed to grow 336.4 tonnes, with an average farmgate price of $0.86 per kilogram. e Includes both fresh and dried grapes. Each grape producing farm is assumed to grow 187.4 tonnes, with an average farmgate price of $2.32 per kilogram. Source: ABARES estimates

Under scenario 1 (comparing full cost recovery with no cost recovery), and assuming that

100 per cent of export certification costs not passed on to importers are passed back to farmers

(an extreme scenario), farm receipts are estimated to fall by 0.11 per cent to 0.28 per cent for

almonds, macadamias and oranges. Impact on commodities ranges from about $425 a farm to

$2 415 a farm.

Under these assumptions, farm receipts for grapes are estimated to fall by 0.38 per cent, or

about $1 635. Estimated percentage reduction in receipts is relatively larger than that for

oranges (0.28 per cent), despite the same relative export certification costs at industry level (see

Table 7). This is because a larger percentage of grape production is exported. As such, costs of

export certification for grapes are spread across a smaller base. This increases the per unit

impost on producers.


34

4 Discussion Export certification services, such as inspection and certification of food, plant and live animal

exports, ensure that Australia’s agricultural and fisheries exports comply with prescribed

conditions of Australia’s export controls and meet requirements of importing countries. The

department recovers the full cost of providing these services to industry through cost recovery

charges collected from exporters. It is redesigning its cost recovery arrangements as part of a

funding strategy for biosecurity and export services.

In this report ABARES examined the impact of full cost recovery on competitiveness of

Australia’s agricultural and fisheries exports. Some stakeholders have concerns that cost

recovery charges for export certification disadvantage agricultural industries by increasing the

cost of exporting. However, ABARES analysis suggests that the impact on value of exports is

small—less than 1 per cent for each commodity considered. This is in large part because export

certification costs comprise a small share of total value of exports (less than 0.8 per cent in

2013–14 for the commodities considered in this analysis).

Notwithstanding small declines in export values overall, the impact of full cost recovery varies

across commodities. Industries with the highest costs of export certification relative to total

value of exports, namely beef and sheep meat exporters, experience the largest decline in the

value of exports under full cost recovery. Commodities for which export demand is less sensitive

to changes in prices (such as almonds, macadamias, table grapes and oranges) are estimated to

have smaller declines in value of exports. This is because many horticulture exporters can pass

on some costs of export certification to importers, particularly where markets distinguish

Australian produce.

The department’s cost recovery charges for export certification increase the cost of exporting,

but the impact on competitiveness of agricultural exporters is limited. The ABARES investigation

of other countries’ cost recovery arrangements suggests that differences, and impacts on

competitiveness, are generally small. Other countries’ cost recovery arrangements differ from

Australia’s and, as a result, costs borne by their exporters to achieve export certification may

also differ. However, all countries considered by ABARES recover at least some of the costs

incurred in providing export certification services. Moreover, some of Australia’s key

competitors in dairy, meat, horticulture and grains export markets recover the full costs of

providing export certification services. These include New Zealand, the United States, Chile and

Canada.

This suggests that, for the commodities and countries considered in the report, full cost recovery

does not significantly reduce export competitiveness. The majority of countries investigated by

ABARES recover at least the costs of providing inspection and certification services, and many

recover overheads as well as direct costs of agencies responsible for export certification. The

analysis also examined how these observed differences (compared with Australia’s cost

recovery arrangements) affect the competitiveness of Australia’s agricultural exporters. For

example, some European countries appear to recover costs of inspection and certification

services only. Compared with a scenario where the department does not recover the costs of

managing and administering the export system from exporters, the fall in value of exports with

full cost recovery was less than 0.1 per cent for all commodities. Compared with a scenario

where the department does not recover its overhead costs from exporters, the fall in value of

exports with full cost recovery was less than 0.12 per cent for all commodities.


35

However, some exporters may be disadvantaged in some markets by cost recovery charges for

export certification. First, Australia exports beef and lamb to the United States so export

certification is an additional cost of exporting not borne by US suppliers. Second, ABARES was

unable to determine the cost recovery arrangements of some of Australia’s main competitors in

export markets. For example, Australia’s main competitors for live sheep in the Middle East

market are Sudan, Somalia and Djibouti. ABARES analysis suggests that the impact of full cost

recovery on the value of live sheep exports is around 0.5 per cent. Similarly, ABARES was unable

to determine cost recovery arrangements of Australia’s main competitors in markets for

seafood.


36

Appendix A: Industry profiles Australia’s agriculture and fisheries industries have a strong export focus. Around 60 per cent of

the gross value of farm production is typically exported, although the share was closer to

80 per cent in 2012–13. The share of fisheries production exported in 2012–13 was almost

50 per cent. In 2012–13 the value of farm exports was around $38 billion and the value of edible

seafood exports was over $1 billion (ABARES 2014b).

In recent decades, Asia has increased in importance as a destination for Australia’s agricultural

production. Asian markets accounted for over 60 per cent of the value of agricultural exports in

2012–13 (ABARES 2014b). The main destinations were Japan, China, Indonesia and the Republic

of Korea. At the same time, exports to Europe and the United States have generally declined—

each accounting for less than 10 per cent of the value of Australia’s agricultural exports.

This chapter presents brief profiles of industries considered in this report. These industries

represent Australia’s main agricultural and seafood exports (Table 1). Australia is a major exporter

of several agricultural commodities, including, beef, sheep meat, wool and macadamias. Other

industries represent a smaller share of global exports but are highly dependent on export markets.

Beef

Australia is a significant producer of beef and veal and one of the world’s largest exporters. In

2013–14 Australia produced about 2.4 million tonnes of beef and veal and was the seventh-

largest beef producer globally (ABARES 2014a). Australia is the world’s third-largest beef

exporter, after India and Brazil, exporting around two-thirds of total production annually. In

2013–14 Australia exported 1.2 million tonnes (shipped weight) of beef and veal, valued at

$6.3 billion (ABARES 2014b).

Australian beef and veal is exported to many countries globally. Australia’s largest beef and veal

export destinations are Japan (with a value of $1 446 million in 2013–14), the United States

($1 375 million) and the Republic of Korea ($844 million) (ABARES 2014d). In 2013 Australia

accounted for over half of all beef imports into Japan, the Republic of Korea and China, and 30 per

cent of all beef imports into the United States (UN Comtrade 2014). Japan, the Republic of Korea

and the United States have traditionally been key export markets for Australian beef and veal, but

demand for Australian beef from China has increased sharply since 2011–12 (Figure A1).

The competitiveness of Australian beef in export markets is an important factor in industry

performance, given the share of production going to export. Australia’s main competitors in beef

and veal markets are the United States, Brazil and New Zealand. Australia is facing increased

competition from the United States in the Japanese and Korean markets since the re-entry of

US beef into both markets. It was excluded in the early 2000s because of disease concerns.


37

Figure A1 Value of Australian beef and veal exports, selected countries, 2005–06 to 2013–14

Source: ABARES (2014d)

Sheep meat

Australia is one of the world’s leading producers of sheep meat, and the largest and second-largest

exporter of mutton and lamb respectively. Australia exports about 50 per cent and almost 100 per

cent of its lamb and mutton produced. The value of Australian sheep meat exports increased by

about 49 per cent in real value terms between 2005–06 and 2013–14. In 2013–14 Australia

produced around 474 000 tonnes of lamb and 288 000 tonnes of mutton, with around 69 per cent

exported (ABARES 2014a). In 2013–14 Australia exported about 416 000 tonnes of sheep meat

(shipped weight), valued at about $2.3 billion (ABARES 2014d).

