TEYS Australia is the latest Australian beef processor to publish its direct consignment price grids on the company website.
Teys added the feature to its corporate website (click here to access) on Tuesday, joining other significant beef processors including Bindaree Beef and Thomas Foods International (see Beef Central’s earlier story on TFI’s decision).
Another export processor, NH Foods, which operates two large plants in Queensland (Borthwicks, Mackay and Oakey Beef Exports on the Darling Downs), and one in NSW (Wingham Beef Exports), told Beef Central this morning it was also examining its position on publication of grids, and will make a decision in coming weeks.
JBS Australia confirmed it has no immediate plans to publish its direct consignment price offers, but chose not to comment for this item.
As of Tuesday afternoon, Teys now publishes grid price offers for its Beenleigh, Biloela and Rockhampton plants in Queensland; Wagga plant in NSW; and Naracoorte plant in South Australia. The grids are offered for standard grain and grass categories – but not for the company’s brand-based ‘program’ business including Grasslands certified, certified premium Black Angus, EU, Certified Organic and MSA grassfed and grainfed. Nor does it publish feeder cattle pricing, unlike Bindaree and TFI’s grid offerings.
TFI’s, Bindaree’s and Teys’ public grids also include specific c/kg or percentage penalties for fat depth, dentition, bruising, butt shape, HGP and meat and fat colour.
Repeating comments made in this article published a fortnight ago on Beef Central, Teys Australia chief executive officer Brad Teys said his company remained ‘neutral’ about whether or not it made its grids publicly accessible, but also warned about potential downsides.
“Our concerns about public grids are on the record,” Mr Teys said.
“We don’t feel as if we have come under pressure to comply, but we continue to have concerns about the risk of perception of price signalling, especially on a falling market, under such public disclosure,” he said.
Mr Teys said the move to publishing grid offers did not diminish the need, in any way, for producer suppliers to pick up the phone to talk to livestock buyers.
“It’s just so important to have those one-on-one conversations, so we can build up a picture of when each producer is likely to be turning off cattle, what sort of condition they will be in, and how they are likely to weigh compared with the same cattle last year.”
“The key to how well the supply chain works, going forward, is always going to be communication and relationships. It’s far removed from simply obtaining a number off a website somewhere. We have to work together, and simply making grids publicly accessible is far from being some simple fix,” Mr Teys said.
Smaller producers represent greatest risk
In discussions with other processors this morning, there remains a level of concern about misunderstanding among producers – particularly smaller ones who may not follow the market as closely as others – about small but important differences between one company’s grid and another.
“It’s the small, less well-briefed producer where the problems will potentially lie,” one processor contact said this morning.
One of the main counter arguments to formally publishing processor price grids has been that through the internet, ‘everybody knows’ where they can source a processor grid on a few minutes notice, negating any need to provide formal public access.
One Queensland processor said last year’s senate inquiry was mis-informed when it was told that current grid prices were ‘hard to obtain.’
“Grids are already easily accessible, by anybody across Australia wanting to sell cattle. Simply putting them on a website somewhere will make no substantive difference,” he said.
There’s considerable potential for the public grids to be mis-understood – especially when they are rapidly changing. Problems could arise where a producer booked in some cattle and saw a grid offer the following day, after the deal was done, at a higher price. When they are killed and they are not paid on that grid, we’re on the front page of the paper again,” he said.
One observer of the recent decisions made by some processors to publicly disclose their grids, in line with recent senate and ACCC inquiry recommendations, was perhaps hastened by the shortage of slaughter cattle in the market over the past two years.
“If this discussion about publishing grids increases the flow of cattle they might have available to them, I suspect they would see this as a positive outcome,” he said. “Making grids more publicly accessible to producers may not be a panacea, but it adds to the culture of transparency between producer and processor that has been lacking in some areas.”
Earlier this month, ACCC’s Mick Keogh said TFI and Bindaree had demonstrated leadership in taking positive action to enhance the standard of competition in livestock markets, especially in relation to sales direct to processors.
“It is now time for others in the sector to follow this lead, which will benefit all in the respective supply chains,” he said.
The ACCC published an update report in May, noting the lack of industry progress towards voluntarily adopting the ACCC’s 15 recommendations, including grid disclosure.
“The ACCC will continue to discuss our beef cattle market study recommendations with relevant ministers and departments,” Mr Keogh said.
“We would like to see uniform national licencing of livestock agents, buyer registers at livestock sales, and enhanced reporting of over-the-hooks cattle sales.”
Timely price information lessens co-ordination risk, ACCC argues
The ACCC’s beef and cattle market study released in March last year said where price grids are not publicly available on a company website, a buyer maintained discretion over whom it releases price grids to. This may limit the bargaining power of cattle producers if they could not easily access price grids from alternative buyers and dampen competition in cattle acquisition markets, the study’s report said.
Some small-scale producers told the ACCC inquiry that their requests for grids were often ignored, because the consignments they proposed to send were too small.
Although buyers are not obliged to purchase cattle from any supplier, information on expected future prices would influence the production and investment decisions of producers.
The ability of producers to make appropriate production and investment decisions was significantly affected by the availability of accurate and timely pricing information, the report said. As a result, limited access to price grids reduced the ability of producers to respond to market signals efficiently. In addition, a lack of transparency in prices offered by processors may lead to less competitive outcomes in cattle acquisition markets, the report said.
The ACCC’s inquiry heard concerns that publishing price grids may reduce price competition. Some parties were concerned that greater price transparency would increase the risk of co-ordinated conduct among processors. However, the ACCC said the publication of price grids of itself would not increase the risk of co-ordinated conduct. Publishing price offers would only raise competition concerns if processors coordinated the timing of the publication of grids and/or then used this information to co-ordinate their pricing conduct.
Further, the ACCC considered that many processors already have a reasonable understanding of their rivals’ prices and so any additional risk of co-ordination would be low. The benefits to producers of more timely and transparent price information would also counter any increased risk of co-ordination, the ACCC report said.