News

MLA responds to questions about delayed price transparency report

James Nason, June 16, 2016

Two reports commissioned by Meat & Livestock in the past 18 months have examined the pros and cons of introducing United States-style mandatory beef price reporting in Australia.

The first report, titled Milestone 4, was completed in April 2015, and was clearly positive about the potential benefits of mandatory price reporting in Australia.

The report said any increase in price disclosure would assist Australian cattle markets to work more efficiently in matching beef and co-product production to customer requirements (see separate story).

That report was not released publicly at the time of its completion in April 2015.

The second report, titled Milestone 5, was completed in May 2016, and was less positive in its assessment of the value of mandatory price reporting in Australia.

It concluded that while the benefits of introducing mandatory price reporting would exceed the costs, the benefits were likely to be small (see separate story).

The second report was released publicly by MLA via a media release on May 25, 2016, at which time the earlier Milestone 4 report, completed over a year earlier, was also published on the MLA website.

Why was the first, more favourable report not released when it was completed, and its release seemingly “hidden” behind the second, less favourable, report, upon its release more than a year later?

Groups including the Australian Beef Association and the Victorian Farmers Federation’s Ovens Valley branch have drawn attention to the delayed release, viewing the developments as an example of opponents of mandatory price reporting successfully working to suppress findings that support its introduction here.

Beef Central asked MLA last week why the reports were released together, despite the first report having been completed over 12 months before.

In his reply MLA managing director Richard Norton said both reports focused on different aspects of mandatory price reporting – the first on possible benefits, the second on practicalities and costs of implementation.

Because they were linked, it was important they were released at the same time and read together, he said.

Mr Norton said the price transparency project was initiated by Cattle Council of Australia, partly in response to a recommendation from the grassfed cattle senate inquiry, and MLA was engaged to oversee the project.

The focus was to consider options for increasing price transparency in light of concerns that a lack of price information along the beef value chain was affecting marketing and investment decisions in the industry.

The project was overseen by a steering committee comprising representatives from CCA, the Department of Agriculture and Water Resources, industry and ABARES.

Mr Norton said the project was divided into five progress sections – referred to as ‘milestones’ – with each section designed to build on the last.

The goals of each section, or milestone, were to:

  1. Engage contractors to execute the project
  2. Review other systems available in other markets, including the US
  3. Investigate price transparency at each stage of the Australian cattle supply chain
  4. Use information from sections 2 and 3 to examine the theoretical benefits of improved transparency
  5. Investigate the practicalities of implementing particular price transparency systems across the Australian cattle supply chain

He said the nature of the project meant that milestones four and five had to be considered and released together.

“Price transparency is a complex matter and, implemented to its fullest extent, has many implications for the beef industry,” he said.

“Given this, the price transparency project was designed to be considered in its entirety, rather than viewed as individual progress sections.

“For this reason both milestones four and five need to be considered together and were released in close succession.

“While milestone four outlines in theory the benefits that full price transparency could provide, milestone five provides context. It outlines critical factors like cost and practicalities surrounding implementation.”

As an example, he said, one of the objectives of the project was to examine the US system of price reporting and the application of that to the Australian industry, given there are key differences between both industries and systems.

The US industry is feedlot based, of which 80 per cent of product is sold on the US domestic market.

In contrast, the Australian cattle industry is predominantly export focussed, with our product sold to more than 100 international markets.

“It’s also important to note that Milestone five acknowledges that a reasonable amount of cattle and beef market information already exists in Australia but does suggest a range of further initiatives.”

Mr Norton said the Project Review Committee considered these and other issues when it met in December to review the project.

At that time it made a series of recommendations urging more work be done.

After considering the project report and the review committee’s recommendations in March, the CCA asked MLA to conduct further examination of:

  • The “carcase cut out option” to encompass determining values for export markets, domestic markets and whole animal products;
  • The development of a reporting system to enable up-to-date data on wholesale beef prices, offal and co-products;
  • The need for greater education to enable producers to effectively market their cattle.

“This work is already underway and MLA will continue to report on its progress,” Mr Norton said.

“For instance, MLA has recently made improvements to its market information reporting, including our weekly Over-the-hook (OTH) cattle indicator reports have been revamped to assist producers and industry to better analyse the key market trends.

“One of the important changes in the Queensland, NSW and Victorian reports is the inclusion of charts to make interpretation of price differences between weights and livestock categories much easier.

“The heaviest weights, fat depths and muscle scores of the cattle categories included in the graphic representations are aimed to best reflect those most sought after by processors.

“MLA’s renewed OTH cattle reports also include an explanation of how best to use and apply the indicators for your business needs, how they’re generated and what percentage of the state’s processing capacity contributes to the calculations.

“The number of indicators derived in each state depends on the number of contributing processors, but in Queensland alone, more than 98 indicators are generated each week.

“The next steps for MLA include an online platform to facilitate easy data sharing for processors and producers, and education to assist producers to best use the information available.”

Another major step forward, he said, will be the progression to value based marketing, assisted by a $4.8 million Australian Government grant to develop advanced new measurement technology that will transform the meat industry.

The joint project, led by MLA, will accelerate the development and introduction of new technology including X-ray and 3D digital imaging for accurately measuring live animals and carcases – paving the way for value-based pricing based on known meat yield and eating quality.

This technology, once developed, will enable producers to be paid on the objective measurement of the product they supply, allowing improved compliance to pricing grids, better targeting of markets and maximised profits.

“As for the big question of any change from a voluntary price reporting system to a mandatory system, this is one that industry must itself resolve, not MLA which is the industry’s service provider.”

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Comments

  1. Eion John McAllister, July 14, 2016

    And still the charades go on and producers interests are sidelined again. Supporting this mantra that technology is the saviour of the beef producer and spending more producer money on projects that allow processers to find even more ways to reduce the payments provided to producers and minimise the risks to processers by being able to have another means to set grid specifications with phantom premiums for yield etc is a pretty ordinary way to support producers. There are a lot of parts of Australia where the environment and climate dictates the running of cattle breeds that are never going to be able to provide yield levels and meet specs that provide access to premiums. The HGP free crap story that sections of the industry peddle is an example of technology that has enormous benefit for producers and their profitability and they are denied market access by a scurrilous and unfounded marketing strategy that prohibits perfectly safe and useful technology from enhancing producer returns. Meanwhile the manipulation of specs for the breeds and entry weights have been altered to ensure that the producer or backgrounder wears the cost of meeting the higher spec requirement and there is no premium paid but there is more likelihood that there are fewer days on feed to meet the processors contract specs. MLA and producer organisations are missing in action in refuting this rejection of a technology that works and benefits producers and instead is happy to continue to support costly and ultra high tech research that enables processors greater profitability. From the eyes of small producers the industry representative bodies and the gravy train are friends of the big players in the industry and it is their interests that they seem to prioritise. All their good ideas cost producers and I don’t see a 12 dollar benefit for each dollar in levies that I pay despite the story peddled by MLA about the multiplier effect.

  2. Philip Downie, June 16, 2016

    What a “load of” from Mr Norton, if they were to be read together why was only one released publicly and the other just put up on the website. Are these guys for real? Future technology, what is needed is farm based technology no point doing all this once it gets to the processor too late then and who is going to have an Xray unit? Develop things for use at farm level, too hard, with grower levies.

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