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ACCC makes 15 recommendations to improve cattle market transparency

James Nason, 07/03/2017
ACCC chair Rod Sims.

ACCC chair Rod Sims addresses a forum in Toowoomba during the commission’s beef and cattle market study last year.

Cattle processors should publish their price grids for direct to works sales to improve transparency in the Australian cattle market.

That is one of 15 recommendations included in today’s final report from the Australian Competition and Consumer Commission, following its investigation of competition issues in Australia’s beef and cattle market.

Other headline recommendations include:

  • that AUS-MEAT conduct more random and unannounced audits of cattle grading and trimming in plants, and publish the results
  • The introduction of consistent objective carcase measurement technology in plants to improve accuracy and transparency of carcase assessments as soon as possible be prioritised
  • The Introduction of standardised national licensing of livestock agents, and commission and salaried cattle buyers and livestock auctioneers.
  • The introduction of a buyer’s register and post-auction buyers report for major saleyards – but not in Queensland, as this would contravene existing State legislation.

The ACCC wants its 15 recommendations to be implemented by industry voluntarily and as quickly as possible.

It has placed the responsibility for ensuring these changes are adopted on the shoulders of the Red Meat Advisory Council.

Since its interim report released in October, the ACCC notes that Meat & Livestock Australia has already made headway on improving online market reports to make it easier for producers to access historical price information and see which way prices are moving for stock.

It says further improvements are still needed, but adds that MLA’s ability to continue to improve market reporting will depend on the quality of information it is provided by other industry participants, such as live exporters, processors and retailers.

The ACCC also acknowledged MLA’s moves to introduce objective carcase measurement. In November last year MLA launched a plan for the industry to borrow $150 million to put DEXA carcase scanning cameras in 90 AUS-MEAT accredited abattoirs across the country.

The ACCC says widespread, consistent adoption of Objective Carcase Measurement technology is needed to bring greater integrity and trust in the cattle grading system.

ACCC backs voluntary price reporting, for now

Despite an ongoing campaign by some sectors of Australia’s cattle production sector for the introduction of US style mandatory price reporting legislation, ACCC is yet to be convinced it is needed.

It says mandatory price reporting can improve transparency, but moves towards a US-style system need to be carefully assessed.

It says the complexity of the Australian industry would make the implementation of a US style mandatory price reporting system difficult, and benefits must be balanced against costs.

The ACCC says it supports the pursuit of additional data collection and publication by MLA through voluntary participation of the industry.

“This is likely to improve market transparency and system integrity at the least cost to the industry as a whole,” the report states.

“If market participants are unwilling to fully participate in this initiative, industry and government may need to re-consider possible legislative change.”

 

The 15 recommendations are:

Transparency in cattle markets

Price grids should be made publicly available

  1. All processors and other major purchasers of prime cattle should make their price grids publicly available in a timely manner.

Public availability of price grids will increase producers’ ability to access and compare prices. This will increase price discovery and the ability of producers to negotiate and make informed and timely decisions about who to sell their cattle to.

Price grids should be easy to interpret and compare

  1. Buyers, agents and producer representative bodies (led by the Cattle Council) should expand their engagement with producers to enhance industry understanding of price grids and their interpretation.
  1. All buyers should simplify their price grids, where possible, to ensure they are easy to interpret and compare. These measures will improve transparency and the ability of producers to negotiate and make informed choices about who to sell their cattle to.

Improvements to market reporting are needed

  1. Meat & Livestock Australia (MLA) should continue its work to improve the collection and public reporting of cattle sale prices, including: A) reporting cattle prices across sales channels on the same basis so that indicative prices for each channel are easily comparable; and; B) making improvements to the reporting of prices throughout the supply chain, including wholesale, retail and export beef prices.

The ACCC welcomes progress made on some of these measures as recommended in its Interim Report.

These include improvements made by MLA to the Market Reports & Prices section of its website.

MLA’s ability to continue to improve market reporting will depend on the quality of information provided to it by other industry participants, such as live exporters, processors and retailers.

Additional market reporting is needed

  1. Data collection and reporting should be expanded to cover prices paid for: A) direct (paddock) sales; B) OTH sales, noting that some processors pay prices over and above those quoted on their price grids, and; C) cattle sold to the live export market.

MLA’s ability to improve market reporting will depend on the quality of information provided to it by other industry participants, such as live exporters, processors and retailers.

Over the hooks transactions and grading

Objective carcase measurement should be prioritised

  1. The introduction of objective carcase measurement technology should be prioritised by the industry and adopted by all processors in a consistent manner as soon as possible.

Objective carcase measurement technology will increase accuracy and transparency of value assessments. Appropriate auditing and verification systems will be needed to support the technology.

The ACCC welcomes the moves made by MLA to introduce objective carcase measurement technology throughout the industry, as recommended in the Interim Report.

Objective carcase measurement data should be shared

  1. Data produced from objective carcase measurements should be shared for the benefit of the industry.

The data produced as a result of objective carcase grading will be of wider benefit to the industry if aggregated and shared. For example, producers would be able to measure their own performance against the rest of the industry and make any production adjustments necessary to achieve higher cattle grades and prices.

