News

Levy restructure: What are the implications for MLA?

James Nason, November 4, 2014
Richard Norton

Richard Norton

It is still too early to judge what the implications will be for Meat & Livestock Australia if grassfed levy revenue is redirected to a different cattle industry body, managing director Richard Norton told Beef Central yesterday.

A decision by Cattle Council of Australia last week to back the restructure model recommended by the Senate Inquiry into grassfed industry structures means it is now more likely that grasssfed levies will flow to restructured version of the council in future rather than to MLA as they currently do.

Grassfed levies represent the dominant source of MLA’s annual revenue at present, worth around $61m last financial year. Matching Government contributions accounted for $47m of its annual income, followed by sheepmeat levies at $34m and grainfed industry levies at around $10m.

Mr Norton has been overseeing a review and restructure of MLA since his arrival in June. The review was initiated in response to stakeholder criticisms voiced during industry reviews and the senate inquiry about the effectiveness of MLA’s levy investment decisions and concerns about its approach to consultation, transparency and accountability.

The restructure he unveiled in August involves a reinvention of MLA’s R&D investment consultation model, an increased prioritisation on livestock productivity and eating quality, a more sophisticated, evidence-based approach to future marketing strategies, and a planned 10pc or $6 million reduction in fixed costs by the end of 2015. About 30 staff from 240 have already left since the review process commenced.

Mr Norton said it was too early to judge how MLA would be affected if grassfed levy funding and associated government contributions are re-directed to another organisation.

“There is no real detail around it yet, and as we’ve said before, it always has been an industry decision,” he told Beef Central.

‘Clearly levy payers are angry’

Having just returned from six producer meetings in Queensland, he said it was clear just how tough things have become for many grassfed producers.

“Clearly levy payers are angry and they are clearly saying the levy hasn’t done anything to increase farm gate price. That’s even after I explained that over the past two years 17m livestock have been slaughtered or live exported – the largest number ever – due to unprecedented drought conditions,” he said.

He said producers now have big decisions to make about what they want their levy-funded bodies to do and where they want to see levies invested.

For example a common theme of producer feedback last week was that many believe the Government should help to implement a socialised cattle marketing model, where the price is pre-determined before the livestock leave the farm and everyone gets a similar price.

Many also expressed the view that MLA should not be focused on downstream consumer “pull-through” marketing but on helping producers to market livestock. Steel producer BHP did not spend money helping to market cars in Asia, they argued. “We’re livestock producers, we want the levy used to market livestock,” was a common refrain.

“I talked to producers about the $8m that the processing sector invested in international markets last financial year.

“We have had record exports and higher demand than ever before and it’s obvious to me that without this export demand the impact of the drought at farm gate would have been even more severe.

“The ‘clean, green and safe’ reputation of Australian red meat in international markets didn’t just happen overnight. It is the result of industry investment over a long period of time and it is critical to the continued and growing international demand.”

Gap in understanding of  structures

The roadshow sessions also underscored a gap in understanding as to how industry structures work and the scope of activities MLA is permitted to engage in under its existing statutory funding agreement.

For example, some producers were surprised to hear that MLA was not able to engage in lobbying or advocacy on behalf of industry, while others expressed the view that levy funds should be used to support producers in the current live export compensation action against the Government, which was not within the current scope of MLA’s existing SFA.

As a new MD coming into MLA, Mr Norton said he had also noticed a significant disconnect between a view held by producers that MLA did not consult with industry over how levies are spent, and his direct experience of seeing how closely MLA interacted with numerous councils, committees and taskforces to determine where levies would be spent.

This reflected a lack of information being provided to the levy payer about the consultation and investment process, he said. “There is an issue around levy payer understanding of how levies are spent,” he explained. “MLA needs to improve how we communicate this to levy payers. It is something we have committed to doing and it needs to be a lot simpler.”

