Australia’s largest meat-processing plant estimates additional costs of the carbon tax at $3.3 million a year. JBS, the owner of Dinmore, a facility near Ipswich, Queensland, says half of the costs will be directly due to their emissions, with a further $1.5 million due to increased utility prices.
It’s just one facility among many that says they will suffer under the introduction of the carbon tax in July this year.
Although the biggest farms and processing facilities will be most heavily affected, the average farmer could be slugged around $1500 per year, according to consultancy firm IDC Solutions.
The carbon tax applies to the top 500 polluters throughout Australia, but the beef industry says it is over-represented in the target group. Australian beef producers contribute over $7 billion to the economy and employ some 120,000 people, according to industry figures.
National Farmers Federation president Jock Laurie claims the tax could add $10,000 a year to farmers’ costs. As the agriculture industry competes on an international stage, farmers believe other countries that are not taxing their farmers such as Brazil, which holds the world’s largest commercial beef industry, will be given an unfair advantage.
The Cattle Council of Australia is also against the introduction of the carbon tax. They say it will drive up costs used for production, including electricity, fuel and transport, harming farmers’ abilities to compete on a world stage. Deputy director Jed Matz told Crikey the impacts would be significant.
“Costs for grass-fed cattle farmers will rise by as much as 2.3% by 2025 under the predicted carbon price,” Matz said. “Beef production in Western Australia, Northern Territory and Queensland may see even higher increases in costs as many of them will be subject to full carbon price increases in their use of aviation fuel and aerial mustering services.”
The cost of electricity to beef producers is anywhere from $4200 for those in Victoria to $9200 for graziers in Queensland, according to the Cattle Council’s figures. The average Australian beef producer boasts an income of $42,000 a year.
As the biggest meat production facility in Australia, Dinmore will be heavily impacted by the carbon tax. Dinmore’s carbon dioxide emissions are 80,000 tonnes a year, which with the $23/tonne price will cost $1.5 million a year. The plant’s emissions come from coal and gas fired boilers as well as methane.
Dinmore has the capacity to process 3400 head per day and employs around 2000 staff. The carbon tax will add approximately $5-6 to every beast processed, the company claims, and to remain in operation other costs will have to be reduced.
Other processing plants, such as the Teys, located in Rockhampton, has an emissions profile based around its consumption of black coal and significant electricity purchases. Teys will also pay a carbon price on their electricity and fuel consumption. Based on their 2009-2010 emissions, they expect to pay up to $1.7 million dollars a year. By 2020, with its current emissions, Teys could be expected to pay up to $3 million a year.
But there is some good news. “As part of the Clean Energy Futures Package, agriculture, forestry and fishery industries will not be required to pay a carbon price on their fuel use and there is a two-year exemption for heavy vehicle on-road transport,” Matz explains.
“It is difficult to say what the government may do in years to come but if fuel was included it would increase on-farm costs significantly and severely constrain our competiveness on international markets.”
In addition, research and development for new technologies to make more efficient processing plants are underway, but will take time to implement. “Cattle producers are price takers so any additional costs imposed on the supply chain will result in reduced prices for producers,” said Matz.
“Increased costs on-farm due to a carbon pricing mechanism reduces profitability even further. At present, these increased costs and reduced prices can only be managed through productivity gains on farm, which is difficult and takes time. The industry is investing in research and development to advance methodologies that may assist producers sell carbon offsets into the Carbon Farming Initiative. This research and development is progressing but will take time and may not be appropriate for all producer.”
He said the exact impact on beef prices was difficult to predict: “There are many factors that affect the price of beef at the supermarket so it is difficult to predict what may occur at that level. We can predict that costs to produce beef will increase and the price producers received for that beef will diminish so the profitability of beef production will decline relatively to if a carbon pricing mechanism was not introduced at all.”