Rural and Regional Manufacturers Seeking Energy Policy Certainty
(14 May 2019)
Accessibility, reliability and affordability of energy are pressing concerns for agricultural manufacturers as the clock winds down to the Federal Election, according to the industry alliance that brings together manufacturers from the food, fuel and fibre sectors.
The Australian Agricultural Manufacturers Alliance (AAMA) was formed last year to allow peak bodies across the red meat and pork, rendering, sugar, poultry, dairy products, stock feed, cotton ginning and oilseeds sectors to work collaboratively on issues that affect them all. Energy was identified as the key priority for all members.
Patrick Hutchinson, who is CEO of the Australian Meat Industry Council (AMIC) and member of AAMA says that for too long agricultural processing and manufacturing businesses have been left in limbo by both sides of politics.
“The performance of our national politicians on energy over the past 12 years has been abysmal. None of the major parties is blameless,” he says.
“High energy prices, monopolistic practices and supply unreliability discourage businesses investing more in their operations. Reduction in cash flow, capital expenditure, staff hours and ultimately jobs are the by-products of the rise in energy costs.”
The challenges are reflected across AAMA’s combined membership, with frustration around energy policy also being experienced in the sugar sector, which is largely self-sufficient in terms of electricity production.
David Pietsch, CEO of the Australian Sugar Milling Council (ASMC), says sugar mills generate electricity and steam to power all factory operations by burning bagasse (a fibrous sugarcane by-product). Across the sugar industry, more than 50% of the electricity produced is exported to the National Electricity Market, providing renewable electricity to over 170,000 households.
“Investment confidence, however, has been stymied due to the lack of a bi-partisan national energy policy, even though bagasse is readily available and our members have significant expansion potential,” Mr Pietsch says.
Nick Goddard, from the Australian Oilseeds Federation, says the Australian oilseeds industry relies on stable, affordable and predictable energy costs in order to ensure competitiveness in the domestic and global market.
“Australia has world class oilseed processing facilities, yet the industry is subjected to competing locally and globally with vegetable oils from near neighbours where energy costs provide them with a competitive advantage. The ability to competitively process on-shore is vital for Australia to fully realise its potential internationally as a source of healthy, ‘clean and green’ vegetable oil,” he says.
He adds that providing surety on energy costs also drives confidence in future investment in processing capability and efficiencies, further improving competitiveness. “Confidence in future investment is vital to support and planning for regional areas,” he says.
In a similar vein, Dr Peter Stahle from the Australian Dairy Products Federation says energy policy is a serious concern to members.
“The current cost of energy (electricity and gas) for dairy processors is approximately $170 million per annum. In 2017-18 Dairy Australia estimated this cost to have risen between 50-70 per cent, an additional $100 million.
“The dairy industry has limited capacity to respond to rising energy costs. Milk flow is constant, it cannot be turned off and on at the flick of a switch. Some companies with multiple processing sites may have the ability to divert milk to alternative sites to help alleviate localised demand on a network, or they can shift demand to different times of the day to leverage off-peak rates or install their own energy generation system to become more self-sufficient. [But] achieving any substantial reduction in energy cost for the dairy industry requires the energy sector to lower its prices.”
AMIC’s Patrick Hutchinson says agricultural manufacturers directly support 100,000 jobs across rural and regional Australia. A further 200,000 indirect jobs flow from the goods and services required across the supply chain.
“Our members are working with different raw materials, but a lot of our challenges are the same, and energy is absolutely at the head of the list. We urge all sides of politics to support consistent and stable energy policies,” Mr Hutchinson says.
The Australian Agricultural Manufacturers Alliance (AAMA) was formed in 2018. The alliance was created to represent the shared interests of agri-sector manufacturers and contribute to recognition, growth and sustainability of the sector.
Members include the Australian Meat Industry Council, the Australian Renderers Association, the Australian Sugar Milling Council, the Australian Poultry Industries Association, the Australian Dairy Products Federation, the Stock Feed Manufacturers’ Council, the Australian Cotton Ginners Group and the Australian Oilseeds Federation.
AAMA members represent in excess of $40bn value to the Australian economy, and over 100,000 jobs.
For more information see www.agmanufacturing.com.au
The Australian Meat Industry Council today launched its election policy asks. On energy, it is calling for:
Effective energy policy for regional manufacturers that delivers reliability, sustainability and affordability. That requires:
Affordability: Recognition that the competitive retail market for domestic and metro business consumers is not there for regional operators, where there is limited and sometimes no choice in supplier.
Reliability: Commitment to ensuring regional Australia has the energy infrastructure it needs.
Sustainability: recognition of the work industry is doing to try to achieve carbon neutrality – understanding also that while this is good for the environment, investment around renewables is also critical in addressing high energy prices.
See the full election policy document at www.amic.org.au
The newly-formed Australian Agricultural Manufacturers’ Alliance (AAMA), which held its inaugural meeting recently, is taking on one of the industry’s most pressing challenges: energy.
The alliance was created to represent the shared interests of agri manufacturers and contribute to recognition, growth and sustainability of the sector. The first meeting was convened by the Australian Meat Industry Council (AMIC) and included representatives of the Australian Renderers’ Association Inc., the Australian Sugar Milling Council, the Australian Poultry Industries Association, the Australian Dairy Products Federation, the Stock Feed Manufacturers' Council of Australia, the Australian Cotton Ginners Group and the Australian Oilseeds Federation.
AMIC CEO Patrick Hutchinson says the alliance will help members work together on shared issues and will also allow them to share ideas, data and learnings.
“While agri manufacturers have been represented within their own subsectors, until now there has been no overarching agri manufacturing group to advance the interests of the broader sector. Agricultural manufacturers directly support 100,000 jobs in Australia, and if you also consider the multiplier effect across the supply chain, it’s more like 300,000 jobs.
“Our sector is a huge contributor to the national economy and our members are an essential part of the supply chain. Manufacturing plays a pivotal role as the conduit between raw material and market.”
AAMA has created a list of five key priorities, with energy to be the first focus. Mr Hutchinson introduced the new alliance and discussed its priorities at a meeting last week with Federal Environment and Energy Minister Josh Frydenberg.
“Our members are working with different raw materials, but a lot of our challenges are the same, and energy is absolutely at the head of the list. We look forward to working with industry and government to help find solutions around security in costs, policy certainty, and helping businesses make the most of new generation power sources,” Mr Hutchinson says.
Other prioritised challenges include road infrastructure; regulatory burden; water issues; and terms of trade.
“The alliance structure is still being formalised and ratified but all the groups are enthusiastic about the value the new organisation will deliver and are keen to get to work.”
CEO, Australian Meat Industry Council
0435 357 942
Energy costs the first priority for new agri manufacturing industry alliance
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