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Processors reject MLA’s objective carcase measurement proposal – in its current form

Jon Condon, 23/02/2017

Red meat processors remain unconvinced that Meat & Livestock Australia’s objective carcase measurement project in its current form justifies industry-wide investment, identifying a long list of “conceptual, methodological, and policy-related deficiencies” in the proposal.

domestic-beef-processingThe response appears to leave MLA’s ambitious $150 million objective carcase measurement implementation project in limbo in a financial sense, with expectations that processors would be involved in any funding model.

Processors stress, however that they are not opposed to adoption of OCM per se, but simply to the ‘fast-track’ project in its current form.

Opinions also contrast strongly about where the OCM technology development process for beef carcases is up to. Some large processors claim a commercially-viable system for beef is still ‘years away’, while MLA remains adamant that technology for beef is close to being operations-ready.

One of Australia’s largest processors was continuing to trial and ‘prove-up’ OCM livestock technology in its plants, but said there was ‘still a long way to go’ due to the complexity in a beef carcase.

Launching its proposal at November’s industry annual general meetings near Adelaide, MLA proposed the installation of Dual Energy X-ray Absorptiometry (DEXA) technology in 90 AusMeat accredited abattoirs across Australia, at a cost of up to $150 million.

Processors at the time told Beef Central they had been taken by surprise by the announcement, claiming a lack of prior consultation over the proposal.

One of the prime motivators behind MLA developing Project 150  was that the introduction of OCM was seen as a means of providing more independence and accuracy in the carcase grading and pricing process, and to rebuild producer confidence in how carcase prices are determined ‘behind closed doors’ in abattoirs.

Prioritising the introduction of objective carcase measurement was also a key recommendation for the industry in the Australian Competition and Consumer Commission’s interim report, following a six-month investigation last year of the cattle and beef supply chain.

“Once implemented, the information arising from this technology will greatly enhance both the objectivity and the scope of carcase feedback provided to producers,” the ACCC’s report said.

MLA managing director Richard Norton said the move to fast-track the rollout of OCM would pave the way for scientific measurement of saleable meat yield, future value-based marketing and industry-wide productivity gains through processing automation, genetic improvement and data-based on-farm decision making. Longer term, he also expected the project would reduce the industry’s annual multi-million cost of grading.

Processors remain supportive of principle of OCM

Late last year, during a briefing to agriculture minister Barnaby Joyce, the Australian Meat Industry Council said processors needed time to assess the Project 150 feasibility study and see detailed implementation plans to ensure that the technology was rolled out in a ‘responsible and cost-effective manner’ and ‘actually delivers to expectations.’

“All of industry is behind this initiative (OCM), however it is critical we take a cohesive and consultative approach to its introduction to make sure all supply chain participants benefit,” processors told the minister.

Some of Australia’s larger processors are already well down the path of investigating objective carcase measurement technology for their own commercial purposes. Whether the DEXA technology will fit their objectives or be welcomed by them remains to be seen.

AMIC said while it remained a strong advocate for OCM and its importance within the Meat Industry Strategic Plan, the R&D must deliver commercial outcomes for the entire industry for it to succeed.

“This will require an intensive feasibility study into the technology, and substantial due diligence by all supply chain stakeholders,” it said.

One processor asked how such a $150 million investment would benefit the processing sector, in terms of reducing costs. Who’s the real beneficiary from this process? Is it about satisfying a political process, via a senate inquiry which is looking to deliver in recommendations, or to appease MLA’s producer constituents by promising higher farmgate returns?” the processor asked.

Letter outlines AMIC’s concerns in detail

The Australian Meat Industry Council in late December wrote to MLA chair Michelle Allan outlining its reasons not supporting the Project 150 proposal in its current form.