Sheep meat production in Australia increased over the decade to 2013–14. The share of

production going to export increased steadily from around 50 per cent in 2000–01 to almost

70 per cent in 2013–14 (ABARES 2014b).

The main destinations for Australian exports of sheep meat are the Middle East, the United

States and China. In 2013–14 exports to these markets accounted for almost two-thirds of

Australian lamb exports (ABARES 2014d). Exports of lamb to these markets generally increased

over the six years since 2006–07. Exports of mutton were in decline until 2011–12, when

exports increased, particularly to the Chinese market (Figure A2 and Figure A3).

Australia’s only major competitor for global sheep meat markets is New Zealand. It exports

much more lamb but around the same amount of mutton as Australia (ABARES 2014b). In 2013–

14 New Zealand exported 306 000 tonnes of lamb, 35 per cent more than Australia exported in

the same period (ABARES 2014d).


38

Figure A2 Volume of Australian lamb exports, selected countries, 2005–06 to 2013–14


Figure A3 Volume of Australian mutton exports, selected countries, 2005–06 to 2013–14


Live cattle exports

In 2011 Australia was the fifth-largest exporter of live cattle worldwide (Deards et al. 2014). In

2013–14 Australia exported almost 1.0 million head of live feeder/slaughter cattle, valued at

around $780 million (ABARES 2014d). Between 2005–06 and 2013–14 the value of live cattle

exports has ranged between $400 million and $600 million (2013 dollars). Cattle have been

mainly sourced from northern Australia.


39

The main export markets for Australian live cattle are in South-East Asia, where cultural and

religious preferences, declining domestic herds and a lack of infrastructure drive demand for

livestock imports. In 2013–14 Australia exported 614 158 head of feeder/slaughter cattle to

Indonesia (Figure A4), which accounted for 62 per cent of all feeder/slaughter cattle exports.

Other markets for feeder/slaughter cattle in the region include Vietnam (accounting for 13 per

cent of total volume in 2013–14), Malaysia (5 per cent) and the Philippines (2 per cent). Another

important market is Israel, which accounted for 11 per cent of exports in 2013–14.

Figure A4 Australia live cattle exported (’000), selected countries, 2005–06 to 2013–14


Australia is the main exporter of live cattle to South-East Asia, accounting for around 80 per cent

of the region’s live cattle imports (Deards et al. 2014). Restrictions imposed by Indonesia on

cattle and beef imports from Brazil and India—resulting from their not having status as being

foot-and-mouth disease free—has allowed Australia to remain the only supplier of live cattle to

Indonesia. Australia’s only competition for the South-East Asian market comes from Thailand,

which primarily exports to Malaysia and Vietnam. Thai cattle prices are generally significantly

lower than those of Australian cattle (UN Comtrade 2014).

Australia’s livestock industries enjoy disease-free status, which contributes to the industry’s

global competitiveness as a supplier and allows Australia to command a premium in export

markets. However, government policies in major export markets also have the potential to

significantly affect Australia’s live export trade. For example, since 2010 Australia’s live cattle

exports to Indonesia have been subject to trade measures to support Indonesia’s self-sufficiency

objectives. These include weight limits, import quotas and, since 2013, a reference price

mechanism (Deards et al. 2014).

Live sheep exports

Australian live sheep exports have been declining since the 1990s, following disruptions to trade

in several markets and a fall in the number of sheep available for export. The value of Australian

live sheep exported declined by about 50 per cent between 2005–06 and 2013–14. The number

of Australian live sheep exports fell to 1.97 million in 2013, the lowest recorded since 1975

(Deards et al. 2014).


40

Australia’s live sheep export trade is concentrated in Western Australia. Live exports

represented 47 per cent of the state’s sheep meat industry gross value of production in 2012–13.

Shifts in land use towards grain production in the state since the early 1990s have led to a

decline in the sheep flock, reducing supply of live sheep available for export.

In 2011 Australia was the second-largest exporter of live sheep. Key export destinations for live

sheep from Australia have remained in the Middle East, with the region accounting for around

95 per cent of live sheep exported in 2012–13 (ABARES 2013). In 2013 Australia’s export

market share was 67 per cent in Qatar, 57 per cent in Kuwait and 31 per cent in Jordan

(UN Comtrade 2014); these levels have been relatively stable since the mid-2000s. However,

Australia’s overall market share in the Middle East had been falling since the early 2000s (Figure

A5). The fall was in line with the general fall in live sheep exports from Australia.

Figure A5 Live sheep exported (’000), selected countries, 2005–06 to 2013–14


Australia’s major competitors in the Middle East market for live sheep export include Djibouti,

Somalia and Sudan. These countries combined supplied about 62 per cent of all live sheep into

the Middle East in 2011. This partly reflected the higher prices of Australian sheep relative to

African sheep. Despite this, Australian sheep are often preferred because of their higher quality

and because they are more likely to be disease-free (Deards et al. 2014).

Wool

Australia is the largest producer and exporter of wool globally. In 2012–13 Australia produced

about 435 100 tonnes of wool (greasy equivalent). This represented about 20 per cent of world’s

production and was valued at about $2.47 billion (ABARES 2014d). In 2013–14 Australia

exported about 295 400 tonnes of greasy wool, valued at about $2.2 billion. According to the

International Wool Textile Organisation, Australia accounted for about 44 per cent of the global

wool market, followed by New Zealand at about 17 per cent (ABARES 2014b).


41

Wool production in Australia fell over the two decades to 2009–10. Shorn wool production was

at its peak in 1990–91 at 912 000 tonnes but fell continuously to about 350 000 tonnes in 2009–

10. The decline was mainly a result of the collapse of the wool reserve price scheme. However, a

period of flock rebuilding from 2009–10 resulted in shorn wool production stabilising rather

than declining in the five years to 2013–14 (ABARES 2014b). Reflecting this, the real gross value

of production also fell significantly between 1990–91 and 2009–10, with annual fluctuations

caused by movements in the wool price. Periods of intense drought (for example, in 2002–03

and 2006–07) also contributed to subsequent declines in stock numbers and wool production.

Europe was Australia’s main export market for wool until the early 2000s, when China became

Australia’s export destination. At present, China accounts for around 75 per cent of Australia’s

total wool exports. In 2013–14 Australia exported around 324 000 tonnes of wool, valued at

around $2.1 billion (Figure A6). Europe’s share of Australian wool exports fell from around

42 per cent in 1990–91 to around 8 per cent in 2013–14. Australian wool is also exported to

India, Taiwan, Republic of Korea, Japan, Thailand, Turkey and the United States.

Figure A6 Value of wool exports, selected countries, 2005–06 to 2013–14


New Zealand is the second-largest wool exporter globally. However, Australian exports fine wool

to China for the clothing industry and New Zealand mainly exports strong wool for the carpet

industry.

The wool industry faces competition from synthetic fibre and cotton. World demand for wool

has fallen as demand for textiles and apparel made from synthetic fibres and cotton has grown.

Between 1990 and 2012, global synthetic fibres production increased by about 250 per cent as a

result of increased demand (ABARES 2014b). World cotton production also increased by about

64 per cent between 2009 and 2012.


