News

Major changes ahead for cattle if recommendations are adopted

James Nason, 10/09/2014
Federal agriculture minister Barnaby Joyce.

Federal agriculture minister Barnaby Joyce.

Australian cattle industry structures could look extremely different in future if the recommendations from yesterday’s Senate Report into grassfed cattle industry levies and structures are adopted by the Government.

Whether that will happen is now largely in the hands of Federal Agriculture Minister Barnaby Joyce. Like most people across the industry, he is currently assessing the findings, and has yet to offer any clear indication as to whether he will accept or reject the recommendations.

After considering a diverse range of industry views aired in seven public hearings across Australia and in almost 200 written submissions, the Senate Rural and Regional Affairs and Transport committee has come to the firm conclusion that producers must have ownership of their levies and direct authority over how that funding and matching tax payer funds are spent.

The basic question for the Senators to answer was whether that could be delivered with some minor tweaks to existing bodies and levy systems, or by a major and far-reaching restrucuture.

The Cattle Council of Australia, which directly represents the consensus view of about 15,000 cattle producers and has recently introduced a direct membership channel, argued that only minor tweaks were required to give producers the level of control over MLA they needed.

It maintained that simply re-directing a small portion of grassfed levies, about $3-$4m a year, to Cattle Council, and changing MLA’s constitution to require it to act on the peak industry body’s recommendations, would solve the vast majority of concerns expressed by producers about MLA’s transparency, accountability and performance during the inquiry.

Other groups, most prominently the Australian Beef Association, which claims to represent up to 1000 paid members, argued for the creation of a whole new producer owned and elected body to take full control of grassfed levies, and to farm that money out to competing tenderers including MLA as required.

In the end the committee clearly gave greater weighting to the views of groups with less demonstrated representative backing, by recommending in favour of a new body.

If adopted, the committees’s main recommendation would most likely mean the end of MLA and Cattle Council of Australia, certainly in their current form.

In doing so the committee has also given Federal Agriculture Minister Barnaby Joyce a tougher sandwich to swallow than would have been required had it supported the view of CCA’s minor tweak, faster to implement and lower-cost option. (Not every participating Senator agreed with the committee’s majority conclusion, with Liberal Senator Ian MacDonald lodging a dissenting repport clearly in support of the CCA position – See the full report here)

If the recommendations are adopted by the Government in full, we would at some point in the future see:

  • A new producer owned and elected body established by legislation to receive and control the disbursement of the $50m plus generated from compulsory $5/head cattle transaction levies each year and matching Government funds for R&D.
  • The new body could be a reformed version of Cattle Council of Australia, or an entirely new entity.  Committee chair Glenn Sterle says this is a question that should be left up to producers to decide (More comments from Senator Sterle further down in this article)
  • The Committee says the new body would overcome the flaws in the current structure by “bringing together the authority for levy investment with the means to invest it” in one body:

The establishment of such a body would address problems of representation and strengthen producer accountability by establishing a direct relationship between producers and the body; thereby bring together the authority for policy settings and delivery. This could be achieved through legislative means by combining Peak Industry Council (PIC) policy development responsibilities with the statutory marketing and separate statutory R&D corporation authority.

  • The new body would have the authority to disperse grassfed levy funds and matching Government R&D funds to service providers, which would include MLA. As MLA would remain a service provider under the proposed reform, the committee says, it would be able to continue to tender for R&D and marketing work under the grassfed levy, but would no longer directly receive or control that levy and matching Government funds.
  • Levy payers would be eligible to register for membership of the new body and would be required to vote on the rate of the levy they pay every few years.
  • Levy payer members would also be required to vote on whether to vary the allocations of the $5/hd levy between Animal Health Australia, the National Residue Survey, marketing and R&D, with final agreement on varying the allocations achieved with ministerial support.
  • The committee suggests that the composition of the board of the new producer-owned body could be determined on a geographic or zonal basis:

The committee makes no specific recommendation on the method to be used, as that is a matter for industry to determine. Notwithstanding this point, in light of the overwhelming evidence in favour of a directly elected body, the committee strongly supports a directly-elected board model. While the committee acknowledges the strong evidence in support of a two-tiered voting system as a viable option to address the disparity between small and large producers, the voting system is also a matter for industry. The committee simply notes that the voting system should be fair and equitable, while the vote allocation system should be transparent.

Sterle: ‘Existing structures not sustainable’

WA Labor Senator Glenn Sterle

WA Labor Senator Glenn Sterle

Speaking to Beef Central last night, committee chair Senator Glenn Sterle said that in his view, the existing relationship between CCA and MLA was “just not sustainable”.