AMIC listed a series of “conceptual, methodological, and policy-related deficiencies” in the proposal. Some of these included:

  • The DEXA technology, whilst widely used in many industries, was only now being applied on a pilot basis in selected red meat processing facilities in Australia to measure lean meat yield. The research was yet to conclude if DEXA was the most suitable technology for the red meat industry, or whether MEXA or CT technologies would be more suitable. Accordingly, it was premature to announce a $150m investment (which still lacked any viable financial scrutiny) without sound and verified information on the technical and commercial viability of the technology in practical processing conditions, AMIC said. The calculation of the cost of the project assumed that without the cost of the technology being supported by industry and, under one scenario, matching government funds, the technology would not be adopted. “Without an analysis of the commercial viability of the technology in the absence of industry funds, it is impossible to say whether the investment by industry would be inadequate, excessive, or anywhere in between,” AMIC said.
  • AMIC said the analysis of the benefits of the DEXA technology was driven by assertions about aspects such as the ‘pass-through’ of those benefits to producers. “No evidence is provided to support those assertions. The analysis produced appears to attribute all the purported benefits that could be generated by various changes to the value chain solely to DEXA OCM technology. This is clearly an exaggeration,” it said.
  • An assertion that without the $150m investment, the uptake of OCM would take place more slowly, assumed that the widespread adoption is justified, AMIC said. “This requires a proper cost-benefit calculation both at the micro (plant) level under commercial considerations and the macro (industry and public interest) level. Without that analysis, no industry stakeholder can reach the conclusion that an expedited introduction of the technology is justified, rather than a slower one. It is simply an assertion that is not supported by evidence.”
  • The assertion that without the project, only larger processors would implement OCM, was not supported by evidence, AMIC said. “This assertion implies that the technology is not scale-neutral, however there is no evidence provided to this effect. Moreover, it assumes that MLA and the government have a justifiable interest in engineering the structure of the red meat processing industry through this project. AMIC is not aware of any decisions made which have devolved to MLA the responsibility for using industry (or public) funds for such a purpose in the red meat processing industry. The processing sector’s service provider, AMPC, has no mandate to facilitate structural engineering in the industry in this fashion, and accordingly AMIC/AMPC could not endorse the use of its funds for such a purpose.”
  • The Australian Meat Processor Corporation provided information to last year’s ACCC cattle and beef market study, to the effect that there was no evidence of systemic deficiencies in the grading and reporting system. “The fact that producers have complaints about feedback does not mean those complaints are justified and supported by substantive evidence,” AMIC said. “Information provided by processors has indicated there are in fact only a small number of areas which are generally causing concern, mostly where there is subjective measurement of carcase attributes such as dentition, fat score, and colour. The adoption of OCM technology offers a means of addressing these specific issues, but this is subject to the technical and commercial viability of the technology in practical processing conditions. The MLA proposal appears to view OCM as a means of transforming the entire supply chain, which is entirely disproportionate to the nature and dimension of the issues to be addressed.”
  • The assumption in the MLA proposal that data generated by OCM would be accessible by producers would require considerable research and analysis to be considered economically justifiable and commercially warranted, AMIC said. “The provision of data is not without cost, and many processors would need to consider carefully the commercial and other ramifications of generalised data release. We reiterate the point made about the small number of specific areas of subjective measurement causing concerns that might be addressed by OCM technology. It is entirely disproportionate to this task to require generalised release of processing data as appears to be required by the MLA proposal.”

The letter said AMIC and AMPC members had already established R&D projects to develop and test appropriate technologies to address the specific issues associated with subjective measurement.

These projects (including the trial DEXA installation at Teys’ Rockhampton plant), were of a ‘pilot’ nature, as was entirely appropriate for the development and introduction of new technology such as OCM under realistic, commercial conditions, it said. Beef Central was told the processing sector had already spent some $6 million on development and investigation into objective carcase measurement technologies.

“AMIC and AMPC plan to investigate the results of these projects, and the potential for their extension more broadly within the industry,” AMIC’s letter said.