42

Dairy

On a global scale, milk production in Australia is relatively low but the industry is the third-largest

agricultural sector in Australia. In 2012–13 Australia produced about 9.2 billion litres of milk,

accounting for about 1.8 per cent of global milk production. The wholesale value of the Australian

dairy industry in 2012–13 was more than $13 billion (PC 2014).

Australia is among the main exporters of dairy products worldwide. In 2013–14 Australia

exported about 57 per cent of its dairy products (cheese, skim milk powder, butter, casein and

whole milk powder), mostly to countries in Asia. In 2013–14 Australia exported about 437 500

tonnes of butter, cheese, whole milk powder and skim milk powder, valued at about $2.2 billion

(ABARES 2014d). The main importers of Australian cheese and milk powder are Japan and

South-East Asia respectively. Other export destinations include the Russian Federation, Hong

Kong, Taiwan, Republic of Korea, Saudi Arabia, the Netherlands and Yemen.

Demand for dairy products in Japan and South-East Asia has been relatively stable since 2005–

06, while demand in China has been increasing since 2005–06.

Figure A7 Value of Australian dairy product exports, selected countries, 2005–06 to 2013–14


Australia faces competition from other dairy exporting countries, especially New Zealand, the

European Union and the United States. In 2011–12 the European Union exported about

1.3 million tonnes of cheese and skim milk powder; Australia exported 188 000 tonnes

(ABARES 2014d). The free trade agreements between Australia and China and New Zealand and

China are expected to provide Australia and New Zealand with a competitive advantage over

other countries exporting to China.

Horticulture

The gross value of production of the Australian horticulture industry is large. Unlike the

production of other agricultural industries, its production is mostly sold domestically. The

estimated gross value of production of the industry was about $9.1 billion in 2013–14. The bulk

of production lies in fruit (excluding wine grapes), tree nuts and vegetables (ABARES 2014c).


43

The smaller horticultural industries such as almonds and oranges are far more export-oriented

and account for a large proportion of horticulture export revenue. In contrast, the larger industries

such as bananas are almost entirely domestically focused. In 2012–13 the value of Australian fruit

production was about $3 521 million while export value was about $634 million (ABARES 2014c).

In 2013–14 the most export-oriented horticulture commodities were almonds, macadamias,

oranges and table grapes. Exports of nuts have trended upwards over the past decade. Exports

of fruit have remained relatively volatile (Figure A8), subject to seasonal conditions and

fluctuating consumer demand.

Figure A8 Value of Australian fruit and nuts exports, 2005–06 to 2013–14


The value of Australian fruit exports increased by about 48 per cent (in real terms) between

2010–11 and 2013–14, from $503 million to $743 million (in 2014–15 dollars). This can be

attributed to strong export growth of table grapes, fresh oranges, mandarins, cherries and

mangoes. Table grape exports, in particular, have grown rapidly.

The Australian orange industry has a strong export focus, exporting almost one-third of total

production in 2013–14. The major markets for orange exports in 2013–14 were Japan, Hong

Kong, the United States and China. The United States has been an important market for

Australian citrus exports, but market share has fallen. Australian orange exports to the northern

hemisphere during the southern hemisphere production season face competition from Chile,

Peru and South Africa. The Australian citrus industry has refocused on the Asian region. Exports

to China grew tenfold in 2012–13 and tripled in 2013–14; China is now Australia’s third-largest

citrus export destination.

Almond and macadamia production made up 94 per cent of the total value of tree nut

production in Australia. Australia is now the second-largest producer of almonds, accounting for

about 7 per cent of global production. The Australian almond industry is now highly export

focused, producing more than three times the quantity consumed domestically. In 2013–14 the

value of almond exports increased by 142 per cent, making almonds Australia’s largest

horticultural export. This is as a result of an increase in world prices, as demand remained


44

strong and stocks in major exporting countries fell. As of 2013 Australia was the largest

producer of macadamia nuts globally, although South Africa, the United States and Kenya have

gained market share in recent years.

Horticulture products are typically subject to heavy tariffs and non-tariff biosecurity

restrictions. At present, tariffs stand at around 10 per cent to 30 per cent on imports to China,

10 per cent to 40 per cent to Japan, 30 per cent to 40 per cent to India and 30 per cent to

50 percent to the Republic of Korea. Australia has signed free trade agreements with the

Republic of Korea and Japan, and is progressing towards an agreement with China, and these

may substantially increase Australia’s international competitiveness.

Wheat

On a global scale, Australia is a relatively small producer but a major exporter of wheat.

Australia’s wheat production accounts for less than 4 per cent of total world production. In

2013–14 Australia produced about 27.0 million tonnes of wheat, exporting around 68 per cent.

The volume of wheat exported in 2013–14 accounted for approximately 12 per cent of total

world trade (ABARES 2014d).

Production and export of wheat increased between 2006–07 and 2011–12 and fell slightly fall in

2012–13 (Figure A9).

Figure A9 Volume of Australian wheat production and exports, 2005–06 to 2013–14


The most significant destinations for Australian wheat exports are in South-East Asia—

particularly Indonesia and Vietnam—and North Asia, particularly the Republic of Korea, Japan

and China. Australia’s major competitors in these markets are Canada and the United States.

However, Australian maintains dominance in export share in its key markets, especially

Indonesia. The proximity of Australia to the Asian region provides Australian exporters with an

advantage over its competitors.


45

Coarse grains

Australia is a small producer and exporter of coarse grains on the global scale. However, over

half of production is exported. In 2013–14 Australia produced about 12.6 million tonnes of

barley, grain sorghum, corn (maize), oats and triticale valued at about $3 319 million

(ABARES 2014d). About 64 per cent of the 2013–14 coarse grain production was exported.

Barley is the most-exported coarse grain in volume and value, followed by grain sorghum and

maize. In 2013–14 Australia produced about 9.5 million tonnes of barley, with around

75 per cent exported (ABARES 2014d).

Coarse grain production and exports were relatively stable over the decade to 2012–13, with the

exception of 2006–07. Drought, among other factors, accounted for the sharp decline in

production during that period (Figure A10).

Figure A10 Volume of Australian coarse grain production and exports, 2005–06 to 2013–14


Seafood

Australia produced 228 556 tonnes of seafood products in 2012–13, contributing $2.4 billion to

the national gross value of production (GVP). This production comes from the wild-caught sector

($1.4 billion, 57 per cent) and aquaculture ($1 billion, 43 per cent). The most valuable species

produced in 2012–13 were salmonids ($497 million), rock lobster ($451 million), prawns ($277

million), tuna ($177 million) and abalone ($190 million). Of these, rock lobster, tuna and abalone

are heavily exported, predominantly to markets in Hong Kong, Japan, Vietnam and China.

In 2012–13 edible seafood exports totalled $1 billion. Over 79 per cent of this was derived from

the export of tuna ($447 million), abalone ($186 million) and tuna ($163 million). Japan is the

largest market for tuna, importing around 97 per cent of all tuna exported from Australia on

average over the last 10 years to 2012–13. The key markets for abalone have traditionally been

Hong Kong, China and Japan. They constituted over 80 per cent of total abalone export value,

averaged over 10 years from 2003–04. However, in recent years abalone exports to China and

Hong Kong have declined while Vietnam has started to grow as new market.


