News

Industry at loggerheads over DEXA: ABA

David Byard, Australian Beef Association, 03/03/2017

In this contributed item, the Australian Beef Association provides opinion about the different industry views that have emerged about the adoption of DEXA objective carcase measurement technology, and whether MLA has stepped beyond its charter in proposing its adventurous Project 150 adoption model 

 

THE recent press coverage regarding differences of opinion between MLA cattle producers and AMPC over the MLA DEXA yield grading project rollout underscores the long held concern among many red meat industry players about the current organisational structure of their industry.

According to the Red Meat Industry MOU and MLA brochures they are a service provider in the red meat industry and not an industry representative body or lobby group. MLA receive levy funds from cattle producers, sheep producers, lot feeders and meat processors.

When MLA announced the DEXA rollout in November, it talked about having in principle support from Barnaby Joyce and made no mention of a business plan. Now that AMPC and AMIC have come out saying they are employing their own consultants to review the viability of DEXA, it suddenly appears that MLA does have its own business plan.

I suspect that levy payers throughout the land would like to see this business plan and who won the contract for this plan as well as the tender process that was employed by MLA when they commissioned the business plan.  In commenting on the plan by processors to pay a well-known consultancy group to have a good look at DEXA – MLA came out and said they were bound by the rules to call for tenders.

The real issue is that MLA is meant to be responding to the direction and instructions from the levy payers that fund it. Yet it would appear that the processor levy funded body, AMPC, who, although it is not clear, are presumably funding this program jointly with Cattle Producers, are not happy with the proposed DEXA rollout and want to carry out their own independent review.

If processor levies have not been used by MLA to fund the DEXA development, the story is even worse. Why is MLA spending cattle producers’ levies to produce a DEXA solution to beef grading and yield measurement in abattoirs if the processors are not on side?

In 2016 MLA received $115 million in transaction levies, together with $46.4 million in Commonwealth matching R&D contributions and with other income had access to over $203 million to apply to operating activities.

This sort of money gives MLA incredible power over consultants and people writing reports, it seems there could be a danger that anybody writing a report that was critical of the MLA may be concerned that they won’t get any work from the MLA in the future.

Board selection process

When it comes to MLA board member elections, it seems most occasions there are around 150 applicants for this high profile board. The MLA staff shortlist applicants and then we have a selection panel that does the final selection.  If two vacancies exist at the AGM, members have the two selected candidates to vote on. People applying for the selection panel are selected by popular vote at the AGM, however the chair of the MLA board probably has enough votes to outvote a big percentage of producers, therefore the people on the selection panel could potentially be chosen by the MLA board.

It has often been said that no change to our red meat industry organisational structures  is not an option, and producers who do most of the paying have too little of the say.

Processors have a system in place where they have their own service company which gives MLA work for R&D, but refuses to pay towards any marketing. Surely producers could develop their own system along the lines of the processors system whereby producers have real effective control over the expenditure of their own levies and they can choose what they are going to fund and how much they will put towards each project.

As it stands now, cashed-strapped CCA has to bow and scrape to the MLA  for consultancy contracts to earn about $750,000 a year to help it fund its operations Consultancy contracts don’t seem to be let out by MLA through a tender process?  This of course makes it almost impossible for CCA to control and direct MLA on behalf of grassfed cattle producers, as it is meant to do under the current red meat industry structure.

The time has surely now come for the Government and grassfed cattle producers to get together and bring about the organisational changes needed to ensure that cattle producers have an effective sustainably-funded representative body to manage and direct the expenditure of the considerable sums of levy moneys paid by them to industry bodies each year.

 

 

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Comments

  1. Eion McAllister, 07/03/2017

    200million odd dollars is a pretty fair guaranteed income each year. About half is taken from the pockets of cattle owners at each point of sale by compulsory contribution without any redress or choice by the owner of the animals. There is no competition available for levy payers. The normal rules of commerce have an expectation that competitive market forces provide market place choice for sourcing of services. One can choose their agent, their selling platform, market your own animals directly or vertically integrate your own business into retail sales. You have no choice about where you can direct your interest in Rand D, Advocacy or representation. Despite all the statements about how worthwhile MLA is for the industry I have over the years shifted from a position of general support for its functions to a sense of unease over the worth of it to a position of outright resentment towards it. I think it is a very lacklustre outfit, bereft of competition in it’s sphere of operations. Smaller producers in this country are milked by the system and have little influence over it. It is now a self perpetuating bureaucracy which is as much interested in maintaining its existence as it is in doing anything else.If it had to perform in a truly commercial context it would be a very different organisation or it would be broke. Governments are not going to ever endorse an advocacy role for it and Industry bodies are beholden to it for their existence via the meting out of funds. Effective industry representation and successful political influence are vital for any industry to be successful and it doesn’t seem to be happening for beef. Compare our industry to the influence of the Banks or the mining sector and you get my drift.

  2. Rod Dunbar, 05/03/2017

    Interesting comment from MLA!!

