The board of Meat and Livestock Australia last night rejected a Federal Government approach designed to force the service delivery company to use $5 million of industry funds as an ‘initial contribution’ towards compensation to stakeholders affected by the Indonesian live export trade closure.

Following a meeting of Federal Ag minister Joe Ludwig, State ag ministers and industry representatives on Friday, Sen Ludwig sent a letter to MLA outlining his terms for the raising of a compensation fund.

Sen Ludwig’s letter asked MLA chairman Don Heatley to ‘help industry members in their time of need.’

He asked MLA to dip into its contingency fund to provide $5m, or be forced to do so by law.

“I understand the MLA board has at its disposal contingency funds which could be directed to assisting with the resolution of the domestic supply chain,” Sen Ludwig’s letter said.

Such expenditure would satisfy the criteria for expenditure by MLA on ‘marketing and promotion’ established under the Australian Meat and Live-stock Act 1997, the letter suggested.

“I would expect $5 million could be made available as an initial contribution to a contingency fund for industry. I would be grateful for your and the MLA board’s support for my proposal,” Sen Ludwig said.

“Alternatively, I would propose to use my powers under Section 69 (3) of the Act, to direct MLA to use the marketing and promotion funds to manage the immediate domestic supply impacts of the suspension of trade.” 

Reliable sources suggest the MLA board has sought independent legal advice over the appropriateness of using the industry contingency fund for such a purpose, and is of the opinion that there are no legal grounds.

While the matter has only just emerged, the preliminary legal opinion is that under its constitution, MLA is not entitled to tap into reserves for compensation under the terms outlined by the Government.

The contingency fund is for emergency purposes in the event of an industry crisis, in the specific areas of R&D, market access, and promotion – none of which are seen to cover the Ludwig demand.

The MLA board also rejected the notion that there is $60-$70 million sitting in a consolidated fund as reserves. What is lost in that interpretation is that those funds are split across a broad range of industry activity: there are separate ‘jam jars’ for grassfed, grainfed, beef, sheepmeat, R&D, and other activity, for example. 

A phone hook-up of MLA directors last night was said to be ‘resolute and unified’ in its stance that a move to provide compensation funds from industry contingency reserves was inappropriate, both in principle and in legal terms. That stance is understood to have been broadly supported by peak council groups and other stakeholders.

The MLA board was due to respond to Sen Ludwig’s approach this morning. Any protracted stand-off between the Ag Minister and the MLA board could ultimately see the matter before the Federal Court.

The MLA board and peak council groups are likely to issue a statement on Tuesday. More details on Beef Central as they come to hand.