Meat and Livestock Australia should be complemented on its efforts to give levy payers a new tool to gauge industry health and performance through measuring the farmers’ share of the retail dollar over time.
By extension, this should translate into a tool that will measure MLA’s own performance, on beef producer’s behalf.
This measure has been called-for for many years by the Australian Beef Association, with little action, and MLA clearly seeing no reason to expose itself to such scrutiny or accountability.
One wonders why MLA does not want its performance measured?
For any tool to actually work with any success, it is important that the data used is factual and correct. Unfortunately initial presentations by MLA (see Beef Central’s original story, “Retail $ share provides new tool to gauge industry health”) seem to suggest that despite all the resources at its disposal, it still has a lot to do to ensure it gets its facts straight.
MLA continues to claim that producers’ share of the retail dollar has improved. These assumptions have been questioned in the past: it always depends on the set of data being used.
According to MLA publications, in 2003 the price paid for saleyard cattle was $3.49, while in today's prices, they average $3.90. However according to ABARES figures, in 2003 the price of young cattle was $3.19.
MLA's daily figures suggest that the price of young cattle on today's market is a fraction below $3.40 – a long way from the figure of $3.90 used. It would seem the only correct statement made by MLA is that cattle prices are not much higher than they were a decade ago. Who could disagree?
According to MLA the domestic market is still the biggest market for Australian beef and there is only 1pc difference between beef consumed in 2003 versus 2012. However even the raw figures show the red meat industry is losing market share – nothing to brag about, but these figures also fail to take into consideration influences like population growth.
In plain English these figures show that in 2012 Australians consumed 33kg of beef per person, while in 2003 we ate 37.7kg, or 4.7kg more. Meanwhile, between 2003 and 2010, poultry has lifted from 34.6kg to 41.7kg, and pork from 22.1kg to 25.5kg. It is not rocket science that the red meat industry is losing market share.
In the period from 2003 to 2012 expenditure on beef has risen by 16pc to $850 million. One could be excused for wondering where this massive increase has gone: it certainly does not seem to have helped producers.
Over this 10 year period the MLA has absorbed well over $1 billion in compulsory levies, and it was not that long ago that levies were lifted from $3.50 to $5.00 per head sold. We were told at the time that this was done so that beef could retain market share.
If MLA was a public company listed on the stock exchange, there would be serious questions asked by shareholders, with falling market share and billions of dollars thrown at the problem, with little result. I am sure the share price would be in free-fall, not the sort of company a stakeholder would want to invest in.
Figures from the saleyard to the retail shelf are interesting. In 2003 the price of beef according to ABARES was $3.18 and the price of beef at checkout was $13.60/kg. In 2012 this had risen to $16/kg, despite the downward pressure brought on by the supermarket war.
MLA suggests under its new data collection set that the producer in 2012 gets 36.6pc of the retail dollar, contrasting favourably with 2003 when the share of the retail dollar was 30.4pc.
MLA suggests some people will be very surprised to see this increase. Again I agree, people will be very surprised by these figures, I'm not sure how the MLA arrives at these figures, perhaps MLA might like to share the data they used to make their calculations.
I am quite happy to share my calculations. Using a 200kg carcase which would have 70pc meat and 30pc bones and fat, this would leave 140kg of saleable meat. Multiply 140kg of meat by the retail price of meat which in 2003 was $13.67, would give me $1913 at checkout and would give producers a total of $636 or $3.16/kg for his carcase or 33pc of the retail dollar.
If you were to use the same equation and use $16 as the average price of retail meat and $3.40/kg for carcase price, then the proportion is 30pc, which is in direct contrast to MLA’s claim that the producer in 2012 gets 36.6pc of the retail dollar.
As stated earlier any tools the industry has at its disposable should make diagnosis of any problems simpler. What troubles the Australian Beef Association and others is evidence given by major supermarkets to all and sundry including the ACC and Parliamentary enquiries that suggest, among other things, that the producer is getting 54pc of the retail dollar.
These reports grace the shelves of the Parliamentary libraries and can be, and are used when forming legislation. They give a completely false view.
When these enquiries take place one would wonder where Cattle Council of Australia and the MLA are. I certainly can't find any evidence of a well-written submission to these enquiries by producer lobby groups, with the exemption of Australian Beef Association.
For its part, the MLA correctly says that its focus is on R&D and marketing. On the other hand the Cattle Council say that it doesn’t have the resources, and at the same time, supermarkets and others spend considerable resources on their submissions, leaving farmers voiceless.
The industry only has to look with envy at the operations of the spin-doctors from the two large supermarket retailers: when producers complain they are simply told to get more efficient.
With the cost of production rising, it is imperative that producers make sure that they have the right representation that doesn’t include bodies that are intent on window dressing and looking after their own interests.
- Beef Central will provide an opportunity for MLA to explain the methodology and data set sitting behind its retail market share calculation, as sought by ABA’s David Byard.
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