    1. “but the need for more transparency and objective measurement in over-the-hooks selling has long been a high priority for producers – and all of industry”

    It would be of benefit for Mr Norton to explain how either he, or MLA, or CCA could actually know what the 200,000 CTL payers actually think on this matter. He has no direct contact with them, MLA cannot ID them, neither can CCA. When he refers to “industry” he can only refer to the membership of MLA and maybe the 10% in CCA and their satellites.

    2. Meat Industry’s Strategic Plan (MISP 2020)

    Again this document is a Cabinet Minute pertaining to the Processors and meat production a secondary industry; why should CTL payers fund $150 million program to benefit that them? They will not hand anything back to CTL payers. If by some stroke of sabotage it did become reality, the CTL levy will have to rise considerably; how do you propose to get that through, by applying politics at the Ministerial level?

    3. MLA’s governance and financial management is tightly regulated through the Australian Meat and Live-stock Industry Act 1997 and a Statutory Funding Agreement with the Australian Government

    Yes that is true because MLA is a federal government agency! Yes and that regulation contains elements like compulsory contributions to a supposed corporation; can Mr Norton show us where in the Corporations Act where compulsory contributions, and by association compulsory shareholdings to a Corporation are Legal? I can show him the section where it says its illegal!

    Most of our subscribers are not interested in how you, Mr. Norton as part of a government department choose your directors or how you operate because you’re a Federal Government entity; its up to the Minister and his minions to direct you; and the department tells us that they do.

    We do object to the subsidisation of the Processors and the Meat Industry generally at the cattle industry’s expense; and we should not be paying compulsory levy per se, and we need to seek candidates for federal political office that concur with these conservative ideals.

    All I can say about David Byard’s comments is that while ever we have these large amounts of levy money being collected, the vultures will keep circling!!

    Rod Dunbar – Director – United Stockowners of Australia

  3. David Byard, 04/03/2017

    Richard Norton,s comments are very enlightening and he makes very interesting points on my opinion piece. It is great and reassuring to learn about the structures and processes that are in place to ensure MLA’s governance and financial management is tightly regulated but the only comments that I made in my opinion piece about governance and financial management was to ask questions about the tender process for the MLA Dexa business plan and the $750,000 consultancy work carried out by the Cattle Council of Australia for MLA each year. Unfortunately Richard Norton does not address these questions. My opinion piece I also raised questions about the source of funding of the MLA Dexa business plan to date enquiring as to whether that work had been jointly funded by cattle producers and processors or just cattle producers and asked why this work had been carried out if the processors were not on side, but again, Richard Norton did not address these queries. Perhaps in the interests of all Beef Central readers Richard could now address these outstanding questions ? It is also great that Richard Norton has drawn Beef Central readers to the relevant links and sources regarding MLA’s voting process, however he did not address my central concern that MLA levy payers were funding the MLA’s operation only get one vote in the same number of candidates that are necessary to fill the number of MLA board vacancies. A situation is in sharp contrast to the processor levy funded AMPC board where seven directors are elected directly by processors and those seven directors then appoint 2 special qualification skills-based directors . Consequently processors unlike cattle producers have direct control and management over the expenditure of their levies.

  4. Richard Norton, 03/03/2017

    David Byard is entitled to his personal opinion, but the need for more transparency and objective measurement in over-the-hooks selling has long been a high priority for producers – and all of industry – as set out in the Meat Industry’s Strategic Plan (MISP 2020). MLA has put a proposal to industry to achieve just that, by fast-tracking the adoption of DEXA technology across industry. However, it is now up to industry to decide if MLA proceeds with the proposal in its current form, through an alternate funding model, or other means.

    Personal opinions are one thing, but misrepresenting the facts is another.

    MLA’s governance and financial management is tightly regulated through the Australian Meat and Live-stock Industry Act 1997 and a Statutory Funding Agreement with the Australian Government, and is more broadly subject to the Corporations Act 2001. The company is audited annually by independent external experts (Ernst and Young) and also reports to the red meat industry’s peak industry councils. Separately, MLA’s Statutory Funding Agreement requires MLA to be subject to an independent review. The 2016 review covering MLA’s governance, stakeholder engagement, planning and operation undertaken by ACIL Allen found that many programs are performing to a high level and confirmed that MLA has in place the governance arrangements, policies and processes to meet best practice principles and recommendations as ascribed by leading authorities.

    Mr Byard’s claims regarding the selection of MLA’s board members are also wrong. MLA’s Statutory Funding Agreement and Constitution specify that MLA have a skills-based Board recommended by a Selection Committee. MLA’s Constitution establishes a Selection Committee for the purpose of reporting to the members of the company on the suitability of candidates for re-election or election to the office of director at general meetings. MLA Directors are nominated through a rigorous selection process led by the Selection Committee and assisted by an external specialist recruitment firm. The Selection Committee is comprised of four independent producer representatives, three peak industry council representatives and two MLA Board members (with no voting rights). MLA staff do not shortlist applicants.

    All this information regarding MLA’s governance, financial management and board selection is freely available on the MLA website and in the company’s Annual Report. The board selection process has also been extensively covered in Beef Central here: https://www.beefcentral.com/news/three-directors-sought-for-mla-board-2/ and here: https://www.beefcentral.com/news/three-nominees-decided-for-2016-mla-board-positions/.

    Richard Norton
    Managing Director, MLA

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