Executive Directors Report - 2004

In 2004, ARCBA concluded 2 ½ years of research in identifying the strategic positioning and opportunities for ARCBA members in the years ahead. This was covered by a Workshop in Brisbane in August, 2004 – this being the third and final workshop on this important topic.

 

1. Strategic Objectives

It is worthwhile reiterating the strategic objectives that came out of the review.

VISION (of Industry):

By 2013 the cattle genetics produced by Australia’s registered cattle industry will be:

MISSION (of ARCBA):

To provide leadership and support to Australia's cattle seedstock industry to produce and market cattle genetics which improve their viability as seedstock producers and the profitability of commercial cattle production.

GOALS (of industry):

  1. Improve the quality and economic performance of Australian cattle genetics.
  2. Maximise the use of registered pedigree and superior performance-analysed Australian cattle seedstock.
  3. To maintain and enhance the disease free status of our beef and dairy herds.
  4. To develop export marketing strategies.


2. Financial Benchmarking

ARCBA commissioned CCH Benchmarking in 2004 to undertake a benchmarking survey of the financial results of ARCBA members in 2003. This was the fourth such survey to be conducted. The previous surveys were conducted in 1992, 1994 and 1996.

Thirty (30) breeds participated in the 2004 analysis:

Table 1 gives a summary of the major results since 1992. This shows that the Operating surplus as a percentage of turnover has declined gradually from 4% in 1992 to 1.86% in 2003. Admittedly the 2003 result was affected by the drought. However, this return is at a critically low level. In 2003, the 30 surveyed societies reported a total income of $11.4M for an operating surplus of just $210,000.

 

Table 1: Summary of Major Results

  1992 1994 1996 2003
Operating Surplus % 4 3.95 3 1.86
Cost composition of income %        
Wages 31.1 27.7 28.2 34.2
Data Processing – Breed Register 5.6 5.5 5.8 5.4
- Performance & Accounting 0 2.5 2.4 5.9
Promotion 10.1 8.05 9.1 7.4
Transfer of provisions 2.6 3.9 4.3 3.5
Other Costs
46.7 48.0 47.2 41.8
         
Income/Stud Breeder $ 533 574 700 1129
Members, Regos, Transfers, AI as % of Income 71.1 66.71 70.2 59.6
         
Expenditure as % of Total        
- Record Processing 15.2 16.3 14.8 18.6
- Breed Promotion 38.6 41.0 36.2 36.3
- Technical Services 12.1 11.1 13.1 8.9
- Admin/unallocated 34.1 31.6 35.9 36.2
Equity % 89.5 90.6 89.3 83.8
         

From examining the Financial Benchmarking reports since 1992 and the 2004 Report in particular, the Executive Director has come to the following conclusions:

  1. In 2003, the average operating margin of breed societies was at a perilously low level of 1.8%. Unless this can be improved substantially the viability of some breed societies will be at risk.


  2. There is no unique formula or target size for running a profitable breed society.

  3. Because the decline in herdbook registrations appears to be long-term, it is important that breed societies take new business initiatives in which they have competence but are outside the traditional sources of income from membership fees, registrations, transfers and AI fees. A number of societies appear to have been successful in managing this diversification.


  4. Labour is the largest single cost of breed societies and it is escalating at a compound rate of 5% pa in the community at large. This escalation of labour costs is looming as a threat to the viability of some breed societies. There could be benefit from further exploring strategic alliances between breed societies with common goals in relation to particular activities eg technical services.


  5. Many breeds appear to be targeting an increase in membership of commercial breeders. This is a positive step and in line with ARCBA's recommendations.

3. Key Issues coming out of the Strategic Planning

In August 2004, the Executive Director presented the key issues coming out of the strategic planning. In summary, these are:

  1. The downward trend in registrations and in profitability of breed societies indicates that there is a need for a radical change in the approach to breed society business.
  2. Breed societies that wish to expand MUST develop services to the commercial cattle industry .which is at least 30 times the size of the seedstock sector.


  3. The trend towards use of crossbreds and composites for commercial beef production appears to be accelerating. Breed societies should examine the development of recording services to crossbreeds and composites to reverse erosion of their throughput.


  4. Breed societies need to be proactive in the export of quality-assured genetics and provide technical support to importers.


  5. Breed societies have an opportunity to capture new business through use of advanced Internet systems.


  6. The obsession of many breed societies about running separate offices needs revisiting. There is a case for developing strategic relationships between groups with common goals.


  7. Huge investments are being made by both the beef and dairy CRCs into bovine genomics. Breed societies should work closely with these CRCs to obtain first-to-market advantages.


  8. Cattle breeders are essentially in the food industry and should be looking to develop joint ventures to promote and market beef.


  9. International genetic evaluations are a way to offer more genetic power to the commercial industry and therefore boost genetic sales.

Past history shows clearly that the traditional model of beef society organisations is unsustainable. The future is bright for those societies with the courage and imagination to follow a new strategic direction.

