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Grassfed inquiry: Plenty of problems, but what about solutions?

James Nason, 13/03/2014

The opening stages of the Senate Inquiry into grassfed cattle structures and levies have focused plenty of attention recently on problems facing grassfed cattle producers, with rising costs, stagnating farm-gate returns and a lack of control over, and value from, money paid in compulsory transaction levies chief among them.

But what about possible solutions?

A key challenge for the Senators involved in the inquiry is not just to get their heads around some very complicated structural, cultural and performance issues in a very short space of time, but to find some effective answers as well.

At the end of the inquiry process the Senatorswill be required to  make recommendations, which the Government can either accept or reject as it sees fit.

More than 180 written submissions were lodged prior to the commencement of the first public hearing, with many offering suggestions as to what Senators should be recommending to Government in their final report, due on June 30.

Beef Central has waded through many of submissions lodged and below has summarised some of the many recommendations Senators are being asked to support.

The below examples are far from exhaustive but offer a broadly representative sample of the divergent solutions various grassfed beef stakeholders are advocating, ranging from minor tweaks to full structural overhauls. One of the more common positions advocated is for Senators to recommend that the Government launch a full and independent review into all existing industry structures.

 

CATTLE COUNCIL OF AUSTRALIA

Cattle Council says it remains best placed to continue as the representative body for grassfed cattle producers in Australia guiding grass-fed levy expenditure, particularly now that it has opened a direct membership channel that gives any cattle producer in Australia the opportunity to contribute to its policies and stand for election to its board

CCA wants the $5/hg grassfed levy maintained, including the matching Government funding for R&D, but also wants to receive about $4 million of the $50m plus generated in compulsory grassfed levy revenues each year to help it to fund strategic planning, strategic policy development and industry management work for the benefit of the whole grassfed cattle industry.

CCA also believes a joint Government/Industry project should be undertaken to assess the pros, cons and cost-benefit of any other levy collection mechanisms and the systems available to identify levy payers.

AUSTRALIAN BEEF ASSOCIATION

ABA wants to see the role of “peak council” for grassfed producers reallocated to a new organisation, for example called the Grassfed Cattle Producers Association, and the CCA’s role as the designated Peak Counci terminated.

The new peak council would have as members all grassfed cattle producers who pay the Cattle Transaction Levy, with board members elected by a vote of all members.

The GCPA would receive the full $50m plus generated in grassfed levies each year, would negotiate marketing and R&D priorities and objectives with grassfed producers, and would disseminate funds to service providers (such as MLA and others) on a competitive basis.

Grassfed producers would vote on the level of levy paid and therefore the level of funding the organisation receives.

* Clarification: An earlier version of this article stated that the ABA wanted the CCA to be terminated. The ABA’s submission states that it wants the CCA’s role as the designated Peak Council terminated.

GREG BROWN

Immediate past president, Cattle Council of Australia

In his submission NQ cattleman Greg Brown argues that a culture of secrecy and supremacy has hampered serious input from external sources into MLA and has impeded effective collaboration with co-investors or industry partners. The former CCA president says peak councils have very little real opportunity to exert authority over MLA at all.

His view is that the Federal Government should insist on a greater degree of accountability and performance from MLA, and should facilitate an extension of power to peak councils. He supports the direct provision of a portion of the grassfed levy to CCA to improve its resourcing and ability to adequately oversee MLA.

Mr Brown is also calling for a comprehensive review by an independent team of experts to be conducted across all MLA activities.

He also believes a greater percentage of levy expenditure should be directed towards R&D, which he describes as grossly underfunded, and backs the creation of an autonomous organisation to manage R&D expenditure in future.

JOHN CARTER

Former Australian Beef Association chair and Former NSW Meat Industry Authority Chair

Crookwell, NSW cattle producer John Carter says MLA has become an institution that puts itself before the interests of those who fund it, and says that despite spending hundreds of millions of dollars of producer funding on R&D and marketing, it has failed to deliver higher cattle prices while domestic retail prices have increased by 50pc since 2000.

