An economy without feedlots – what’s the impact?
If the Australian feedlot industry were to be shut down or regulated out of existence how would the Australian, state and regional economies be impacted? This is a big question that Meat & Livestock Australia (MLA) commissioned Deloitte Access Economics to investigate to update the Regional Feedlot Investment Study.
“People who are not familiar with the industry or outside agriculture may not realise the size of the feedlot industry and the economic contribution it has.” These were some of the opening words of Cedric Hodges, Director at Deloitte Access Economics, when presenting the findings of their investigation to an auditorium full of industry stakeholders.
This is the fifth time the Regional Feedlot Investment Study has been conducted with the previous update being released in 2018.
All sectors have cycles, peaks and troughs. The feedlot sector has the extra ability (over other sectors) to help smooth cycles in the broader value chain, while also having cycles of its own.
“The feedlot industry accounts for 25% of Australia’s total beef exports. That’s a fact that people might know or appreciate,” Cedric said.
“It’s important to remind people not only how important feedlots are for the Australian economy but also to economies on a state and regional level.”
Part of the cycle that the sector goes through is in terms of trade, Cedric explained.
“Terms of trade is basically the price of what you’re selling relative to the price you had to produce it.”
“In the case of feedlots, this can swing, a lot. The price of feed contributes to this heavily, and can vary considerably between different climatic conditions or other conditions the sector may be facing,” Cedric said.
During the time that this particular study was conducted, there was a peak seen where feed prices coincided with troughs seen in the price received for cattle.
What was the contribution
The value add of both indirect and direct of the feedlot sector in financial year 23–24 to the Australian economy was $4.6 billion.
“This is a huge contribution to the Australian economy when you consider it is just for the one financial year.
“It was also shown that feedlots supported 24,000 full time jobs,” Cedric said.
“That is a bigger number than some of the towns that some feedlots are operating out of.”
It was shown that Queensland and NSW hold the dominant production when it comes to feedlots within Australia.
“While they are the dominant states, they do not account for all of the production in Australia, just the majority.”
When considering the other states, SA has doubled in value since 2017, and the production of WA is also significant.
A closer look at the Western Downs
To evaluate the impact on a more regional basis, the study explored the Western Downs specifically.
“A 30,000 head feedlot has a large contribution of $25 million in value add. For a local government area such as the Western Downs, that is significant.”
When also evaluating employment for those regions, feedlots continue to contribute significantly.
Considering the ‘what-ifs’
Deloitte looked at some ‘what-ifs’, one being what the Australian economy would look like if the sector didn’t exist.
“The removal of the feedlot sector would result in $59 billion less in economic activity, and 0.4% reduction in GDP. Now that is a lot more than $4.6 billion,” Cedric said.
You might be asking yourself, “How can it be $59 billion less if it is generating $4.6 billion?”, to which Cedric explained further.
“The reason is that the removal of the feedlot industry spills over. It creates fewer conditions for investment and fewer opportunities for employment in other sectors.
“The sector is unique, as we mentioned earlier. We can see this if the sector is removed, not only is there the impact on the sector itself, but because of its key role in the value chain, within meat processing and the grazing value chain, those sectors also feel the impact,” Cedric said.
But, what if the Western Downs, for example, constructed a brand new 15,000 head feedlot? What would the economic impact on that region be?
“If the industry is doing well, naturally, expansion is the next step. If this example feedlot were to be developed, it would create 283 full time equivalent jobs across the economy (not just the feedlot itself) and generate over $60 million in additional value add for the region.”
