BUYING and selling slaughter cattle through direct consignment is not like ‘trading lumps of wood’, processors who do not support public disclosure of grid prices suggested this morning.

Beef Central approached large multi-site beef processors Teys Australia, JBS and NH Foods for a response after competitor Thomas Foods International announced yesterday that it will join NSW processor, Bindaree Beef in publicly disclosing current grids via its website (see today’s separate story).

Bindaree’s and TFI’s decisions follow recommendations made by the Australian Competition and Consumer Commission last year as part of its Beef Market Study, that to improve transparency and industry efficiency, cattle buyers using price grids should make them publicly available to producers in a timely manner.

The study’s final report recommended that grids should be published in a prominent position on a processor’s website and also be made available through an unconditional phone request as soon as practicable after prices are updated.

While TFI and Bindaree now follow that recommendation, other processors say there are compelling reasons why they have chosen not to post current grid offers on their websites.

Much of that was to do with the relationship and critical need for direct communication between livestock buyer and seller, they said.

Just one of the reasons raised was the risk that producers might not adequately understand or appreciate the differences that existed between one company’s grid offer and another – that could have significant impact on the ultimate price achieved. Weight and fatness tolerances were good examples, one processor pointed out.

Testimony delivered by AusMeat CEO Ian King and others during the ACCC and Senate inquiries last year clearly flagged the lack of understanding among some beef producers about how price grids worked. That process led to a producer education program being implemented, to start to address the problem, including this webinar hosted by Beef Central, which attracted almost 500 stakeholders.

Teys Australia managing director Brad Teys, said one of the biggest issues with simply posting grids online was that it reduced the opportunity for the company livestock buyer to directly ‘engage’ with the prospective supplier in a meaningful way.

“It’s all about relationships. We want to talk directly with our prospective suppliers, and we feel simply posting grids online would damage that opportunity,” he said.

“It’s never going to be like buying a set of dumb-bells or an exercise bike on Amazon or eBay. Beef is a relationship-based industry, and having that first-hand engagement is vital,” he said.

There were times when grids could change two or three times in a day – both upwards and downwards, Mr Teys said.

“When the market is going backwards like this due to over-supply, if major competitors were compelled to post their grids as they changed – perhaps hourly – it would be very easy for other stakeholders to draw the conclusion that competitors were price-signalling to each other,” he said.

“If you wanted to introduce a mechanism that allows processor competitors to easily signal price movements to each other – mandatory public grids would certainly do that,” he said.

Nor did it address the tendency for many processors to offer ‘plus-five’ or ‘plus-ten’ on top of the nominated grid offers, at certain times in the supply-demand cycle.

Mr Teys said his company remained ‘neutral’ on the issue of publicly-accessible grids, and if pushed by the ACCC to implement it, would probably do it. But he stressed that he saw serious negative implications for the industry, particularly when cattle prices were in decline.

“Under such circumstances, some producers would very quickly accuse us of price signalling –following each other all the way down.”

He said the relationship between producer and processor relied heavily on communication.

“We really need to engage with producers in a meaningful way when trading over the hooks.  Every transaction is a negotiation, especially when cattle turn-off tightens. Buyers have to be talking directly to their producer contacts – relationships and intuition will always matter in this area.”

“Cattle aren’t like that – they’re all different; the seasons differ from year to year; the turnoff this year might be later than last year – all these things have to be considered in the transaction, and that requires direct communication.”

General manager of NH Foods’ Oakey Holdings, which runs large export abattoirs at Mackay and Oakey in Queensland and Wingham in NSW, Pat Gleeson said his company chose not to publish grids, because the downsides clearly outweighed any advantages perceived by the ACCC.

“Ours is a relationships- based business, with a strong level of trust,” Mr Gleeson said.

“There’s often differences between how our grids are set up and others, that producers could easily overlook or misinterpret, without having that discussion,” he said.

“Those phone discussions between buyer and seller add a lot of context – providing a sense of what cattle he or she has coming through the system, or whether he has cattle available, if a hole needs to be filled in a kill. All that gets lost if today’s price is simply posted on a website somewhere. We need our valued suppliers to continue to talk to us.”

“Sanitising the process and treating slaughter cattle like a commodity would destroy that vital communication,” Mr Gleeson said.