Mr Carter believes producers should stop funding export and domestic promotion altogether, arguing that the role is already being undertaken by two large multinational processors with offices around the world and supermarkets domestically. “Producer funded marketing of processor owned product on the export market makes as much sense as Australian coal exporters paying a levy for Chinese steel manufacturers to market their steel”.

Mr Carter advocates a return to the slaughter levy instead of the current transaction levy and a dramatic reduction in the levy paid. He believes MLA and RMAC should be wound up and replaced by a specialist Meat and Livestock Research Corporation to manage R&D, and an Australian Meat Division formed within the Federal Department of Agriculture to oversee the functions of market reporting, beef grading to the consumer and trade negotiation.

Unlike the ABA, the group he helped to found, Mr Carter is strongly opposed to the concept of a compulsory levy being placed in the hands of producers, whether elected or not: “My many years of experience has convinced me that they are incapable of using their fellow producers’ funds wisely and quickly develop a club mentality. Administration of asylums by inmates has invariably been unsuccessful.”

Mr Carter wants to see the inquiry result in the Federal Government conducting a referendum of all levy payers on what, if any levy they will support, with one vote for each levy payer.

AGFORCE QUEENSLAND

AgForce Queensland is the largest contributor of SFO membership fees to Cattle Council of Australia.

It recommends that CCA be retained as the premier peak industry body for grassfed cattle, and supports the call for CCA to be allocated a portion of the grassfed levy to provide oversight and performance management of MLA.

AgForce suggests the committee also consider further recommendations for improvements to existing red meat industry organisations such as Aus-Meat, MLA and RMAC, to “modernise existing structures in line with an evolving beef industry”.

The AgForce submission says there has long been a perceived cultural issue with MLA and its attitude to MLA members. “Concerns raised with MLA management on strategic and operational issues can be met with resistance and often deflected with arguments of corporate responsibilities”. It says it can be very difficult for MLA members to get resolutions before the Board, and says the MLA board selection process does not give grassfed levy producers an adequate say.

It recommends that MLA’s board selection committee be composed only of representatives of peak industry councils, and with representation determined by the proportion of levies each sector pays.

AUSTRALIAN LIVESTOCK AND PROPERTY AGENTS ASSOCIATION

The peak representative body for stock and station agents says the Australian Government should consider establishing a register to record the number of livestock sold by each levy payer, the type of livestock sold and the amount of levy paid. “All this information is required to calculate and deduct levies, but is not reported,” ALPA says. “This valuable statistical information will aid with MLA voting rights amongst other beneficial possibilities for the entire livestock industry.”

ALPA’s submission also calls for agents to be compensated for the costs of collecting compulsory industry levies, and for levy payers to be excused from paying compulsory levies when impacted by exceptional circumstances as fire, flood, or drought.

 

HEYTESBURY CATTLE COMPANY

Heytesbury Cattle Company runs more than 160,000 head of cattle across six cattle stations in the Kimberley region of WA and the Northern Territory, focusing primarily on the production of cattle for the live export trade to Asia and the Middle East.

In the company’s submission chief executive officer Paul Holmes a Court says current grassfed cattle industry structures and systems are fundamentally flawed, are in capable of meeting the collective needs of the industry and are therefore in urgent need of reform.

Mr Holmes a Court maintains that proper reform requires starting with a clean sheet of paper and designing a simple structure which is efficient, effective and accountable. “Starting with the current failed system and trying to amend and adapt is not the way to get a good result”.

The authority which currently sits with CCA and the money that currently flows to MLA had to come together to create a well-funded and fully accountable body, with a board directly elected by industry participants, if the industry was to respond to the challenges facing it and capture opportunities in marketing and R&D.

