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’
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.”