The New South Wales Farmers association has this morning called for the introduction of a mandatory code of conduct in saleyards to protect against potential buyer collusion.

Representatives from the NSW peak farmer body addressed the opening session of the Senate Inquiry into the effect of market consolidation in the red meat industry in Albury this morning.

Asked by Nationals Senator Bridget McKenzie if they had firm evidence that buyer collusion in saleyards was occurring, NSW Farmers livestock president Derek Schoen said such evidence was very difficult to find.

He said attempts to find evidence were not helped by the Australian Competition and Consumer Commission’s lack of understanding of the rural sector.

“It is very hard to get this as concrete evidence and I think the ACCC found this a very difficult task,” Mr Schoen told the Senate committee.

“They said they had gone to the Barnawatha Saleyards to interview the agents and producers (one week after as many as nine regular Wodonga buyers were reported to have boycotted the opening Barnawatha sale), and this highlighted the lack of experience that the ACCC has in the rural sphere.

“I asked them how did they turn up? And they said ‘in a suit and tie'”

“I asked them how did they turn up. They said no one would talk to us, and I said well how did you turn up? And they said ‘well in a suit and tie’.

“And I said well, it is a dead giveaway, no one is going to talk to someone in a suit and tie especially a week after what had happened.”

Mr Schoen said there has been anecdotal evidence of buyer collusion for over 25 years but unless CCTV cameras were installed in all saleyards it would be very difficult to gather firm evidence that it was happening.

“We are really looking for a code of conduct so the saleyards can operate with the producers’ confidence in the system.”

NSW Farmers said the number of purchasers or processors that a single commission buyer can act for also needed to be addressed.

“That takes out competition straight away when you have one commission buyer operating on behalf of half a dozen processors,” Mr Schoen said.

Commission buyers, especially where you have smaller saleyards where the numbers will be a bit less, if you take out any competition, it can have a dramatic effect.

“We saw that two weeks ago at Singleton saleyards where one processor was not there to purchase and the cow price dropped between 9 and 12c/kg.”

“So if a commission buyer takes over the role of all the processor buyers, then it takes out that competition because of course they have a duty from the person that is hiring them to get the stock at the cheapest possible price.”

In its written submission to the inquiry, NSW Farmers argues that a mandatory code of conduct would provide:

• transparency on stock available at a saleyard, the stock purchased and price outcomes;
• a requirement that buyers’ agents must not represent multiple buyers that would result in the acquisition of over 5% of livestock in any given day; and
• a requirement that buyers’ agents disclose the buyers that they represent at a saleyard.

NSW Farmers also believes service kill service arrangements should be considered within the scope of a mandatory code of conduct and impose an obligation on processors to:

• publish details of available capacity for service kill services;
• develop protocols for the provision of service kill services including practical issues such as delivery times that cannot be changed without adhering to a notice procedure; and
• adopt non-discrimination obligation that applies to all third parties irrespective of the volume of service kill services required.

NSW Farmers also wants the ACCC to launch a seperate investigation into the impact of commission buyers’ agreements on competition.

In a further demonstration of the lack of confidence producers have in the ACCC, NSW Farmers livestock policy director John Dunn said the competition watchdog’s review of the JBS takeover of Primo appeared to overlook critical factors that affect competition in livestock markets.

Mr Dunn said the ACCCs analysis of JBS’ acquisition of Primo made note of a geographical distance of 500km to define a market, and concluded that the takeover would not impact on competition in that particular region.

However, NSW Farmers’ view is that the ACCC’s approach was flawed because it assumed that every abattoir was the same.

Mr Dunn said one NSW Farmers’ member in the region produced Jap Ox bullocks, and had access only to two abattoirs that would buy that category of stock.

“(But) in the ACCCs assessment it was determined that there were a series of abattoirs available to that producer and therefore there would not be an impact on his ability to access the market,” Mr Dunn said.

“It is as if the ACCC just assumed that all abattoirs are the same, and as industry and farmers we know that is now the case.”

NSW Farmers submitted to the inquiry that that the geographic market definition of 500km was an inappropriate mechanism for assessing the competitive tension of a market, particularly in the abattoir space.

Mr Dunn said the association welcomed agriculture minister Barnaby Joyce’s decision to appoint an agricultural commissioner to the ACCC.

“We eagerly await that appointment because we think that position will enliven and create more accuracy in the ACCCs assessment both of competition policy issues as well as consumer protection issues,” Mr Dunn said.

Other issues to attract significant debate at this mornings senate inquiry included arguments surrounding pre- and post-sale weighing.

Further evidence will be provided to the inquiry later today from several individual beef producers as well as Meat & Livestock Australia managing director Richard Norton and Ausmeat chief executive officer Ian King.

Stay tuned to Beef Central for more reports.

 

Opening Statement to the Senate Inquiry into the effect of market consolidation on the red meat processing sector – Derek Schoen – President, NSW Farmers Association:

 

Thank you for the opportunity to present to the Senate Committee today on behalf of the thousands of red meat producers in New South Wales. I believe that this is a once in a generation opportunity to address the market failure that is occurring in the red meat supply chain.

I would like to thank Senators Williams, Canavan, O’Sullivan and McKenzie for pushing for this inquiry and acknowledge the Chair of the inquiry, Senator Sterle.

Farmers in NSW have been producing high quality beef and lamb for Australian families for well over 100 years. Over that time, the supply chain has become more and more complex.

Many of the rules and structures which govern our supply chain were designed for the 20th Century, a time when our emerging export markets were in comparative infancy; a time too when our processing sector was not so heavily consolidated.

Today is about enlivening the red meat market which is beset by market failure and plagued with a lack of integrity, transparency and accountability.

In spite of growing demand for Australia’s premium meat and with new Free Trade Agreements set to create exponential growth in the red meat sector, our farmers are still struggling to get a fair price for their produce. Meat and Livestock Australia’s own figures show that real prices have dropped steadily over the last thirty years. Meanwhile input costs have risen.

Farmers are being squeezed by a system with less and less transparency.

Farmers want to see competition, innovation and productivity, but the benefits must also flow to them and not just the processors and supermarkets.

The processing sector has undergone significant consolidation – today the top two processors produce 46% of Australia’s meat.

There is now a clear signal for government to act.

They must act to:

• fix the saleyard system;
• enshrine independence in the AUSMeat grading system;
• examine the effectiveness of competition law; and
• ensure that farmers are treated as equal players in the supply chain by investigating the issue of kill space.

This inquiry should make clear recommendations to ensure that when farmers grow the best, there is a guarantee that they are rewarded at the farm gate.