46

Similarly, rock lobster exports have been redirected from traditional markets. In the early

2000s, key export markets for rock lobster were Hong Kong, Japan, Taiwan and the United

States. However, exports of rock lobster to Japan, Taiwan and the United States declined

gradually over the decade and, by the late 2000s, around 70 per cent of rock lobster exported

from Australia was sent to Hong Kong. Hong Kong remains a key market for rock lobster, but

Vietnam has become the largest importer of rock lobster since 2012–13. Anecdotal evidence

suggests that Hong Kong and Vietnam are entry ports for seafood exports to China.

Tuna

Fresh, chilled and frozen

Fresh, chilled and frozen tuna products dominate Australian tuna exports. In 2013 Australia

exported 10 032 tonnes ($137 million) of tuna products, of which 8 991 tonnes ($134 million)

was fresh chilled and frozen. Around 8 413 tonnes (94 per cent) of fresh, chilled and frozen tuna

products were sent to Japan. Southern bluefin tuna constitutes around 95 per cent of all

Australian export earnings from fresh, chilled and frozen tuna. Table A1 lists the main suppliers

of fresh, chilled and frozen southern bluefin tuna to Japan.

Table A1 Imports of fresh, chilled and frozen southern bluefin tuna into Japan

Exporting country

2012 (tonnes)

2013 (tonnes)

Exporting country

2012 ($US million)

2013 ($US million)

Australia 6 917 7 876 Australia 160 126

Republic of Korea

846 1 000 Republic of Korea

21 16

New Zealand 449 471 New Zealand 11 8

Rest of Asia 310 612 Rest of Asia 10 11

Total world 8 920 10 428 Total world 203 161

Source: UN Comtrade 2014

Japan is Australia’s main export destination for southern bluefin tuna. However, Atlantic bluefin

tuna from Mediterranean Europe is also a premium tuna; it competes with Australian southern

bluefin tuna. Table A2 lists the main suppliers of Atlantic and Pacific bluefin tuna into Japan.

Table A2 Imports of fresh, chilled and frozen Atlantic and Pacific bluefin tuna into Japan

Exporting

country

2012

(tonnes)

2013

(tonnes)

Exporting

country

2012 ($US

million)

2013 ($US

million)

Republic of Korea

1 370 560 Mexico 31 64

Mexico 1 282 3 589 Spain 13 12

Canada 327 322 United States 12 4

United States 326 134 Canada 11 9

Total world 4 309 5 635 Total world 101 111

Source: United Nation’s Comtrade database 2014


47

Abalone

Live, fresh and chilled, frozen, and prepared and preserved

In 2013 Australia exported 2 815 tonnes of abalone ($179 million). This is broken down into three

categories: live, fresh and chilled (1 414 tonnes, $73 million); frozen, dried, salted or in brine (749

tonnes, $57 million); and prepared and preserved (651 tonnes, $48 million). The top three

international markets for each of the abalone export categories by value are listed in Table A3.

Table A3 Top export destinations for Australian abalone by commodity type

2012 ($ million) 2013 ($ million)

Live, fresh or chilled

Hong Kong 45 30

China 23 19

Vietnam 9 18

Total world 83 73

Frozen, dried, salted or in brine

Hong Kong 23 25

Japan 15 14

Singapore 8 10

Total world 52 57

Prepared and preserved

Hong Kong 31 25

Singapore 10 14

Total world 51 48

Source: Australian Bureau of Statistics 2014

Australia appears to be the dominant supplier of abalone across all categories and species for

each of its export markets. Table A4 lists the main suppliers of all categories of abalone for each

of Australia’s key export markets.

Table A4 Imports of abalone into China, Hong Kong, Japan and Singapore, 2012

$US million Share (%)

China

Australia 25 90

Asia 1 3

Total world 27 100

Hong Kong

Australia 76 30

South Africa 43 17

Japan 24 10

Rest of Asia 33 13

Japan

Republic of Korea 60 56

Australia 27 25


48

$US million Share (%)

Rest of Asia 9 8

Total world 108 100

Singapore

Australia 22 34

New Zealand 12 19

Rest of Asia 17 26

Total world 64 100

Source: UN Comtrade 2014

Rock lobster

In 2013 Australian rock lobster exports were valued at around $457 million. The main destinations for Australian rock lobster exports (unfrozen) are China, Hong Kong and Vietnam (Table A5). Australia (along with New Zealand and the United States) is a leading supplier of unfrozen lobster products into China and Hong Kong.

Table A5 Top export destinations for Australian unfrozen rock lobster

Country 2010 ($ million) 2011 ($ million) 2012 ($ million) 2013 ($ million)

China 14 64 9 4

Hong Kong 278 267 256 107

Japan 14 12 10 6

Vietnam 0 14 73 335

Total export 317 373 360 457

Source: Australian Bureau of Statistics 2014

C

ost reco

very arrangem

ents fo

r expo

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and

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stralian agricu

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AB

AR

ES

49

Appendix B: Sensitivity analysis

Variable export prices

Table B1 Estimated potential impacts under full cost recovery compared with scenario 1, assuming variable export prices

Market impacts Abalone Almonds Beef Cattle live

Dairy a

Grains Maca-damias

Oranges Prawns Rock lobster

Sheep live

Sheep meat

Table grapes

Tuna Wool


Producer price (%) –0.22 –0.08 –0.48 –0.62 –0.06 –0.15 –0.06 –0.22 –0.17 –0.24 –0.62 –0.63 –0.34 –0.24 –0.06

Export price (%) 0.03 0.07 0.31 0.06 0.01 0.02 0.09 0.34 0.08 0.01 0.06 0.17 0.23 0.01 0.01


Domestic production (%) –0.01 –0.04 –0.40 –0.25 –0.03 –0.09 –0.03 –0.13 –0.01 –0.01 –0.25 –0.21 –0.19 –0.01 –0.05

Domestic sales (%) 0.11 0.01 0.31 na 0.01 0.02 0.01 0.02 0.09 0.12 na 0.52 0.04 0.12 0.00

Exports (%) –0.11 –0.05 –1.10 –0.25 –0.05 –0.13 –0.07 –0.47 –0.25 –0.04 –0.25 –0.70 –0.31 –0.02 –0.05

Relative change in values at market prices b

Domestic production (%) c

–0.09 0.00 –0.49 –0.20 –0.04 –0.12 –0.02 –0.18 –0.11 –0.04 –0.20 –0.36 –0.16 –0.03 –0.04

Domestic sales (%) d –0.11 –0.07 –0.17 na –0.05 –0.13 –0.05 –0.20 –0.09 –0.12 na –0.11 –0.30 –0.12 –0.06

Exports (%) e –0.08 0.02 –0.79 –0.20 –0.04 –0.11 0.03 –0.13 –0.18 –0.03 –0.20 –0.54 –0.09 –0.02 –0.04

Absolute change in values at market prices b,f

Domestic production ($m) c

–0.3 0.0 –60.6 –1.5 –1.8 –12.7 0.0 –0.7 –0.4 –0.3 –0.4 –13.6 –0.5 0.0 –1.2

Domestic sales ($m) d –0.2 –0.1 –10.8 na –0.8 –3.5 –0.1 –0.5 –0.2 –0.2 na –1.6 –0.3 0.0 0.0