“Once it is more clearly understood what the technical and commercial conditions might be under which the technology will successfully address the specific issues, then it will be possible to identify any requirements for further investment in the area, and the possible use of industry and/or other sources of funds.”

“AMIC/AMPC has funds available for such investment, but if this proves to be inadequate for the scale of investment required, then it will be determined whether there is a justification for funds from other sources, such as MLA. This is the proper approach to the determination of R&D investment in the red meat processing industry.”

The letter said both AMIC and AMPC remained concerned about the use of levy funds – be this actual or securitised – in the manner described in the Project 150 outline.

“Until the results of these pilot projects bear fruit, and a proper evaluation of the basis for a major program of investment in OCM technology adoption is carried out, we are unable to support any further development of OCM by MLA in the form described,” AMIC said.

 

 

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Comments

  1. Catherine Ainsworth, 28/02/2017

    In light of the quantum of investment required, this due diligence should be applauded, rather than questioned. Corporate governance standards also require those who commit funds to long term, game-changing technology to make decisions based on industry good, and not be rushed into deals that benefit the technology provider in the first instance. Red meat producers should also ask the question about the best use of levy funds of this magnitude – and the motives and private interests of those making the case that this is suddenly urgent.

  2. Eion McAllister, 27/02/2017

    One of the assumptions that underpin many ideas relating to the applications of technology is that replacing people with machines is the answer to improved productivity, profits and the woes of the world. Robotic processing is something that will destroy jobs for many Australians and while it may improve the margin for processors it will have huge social impacts for sectors of the beef industry and for many rural centres.Producers are mindful of the need for them to have viable rural communities. I think many have a sense of disquiet about MLA being a facilitator of reduction in jobs through the adoption of this type of technology. Scanning is lauded as a means of paying the producer for the actual contents of an animal. If Volkswagon can write software to fudge emission level results for their vehicles then scanning technology is likely to be also prone to such manipulation and a real risk is there that inaccuracy can be introduced into such systems. Look at the cost to rectify VW’s little number around the world. I recently spoke with an accredited scanning technician who outlined the issue of inaccurate results obtained by ultra sound scans for EMA and fat coverage which can be achieved on Bos indicus content cattle simply by the angle of the sensor. Some marvellous scores can be achieved which are flattering to the animal being marketed. While x ray technology may have some higher level of accuracy, my point is that it depends very much on the intent of the party setting up the technology system. All systems have margins of effectiveness which can be utilised to emphasise a preferred outcome for a party. Remember statistics are able to “prove” a lot of different” truths” depending on the analysis.

  3. Sean Starling, 27/02/2017

    Phillip the other links I omitted to include was the additional benefit that this x-ray grading technology provides the industry through driving automation that increases yield, shelf life, operator safety and efficiency.

    Lamb benefits can be found here: http://off-farm.mla.com.au/Products-and-services/LEAP

    Beef benefits can be found here: http://off-farm.mla.com.au/research-and-development/search-rd-reports/final-report-details/Productivity-Off-Farm/Beef-scriber-rib-cutter-robotic-system/2684

    Hopefully you can click on the links and they should take you to the correct location on the MLA website. If not let me know and we can work out a plan B.

  4. Sean Starling, 27/02/2017

    Hi Phillip, type this link into a web browser and you will be able to access the report on this technology from Murdoch University. This report is for lamb and beef will be available soon.

    https://www.mla.com.au/research-and-development/search-rd-reports/final-report-details/Eating-Quality/Lamb-Eating-Quality-and-Supply-Chain-Grading/3288

    Alternatively, send me an email on sstarling@mla.com.au and I can send you a copy of the report.

  5. Philip Downie, 26/02/2017

    Yep no substantive evidence has been found maybe because the carcase is no longer available by the time the complaint has been made thus making a re evaluation impossible. There must have been some sort of estimate in the real world that this actually works. Having worked on developing secondary instruments surely they have sampled a range of carcases for colour, fat color, yield, etc. Then run some unknowns and analysed those after scanning to check the accuracy?

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