Australasian Agribusiness Review - Vol. 17 - 2009

ISSN 1442-6951

Vol 17 - Paper 1 (pp.1-21 )

A Preliminary Economic Analysis of Live Cattle Imports in Korea

Zhang-Yue Zhou and Murray Prideaux

Centre for AusAsia Business Studies, School of Business, James Cook University, Townsville QLD 4811 Australia

Vol 17 - Paper 2 (pp.22-46 )

Uncover the Causes of China's Low Utilisation of Grain TRQ

Zhang-Yue Zhou and Xia Kang

Zhang-Yue Zhou, Centre for AusAsia Business Studies, School of Business, James Cook University, Townsville QLD 4811, Australia

Xia Kang, Academy of State Admin. of Grain, Beijing, China, 100037

Since China’s accession to the WTO in late 2001, China’s utilisation of grain TRQs (tariff-rate quotas) has been very low, being only about 12 per cent on average during 2002-08. This is in sharp contrast to anticipations of many analysts who believed that China’s grain imports would grow significantly after its WTO accession. This paper examines China’s management of grain TRQs and analyses why the grain TRQ utilisation is low. Our study shows that the primary cause for the low utilisation of the TRQ has been due to comfortable domestic supply situations, thanks to policies promoting domestic supply. Whether China’s grain TRQ usage will increase and how its grain trade policy will evolve in the future will continue to be affected by domestic grain supply and demand, and also by the outcomes of bilateral and multilateral free trade

Vol 17- Paper 3 (pp.47-77)

The Influence of weight and Fat on Lamb Prices, revisited

Charlie Hufton, Garry Griffith, John Mullen and Terence Farrell

Previous research has found inconsistencies in the valuation of weight and fat characteristics of lamb carcasses between the saleyard and wholesale markets. In this paper, recent New South Wales saleyard, over-the-hook and wholesale price data on different classes of lamb are analysed using hedonic methods to determine the relative influence of weight and fat on prices received. In relation to fat score, lambs that are assessed as fat score 2 are discounted relative to lambs assessed as fat score 3, by around 26 c/kg in the live lamb market and by around 8 c/kg in the carcass market. There are no significant premiums or discounts for lambs assessed as fat score 4 in the markets where that could be tested. Premiums and discounts for fat scores are now consistent across the two market levels, and this implies some improvement in the efficiency of price discovery in the lamb market since Mullen’s study a decade ago.

Vol 17 - Paper 4 (pp.78- 93)

E-business Diffusion among Australian Horticulture Firms 

Alemayehu Molla and Konrad PeszynskiSchool of Business Information Technology, RMIT University

Vol 17 - Paper 5 (pp. 94 - 115)

The Aggregate Economic Benefits to 2007/08 from the Adoption of Meat Standards Australia

Garry Griffith, Heidi Rodgers, John Thompson and Cameron Dart

Meat and Livestock Australia funded a major R&D program in the mid 1990s to investigate the relationships between observable beef characteristics, cooking methods and consumer appreciation of beef palatability.  Out of this R&D grew the Meat Standards Australia (MSA) voluntary meat grading system which was aimed primarily at providing an accurate prediction of beef eating quality for the domestic market.  Over the period 2004/05 to 2007/08, beef consumers across Australia were prepared to pay around $0.32/kg extra for MSA branded beef on a carcass weight equivalent basis to guarantee tenderness. However premiums for live cattle that eventually grade MSA are relatively new, and vary considerably by State.

The cumulative retail-level economic benefit of the MSA system to 2007/08 is estimated to be around $300 million, with a current annual benefit of around $57 million. Given total costs of the R&D and the subsequent development of the MSA system of about $74 million to date, the ex post R&D benefit-cost ratio therefore is in the order of 4:1, to date. Accounting for the additional implementation costs in processing plants in particular results in an industry benefit-cost ratio of at least 2:1, to date.

Vol 17 - Paper 6 (pp.116-140)

An analysis of cropping systems of the Wimmera and Mallee

Tim McClelland and Bill Malcolm

Department of Agriculture and Food Systems, University of Melbourne

Crop farming systems in the Wimmera and Mallee region of Victoria are diverse. In this research the performances of four representative farming systems, designated ‘Reduced Till’, ‘Hungry Sheep’, ‘Fuel Burners’ and ‘No Till’, were examined and evaluated using economic and technical criteria. Activity gross margins were produced and a number of sustainability measures recorded and examined over number of trial ‘paddocks’ over a period of six years from 2000 to 2005. The results of the study indicate that three of the systems - Reduced Till, Hungry Sheep and Fuel Burners - over a 6 year period of low average annual rainfall, made similar contributions to profit when looked at across all paddocks and over time. The No Till system trailed the field. Reduced Till, Hungry Sheep and Fuel Burners had comparable economic performances. Reduced Till had a mean economic performance similar to Fuel Burner and Hungry Sheep, though his system also had a greater ’down-side’ risk, with paddocks that lost the largest amounts of money in some years. Conversely, paddocks under the Fuel Burner and Hungry Sheep systems produced the lowest losses in the poor years and, significantly, achieved the highest gross margins by a considerable margin in the good years. Fuel Burner was the least volatile system, closely followed by Hungry Sheep. Hungry Sheep and Fuel Burners had the lowest ‘poor’ economic performances and the highest ‘good’ economic performances.

