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Beef Marketing Levy Review

Australian grass-fed cattlemen have been paying a levy on cattle sold since before the days of AMLC (pre-MLA).  When MLA was established in 1997 the levy was $3.50 per head.  In 2005 industry, in a questionable nationwide vote, allowed an increase to the levy to $5 to enable more funds to be directed to beef marketing.

When granting the $1.50 marketing component increase, Minister for Agriculture Peter McGauran stated that the increase must be evaluated by 2010 to determine and demonstrate whether it had been appropriate and beneficial to the industry.

To this end, a review was conducted by an apparently ‘independent Levy Paying Committee’ of 14 cattle industry representatives.  

(I would have thought that the two processors on the committee would have been very keen to keep the levy at $5, as marketing is a great tool for processors and retailers, but cattlemen do not market meat, they trade in cattle).

We were told that Committee met six times and considered the following questions:

A).   has the 2006 increase of $1.50 a head in the beef marketing levy delivered benefits to our industry? 

B).   What have been the major influences on livestock prices since 2006?

C).   What are the key challenges and opportunities likely to face the industry over the next five years?

D).   What would the marketing program scenarios be under a range of funding levels?

E).   What is the appropriate level of spending on these programs.

To analyse these questions an independent ‘analysis expert’ from Warwick Yates was appointed, plus associates from the Centre for International Economics.

Some of the Committee findings were that:

a). the additional marketing levy had delivered five times the investment back to producers. Looking at producers’ returns today, and even 5 years ago, how could anybody come to this conclusion??  A $20million investment return to producers at five times would mean there had been a return of $100mil a year over 5years.

and b).   The major impacts influencing livestock prices since 2006 have been the high exchange rates and high grain prices until late 2008;   and now credit restrictions on global trade;  plus a collapse in demand for co-products. Without these impacts livestock prices would have been near record levels. 

All industry faces critical challenges, such as mounting attacks on our environmental integrity;   increased competition in our major markets;   as well as positives such as our world leading systems concerning product quality, safety and industry integrity.  These stand us in good stead to grow existing markets, and capture new ones.  But they are also tools used by the processing sector, whose power and influence within MLA and the industry grew enormously during these years, to the detriment of the producer

The ‘world leading systems’ are only really beneficial to the processer and trading sector of our industry, with no flow back returns to producers from this increased trade at increased prices. 

As we have stated many times, these schemes are in fact used to decrease the value per animal paid to the producer.   In 2014/15 we are finding that producers in South America are get better prices than Australian cattlemen, and the US cattleman is getting double.  Unlike both these countries, Australia has no FMD no BSE.  And they have no NLIS.

The Committee concluded that the five dollar levy was a modest and appropriate investment in the future industry.   Many did not agree. 

One of the questions asked was why MLA focused on growing consumer demand rather than increasing livestock prices?

The answer was that MLA programs are based on the premise that by driving overall industry revenues, through both exported values and domestic consumer expenditures, that the benefits of this revenue would automatically flow back to levy payers.  Producers can tell MLA and the politicians and the Committee that this is RUBBISH, and has never happened.

Here is an example of just how far out of touch the committee was.

In 2014, despite the increase in the levy, producers were getting record lows whilst the domestic market prices had increased and processors were receiving record prices in their overseas markets.   The $20 million a year increase in levies has done nothing for producers and they have been subjected to third world prices and treated as peasants, whilst processors and retailers reap all the benefits of the increases in prices and tonnages.   Rest assured politicians and bureaucrats, nothingis flowing back to the producers in the form of financial reward or equity. 

As of 30 September 2009, MLA had 46,785 members. 5085 cattle producer members cast their vote to keep the levy at $5, representing only 12.5% of MLA voting members. And 58 cattle producers registered in the non- member poll, of which 25 return their levies notice and 14 cast their vote.  Processors, through their feed lots, and big companies that have such a huge voting block would have been right behind keeping the $5 levy.  (How many people that pay a $5 cattle levy are not registered as MLA members?)

Producers’ fortunes, producers’ futures, producers’ investment in industry,   will never improve or advance unless the producers demand to be in charge of their own industry.  We are very capable of managing our own industry, working within the MLA system, working with the other sectors of the red meat industry, by ensuring that producers get a fairer deal and better control of their levies. 

The same fundamental challenges are there right throughout the beef industry. Every link in the chain is integral to our future viability.  Sooner or later other parts of the chain, like the processors and supermarkets, must realise that they are killing the goose that lays the golden eggs.

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