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CORRECTED VERSION ECONOMIC DEVELOPMENT COMMITTEE Inquiry into export opportunities for Victorian rural industries Nhill – 28 August 2001 Members Mr R. A. Best Mr N. B. Lucas Mrs A. Coote Mr J. M. McQuilten Mr G. R. Craige Mr T. C. Theophanous Ms K. Darveniza Chairman: Mr N. B. Lucas Deputy Chairman: Mr T. C. Theophanous Staff Executive Officer: Mr R. Willis Research Officer: Ms K. Ellingford Witness Mr J. Millington, General Manager, Luv-a-Duck Pty Ltd. 28 August 2001 Economic Development Committee 12 The CHAIRMAN — The Economic Development Committee is an all-party investigatory committee of the Legislative Council. Today we are hearing evidence in relation to both structural changes in the Victorian economy and an another reference relating to rural export opportunities. I advise all present at this hearing that all evidence taken by this committee, including submissions, is subject to parliamentary privilege and is granted immunity from judicial review pursuant to the Constitution Act and the Parliamentary Committees Act. We welcome Mr John Millington the general manager of Luv-a-Duck to our inquiry. How we do this is usually for you to make an opening statement and then we ask some questions. We have 30 minutes to do that. Mr MILLINGTON — Thank you for the opportunity to come along today. I have been to one of these once before — it was the banking inquiry at Minyip, about the time when Nhill had applied to put in a community bank here. We were one of the first along with Minyip and I remember that I got a fair old grilling. I hope I do not get one today. I will pass these around because I would like to talk to this outline of our company, where we have come from, where we are now and some of the impediments and barriers to export. Luv-a-Duck is a family-owned company. It was started by Arthur Shoppee a little over 25 years ago. He was originally a drycleaner here in Nhill: he certainly was not a duck farmer. With the advent of drip-dry clothing he had a business which was not particularly successful; it was going downhill, and being a keen duck shooter and a lover of duck he bought 50 day-old ducklings and grew them in his backyard at home, just a little way up the street. Then he got another 100 and they were successful. Eventually the council and his neighbours ran out of patience and he leased a small property on the edge of town which is still there and still part of our enterprise today. I will not tell you anything about Nhill because I believe the shire has put in a submission. I will only say that one of the reasons we are here and continue to be here is the hardworking country people: they are loyal and have been instrumental in the success of our company. We currently employ a little over 135 people here in Nhill and the surrounding towns. We have a quarantine station a bit south of here at Gymbowen which provides the breeding stock for another farm just a little bit to the south-east of us here at Winiam and then the hatchery here in town supplies the commercial stock to the operation on the edge of town. We would have 350 000 to 400 000 ducks on the property at any one time. We produce 38 000 to 40 000 ducks a week, primarily distributed throughout Australia. As a matter of interest, our weekly payroll is over $55 000, and I dare say that the majority of that is spent in this town or surrounding towns each week. We purchase over 300 tonnes of feed each week. We are fully integrated in that we are responsible for all of the growing phases from the breeder, as I said before, to the egg, hatchery, growing and on to processing. At that point we do two things. We produce a whole bird which is the traditional bird to go to the Chinese market, and any of you who have been up and down Collins Street will have seen the orange ducks hanging up in the window. With a bit of luck it is our duck, but it is the traditional way of the Asians doing the duck. The Asian population has been instrumental in our success in sales and marketing over the years. In recent times we have started to develop our products. In the back of that corporate profile brochure you will see some of the value adding things. We are marinating, we are cooking, we are preparing oven-ready meals, particularly for the hospitality trade; the restaurants, the caterers and the airlines want a duck that they can heat and eat, they do not want to be mucking around cooking whole birds in ovens. That is the direction we have taken in recent times. As a result of that, our turnover last year was a little over $18 million and we anticipate that going up this year. That is the main reason for it. We see our future as being here in Australia. We have a very strong domestic base for our marketing. We have distributors right throughout Australia and depots in all states. We believe that if we maintain a good local market then we can certainly be on a good foot to be able to export. We have a couple of problems there at the moment. The cost of production for us is about 35 cents a kilogram more than what it costs to produce a duck in most of the Asian region. We have some advantages that they do not have but certainly in terms of labour and packaging costs theirs are less than ours. The challenge for us is to drop that 35 cents because if the federal government so pleases and opens the gate to product from Asia it will decimate Luv-a-Duck and the poultry industry unless we take steps to do something about it beforehand. We are very much concerned about that. We are doing some exporting of our value-added product into Indonesia, the Pacific Islands and more recently Singapore. We have been successful in getting a listing into Singapore; we are one of the first of the poultry companies in Australia to do that and we are very proud of that achievement. In order to trade into Singapore you have to reach very low microbial loads — food-borne bacteria — on the product, and we have managed to achieve that. We are very pleased with it. 28 August 2001 Economic Development Committee 13 We are also very optimistic that Singapore is the springboard to Asia. It is certainly the nerve centre and the hub and we see that as the opportunity to branch out into other parts of Asia. However, we face a number of impediments. I would say at the outset that while they are impediments and barriers they are probably federal issues rather than state issues, but I think this committee should be aware of the issues that face anyone in the meat industry and certainly in the poultry and duck industries. There are issues which are beyond Nhill, beyond this region and certainly beyond Victoria and probably Australia. In a large number of cases there are artificial trade barriers that are set up against us; it is certainly not a level playing field. I draw your attention to the case of an outbreak of exotic disease. Victoria is a signatory to the exotic disease protocol and the procedures that are followed in the event of an outbreak of disease. In our case the last time there was an exotic disease outbreak in Sydney they closed Sydney and New South Wales down; they closed Victoria and the whole of Australia down because Australia is a very fair-minded country and a signatory to the protocol out of Brussels. The simplified explanation is that Australia notifies Brussels that there is an outbreak of disease and Brussels then says Australia is off limits to importing countries and they shut the borders. At the last outbreak we had containers of product on the wharf ready to go and we were told that there was an outbreak of exotic disease in New South Wales and our product could not move. It took us three weeks to clear that, and for a little company like us that is hard going. Where the inequity comes is if it was France that had an outbreak of disease they would shut France down but Italy, Spain, Switzerland, across the Channel up to England and up into Germany could all continue to trade and it is only a couple of hundred kilometres away; we are 1200 kilometres from New South Wales. There is a case to be mounted for regionalisation or area freedom within Australia. I would encourage you to take that on board when you have the opportunity in the forums that you approach. We have an issue with the Australian Islamic Council which we also see as inequitable. For the past two years we have been processing all of our ducks as halal — that is, killed in the Islamic way. We are certified with the Australian Islamic Council. Two slaughtermen come up from Melbourne each week, spend the week with us and go home on the weekends. We recently applied to export our product into Malaysia only to be told that the Malaysians do not recognise the Australian Islamic Council. In order to have product go into Malaysia we have to fund two of them to come down on business class air fares with two nights accommodation and $80 a day expenses so we can be given the approval to kill in their particular cultural way.