Large-scale sheep meat processor Roger Fletcher used an appearance at the senate inquiry into red meat processing yesterday to reiterate his long-running calls for levy-funded sheepmeat and beef marketing activities to be separated.
In fact, he suggested that if the sheepmeat industry should be more closely aligned with any other industry, it would make more sense to partner it with the wheat industry, given the complementary nature of the wheat/sheep sector.
He also spoke against Sheepmeat Council of Australia suggestions that the industry needs more abattoirs, and indeed more “Roger Fletchers”, saying that the lessons learned from the days when 47 council owned service kill abattoirs operated around Australia demonstrated that more smaller plants was not the answer.
Mr Fletcher said there had been strong industry support to run sheepmeat and beef levy marketing out of different organisations when the old Australian Meat and Livestock Corporation was wound up 17 years ago.
It was a “no brainer”, he said, but the Government wanted fewer organisations and decided to keep sheepmeat and beef marketing under one roof within the newly formed Meat & Livestock Australia.
He told Senators yesterday that it made sense to split the competing sheep and beef industries into different organisations.
“If you want to get the best people to give their time to promote their industry and take it forward, you are not going to do it if three quarters of the day is spent on something they’re not even in.”
Earlier in the inquiry representatives of the Sheepmeat Council of Australia called for the Government to support moves to encourage more competition and more service kill options in Australia’s meat processing sector.
“We want more Roger Fletchers, we want more processors,” New England sheep producer James Jackson said.
The SCA representatives said large vertically integrated processors had the opportunity to shift profits from one tier to the next, and could use predatory pricing to put new entrants, such as those offering a service kill, out of the market.
There was no imperative for the large vertically integrated companies to provide a service kill, and in fact, there was an incentive for them to close down service kills, Mr Jackson said.
“You have to have competition, you have to have opportunity for those brands to develop and flourish.”
SCA spokesperson Alexander McLachlan said there had also been circumstances where larger players had bought smaller abattoirs only to shut them down.
“It is very difficult nowadays particularly in regional areas for any sort of abattoirs to start up. To start up a big abattoir your pockets need to be extremely deep to do that, so you see a reduction in competition in the processing space and nothing to fill it.”
James Jackson said if processors were worried about having enough supply in future, producers had to “see the money” they needed to invest in flock rebuilding.
“It is a straight economic argument. If you want 150 million sheep again Roger, we need more.”
In his appearance in the following session, Mr Fletcher said the lessons of the past showed that having more smaller abattoirs was not the answer.
While most would assume that having 20 people buying in a saleyard would create better prices than four buying in a saleyard, this was wrong, Mr Fletcher told senators:
“This is where I have got to get everyone too. Those 20 have got to resell the product, they are only a manufacturer in the middle, they then move the product to somewhere else. Now of those 20 one is short is cash, one has got stock in store, so say the price is $1 or 95c, the bloke says 90c, next minute the price is 90c, so then you are back to the saleyards and you push the price back. …That is why I have no hair on my head killing there, because they were badly managed by councils. By the way to prove it there were 47 council-government abattoirs in Australia, today none. Governments can’t run these sorts of businesses.”
The industry had changed completely over the past 20 years. Smaller abattoirs could not viably market all of their by products, whereas the larger processors had put a huge amount of effort into finding markets all over the world for all parts of the carcase.
He said the larger abattoirs had created benefits for farmers by constantly striving for efficiencies – Fletchers International is processing sheep at the same cost as it was 25 years ago he said – and by opening valuable new markets.
For example, in the past mutton used to go into sausages, pies and small goods. Today, no mutton goes into those products, because it is all sold into higher value export markets that had been developed by processors, and not MLA, he said.
“We found those markets. We (the industry) only pay 20c levy to MLA on mutton and I pushed that because we are the ones finding the markets. How do we do that? We go into a country, we look at what the customer does, how does he use it and cook it, and we cut it the right way for it. That is what has changed the market, nothing else.”
Subsidising smaller abattoirs would only lead to a repeat of past mistakes, he said.
“Guess what, you will do exactly the same as you did with blue gums in western Australia and the wineries, you force them up and you kill everyone else at the same time, it was a disaster.”
He also rejected any suggestion of buyer collusion in saleyards:
“Most of the sheep processing plants are family owned Australian businesses, and I can tell you, don’t worry about the bloody collusion, (they are) highly competitive.”
Mr Fletcher said the Australian industry operated in a regulatory environment that put it at a disadvantage to its major export competitor, New Zealand. The NZ industry did not pay payroll tax which cost $1/hd in Australia, or super at $1.50/hd. The NZ currency gave their exporters a $14 advantage, while their trade arrangements with China also gave them a $5/hd advantage in the market.
That was why it was essential that Australia’s Free Trade Agreement with China gets through. Anyone who knocked it back was “killing sheep farmers”, he said.
He also urged Senators to add their weight to efforts to secure a Free Trade Agreement between Australia and India.
“It is critical for our industry. We deal around the world and we know that wherever there is an Indian population there are sheep eaters – Birmingham, London, Middle East, Singapore, Mauritius – all sheepmeat eaters. (But) there is 37pc import duty on it and we’re out of India because of that.”
One positive for the Australian industry had been its success in building the chilled lamb carcase trade via cargo in passenger jets into the Middle East.
“In 2004, we had 250,000 lambs went by aired chilled. Last year 2.5 million carcases, all in the bellies of the jets… In 2004, 4.1 million live (export) sheep went out. Last year two million. So the live trade is slipping back and something is taking it over.
- More reports from the inquiry on Beef Central later