4. Projects delivered

4.1 Genetic Export Secretariat

The Executive Director wrote an analysis of Australia's failure to meet its potential as a bovine genetic exporter and delivered this widely to industry. He called for the establishment of a Genetic Export Secretariat to co-ordinate Australia's bovine genetic exports. ARCBA's 30th Annual General Meeting recommended that the International Livestock Resources and Information Centre (ILRIC) become the secretariat. ARCBA persuaded the ILRIC Board to take up this role and provide initial funding from ILRIC's operational budget. ARCBA also made representations to the Cattle Council of Australia in November, 2004 which resulted in their support of ILRIC performing the Export Secretariat role.

ILRIC has responded very positively. It has undertaken market research on the bovine genetic requirements of 214 countries and ranked them in terms of being potential genetic importers. ILRIC has created an extensive mailing list of international contracts, it is developing a website, creative packages for financing exports and its CEO has made extensive overseas representations.

A relatively small financial input from ARCBA has caused a very substantial investment in genetic exports by a partner organisation.

 

4.2 Technical Support program for beef breeding

One of the groups at the ARCBA Workshop in August, 2004 acknowledged the success of the Tropical Beef Technology Services project and requested that ARCBA take initiatives to see if a similar project could be established in Southern Australia. Within one month, ARCBA had put together an imaginative proposal involving 15 breed societies, ABRI, MLA and the BIA. This included a radical plan costing over $1M to revitalise breed breeding extension and technical support in Southern Australia through to 2010. Breed societies will only be contributing 36% towards cost of this program but their members will be the major beneficiaries.

A three year extension of TBTS has also been achieved. This means that the Australian beef industry now has $1.4M of funding towards what will emerge as a national extension program in the latest beef breeding technology.

 

4.3 Johnes Disease

The provision of seedstock genetics that is free of disease has always been a major priority of ARCBA. The Association has been a strong advocate for payment of compensation to cattle breeders who have cattle testing positive to Johnes disease. Due largely to Alex McDonald's persistent representations to the Cattle Council of Australia (CCA), a $3.9M compensation fund has been made available with appropriate recognition that registered cattle must be compensated at a higher level than commercial cattle. This single achievement represents 100 years of membership fees for all ARCBA members.

 

5. R.W. Vincent Award

ARCBA has established the R.W. Vincent Award to recognise outstanding contributions to the cattle industry over a sustained period of time. It is the cattle industry's highest award given infrequently. In 2004, the Award was made to Mr Bob Freer. Bob's contribution to beef cattle extension have been legendary.

They include 23 years with NSW Agriculture, research and development activities with the Hereford breed, Chairmanship of MLA's National Beef Extension Program and he has been Chairman of the Global Genetic Evaluation Committee of the World Hereford Council.

 

6. Registrations

 

Beef cattle registrations reached their lowest recorded level of 126,785 in 2003. This was largely due to drought. However they recovered to 128,716 in 2004. This was encouraging considering that the drought worsened in 2004.

 

 7. Membership

During the year the Lincoln Red and Senepol breeds joined ARCBA. The Association represents 37 breeds and 11,224 registered cattle breeders (up by 470 on 2003/04). In addition there are five associate members within Australia and the peak industry councils of the registered cattle industries in the USA and the Philippines are associate members of ARCBA.

 

 8. Education

ARCBA presented the results of its Financial Benchmarking and Strategic Planning research at an industry workshop in August, 2004. A total of sixty (60) delegates attended across a wide range of breeds (including a representative from New Zealand). Delegates were provided with detailed information to be shared with their respective Councils and members.

 

 9. 30th Anniversary

The AGM in 2004 marked the 30th Anniversary of ARCBA as a peak Council serving the Australian registered cattle industry. ARCBA has released a publication highlighting its achievements over this period of time.

 

 10. Fiscals

The table below shows the comparison of the budget for 2004 with the actual financial performance.

Item 2004 Budget 2004 Actual
     
Income    
Membership Subscriptions* 38,000 38,572
Interest 2,800 2,852
Bencmarking Report 4,100 4,373
Workshop Fees 4,800 5,695
Recoup Travel to Workshop 3,000 2,403
Sundry Income - 50
Total $52,700 $53,945
     
Expenses    
Cattle Council 2,250 1,625
Secretariat 26,600 25,836
Benchmarking Report 10,000 10,000
Consultancy 5,000 1,331
Audit 900 885
Travel including to Workshop 6,000 5,866
Other incl Workshop costs, Presidents honorarium, insurance etc. 7,000 7,996
Total $57,750 $53, 539
Profit/Loss() ($5,050) 406
     
Starting Reserves $77, 766 $77, 766
Estimate Closing Reserves $72, 716 $78, 172


Because of the heavy commitment which ARCBA needed to make to strategic planning and financial benchmarking, a loss of $5050 was predicted for the 2004 calendar year. In the event, ARCBA was able to return a small surplus of $406 for the year through prudent management.

Accumulated funds stood at $78,172 at the end of 2004. This is about 1.5 times the annual expenditure level. While ARCBA has very limited resources annually for the task it has to perform for the registered cattle industry, these funds have been managed carefully to ensure that the Association is in a secure financial position. The projects delivered in 2004 will benefit the registered cattle industry by some millions of dollars. Clearly the benefit:cost of ARCBA's activities is very high.

PA Rickards OAM
Executive Director

August 10, 2005