Exports ($m) e –0.1 0.1 –49.8 –1.5 –1.0 –9.2 0.0 –0.2 –0.2 –0.2 –0.4 –12.0 –0.2 0.0 –1.2

a Producer prices are defined in 2013–14 dollars and refer to price received by producers, including any implicit subsidy from less than full cost recovery. b Export prices are defined in 2013–14 dollars and refer to fob price paid by importing countries. c Changes in market value of production are based on change in market value of exports and domestic sales. d Changes in market value of domestic sales are based on change in domestic sales and change in producer price. e Changes in market value of exports are based on change in volume of exports and change in export price. f Absolute changes in values are measured in 2013–14 dollars (millions). na Not applicable. Note: Measures change in value of exports with a move to full cost recovery relative to a scenario with no cost recovery. Source: ABARES estimates

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Table B2 Estimated potential impacts under full cost recovery compared with Scenario 2, assuming variable export prices


Dairy a

Grains Maca-damias

Oranges Prawns Rock-lobster

Sheep live

Sheep meat

Table grapes

Tuna Wool


Producer price (%)

–0.06 –0.02 –0.04 –0.23 –0.02 –0.03 –0.01 –0.08 –0.05 –0.07 –0.23 –0.05 –0.13 –0.07 0.00

Export price (%) 0.01 0.02 0.03 0.02 0.00 0.00 0.02 0.13 0.02 0.00 0.02 0.01 0.08 0.00 0.00



0.00 –0.01 –0.03 –0.09 –0.01 –0.02 –0.01 –0.05 0.00 0.00 –0.09 –0.02 –0.07 0.00 0.00

Domestic sales (%)

0.03 0.00 0.03 na 0.00 0.00 0.00 0.01 0.02 0.03 na 0.04 0.01 0.03 0.00

Exports (%) –0.03 –0.01 –0.09 –0.09 –0.02 –0.03 –0.01 –0.17 –0.07 –0.01 –0.09 –0.06 –0.12 –0.01 0.00



–0.03 0.00 –0.04 –0.07 –0.01 –0.03 0.00 –0.07 –0.03 –0.01 –0.07 –0.03 –0.06 –0.01 0.00

Domestic sales (%) d

–0.03 –0.02 –0.01 na –0.02 –0.03 –0.01 –0.07 –0.02 –0.03 na –0.01 –0.11 –0.03 0.00

Exports (%) e –0.02 0.00 –0.07 –0.07 –0.01 –0.02 0.01 –0.05 –0.05 –0.01 –0.07 –0.04 –0.03 0.00 0.00

Absolute change in values at market prices b,f


–0.1 0.0 –5.0 –0.6 –0.6 –2.8 0.0 –0.3 –0.1 –0.1 –0.1 –1.1 –0.2 0.0 0.0

Domestic sales ($m) d

0.0 0.0 –0.9 na –0.2 –0.8 0.0 –0.2 –0.1 0.0 na –0.1 –0.1 0.0 0.0

Exports ($m) e 0.0 0.0 –4.1 –0.6 –0.3 –2.0 0.0 –0.1 –0.1 0.0 –0.1 –1.0 –0.1 0.0 0.0

a Producer prices are defined in 2013–14 dollars and refer to price received by producers, including any implicit subsidy from less than full cost recovery. b Export prices are defined in 2013–14 dollars and refer to fob price paid by importing countries. c Changes in market value of production are based on change in market value of exports and domestic sales. d Changes in market value of domestic sales are based on change in domestic sales and change in producer price. e Changes in market value of exports are based on change in volume of exports and change in export price. f Absolute changes in values are measured in 2013–14 dollars (millions). na Not applicable. Note: Measures change in value of exports with a move to full cost recovery relative to a scenario where only costs of providing inspection and certification services are recovered from exporters. Source: ABARES estimates

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Table B3 Estimated potential impacts under full cost recovery compared with Scenario 3, assuming variable export prices


Dairy a

Grains Maca-damias


Sheep live

Sheep meat

Table grapes

Tuna Wool


Producer price (%)

–0.05 –0.01 –0.08 –0.18 –0.02 –0.02 –0.01 –0.05 –0.04 –0.05 –0.18 –0.10 –0.07 –0.05 –0.01

Export price (%) 0.01 0.01 0.05 0.02 0.00 0.00 0.01 0.07 0.02 0.00 0.02 0.03 0.05 0.00 0.00



0.00 0.00 –0.06 –0.07 –0.01 –0.01 0.00 –0.03 0.00 0.00 –0.07 –0.03 –0.04 0.00 –0.01

Domestic sales (%)

0.02 0.00 0.05 na 0.00 0.00 0.00 0.01 0.02 0.03 na 0.08 0.01 0.03 0.00

Exports (%) –0.02 –0.01 –0.17 –0.07 –0.01 –0.01 –0.01 –0.10 –0.06 –0.01 –0.07 –0.11 –0.06 –0.01 –0.01



–0.02 0.00 –0.08 –0.06 –0.01 –0.01 0.00 –0.04 –0.02 –0.01 –0.06 –0.06 –0.03 –0.01 –0.01


–0.02 –0.01 –0.03 na –0.01 –0.01 –0.01 –0.04 –0.02 –0.03 na –0.02 –0.06 –0.03 –0.01

Exports (%) e –0.02 0.00 –0.12 –0.06 –0.01 –0.01 0.00 –0.03 –0.04 –0.01 –0.06 –0.08 –0.02 0.00 –0.01

Absolute change in values at market prices b, f


–0.1 0.0 –9.5 –0.4 –0.5 –1.3 0.0 –0.1 –0.1 –0.1 –0.1 –2.1 –0.1 0.0 –0.3


0.0 0.0 –1.7 na –0.2 –0.4 0.0 –0.1 –0.1 0.0 na –0.3 –0.1 0.0 0.0

Exports ($m) e 0.0 0.0 –7.8 –0.4 –0.3 –1.0 0.0 0.0 0.0 0.0 –0.1 –1.9 0.0 0.0 –0.3

a Producer prices are defined in 2013–14 dollars and refer to price received by producers, including any implicit subsidy from less than full cost recovery. b Export prices are defined in 2013–14 dollars and refer to fob price paid by importing countries. c Changes in market value of production are based on change in market value of exports and domestic sales. d Changes in market value of domestic sales are based on change in domestic sales and change in producer price. e Changes in market value of exports are based on change in volume of exports and change in export price. f Absolute changes in values are measured in 2013–14 dollars (millions). Note: Measures change in value of exports with a move to full cost recovery relative to a scenario where only direct costs of providing export certification are recovered from exporters. Source: ABARES estimate

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Table B4 Changes in farmgate prices under full cost recovery compared with alternative scenarios, assuming variable export prices

Commodity Scenario 1 Scenario 2 Scenario 3

($) a (%) b ($) a (%) b ($) a (%) b

Beef cattle for domestic slaughter –$6.66/head –1.01 –$0.55/head –0.09 –$1.04/head –0.17

Sheep for domestic slaughter –$1.07/head –1.32 –$0.09/head –0.14 –$0.17/head –0.27

Beef cattle for live export –$4.90/head –0.74 –$1.77/head –0.28 –$1.39/head –0.22

Sheep for live export –$0.57/head –0.70 –$0.21/head –0.33 –$0.16/head –0.26

Grapes (excluding wine) –$7.87/tonne –0.38 c –$2.91/tonne –0.14 c –$1.61/tonne –0.08 c