“We can’t have a representative body pertaining to represent the producers out there arguing with MLA who handles the money and then having to tread very carefully because they rely on MLA for funding,” he said.

“That is just not sustainable, and in fact it is terrible how that happens.”

He said a decision on how a new producer owned, elected and controlled organisation should take shape should be a decision “wholly and solely for producers”.

“And you know what, I reckon they’ll fight like buggery, they will knock each other out, but when all this is said and done, the law says 50 plus 1 is a democracy.

“You would hope the majority will say, well we have been given a chance, we didn’t have that before, should the minister respond to our recommendations or our report.”

‘MLA should be just a service provider’

The committee has also recommended that the Australian National Audit Office conduct an audit of levies spent by Meat & Livestock Australia.

Senator Sterle said the committee heard many concerns expressed during the inquiry about a lack of transparency and accountability within MLA, concerns which he believed had not been adequately addressed by the organisation.

“It is all very well in the last minute to come out under the new CEO and make some announcements, which he did and good luck to them, but they have done nothing over the years to address the concerns about a lack of transparency and accountability,” Senator Sterle said.

“With my recommendations, I think MLA’s role now should be just as a service provider.

“They handle none of the money, it goes to this producer owned and elected organisation.

“As far as I am concerned MLA has had their run, that is it.

“I am not in favour of any revamps, any tweaking, or even promises with the new direction from the new leadership. They have had their chance, they didn’t address it.”

RMAC recommendation within committee’s brief: Sterle

In a recommendation that cuts across all red meat sectors, the committee has also called for the Red Meat Advisory Council (RMAC) to be dissolved.

RMAC brings together the leaders of all peak industry councils in the red meat sector – grassfed and grainfed cattle, domestic and export processors, live exports, and sheepmeat and goatmeat producers – to discuss multi-sector issues and policies, and to speak on behalf of the red meat industry with a single voice when all groups reach a consensus position on an issue.

RMAC is also responsible for managing the Red Meat Industry Reserve Fund which generates income to support its member councils, and can be drawn upon to provide capital funding if and as needed for multi-sector crisis management.

The terms of reference limited this inquiry to the grassfed beef industry, but Senator Sterle told Beef Central the committee was within its rights to recommend the dissolution of a body that spans the entire red meat sector.

“Our committee looks at all related matters,” he said.

“There is no way known on God’s earth that I could see RMAC advising any minister when they are being represented by the live exporters, by the feed lotters, being represented by the processors who have an interest in seeing cattle slaughtered and processed on our shores, and then producers, what an oxymoron.”

The Senator said the group was ‘too conflicted’ and in his view too lop-sided in favour on the processing sector to provide a balanced view.

“They are three-quarters lop sided, and they are sitting on a pool of money which should now be split up.”

No room for agripolitcal function in proposed structure

One major unresolved question is how the grassfed cattle industry would engage in agripolitcal activity if the new body proposed by the Senate Committee is established.

The Senate Committee report specifically says the new levy funded, producer owned group could not be involved in agripolitcal activity.

The proposed body appears to be very similar to how the producer-owned, levy-funded service delivery company Australian Pork Limited (APL) operates in the pork and pigmeat industry, which is seen to be an effective model for that sector.

However one distinct difference is that APL has a clause in its constitution that allows it to undertake strategic policy work, which is what CCA had proposed.

The Senate Committee’s report does not allow room for the proposed new grassfed body to undertake that key function.

Does that suggest a separate industry representative group, funded only by producer membership fees, would still be required to undertake important agripolitical work on behalf of the sector?

This is one of a number of questions the Minister will have to consider as he decides how to deal with the recommendations going forward.

Minister Joyce comments

In comments to Beef Central this morning, Mr Joyce said he appreciated the work of the Senate committee in delivering its report and associated recommendations.

“The Government will consider these recommendations of the Inquiry into Industry Structures and Systems Governing Levies on Grass-fed Cattle within the broader context of the red meat sector, and will deliver a response in due course after proper consultation with industry and affected stakeholders.”

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Comments

  1. John Wigand, 11/09/2014

    And now the games begin (I wonder if the Minister is regretting pulling this on?).

    Give a handful of industry mavericks (read: vocal minority) even a sniff of blood, and they’ll start tearing the industry carcase apart before you know it.

    The minute the emotion and colourful adjectives start slipping into the vocabulary…all the facts (what’s left of them) go out the window.

