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Drought Funding

Australia has not seen the last of this drought yet, and we know we can expect more in varying degrees of severity in the future. Our industry needs true leadership when it comes to future thinking about droughts – the curse of the farmer.

However our Prime minister and his government are taking their time finding solution to the eternal questions of drought relief and management.

When thinking beyond the drought situation,

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any real business person will tell you that ‘forecasting success, viability, or profitability’ based on their cost-calculated prices and expected projected sales is what gives a business a bottom line to work with.

Consequently, far worse than drought (in the longer term), is the lack of fair or decent prices that producers receive for their livestock. In 1999 a producer expected to get an average of $1.80/kg for his animal across the country. That $1.80/kg is still the average mean price in 1999, and is still so in 2013! Then prices dropped drastically for those with drought affected cattle, leading to an overall collapse in the market price, which is exactly what happened with the Live Export fiasco only 3 years ago.

The inability of producers to receive a fair price when 200,000 cattlemen have only a minimum number of abattoirs to sell their cattle to ensures prices stay low and controlled. It’s the bottleneck theory in action!

Add the 4% annual inflation to that price on cattle, then the value of that of $1.80 has dropped by 40%. This now means that that $1.80 is now worth a little over the dollar.

The economy’s costs, across the country, have increased by 40% since 2000, and retail meat prices have risen 30% over the same period, but farm gate prices for cattle have not changed in over 30 years.

How does this happen? Why are farmers still getting those prices today?

On the one hand, we have multinational processors and the supermarket duopoly squeezing producers so hard, that many are actually getting paid less for their stock than the cost of production, or transport. Meanwhile, in the same period, the meat off these animals has risen by a thousand dollars or more at the slaughter and retail end. .

The processors themselves will tell you there has also been a boom in the export beef prices, but the ‘pull through effect’ of that extra money simply has not happened for the producers. But processors and retailers are reaping the rewards.

The grassfed cattle producers may be wondering why they contribute $54+ million to MLA when they’ve received no returned value from years of paying for R&D and marketing, while the processors and retailer forge ahead. CCA have forgotten who they are to represent, and bow to MLA to receive their small part of the annual grassfed levy.

MLA has Retained Earnings of about $30 million. (During the live shipping debacle, the primary Industries Minister of the day instructed MLA to use some of their money to aid the producers. MLA refused. Whose money is it?) How many farmers have retained earnings?

There is also an Industry Levy Reserve Fund, which is the remaining funds left over from the transfer of the old ALMC to the ‘new’ MLA. It is about $40m, and is used to fund RMAC (Red Meat Industry Council), and Peak Councils like CCA and Aust Meat Processing Corp (AMPC) out of the interest earned. AMPC and Animal Health Australia [AHA] have also got lovely large nest eggs of retained earnings.

The grassfed producers’ Peak Council have nothing like that, and receive only a pittance from the levies we’ve paid, handed down by MLA who is like Scrooge McDuck and wallows in cash.

Will this money continue to be used to fund industry organisations or should it be utilized in a different manner? Could some of this money be used for drought in some way? Most of the producers suffering drought and low prices have contributed to these funds. How can it be used now to help them?

The fact is most producers have used up their own nest eggs and are in real trouble. Many may lose their properties and equity. One can imagine the screaming if ABA suggests that ‘nest eggs’ are actively used to help producers.

People should remember that without grassfed cattle, there is simply no industry. And other sections of the industry should remember the story of a goose that laid the golden egg.

Tomorrow Tictak readers will receive a second article…..one that will make you think very carefully about who you are going to let into your camp with you.

Beware sheep in wolf’s clothing. Watch for that!!

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