Oranges –$2.18/tonne –0.28 –$0.81/tonne –0.10 –$0. 45/tonne –0.06

Grains –$0.44/tonne –0.22 –$0.10/tonne –0.05 –$0.05/tonne –0.02

Macadamias –$4.44/tonne –0.15 –$0.96/tonne –0.03 –$0.47/tonne –0.02

Almonds –$5.43/tonne –0.11 –$1.18/tonne –0.02 –$0.57/tonne –0.01

Milk 0.04c/litre –0.10 0.01c/litre –0.03 0.01c/litre –0.03

Prawns $0.03/kilogram –0.17 c $0.01/kilogram –0.05 c $0.01/kilogram –0.04 c

Tuna $0.03/kilogram –0.24 c $0.01/kilogram –0.07 c $0.01/kilogram –0.05 c

Rock lobster $0.18/kilogram –0.24 c $0.05/kilogram –0.07 c $0.04/kilogram –0.05 c

Abalone $0.14/kilogram –0.22 c $0.04/kilogram –0.06 c $0.03/kilogram –0.05 c

Wool 0.4c/kilogram –0.07 0.0c/kilogram –0.00 0.1c/kilogram –0.01

a Absolute changes in farmgate prices are calculated by dividing the total burden on industry by number of units produced domestically. Burden on industry includes costs of export certification that are not passed on to importing countries and losses on domestic sales resulting from lower domestic prices. b Estimated percentage change in price differs across farm types according to average price received. Estimates presented in this table are based on highest percentage change across the six farm types considered in farm surveys. c These estimates use export prices as a proxy for farmgate or vessel prices. Where farmgate prices are lower than export prices, estimated percentage impacts on producer prices will be greater. Source: ABARES estimates

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Table B5 Change in value of broadacre and dairy farm receipts in 2013–14 under full cost recovery compared with alternative cost pass-back rates and alternative scenarios, assuming variable export prices, $ per farm and per cent of farm receipts

Farm type Value of farm receipts ($) a

30% cost pass-back

60% cost pass-back

100% cost pass-back

$ % $ % $ %

Scenario 1

Wheat and other crops 832 954 –565 –0.07 –1 130 –0.14 –1 884 –0.23

Mixed livestock–crops 427 458 –509 –0.12 –1 018 –0.24 –1 697 –0.40

Sheep 263 893 –453 –0.17 –905 –0.34 –1 509 –0.57

Beef 274 709 –621 –0.23 –1242 –0.45 –2 070 –0.75

Sheep–beef 331 453 –732 –0.22 –1464 –0.44 –2 440 –0.74

Dairy 622 934 –194 –0.03 –389 –0.06 –648 –0.10

Scenario 2



Sheep 263 893 –55 –0.02 –110 –0.04 –184 –0.07

Beef 274 709 –71 –0.03 –141 –0.05 –236 –0.09

Sheep–beef 331 453 –72 –0.02 –144 –0.04 –239 –0.07

Dairy 622 934 –57 –0.01 –115 –0.02 –191 –0.03

Scenario 3



Sheep 263 893 –90 –0.03 –180 –0.07 –300 –0.11

Beef 274 709 –113 –0.04 –225 –0.08 –375 –0.14

Sheep–beef 331 453 –119 –0.04 –238 –0.07 –397 –0.12

Dairy 622 934 –49 –0.01 –99 –0.02 –165 –0.03

a Figures in this column are average value of farm receipts 2008–09 to 2012–13, expressed in 2013–14 dollars. Change in economic value of farm production is measured relative to these figures. Note: Impacts of a decrease in demand for farm outputs, as a result of increases in export certification cost recovery charges, are not considered in these estimates. Source: ABARES estimates

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Table B6 Change in value of average farm receipts for selected horticulture products under full cost recovery compared with alternative cost pass-back rates and alternative scenarios, assuming variable export prices, $m a farm

Farm type Value of receipts a

30% cost pass-back

60% cost pass-back

100% cost pass-back

$ % $ % $ %

Scenario 1

Almonds b 2 225 058 –725 –0.03 –1 450 –0.07 –2 417 –0.11

Macadamias c 281 696 –128 –0.05 –255 –0.09 –425 –0.15

Oranges d 290 527 –244 –0.08 –488 –0.17 –814 –0.28

Table grapes e 435 364 –491 –0.11 –982 –0.23 –1636 –0.38

Scenario 2

Almonds b 2 225 058 –157 –0.01 –315 –0.01 –525 –0.02

Macadamias c 281 696 –28 –0.01 –55 –0.02 –92 –0.03

Oranges d 290 527 –90 –0.03 –180 –0.06 –300 –0.10

Table grapes e 435 364 –181 –0.04 –362 –0.08 –604 –0.14

Scenario 3

Almonds b 2 225 058 –76 0.00 –153 –0.01 –254 –0.01

Macadamias c 281 696 –13 0.00 –27 –0.01 –45 –0.02

Oranges d 290 527 –50 –0.02 –100 –0.03 –166 –0.06

Table grapes e 435 364 –100 –0.02 –201 –0.05 –334 –0.08

a Value of farm receipts is based on average volume of each commodity grown per farm in 2012–13. b Each almond producing farm is assumed to grow 401.1 tonnes a year, with an average farmgate price of $5.55 a kilogram. c Each macadamia producing farm is assumed to grow 86.4 tonnes a year, with an average farmgate price of $3.26 a kilogram. d Each orange producing farm is assumed to grow 336.4 tonnes a year, with an average farmgate price of $0.86 a kilogram. e Includes both fresh and dried grapes. Each grape producing farm is assumed to grow 187.4 tonnes a year, with an average farmgate price of $2.32 a kilogram. Source: ABARES estimates

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Fixed export prices

Table B7 Estimated potential impacts under full cost recovery compared with Scenario 1, assuming fixed export prices


Dairy a Grains Macadamias Oranges Prawns Rock lobster

Sheep live

Sheep meat

Table grapes

Tuna Wool


Producer price (%) –0.25 –0.15 –0.79 –0.68 –0.07 –0.17 –0.15 –0.56 –0.25 –0.25 –0.68 –0.79 –0.56 –0.25 –0.07

Export price (%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00



–0.01 –0.07 –0.66 –0.27 –0.04 –0.10 –0.07 –0.34 –0.01 –0.01 –0.27 –0.26 –0.32 –0.01 –0.06

Domestic sales (%) 0.13 0.02 0.51 na 0.01 0.02 0.02 0.06 0.13 0.13 na 0.66 0.06 0.13 0.00

Exports (%) –0.13 –0.09 –1.80 –0.27 –0.06 –0.14 –0.17 –1.19 –0.36 –0.04 –0.27 –0.89 –0.52 –0.02 –0.06



–0.13 –0.10 –1.05 –0.27 –0.06 –0.15 –0.15 –0.72 –0.19 –0.06 –0.27 –0.58 –0.51 –0.03 –0.06


–0.13 –0.13 –0.29 na –0.06 –0.15 –0.13 –0.50 –0.13 –0.13 na –0.14 –0.50 –0.13 –0.07

Exports (%) e –0.13 –0.09 –1.80 –0.27 –0.06 –0.14 –0.17 –1.19 –0.36 –0.04 –0.27 –0.89 –0.52 –0.02 –0.06



