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Opinion: History suggests Red Meat Australia proposal is an ‘impossible pipedream’

Peter Noble, September 5, 2019

Peter Noble

In this second part of his opinion piece on red meat structures in Australia, former Australian Meat Processors Corporation chairman Peter Noble looks at the history of red meat governance in this country, and concludes that the inevitable tensions among stakeholder groups cannot be assuaged by the creation of Red Meat Australia. Click here to view yesterday’s opening remarks.

 

 

 

 

WITH the introduction of the White Paper and the forceful recommendation for the creation of a supreme body to again gain sole control the red meat industry, it is time to reflect on the history of change in the industry. And change the industry has.

From the day that a motley lot of cattle arrived with the first fleet and escaped to grow into a reasonable herd at Cowpastures, the cattle industry was on a steady growth path where today it’s a major economic contributor to Australia.

The regulations in play, from time to time, reflected the state of the industry.

The overwhelming pollution from the slaughtering activity in early Sydney along the Tank Stream forced the industry to move out to a new works at Glebe Island. However, using Sydney Harbour as a dumping ground for the waste products of the slaughtering activity offended the early residents of Sydney and finally in the 1930s the move to Homebush was completed.

The government owned the works as I believe there was not enough capital in the industry to build the works with private capital.

Urbanisation and site pressures finally forced the government to close down the abattoirs in Homebush in 1988 and the business decentralised. Many small players opened up in regional areas and local government works became more active. The industry started to change again.

However, ten years later there was a strong call for change in the regulation of the Red Meat Industry. The closing of Homebush had a lasting effect on processing in Australia.

Statutory bodies have a natural use-by date and the AMLC, the regulatory body of the day, probably fell into that category. Remote bodies with government appointed board members and extraordinary powers were becoming a thing of the past and governing an industry in this manner with minimal industry participation, while it is in turmoil, was sure to fail.

As well, the industry was beset with major issues around residues and an outbreak of Brucellosis, both of which resulted in the collection of large levies.

And against this background the industry was not profitable and there were many insolvencies. The voice of the industry was changing.

The better processors expanded while others failed or left the industry, but those who remained wanted a greater say in the industry. The call became stronger as consolidation grew and the smaller abattoirs, who had been dominant and vocal, started to leave the industry.

After a comprehensive reform process the new structure under the Memorandum of Understanding was formed. The reform reflected, largely, the creation of peak industry bodies doing the advocacy and the creation of two new bodies to look after the Marketing and R&D.

“It is easy to see that the industry bodies need to reflect the realities of the industry, and any structural reforms which are not based on an exhaustive review of the industry is destined to fail”

The major theme of this restructure was for the participants, who were growing bigger and stronger, to be independent of government control and have more self-determination.

A short time later, the processors wanted access to their own levies and the Australian Meat Processor Corporation was established. It started out with a voluntary $0 levy but the processors’ camp was not happy, and the statutory levy was introduced. MLA set up the Donor company and processors set up the PIP programs to provide greater access for the processors to their levies and matching commonwealth funds.

The system was not perfect, but has worked reasonably well except that MLA controls a majority of the R&D and marketing for the processors and the live cattle industry.

It is easy to see that the industry bodies need to reflect the realities of the industry and any structural reforms which are not based on an exhaustive review of the industry is destined to fail.

Here are some rough reflections on the macro-state of the industry at present and let’s see if it is properly reflected in the proposed restructure.

Let’s say 72 percent of red meat is exported and 80 percent of that is done by the top 10 processors. These large processors pay levies right through the supply chain from the paddocks through feedlots and into the processing plants. They probably pay levies a number of times as the cattle move back and forward through the supply chain. So, the levies end up in several buckets; MLA, AMPC, Livecorp and the Australian Lot Feeders Association.

So, what happens in the domestic markets?  The other 28 percent of red meat processed is sold locally, and unsurprisingly, probably 80 percent of that is sold by the supermarkets. Butcher shops are struggling and will probably largely disappear in less than 10 years. Sad but true.

Processors reluctant to give mandates

So, who should have a say in the industry affairs? What do the processors think?

As we saw in the late 1990s and again in 2007, meat processors are reluctant to give mandates. Now that the position of processors is considerably stronger in the market, it is difficult to see how the processors will allow this proposed reform, which requires a strong mandate to be given to a largely unrepresentative body supported by well-paid bureaucrats.

You would think that the real voice of the industry would be the supermarkets, the processors and the producers. That doesn’t seem to be the case, though.

The levy stream through AMPC is taken and mixed with all levies invested under the direction of a central command. The governance of each of the RDCs is substantially different, and to ignore this is a folly.

And what of the 82,000 cattle producers who are clearly essential to the process, but rather unrepresented? Of course, there are some 200,000 PICs as well to fit into the mix. They make up the lion’s share of the $5 levy and really have no say in the spending of the marketing dollars or the R&D dollars.

Impossible goal

Against this background, it is clear that the tensions among players cannot be assuaged by the creation of a Red Meat Australia body.

It is the impossible goal to assume that the Red Meat Industry can present a unified front on all issues that confront it. Just have a look at how the industry is now structured!

This is a pipedream.

 

 

 

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Comments

  1. Joanne Rea, September 6, 2019

    Thank you Peter Noble for your wine and philosopy commentary.
    It is indeed naive to believe that all sectors of our diverse industry can be shoe-horned into one conglomeration.
    There is a plethora of competing interests and it is fundamental to the way our economy operates that that competition remains. It is also fundamental that each sector has its own strong voice.
    This proposed policy model does not even come within a bull’s roar of these requirements.

  2. David Connellan, September 5, 2019

    It’s unrealistic to expect that any statutory body will continue to fit the industry’s requirements ad infinitum. Circumstances change – often dramatically. There should be a mandatory sunset clause where a review is held every 7-10 years, either to continue in its current form for another 7 years, or start again. I agree that any suggestion that all sectors can work harmoniously under a Red Meat Australia platform is incredibly naive.

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