A uniform dispute resolution system should be developed

  1. The Red Meat Advisory Council should develop a uniform and independent complaints and dispute resolution process.

Some processors have their own dispute resolution systems. However, an independent system would provide an additional and independent dispute resolution option to the industry.

The independent system should apply to all purchasers and sellers of cattle, including for OTH and electronic cattle sales.

The Red Meat Advisory Council, AUS-MEAT and buyers should publish information about how parties can use the independent process.

Carcase grading audits should be strengthened

  1. The carcase grading and auditing system should be strengthened by: A) increased communication and education about the process by AUS-MEAT and processors; B) increasing the number of random AUS-MEAT audits of grading results and standard trim; and; C) publication of audit results relating to grading and standard trim.

There is a comprehensive training system for carcase graders and some random auditing of grading results (‘procedural’ audits).

However, the ACCC considers that there is a degree of scepticism in the industry about this process.

Improving the delivery of information about the grading and auditing and language systems will help to decrease the level of misunderstanding in the industry.

This information should be made easily and clearly accessible on AUS-MEAT and processors’ websites.

Increasing the number of procedural audits at which grading results and standard trim measurements are audited will increase confidence in the system for producers and further reduce any risk of conflicts of interest occurring.

Publication of audit results will allow producers to make informed choices about which processor they use.

Carcase feedback and producer education should be clearer

  1. Carcase feedback should be clear and easy to interpret. To achieve this: A) All buyers and agents who routinely deliver carcase grading feedback to cattle producers should ensure it is presented in a clear manner. B) Buyers and agents, who routinely deliver carcase grading feedback, along with producer representative bodies (led by the Cattle Council) should increase their communication and education activities about interpreting grading feedback.

Better industry understanding of carcase grading feedback will reduce disputes and encourage producers to focus on improving their operations to ensure that their cattle meet market requirements.

Buyers and agents should ensure, if feedback sheets contain acronyms and processor-specific terminology, that these are explained in attached documentation.

Saleyards

A saleyard buyer register should be developed

  1. A mandatory Buyers Register should be publicly available prior to the commencement of all physical livestock auctions.

A Buyers Register will increase transparency at saleyards and reduce the risk of conflicts of interest occurring. This register should include details of commission buyers and livestock agents intending to bid at the sale and the principals that those commission buyers will be acting for.

ALPA should work with its members to have this requirement incorporated into auction terms and conditions at saleyards.

A Buyers Register will not be able to be implemented in Queensland, as this would contravene existing legislation in that state.

More detailed reporting of saleyard purchases

  1. Saleyards, commission buyers, auctioneers and agents should provide MLA with information that enables regular standardised market reports for each reported saleyard.

These reports should include information about the identity of buyers, and the proportion of stock purchased by each buyer.

This will increase transparency at the saleyards and reduce the likelihood of conflicts of interest occurring. It will also allow principals and producers to make informed decisions about the commission buyers or saleyards that they use for cattle transactions.

Terms of sales at auctions should be displayed

  1. Selling agents should display the terms of auction in a conspicuous position at all saleyards.

This will ensure all auction participants are aware of their rights and obligations, and encourage compliance with competition laws.

This should include a notice about the penalties for collusive practices under the Competition and Consumer Act, in addition to any notices required by state and territory legislation. Since the Interim Report was released, ALPA has included this in its updated terms and conditions. Some saleyards and agents are also demonstrating industry leadership by doing this.

Licensing and implementation

Livestock agent licensing should be consistent across states and territories

  1. Legislation should be introduced requiring standardised national licensing of livestock agents, professional buyers (applying to commission and salaried buyers) and livestock auctioneers.

This will raise the levels of compliance with the Competition and Consumer Act and general professionalism within the industry.

The ACCC understands that there have been unsuccessful attempts to complete this in the past, but still considers it is an important improvement to make.

Red Meat Advisory Council to drive implementation of recommendations

 

  1.  The Red Meat Advisory Council should have prime responsibility for overseeing the implementation of the above recommendations, and for monitoring compliance with these. The Red Meat Advisory Council should report progress annually to state, territory and federal Ministers.

 

This will ensure that recommendations are progressed, given diverse industry interests.

The RMAC should also prepare an annual report to the Australian state, territory and federal Agriculture Ministers detailing progress in implementing these recommendations and any reasons for a lack of progress.

Industry reaction will follow in a separate report.

 

 

 

 

 

 

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Comments

  1. Rod Dunbar, 08/03/2017

    I could not agree more with both the comments above; all it will do is cost millions and it will not put one cent in the pockets of the producer, we the ones outside the government tent know that we will be forced to pay for this by increases in the CTL.
    Everyone should object because the CTL will rise to at least $7.50 to pay for this – its a complete waste of money. The original complaints still stand the cartel still rules! Rod Dunbar – Director – United Stockowners of Australia

  2. Clarke roycroft, 07/03/2017

    What an amazing waste of time and space. Yes minister comes to mind , it is an absolute waste of producers funds to allow over paid and unproductive public servant’s to fob of the original complaints about the conduct of certain elements of the meat industry.

  3. Ron Chittick, 07/03/2017

    One of the recommendations has already failed before anything has been implemented in that Queensland buyers do not have to register.

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