–0.4 –0.5 –132.5 –2.1 –2.7 –16.1 –0.4 –2.8 –0.7 –0.4 –0.5 –21.9 –1.4 –0.1 –1.8


–0.2 –0.2 –17.6 na –0.9 –4.0 –0.2 –1.3 –0.3 –0.2 na –2.1 –0.5 0.0 0.0

Exports ($m) e –0.2 –0.3 –114.8 –2.1 –1.7 –12.1 –0.2 –1.5 –0.4 –0.2 –0.5 –19.8 –1.0 0.0 –1.8

a Producer prices are defined in 2013–14 dollars and refer to price received by producers, including any implicit subsidy from less than full cost recovery. b Export prices are defined in 2013–14 dollars and refer to fob price paid by importing countries. c Changes in market value of production are based on change in market value of exports and domestic sales. d Changes in market value of domestic sales is based on change in domestic sales and change in producer price. e Changes in market value of exports are based on change in volume of exports and change in export price. f Absolute changes in values are measured in 2013–14 dollars (millions). na not applicable. Note: Measures change in value of exports with a move to full cost recovery relative to a scenario with no cost recovery. Source: ABARES estimates

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Dairy a

Grains Macadamia Oranges Prawns Rock-lobster

Sheep live

Sheep meat

Table grapes

Tuna Wool


Producer price (%) –0.07 –0.03 –0.07 –0.25 –0.02 –0.04 –0.03 –0.21 –0.07 –0.07 –0.25 –0.07 –0.21 –0.07 0.00

Export price (%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00



0.00 –0.01 –0.05 –0.10 –0.01 –0.02 –0.01 –0.13 0.00 0.00 –0.10 –0.02 –0.12 0.00 0.00

Domestic sales (%) 0.04 0.00 0.04 0.00 0.00 0.00 0.00 0.02 0.04 0.04 0.00 0.05 0.02 0.04 0.00

Exports (%) –0.04 –0.02 –0.15 –0.10 –0.02 –0.03 –0.04 –0.44 –0.10 –0.01 –0.10 –0.07 –0.19 –0.01 0.00



–0.04 –0.02 –0.09 –0.10 –0.02 –0.03 –0.03 –0.27 –0.05 –0.02 –0.10 –0.05 –0.19 –0.01 0.00

Domestic sales (%) d –0.04 –0.03 –0.02 0.00 –0.02 –0.03 –0.03 –0.19 –0.04 –0.04 0.00 –0.01 –0.19 –0.04 0.00

Exports (%) e –0.04 –0.02 –0.15 –0.10 –0.02 –0.03 –0.04 –0.44 –0.10 –0.01 –0.10 –0.07 –0.19 –0.01 0.00



–0.1 –0.1 –10.9 –0.8 –0.9 –3.5 –0.1 –1.0 –0.2 –0.1 –0.2 –1.8 –0.5 0.0 0.0


–0.1 0.0 –1.5 0.0 –0.3 –0.9 0.0 –0.5 –0.1 0.0 0.0 –0.2 –0.2 0.0 0.0

Exports ($m) e –0.1 –0.1 –9.4 –0.8 –0.6 –2.6 0.0 –0.6 –0.1 –0.1 –0.2 –1.6 –0.4 0.0 0.0


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Dairy a

Grains Maca-damia


Sheep live

Sheep meat

Table grapes

Tuna Wool


Producer price (%) –0.06 –0.02 –0.12 –0.19 –0.02 –0.02 –0.02 –0.12 –0.06 –0.06 –0.19 –0.12 –0.12 –0.06 –0.01

Export price (%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00



0.00 –0.01 –0.10 –0.08 –0.01 –0.01 –0.01 –0.07 0.00 0.00 –0.08 –0.04 –0.06 0.00 –0.01

Domestic sales (%) 0.03 0.00 0.08 NA 0.00 0.00 0.00 0.01 0.03 0.03 NA 0.10 0.01 0.03 0.00

Exports (%) –0.03 –0.01 –0.28 –0.08 –0.02 –0.02 –0.02 –0.24 –0.08 –0.01 –0.08 –0.14 –0.11 –0.01 –0.01



–0.03 –0.01 –0.17 –0.08 –0.02 –0.02 –0.02 –0.15 –0.04 –0.01 –0.08 –0.09 –0.11 –0.01 –0.01

Domestic sales (%) d –0.03 –0.01 –0.05 NA –0.02 –0.02 –0.01 –0.10 –0.03 –0.03 NA –0.02 –0.10 –0.03 –0.01

Exports (%) e –0.03 –0.01 –0.28 –0.08 –0.02 –0.02 –0.02 –0.24 –0.08 –0.01 –0.08 –0.14 –0.11 –0.01 –0.01



–0.1 –0.1 –20.7 –0.6 –0.7 –1.7 0.0 –0.6 –0.2 –0.1 –0.1 –3.4 –0.3 0.0 –0.4


0.0 0.0 –2.8 NA –0.3 –0.4 0.0 –0.3 –0.1 0.0 NA –0.3 –0.1 0.0 0.0

Exports ($m) e 0.0 0.0 –17.9 –0.6 –0.5 –1.3 0.0 –0.3 –0.1 –0.1 –0.1 –3.1 –0.2 0.0 –0.4


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Table B10 Changes in farmgate prices under full cost recovery compared with alternative scenarios, assuming fixed export prices

Commodity Scenario 1 Scenario 2 Scenario 3

($) a (%) b ($) a (%) b ($) a (%) b

Abalone $0.16/kilogram –0.2 c $0.04/kilogram –0.07 c $0.04/kilogram –0.06 c

Almonds –$10.13/tonne –0.20 –$2.20/tonne –0.04 –$1.07/tonne –0.02

Beef cattle for domestic slaughter –$11.02/head –1.67 –$0.91/head –0.15 –$1.73/head –0.28

Beef cattle for live export –$5.33/head –0.81 –$1.93/head –0.31 –$1.51/head –0.24

Grains –$0.50/tonne –0.25 –$0.11/tonne –0.05 –$0.05/tonne –0.06

Macadamias –$11.41/tonne –0.39 –$2.48/tonne –0.08 –$1.20/tonne –0.04

Milk 0.05c/litre –0.13 0.02c/litre –0.04 0.01c/litre –0.04

Oranges –$5.54/tonne –0.71 –$2.04/tonne –0.26 –$1.13/tonne –0.15

Prawns $0.04/kilogram –0.25 c $0.01/kilogram –0.07 c $0.01/kilogram –0.06 c

Rock lobster $0.19/kilogram –0.25 c $0.05/kilogram –0.07 c $0.04/kilogram –0.06 c

Sheep for domestic slaughter –$1.36/head –1.67 –$0.11/head –0.18 –$0.21/head –0.34

Sheep for live export –$0.62/head –0.76 –$0.23/head –0.36 –$0.18/head –0.28

Table grapes –$13.15/tonne –0.63 c –$4.86/tonne –0.23 c –$2.69/tonne –0.13 c

Tuna $0.03/kilogram –0.25 c $0.01/kilogram –0.07 c $0.01/kilogram –0.06 c

Wool 0.4c/kilogram –0.08 0.0c/kilogram –0.00 0.1c/kilogram –0.02

a Absolute changes in farmgate prices are calculated by dividing total burden on industry by number of units produced domestically. Burden on industry includes costs of export certification that are not passed on to importing countries and losses on domestic sales resulting from lower domestic prices. b Estimated percentage change in price differs across farm types according to average price received. Estimates presented in this table are based on highest percentage change across the six farm types considered in farm surveys. c These estimates use export prices as a proxy for farmgate or vessel prices. Where farmgate prices are lower than export prices, estimated percentage impacts on producer prices will be greater. Source: ABARES estimates

