After experiencing three years of favourable returns, pig producers in Australia (and
major competing countries) faced difficult economic circumstances between mid-
2002 and the end of 2003. World prices fell and, in some countries (including
Australia), feed costs were high. These trends were exacerbated in Australia by an
appreciating dollar relative to the currencies of major competing countries.
Competition on the domestic market from imported pigmeat has been strong and
imports have been steadily rising since quarantine liberalisation in the mid-1990s.
Exports also grew strongly after 1997-98, but declined in 2003-04.
Pig prices have been recovering in recent months, and feed prices have returned to
the range experienced before the 2002-03 drought. Nevertheless, the industry is
concerned about the economic sustainability of many domestic producers and
processors and their longer run competitiveness.
The Productivity Commission has been asked to examine the current situation of,
and outlook for, the Australian pigmeat industry. It has also been asked to consider
whether any government and/or industry measures (including regional measures)
are necessary to enhance the competitiveness of the industry. In undertaking the
inquiry, the Commission is required to take into account:
• the structure and regional distribution of the industry
• key factors influencing the profitability of the industry, and the extent to which
these factors are short or long term influences
• trends and factors influencing demand and supply, including imports and exports
• the competitiveness of the industry, including competitiveness relative to
international competitors, and efforts by the domestic industry to enhance
competitiveness
• the impact and effectiveness of existing and recent government and industry
programs.
The focus of this inquiry differs from the inquiry undertaken by the Commission in
1998 where possible safeguard actions in regard to pigmeat imports into Australia
were examined (PC 1998). In that inquiry, the Commission responded to a request
from the Australian Government to assess whether safeguard action was warranted
against pigmeat imports in accordance with World Trade Organization (WTO)
rules. The terms of reference for this inquiry, however, do not request the
Commission to determine whether safeguard (or provisional safeguard) measures
are warranted.