Senate enquiry into the effects of market consolidation into the meat processing sector; some of the submissions were well worth reading.
Some examples that really struck a chord came from very different sources.
(a) Yes there is massive amount of collusion and misuse of power in the processing industry. The evidence is there for all to see.
(b)The impact of the red meat consolidation is having a huge impact on farm gate prices. I would suggest that 80% of all beef farmers are either going broke or are already broke.
(c) The existing selling structures are satisfactory; the problem is more consolidation and less competition.
A Victorian farmer, cattle farmers for generations are incensed at the charges we are witnessing in the red meat processing sector which has significant flow on effects to all livestock producers.
This farmer came out with some very interesting observations that while he has continued to lift the quality of his herd returns have become less. We are forced to ask ourselves “are we really serious in Australia about producing food for Australia and is the tail wagging the dog.”
In 2003 a fertiliser called DAP cost $480 a tonne, in 2015 the same fertiliser cost $730 per tonne.
In 2005 20t of DAP cost the equivalent of 14 steers by 2014 20t of DAP cost the equivalent of 36 steers.
Auction system is based on competition and price. The foxes are in charge of the henhouse when livestock are sold over the hooks and farmers rely on weights the processor provides for the end price. Can we honestly afford to now endorse auctions sale systems that decrease animal welfare, increased transparency and increased competition by removing all the store buyers?
Another submission of collusion in the marketplace is that it is evident at all sales there is no competition amongst different processors, and several processors are represented by one buyer. Our prices should reflect the world beef prices not whether it has rained in Australia or not. Our industry is in need of an overhaul and every avenue should be explored for the whole industry to move forward.
John Carpenter who relies on and is still passionate about the beef industry came up with some interesting thoughts. His calculation some time ago showed that cattle producers receive only 26.5% of the average retail price of beef. This calculation was based on data source from the MLA and Aus Meat and has never been disputed by anybody; he goes on to say in the US the producer was receiving 49.4% of retail price.
His conclusion in an age of universal deceit, telling the truth will be a revolutionary act. Cattle producers have been fed a diet of lies for the past 20 years and it is time the truth be told before it’s too late.
From my point of view I have watched with interest as supermarkets have fed ACCC and others a diet of what I would consider downright lies.
Certainly the abuse of market power is a huge issue. Cattle producers separate from consumers by at least three layers of monopoly agents, processors and supermarkets. All three can ensure that producers pay the freight both ways, sell wholesale and buy retail.
In the case of supermarkets processors and some agents have very large pockets and are willing to use their money to buy political influence to take on these corporations is a major technical and political undertaking. If producers could get their act together we could put large sums of producers’ money into fighting some of these abuses.
Producers pay $60 million a year into the MLA for marketing and R&D and if 10% of that statutory levy went into looking after producers’ interests this would give us $6 million a year for advocacy. When I look at the processors who pay a statutory levy of $22 million a year to AMPC, who are the processors’ service provider which has in excess of $40 million to play with in retained earnings, the AMPC only gives the MLA $10M. And then I look at the cattle Council trying to look after producers’ interests with a negative budget of $1.6 million. To my way of thinking it is like arming a peak body with peashooters whilst on the opposing side they have unlimited wealth buying the best that money can buy.
Until producers get control of the full statutory levy, which flows unabated into the MLA, producers will always struggle to manage with any sort of voice.