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Table B11 Change in value of broadacre and dairy farm receipts in 2013–14 under full cost recovery compared with alternative cost pass-back rates and alternative scenarios, assuming fixed export prices, $ per farm and per cent of farm receipts

Farm type

Value of receipts ($) a 30% cost

pass-back

60% cost

pass-back

100% cost

pass-back

$ a % $ a % $ a %

Scenario 1


Mixed livestock-crops 427 458 –663 –0.16 –1325 –0.31 –2209 –0.52

Sheep 263 893 –580 –0.22 –1161 –0.44 –1934 –0.73

Beef 274 709 –994 –0.36 –1987 –0.72 –3312 –1.21

Sheep-beef 331 453 –1043 –0.31 –2086 –0.63 –3477 –1.05

Dairy 622 934 –250 –0.04 –499 –0.08 –832 –0.13

Scenario 2



Sheep 263 893 –69 –0.03 –137 –0.05 –229 –0.09

Beef 274 709 –106 –0.04 –212 –0.08 –353 –0.13

Sheep-beef 331 453 –96 –0.03 –193 –0.06 –321 –0.10

Dairy 622 934 –71 –0.01 –143 –0.02 –238 –0.04

Scenario 3



Sheep 263 893 –114 –0.04 –228 –0.09 –380 –0.14

Beef 274 709 –177 –0.06 –354 –0.13 –590 –0.21

Sheep-beef 331 453 –165 –0.05 –329 –0.10 –549 –0.17

Dairy 622 934 –62 –0.01 –124 –0.02 –207 –0.03

a Figures in this column are average value of farm receipts 2008–09 to 2012–13, expressed in 2013–14 dollars. Change in economic value of farm production is measured relative to these figures. Note: Impacts of a decrease in demand for farm outputs, as a result of increases in export certification cost recovery charges, are not considered in these estimates. Source: ABARES estimates

C

ost reco

very arrangem

ents fo

r expo

rt certification

and

Au

stralian agricu

lture

AB

AR

ES

60

Table B12 Change in the value of average farm receipts for selected horticulture products under full cost recovery compared with alternative cost pass-back rates and alternative scenarios, assuming fixed export prices, $m a farm

30% cost pass-back

60% cost

pass-back

100% cost pass-back

Value of receipts ($) a $ % $ % $ %

Scenario 1

Almonds b 225 058 –1 353 –0.06 –2 705 –0.12 –4 509 –0.20

Macadamias c 281 696 –328 –0.12 –656 –0.23 –1 093 –0.39

Oranges d 290 527 –620 –0.21 –1 240 –0.43 –2 067 –0.71

Table grapes e 435 364 –820 –0.19 –1 640 –0.38 –2 734 –0.63

Scenario 2

Almonds b 2 225 058 –294 –0.01 –587 –0.03 –979 –0.04

Macadamias c 281 696 –71 –0.03 –142 –0.05 –237 –0.08

Oranges d 290 527 –229 –0.08 –458 –0.16 –763 –0.26

Table grapes e 435 364 –303 –0.07 –605 –0.14 –1009 –0.23

Scenario 3

Almonds b 2 225 058 –142 –0.01 –285 –0.01 –475 –0.02

Macadamias c 281 696 –35 –0.01 –69 –0.02 –115 –0.04

Oranges d 290 527 –127 –0.04 –253 –0.09 –422 –0.15

Table grapes e 435 364 –168 –0.04 –335 –0.08 –559 –0.13

a Value of farm receipts is based on average volume of each commodity grown per farm in 2012–13. b Each almond producing farm is assumed to grow 401.1 tonnes a year, with an average farmgate price of $5.55 a kilogram. c Each macadamia producing farm is assumed to grow 86.4 tonnes a year, with an average farmgate price of $3.26 a kilogram. d Each orange producing farm is assumed to grow 336.4 tonnes a year, with an average farmgate price of $0.86 a kilogram. e Includes both fresh and dried grapes. Each grape producing farm is assumed to grow 187.4 tonnes a year, with an average farmgate price of $2.32 a kilogram. Source: ABARES estimate


61

Appendix C: Questionnaire This is a reproduction of the ABARES questionnaire distributed to officials in the foreign

national authorities responsible for export certification in November 2014. Table 3 contains a

list of the country-commodity combinations ABARES surveyed.

1. Name and contact details of respondent

2. Country

3. Ministry or agency

4. Export commodities covered

5. Describe the services provided by the programmes that inspect and certify agricultural exports.

Examples of services include:

developing, implementing and monitoring policies and systems that ensure exports comply with export controls and meet importing countries’ requirements

providing inspection and auditing services

issuing permits, certificates and other documentation

6. Describe the service delivery model for providing these services:

Examples include service provided:

by agency or ministry officials

by agency or ministry authorised officers

through third party arrangements

7. What is the estimated annual cost of the programmes that inspect and certify agricultural exports?

For each commodity

8. Are the costs of providing these services recovered from exporters and other businesses?

9. What proportion of costs is recovered from exporters and other businesses (through fees or other mechanisms)?

For each commodity

10. How are costs recovered from exporters and other businesses?

Examples of fees include:

annual charges to register businesses

fees-for-service for inspections

export certificate fees

11. What categories of programme costs are recovered by these fees and levies?

Examples of costs include:

direct costs—for example, staffing costs, overtime, supplier expenses, IT equipment, office and travel costs

indirect costs—programme overheads.


62

Glossary ABARES Australian Bureau of Agricultural Resource Economics and Sciences

AMS Agricultural Marketing Service (United States)

APHIS Animal and Plant Health Inspection Service (United States)

BMEL Federal Ministry of Food and Agriculture (Germany)

CFIA Canadian Food Inspection Agency

CGC Canadian Grain Commission

CLP Chilean pesos

COKZ Controlling Authority for Milk and Milk Products (the Netherlands)

EV (Program) Export Verification Program (United States)

FBO food business operators (Ireland)

FDA Food and Drug Administration (United States)

FGIS Federal Grain Inspection Service (United States)

FSIS Food Safety Inspection Service (United States)

FTA Free Trade Agreement

GIPSA Grain Inspection Packers and Stockyards Administration (the United States)

GVP gross value of production

JKI Julius Kühn Institute (Federal Research Centre for Cultivated Plants in Germany)

Market price Price purchasers of a commodity pay

MEA Ministry of Economic Affairs (Netherlands)

MPI Ministry for Primary Industries (New Zealand)

NVWA Netherlands Food and Consumer Product Safety Authority

Price elasticity A measure of relationship between change in quantity demanded or supplied of a particular good or service and a change in its price

Producer price Price producers receive for a commodity, account for any subsidies or taxes received or paid

RVO regional veterinary officers (Poland)

SAG Agricultural and Livestock Service (Chile)

USDA United States Department of Agriculture

VS Veterinary Services (United States)


63

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