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MLA responds to producer concerns in Senate hearing

James Nason, 24/06/2014

Meat & Livestock Australia representatives took the opportunity presented by last Friday’s Senate Inquiry in Canberra to respond directly to common themes of concern raised by producers about MLA-related structural and performance issues during the previous public hearings around Australia.

Here is an issue-by-issue breakdown of how the MLA contingent of Dr Michelle Allan, Lucinda Corrigan, George Scott, and senior MLA executive Dr Peter Barnard responded to some of the key concerns that have been raised so far:

Grassfed producers lack influence on MLA board selection process 

Several producer representatives have told the inquiry that the MLA board selection process does not give grassfed levy payers an adequate level of influence that is commensurate with the volume of levies the sector pays, and also believe levy payers should be given a choice of candidates for each available position, not just one candidate for each position.

Under the current arrangements the MLA board selection committee is responsible for shortlisting and interviewing candidates for each available board positions , with candidates selected according to the particular skill-sets deemed to be required for each available position. The selection committee then puts forward one candidate for each available board position for a vote by members at the next MLA annual general meeting.

Producers have also expressed concerns that sitting MLA board members have more seats on the board selection committee than any of the individual sectors that fund MLA.

The nine-member committee comprises three sitting MLA board members, including the MLA chair, two grassfed cattle sector representatives, two grainfed sector representatives and two sheepmeat sector representatives. The grassfed sector generates $54m in annual levy income for MLA, the sheepmeat sector around $28m and the feedlot sector $8m.

MLA chair Dr Michelle Allan said the existing skills-based selection process was considered good practice by the Australian Stock Exchange, adding that a popularity vote would not necessarily give the board the skills required to drive the company forward.

However, she added that the MLA board has made an offer to peak industry councils that MLA board members stand down from all selection committees at the next AGM.

She said the MLA board had always agreed to a reduction in the number of members at the selection table, but the MLA Board could not change MLA’s constitution. Only levy payers could change its constitution by a vote at the AGM.

“All MLA can do, as it has done twice before my time, is put that proposition to the levy payers. If it does not reach the required 75 per cent of those who vote, there is nothing MLA can do,” she said.

Dr Allan said MLA was working with the peak industry councils on the issue.

“We need to do that with our peak industry councils, but we have put that position forward that we are happy to have none or three, whatever the industry is looking for.

“We have a skills matrix which we can give the selection committee. We can also show them what the skills look like minus the current standing. We also have an external person run our board processes review. We have offered that up as well.”

Dr Allan said that in her experience the constitutions of other RDC corporations require that current board members do not sit on board selection committees.

“At our first selection committee meeting this year I put that on the table that our board was happy for none of us to be on the selection committee.”

 

Automatic allocation of AGM voting entitlements

To receive voting entitlements prior to each year’s AGM, producers currently have to lodge a form declaring how many cattle they have sold in the previous financial year, and by association how much they have paid in $5/head compulsory cattle transaction levies. They are then allocated voting entitlements based on the information they have provided.

The latitude that exists for false information to be reported and incorrect voting entitlements to be allocated, and the inability to automatically identify levy payers, levies paid and allocate voting entitlements has been a continued source of concern aired by producers at the inquiry.

Dr Allan said MLA reviewed the changes that were required to automatically allocate votes in 2005. At the time, she said, it was determined that would cost an extra $1.48 million on top of the existing annual levy collection costs of $1.1 million. Dr Allan said industry representatives deemed the additional costs as excessive, and the industry decided not to change the process.

She said the MLA board will revisit the issue and will work with the Levies Revenue Service to set out the options and cost for industry to reconsider.

 

Transparency of MLA project reporting

In response to claims MLA lacks transparency in reporting of its use of levy and tax payer funding, Dr Allan said the organisation met all required accounting standards for public companies and accountability standards through its Statutory Funding Agreement with the Government.

Throughout the inquiry Liberal Senator Bill Heffernan has repeatedly criticised MLA over the large number of projects it has funded but which have not delivered a final report .

Dr Allan said there are currently 2756 final reports and summaries for R&D projects available online.

She aid there were also 3076 projects that were not required to produce a final report.