Vol 17 - Paper 7 (pp.141-152)

Economics of soil management in pasture systems for sheep enterprises in the Central West Catchment of NSW

Terence C. Farrell

In this research Grassgro® was used to compare the optimum sheep stocking rates for gross margins against the optimum stocking rates for best practice soil management for five regions in the Central West of NSW. Five best practice management scenarios were used to evaluate the impacts of changes to pasture and soil characteristics.  Results show that maintaining legumes in pastures up to the 30 per cent level would have had the greatest impact on the enterprise gross margins relative to other management changes.  The next largest benefit would have been to increase soil fertility by 10 per cent as it would increase the gross margin by  $17/ha at Trangie and $87/ha at Mudgee. The optimal stocking rates according to the gross margins were 12 hd/ha for Bathurst, 8 hd/ha for Mudgee, 5 hd/ha for Dubbo and Peak Hill, and 4 hd/ha for Trangie.  Minimum total herbage mass estimates indicate that there would have been insufficient ground cover for Peak Hill and Trangie at these stocking rates to minimise soil erosion.  Stocking rates in these two regions would therefore need to decrease to 4 and 3 hd/ha respectively which is a reduction of 1 hd/ha in each region.

Vol 17 - Paper 8 (pp.153-177)

Re-organising farm businesses to improve environmental outcomes - the case of native vegetation on hill country across south-eastern Australia

Jim Crosthwaite, Jim Moll, Josh Dorrough and Bill Malcolm

Profitable grazing systems used widely since European settlement has been associated with a decline in the extent and quality of native vegetation. In this paper it is shown that, for one farming system, making profit and preserving biodiversity are compatible objectives. Dynamic solutions are available that improve the quality of native vegetation while maintaining or increasing profitability, despite the effects of the continuing cost-price squeeze on grazing businesses. The method used is based on economic theory of the farm firm. The whole farm approach is apt. Risk and uncertainty are rife; goals are multi-faceted, including growth, survival, entrepreneurship and profit; a range of optimal plans exist; dynamics rule and static equilibrium analyses are insufficient; and the case study approach is valid. Results are reported for 17 sheep-beef farms in Victorian hill country.

Vol 17 - Paper 9 (pp.178-190)

The cost of non-compliance to beef market specifications

Andrew Slack-Smith, Garry Griffith and John Thompson

Strategic sourcing of cattle that are more likely to meet market specification is a critical challenge for buyers purchasing animals for feedlot finishing. This analysis used a subset of Australian beef industry feedlot data from two long-fed feedlots to assess both the costs and causes of carcasses out-of-specification. The economic value associated with products that are out-of-specification can be illustrated by the Taguchi Quadratic Loss Function, carcass specifications, and industry grid prices. Results from this study demonstrate that there is a large amount of variation in cattle in Australian beef production systems that has led to a reduction in opportunities for precision management and value-based marketing.

Vol 17 - Paper 10 (pp191-200)

Identification of substitute groups for retail beef demand and supply equations

Terence C. Farrell

In modelling retail meat demand and supply equations it is difficult to identify close substitutes or competing products.  However, close substitutes can be identified through a comparison of meat attributes, especially cooking method and sensory attributes. The Meat Standards Australia (MSA) grading system can be used to identify primals (whole muscles) with similar attributes.  The MSA system is based on carcase attributes, cooking methods and sensory properties and it allocates 3, 4 or 5 stars to beef primals.  Prices for different star grades are affected by the quantity of meat allocated into each grade and this is determined by cooking method, which is dependent upon season.  Estimating demand and supply by MSA grades and cooking methods requires fewer variables and therefore reduces multicollinearity and increases model efficiency.

Vol 17 - Paper 11 (pp201-216)

Economic Effects of Alternate Growth Path, Time of Calving and Breed Type Combinations across Southern Australian Beef Cattle Environments: Time of Calving at the Western Australian Experimental Site

B.L. Davies, T.J. Della Bosca and G.R. Griffith

In a Beef CRC project undertaken over the period 2001-2006, different combinations of beef cattle genetics, growth/nutritional pathways and calving seasons were examined across a number of sites in Southern Australia for their ability to achieve targeted market specifications. Comparisons were made between Angus sires selected for high retail beef yield (RBY), for high intramuscular fat (IMF), and for both high RBY and high IMF. There are major implications for local agribusiness firms from decisions made in this production environment due to the reliance on supplementary feeding and feedlot finishing to meet domestic market specifications.

Vol 17 - Paper 12 (pp217-234)

Another Look at Market Power in the Australian Fresh Meat Industries

Kit C. Chung and Garry Griffith

The issue of market power in the Australian food marketing chain is of continuing and growing concern. Contributing factors include sharply rising retail food prices in recent years together with relatively stable farm prices, and thus increasing marketing margins; high and increasing concentration in the retail food sector, where the two largest supermarket chains account for a large percentage of total national grocery sales; and the legacy of past deregulation of agricultural marketing institutions and trade liberalisation. In this paper an updated quantitative analysis of the competitive behaviour of the marketing chains for beef, lamb, pork and chicken, from farm gate to retail, is reported. A New Empirical Industrial Organisation model is used. Both linear and nonlinear, and single equation and SUR, regression analyses are estimated. As with previous studies, no evidence is found that the marketing chains for the Australian fresh meat industries are non-competitive.

Vol 17 - Paper 13 (pp235-258)

Estimating the economic impact of a major beef industry research and development investment: the renewal of the Cooperative Research Centre for Beef Genetic Technologies

G.R. Griffith