He urges Senators to recommend that a taskforce be appointed as a “matter of urgency” to review the functional and representative needs of the grassfed cattle industry and to identify options for improved organisational structures, and to report back within four months.

BINDAREE BEEF

The Inverell based regional meat processor is calling on Senators to recommend the appointment of a cross-sectoral task force, containing no more than five people, to investigate and report on options for reforming current red-meat industry structures.

The company believes such a task force should examine the effectiveness of current industry structures in terms of whether they deliver productivity growth, reduced costs, lower regulatory impacts and increased markets for Australian product. It says the task force should also assesse future challenges and competitive pressures that will impact the industry, look into governance systems that could give greater transparency and accountability to levy payers, consider options for a change to a non-statutory levy in the red meat sector, and explore the ways in which industry structures can be reformed to deliver greater innovation within the sector.

UNITED STOCK OWNERS OF AUSTRALIA

A submission from the ‘United Stockowners of Australia’, a group that describes itself as representing “independent and non-aligned livestock owners and breeders”, but offers no indication of how many members it has or formally represents, suggests that Senators should recommend either of two courses of action.

One is the total deregulation of the industry, including the disbandment of the Red Meat Advisory Council, repealing the Australian Meat and Livestock Industry Act 1997, removing the compulsory cattle transaction levy, and immediately introducing legislation mirroring every aspect of the Packers and Stockyard Act in the United States which maintains competition and price transparency in the US meat industry.

The second is to cease the Cattle Transaction Levy while all grassfed cattle producers are identified, and given the chance via a plebiscite to vote on whether they wish to pay a levy. In the event of a ‘yes’ vote, that a democratic body would then be formed with grassfed producer support.

It also recommends that independent audits be conducted into voting entitlements in MLA from 2004 to now, and into MLA’s expenditure of grassfed levies over the same time.

PETER MAHONY

Central Queensland cattle producer

Peter Mahony from Gyranda Cattle Company says that while world beef prices are high, in Australia increased returns are being pocketed by stakeholders further up the supply chain and not by the producers who are paying most of the levies. He would like to see levies collected from retailers to contribute towards the R&D and marketing work by MLA.

He is also concerned that while interest groups such as animal rights activists and environmentalists continue to wage political attacks against the red meat industry, MLA’s charter offers limited capacity for it to respond in this area, leaving the industry badly exposed. His view is that there needs to be a relaxation of rules that currently prevent the use of levy funds being used for political purposes to ensure greater value for money of producer levies.

 

A case for greater Government involvement?

Is greater Government involvement in industry affairs a desirable way forward?

In his address to the public hearing in Canberra last Friday, John Carter argued the case for genuine transparency in pricing, which would require Government intervention.

‘The point is that industry bodies have no real power’

“The point is that the industry bodies have no real power,” Mr Carter told the inquiry. “The government does have power. It can use the (US) Packers and Stockyards Act. It can take over the beef grading and ensure that it is independent. It can make it so that, if a beef grader does the wrong thing, he goes to jail—as in America.”

Queensland Liberal Senator Ian Macdonald pointed out that the Government “could regulate prices too”.

“I would not suggest that,” Mr Carter replied, to which Senator Macdonald responded “No, I would not suggest it.”

Liberal Senator for WA Chris Back also expressed his reservations about calls for greater government control of industry. “You have confidence in government. That is very kind of you—I do not know that I have quite the same confidence.”

Noting that Mr Carter has had in depth experience in almost every sector of the beef industry, Senator Back asked what his thoughts were on the ideal core body to manage industry affairs for grassfed beef cattle producers.

“In reality, the processors buying and selling the product have got the real control. It is only through bringing in transparency in market reporting, transparency in honest beef grading, that you can really make an impact—and that lies firmly with government.”
All written submissions lodged for the inquiry can be viewed on the APH website here

  • In Beef Central tomorrow US cattle industry analyst Steve Kay explores the effectiveness and issues surrounding the Packers and Stockyard Act in the US.

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