“For example, when a project is a delivery of workshops or forums, printing a publication, sponsoring a field day, we do not require a final report to be published,” she said.

“In addition, some projects are terminated before they are finished—a sign that we have a review mechanism in our project management system. MLA will continue to review its policies around which projects require final reports to increase its transparency.”

Northern cattle producer George Scott, who joined the MLA board last year, said producers were understandably sensitive about how their levies were being spent.

He told the Senators that from what he had seen in his short time on the MLA board to date, the organisation has been “very, very careful” to account for each levy stream and each is spent.

“MLA is quite forensic in how they account for that money and make certain that it is accountable and that those streams are able to be followed through…MLA works very hard to make certain that those dollars can be followed through,” Mr Scott said.

 

MLA ‘disconnected’ from members

Dr Allan said MLA recognised that it had to continually review how it connects with industry.

“Whilst we currently do run events, publications and consultative groups, we are in the process of reviewing the effectiveness and efficiency of all our communication and extension programs,” she told the inquiry.

“With Richard’s appointment, the board has signalled to the industry that MLA is reviewing itself.”

“The board recognises there are opportunities for MLA to improve our processes and systems, and I can assure you that the board is driving these reviews very hard through our new managing director.

“The board recently appointed Richard Norton as our managing director to drive changes throughout the company. Richard comes to MLA with 20 years experience in agriculture, refocusing organisations and ensuring they perform.

“With Richard’s appointment, the board has signalled to the industry that MLA is reviewing itself.”

 

MLA’s role in delivering better producer returns

Dr Allan said producer returns were affected by many things, including labor costs, energy costs, infrastructure costs, and off-farm costs which were double or more than competing countries.

Most of these were out of MLA’s control, she said.

MLA’s work had provided returns that far outweighed its costs, she said.

“The market access expertise within MLA has led the export meat and livestock market to return $16.97 billion to this country annually—that is $46.6 million a day.

“The cost of MLA is $162 million a year, which includes all our overseas offices facilitating the export focus.

“The funds within MLA are made up of levies, tax taxpayers’ money and processor funds. The grass-fed cattle component is $54.2 million. The cost of MLA to Australia is covered in three days return to this country.

Asked by Nationals Senator for Queensland Barry O’Sullivan if MLA was able to influence the farm-gate profits, Dr Allan said that through R&D work it could effect costs on farm and productivity of animals and pastures, but what MLA could not control were the kill numbers.

“In our first presentation to this Senate inquiry, last year was the biggest kill of beef cattle in this country since 1975. If all those animals are lined up at the processor door, the processor can call the price. That is supply and demand.”

 

Why has domestic beef consumption declined despite MLA promotional efforts?

Labor Senator for South Australia lex Gallacher noted that one of MLA’s strategic imperatives involved “aggressive promotion in the domestic market”. He questioned why domestic beef consumption has declined by 1.4pc annually for the past 13 years, falling to 28.8kg per head, despite of the expenditure of grassfed producers’ levies on beef promotion over that time.

Dr Allan pointed to changing National Health and Medical Research Council (NH&MRC) guidelines as a reason.

“I go back to the NH&MRC recommendations. With consumption levels, if you think about it, when we are all kids we would have meat seven days a week. The NH&MRC guidelines say three. If you look at the community and the community expectations, we are up against those community expectations and published guidelines on good and healthy eating…”

Intervening, Senator Gallacher said he wished consumers would take as much notice of the guidelines on cigarette smoking, alcohol and soft drinks.

Dr Allan added that MLA spends only $5 million on all marketing in Australia per year.

“If you look at the people we are up against like Coca-Cola and others, $5 million is not a big amount of money to get your message over.”

Was inconsistent eating quality of beef a factor in the ongoing decline in domestic consumption, Senator Gallacher asked?

Dr Allan said research showed that was not the case and that beef eating quality had improved.

“Nutritional understanding of red meat and lean red meat has also improved.

“But, as was said by the Cattle Council, we have a lot of immigrants in this country who do not naturally eat red meat.

“So, in fact, if the MLA had not continued to promote red meat, it could be lower.”

 

 

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