While grassfed levy funding represents the lion’s share of MLA’s annual operating budget, the redirection of that funding elsewhere would have important ramifications for the other peak councils MLA serves, namely the Australian Lot Feeders Association, the Sheepmeat Council of Australia and the Goat Industry Council of Australia.

Mr Norton said he believed it was unlikely that MLA could continue to exist just to do governance for the remaining organisations. “I suspect that if you give the levy to one you would have to consider at least giving the levy to all.”

Such decisions were up to industry to make, he said.

If producers did not believe the current levy system was working, they then had to understand how they wanted to restructure it.

“If they want to use levies to back a class action against the government, they need now to make sure that they get that structure in whatever system they get.

“If they want to use levy to market livestock and not red meat, then now is the time to implement it.”

Is MLA restructure still relevant?

Asked if the restructure he is implementing will still be relevant should grassfed levy funds pass to the Cattle Council of Australia, Mr Norton said it had been designed to deliver what producers had been asking for – transparency, and greater say by producers over how funding is spent.

“I keep saying that transparency delivers accountability.

“I can only account for the time that I have had at MLA, and I have promised to deliver to levy payers transparency and take MLA’s hands off how R&D decisions are made.

“Under the restructure, within 18 months levy payers will clearly understand that they provide the strategic direction for MLA’s investments. All projects will either have come up through grassroots consultation or will be developed in response to the Meat Industry Strategic Plan and we’re implementing new systems to give increased rigour around methodology used for R&D.”

‘It is a critical time for the industry and let’s hope whatever decision is made is the best decision for the industry.’

“We are working to deliver the improved transparency and accountability levy payers are looking for.

“There are a lot of options to consider here. If MLA is to continue, our work on becoming a high performing organisation will stand industry in good stead. If Cattle Council of Australia takes parts of, or people from MLA, this work will still be worthwhile.”

Under a scenario where CCA would receive grassfed levy funding in future, decisions on the dispersal of levy funding may have to be contestable.

This would effectively make MLA a “middle man” like any other organisation competing for project funding, such as the CSIRO or universities, rather than its current role as a facilitator of R&D and marketing services for the various peak industry councils it serves.

In the event that a future decision is made to effectively terminate MLA, Mr Norton said the existing SFA allows for a period of about 12 months to wind the organisation up.

“This was announced on Friday, there is a long way to go, and there is no detail around it. Industry will make its decision and it will probably take at least 15- 18 months to play out.

“It is a critical time for the industry and let’s hope whatever decision is made is the best decision for the industry.”

 

HAVE YOUR SAY

Your email address will not be published. Required fields are marked *

Your comment will not appear until it has been moderated.
Contributions that contravene our Comments Policy will not be published.

Comments

  1. Andrew Morton, November 5, 2014

    Organisations such as NSW Farmers, which incidentally represent a much larger number of MLA levy payers then ABA and CCP combined, need to stand up and show their support for the current structure and distribution of levy funds. There are more than 20 years of Beef CRC research, much of which has not made it to the farm gate, do we really want CCA looking after the funding that could make that research available to farmers?

  2. Sandy Maconochie, November 4, 2014

    It seems that the CCA have rolled over towards the Senate model because that model gives complete control of “all” the grassfed levies. The current system works fine with industry peak councils steering MLA and Mr Norton’s restructure is smart.
    The CCA has been cash-strapped for years hence using levies of late in part for its financial existence. A new representative body receiving all grassfed levies to first fund itself, then its advocacies, then after that redistribute to whoever it sees fit (including MLA), certainly doesn’t have a genuine ring of efficiency nor transparency.
    Why can’t it be everything that is suggested without upsetting the levy applecart? The other peak councils manage the current system well and should this new idea succeed, what then happens with them?

  3. Michael Clarke, November 4, 2014

    We have made no progress if the funds are going to be hijacked to serve a section of the industry. I don’t believe that producers levies should be used for a case against the Government as we all suffered because of the glut of cattle, but the only winners from the class action will be people who lost directly, not the industry as a whole

Get Beef Central's news headlines emailed to you -
FREE!