    The minute the references to “our levies” and “our money” start underpinning the discussion…constructive critique gives way to division and destruction.

    Seriously, when was the last time you told the ATO “I want this road, built to this intersection, by this date”??? Levies are taxes – literally. They are a part of a socialised model – the exact same way taxes are used to fund roads, hospitals, education…all the things we may not individually or directly need at the one time, but the things we sure as hell benefit from when we do need them.

    Don’t get me wrong, what we’ve got now is not right, and I’m all for reform – any time you have people delving into big buckets of money (especially someone else’s)…there is an inevitable risk of unscrupulous behaviour at worst, or extravagance and waste at best.

    I am genuinely all for reform – which by any definition refers to changes, improvements or amendments to improve something. “Blowing everything up” is not reform. It is costly (read: very costly), time consuming and will cause collateral damage across the board (otherwise know as ‘throwing the baby out with the bathwater’).

    I’ve been part of this industry for over 30 years (and my forebears another 120 years before that), and one thing I’ve learnt is that we sure know how rip ourselves apart.

    I hope this time around (yes, this style of revolution is as cyclical as night following day) some calm and mature heads prevail.

  2. john carpenter, 11/09/2014

    It has taken the strong chairmanship of a Labor senator from W.A. to cut through all the crap and to recognise the current beef industry structure for exactly what it is,a disaster for cattle producers.Thank you Senator Searle.The recommendations are all positive and should be accepted by the minister.There are however loose ends and unanswered questions.FIRSTLY,there is still a need for a plebiscite to determine whether cattle producers want to pay a levy at all.The senators have just assumed that they do.SECONDLY,there is the issue of the north/south divide.There is no point or logic in forcing northern live exporters into the same box as more southerly producers supplying cattle to the beef industry.THIRDLY,if the new producer owned company is forced to become a “Prescribed Body” under the AMLI Act then it will defeat the whole purpose of the exercise.Given that the useless RMAC is the be dissolved it will be necessary and highly desirable to repeal the Act.FOURTHLY,if MLA is to become a “service provider” it will be insolvent almost immediately as no sane person would pay for MLA’s bloated expense base.More nimble private sector businesses will easily prevail over this public service mentality.FIFTHLY, I presume that sheep producers would similarly get their own producer owned/controlled company.SIXTHLY,the results of the audit must be publicly disclosed as we would all like to know where over $1 billion of our money has gone.FINALLY,let’s face it the quality of Australian beef is just not good enough.The only way to to address this killer problem is to adopt a single national beef grading system free from the influence and control of the five corporations that control the beef industry for their own exclusive benefit.I would be prepared a levy to pay a levy for this and this alone.

  3. John Wigand, 10/09/2014

    For a truck driver, Sterle certainly has become an overnight expert on all matters red meat and livestock. I guess he would have seen a few cattle while hauling his rig down the highway.

    Here’s a tip for you, Sterle (from someone who has actually worked in the industry for over 30 years): the red meat industry is big, disparate and cannibalistic. Giving oxygen to the same old individuals and organisations who blame their problems on everyone but themselves only perpetuates the worst that the industry has to offer.

    As the Senate Committee’s chairman, the way in which you’ve allowed your review to drift so far away from the actual subject you were requested to investigate…suggests there are some very sinister agendas at play. Either that, or you’ve had someone feeding you some seriously spurious information.

    The trucking industry might be different, but I for one want an industry that works together. I also happen to know that the supply chain downstream from me is pretty important when it comes to ensuring my cattle are turned into edible and affordable products for Australian and offshore consumption.

    I’ve read your report, from cover to cover. Putting whatever agendas or misinformation you have to one side, it reads to me like a path that will only propagate the old “producer versus processor” mentality that has held the industry back for years. Those of us actually in the game as a business moved on from that crap years ago. You should too.

  4. PAYG, 10/09/2014

    “In the end the committee clearly gave greater weighting to the views……………” – and concerns that arguably represent more than 90% of Cattle Transaction Levy-Payers. Let’s be clear about something else, one does not have to be a member of a political party in order to excerise a vote, or opinion, the end result in which may form a governing entity, policy, structural framework and support. An argument using the fallacy of confirmational bias is as odious as a lingering john-henry left in a elevator.

  5. Peter Vincent, 10/09/2014

    Barnaby Joyce continues to demonstrate his application and diligence as Minister for Agriculture by initiating and accepting this report. One would also hope that the Minister then demonstrates his sensibility, mindful that change for the sake of change is the province of the freshly appointed CEO whose first act is to change the logo. Nothing much changes thereafter.

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