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Abstract
Queensland is the largest meat producing state in Australia, has the largest processing capacity and is
the major meat exporting state. The processing sector is under substantial pressure for change, with
current utilisation rates of 70% or below being sub-economic. There are a number of possible reasons
for the decline in the profitability of this sector, including the loss of supplies through the live cattle
trade, increased physical capacity and throughput, changed industrial relations and a move to
enterprise bargaining agreements, and the impost and structure of government regulation.
Of particular interest is the extent to which low utilisation rates, in spite of the current high slaughter,
are the result of competitive forces within the processing industry. The development of excess
capacity is predictable behaviour in a declining industry where survivor firms position themselves for
increased market share. As well, intense competition on price may also be a facet of competitive
behaviour designed to hasten the exit of rival firms. However, given the magnitude of redundancy
costs it is rational for firms to remain operating while just breaking even, or as long as creditors allow
when they are making losses. Paradoxically, fewer, but more efficient producers would reduce
processing costs and may increase prices paid for livestock.
In October 1998, the Queensland Government committed $20 million to the restructuring of the
processing sector to achieve viability and sustainability goals. Determining the effective focus of
restructuring will require a clear understanding of competitive forces within the processing sector, and
the extent to which over capacity is exogenous to the sector.