Why Australian cattle prices are 50pc lower than cattle prices in the United States, and why Australian consumers pay 20pc more for beef at retail than consumers in the US, were among the initial lines of inquiry pursued by Senators as the first public hearing in the Senate inquiry into the grassfed beef industry got underway in Canberra this morning.
Senators spent a large part of this morning’s session attempting to untangle the complicated structure of organisations and levy flows that exist in the industry, with most questions going to points of detail on operational issues and improving understanding of lines of authority and influence.
Representatives from the Department of Agriculture, the Australian Meat Processing Corporation, Meat & Livestock Australia and Cattle Council of Australia had appeared before the inquiry by the time Beef Central’s daily news email was published today.
The main areas of interest pursued by senators this morning included questions about levels of transparency and accountability within MLA and whether grassfed producers, as the single largest contributors of levy funding to MLA, received commensurate influence over the organisation in return, and compared to other sectors which contributed less.
Cattle Council representatives were specifically quizzed about what they would do to improve conditions for producers if they were able to increase their resourcing by gaining access to a direct portion of the $5/hd levy.
President Andrew Ogilvie said better resourcing would enable Cattle Council to undertake well-researched policy development to focus on solving problems facing the industry.
“It is really difficult to come up with solutions unless you have good research to identify the problem,” Mr Ogilvie said.
“We know where the problem is, we need to do the research so we can then make good decisions on how to solve them.”
Cattle Council also confirmed for the first time how many producers have joined the organisation as direct members since the new membership pathway was opened to all Australian cattle producers on January 30, with the number currently standing at 98.
Mr Ogilvie told the hearing that while not everyone in the industry was satisfied with the new structure CCA has recently adopted, he said it will deliver the outcome most producers seek.
Biosecurity funding set to run out next year
Highlighting the increasingly dire nature of resourcing issues in the beef industry, CCA chief executive officer Jed Matz said in response to a question from WA Greens Senator Rachel Siewert that funding for key animal health projects is likely to run out next year if new funding arrangements cannot be found.
“The best example is the CEO of Animal Health Australia presented to the Cattle Council board last week, and by the end of next year, cattle funds in Animal Health Australia will be entirely exhausted,” Mr Matz said.
“We will have no way of funding our BJD programs, national arbovirus monitoring programs, our FMD risk process, our EADRA, all of our biosecurity functions, that Senator (Chris) Back mentioned were so important.”
Discrepancy between Aust and US prices explored
MLA representatives were asked by South Australian Labor Party Senator Alex Gallacher to explain why Australian producers were receiving less money for their cattle than US producers and why Australian consumers paid more money for beef at retail than US consumers.
Dr Peter Barnard said the reason related primarily to higher off-farm costs in Australia.
The cost of slaughtering cattle in Australia was double that of the United States, worth $300 per head here versus $150 per head there. Higher labour, electricity, fuel and regulatory imposts all contributed to that equation.
Shipping costs were also substantially greater out of Australia than in the US.
“US producers (also) have the enormous advantage of having the largest meat market in the world on doorstep,” Dr Barnard said.
“The US consumes more beef than anywhere else in the world, and US producers get an enormous advantage from having that market on their doorstep.”
Dr Barnard said it was important to understand that the key force keeping cattle prices in Australia low at present was drought, not lack of demand.
Drought was weighing heavily on prices, but demand had never been better, export prices had never been higher and tonnages going overseas continued at record levels.
“It is important this is understood,” he said.
“Those demand conditions been around for the last three to four years and they were feeding into cattle prices in 2011 and 2012.
“The EYCI was almost $4/kg in 2011.
“Producers responded to that by building up their herds from 27 million head to 29 million head.
“Those demand conditions still exist but producers have had to offload cattle because they just did not have grass on the ground…Under that weight of supply processors have been able to get cattle cheaper but demand conditions are still very strong.
“This will turn around, the moment we get some decent rain, this will turn around, let me assure you.”
The Australian Beef Association, the Richmond River Beef Producers Association, the Red Meat Advisory Council and John Carter are due to address the hearings this afternoon.
More public hearings will follow at Broome on May 6, Katherine on May 7 and 8, Rockhampton on May 21 and Albury on May 22.
See Beef Central for further updates on Monday