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ACCC – Right or Wrong?

Over the years I have watched the ACCC conduct enquiries into the red meat industry.

In February 2007 examination prices paid to farmers for livestock and the prices paid by Australian consumers for red meat the ACCC found that there is likely to be sufficient competition so that no single buyer, seller or groups of buyers or sellers is able to exert undue influence on the price of livestock.

In March 2010 JBS Swift Australia was set to increase its’ heavy footprint in the Australian red meat industry with a deal to buy the Rockdale beef feedlot and export processing business at Yanco in southern New South Wales. The statement at the time said that if the deal goes through it could see JBS Swift feed about one animal in four in their feedlots in New South Wales.

From the ACCC point of view they considered that if the merged entity attempted to press the cattle prices to below competitive levels and/or impose their own service terms and conditions existing competitors will be able to attract business and win market share away from the merged entity.

At that time Liberal Sen. Bill Heffernan said he had serious concerns about the deal and how much market power would be given to JBS Swift.  He went on to say that he had already spoken to the ACCC and would be making sure it understood the implications of its decision on the influence he would have on both beef and lamb industries. It appears the ACCC was not listening then and nothing has changed.

He went on to say that we ought to learn what is happening in other countries where two or three entities control the market.

Since that time we have seen Primo go through the same deliberations by the ACCC which gave the green light to the takeover and resulted in the Brazilian owner of JBS Swift flying out in his private jet to seal the deal. These people must be laughing all the way to the bank and Australia’s ability to stop companies taking control.

The ACCC undertook a detailed assessment and determined that Primo is not a strong competitive restraint on JBS Swift. Furthermore the increase in market share, as a result the proposed acquisition, will be relatively small and JBS Swift would continue to be constrained in the markets for the acquisition of fat cattle by a number of alternative processing plants and supermarket chains in northern New South Wales.

Surely the time has come for a royal commission to actually study the misinformation and rubbish that is put out for ACCC to simply swallow. An alternative may be to have specialists working for the ACCC who have some idea of what unique problems there are for the farming industry.

In May 2015 it seems JBS Swift is preparing to stop processing lamb and mutton in at least two of its’ works and according to the unions there may be others that plan to follow.  Roger Fletcher is talking about shutting down for week.  Major industry players say the news that JBS Swift is pulling out of lamb and mutton is quite significant.  Another agent says if JBS Swift stop processing lamb it would be an absolute disaster for the lamb industry and our part of the world.  Another industry player said it could have a devastating impact on producers in Victoria and South Australia.

It is estimated that JBS Swift Australia kills about 30,000 lambs and sheep each day and at its peak and sources 50% of its lambs through saleyards. The company kills lambs at Brookland and Cobram as well as Bordertown and South Australia. John Berry from JBS Swift said whether or not workers would be reinstated is dependent on future market conditions.

Could it be possible that when processors have the price under control we will see JBS Swift and others move back into sheep and lamb processing.  To quote the ACCC, “there is likely to be sufficient competition so that no single buyer or seller, or groups of buyers or sellers, is able to exert undue influence on the price of livestock”.  The move by JBS Swift to stop processing lamb and mutton in their Victorian and South Australian plants will be a good case study to assess how right, or wrong, the ACCC has been.

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