Introduction and background
Referral of inquiry
On 12 December 2013, the Senate referred the following matter to the
Rural and Regional Affairs and Transport References Committee (committee) for
inquiry and report by 28 March 2014:
The industry structures and systems
governing the collection and disbursement of marketing and research and
development levies pertaining to the sale of grass-fed cattle set out in
subsections 6(l)(a), 6(1)(b), 6(2)(a) and 6(2)(b) of Schedule 3 (Cattle transactions)
of the Primary Industries (Excise) Levies Act 1999, including:
basis on which levies are collected and used;
opportunities levy payers have to influence the quantum and investment of the
governance arrangements, consultation and reporting frameworks; and
to maximise the ability of grass-fed cattle producers to respond to challenges
and capture opportunities in marketing and research and development.
On 15 May 2014, the Senate granted an extension of time for reporting.
The committee was required to report by 16 July 2014. Then on 10 July, the
Senate granted a further extension to the committee, requiring it to report on
23 September 2014.
Conduct of inquiry
The inquiry was advertised in The Australian and on the committee
webpage. The committee also wrote to government departments, organisations and
individuals to invite submissions. Details of the inquiry and associated
documents are available on the committee's webpage.
The committee received 188 public and 4 confidential submissions which
are listed at Appendix 1. The public submissions are also published on the
The committee held public hearings in Canberra on 7 March, 20 June and
23 June, Broome and Katherine on 6 and 7 May respectively, Rockhampton on 21 May,
and Albury on 10 June. A list of witnesses who appeared at the hearings is at
The committee acknowledges the organisations and individuals that made
contributions to the inquiry through submission and appearances at the hearings.
Australian red meat industry
Australia's red meat industry includes cattle, sheep, lamb and goats. It
is a multi-sector industry represented by cattle and sheep producers,
processors, lot feeders and live exporters. There is significant diversity of
interest as well as structure within each sector. Producers themselves range
from large extensive to small intensive systems and cover interests which range
from large corporate enterprises with foreign ownership involvement to that of
the small family farm. The diverse nature of the red meat industry, which
encompasses a wide range of interests, has remained a contributing factor to
the lack of full industry consensus on reforms.
Australia's cattle herd, which comprises more than 40 different cattle
breeds, is estimated to be between 26 million and 28.5 million head. Of that,
13.6 million comprises beef cows and heifers.
The grass-fed cattle industry is one of Australia's largest rural
industries. The 2011–12 census revealed that of 135,692 businesses with
agricultural activity across the country, 38,752 were specialised beef farms
(including feedlots), 6,526 mixed beef cattle and sheep farms and 11,552 mixed
grain-sheep or grain-beef farms.
The industry covers approximately 45 per cent of Australia's land mass.
Queensland hosts approximately half of Australia's cattle herd (12.6 million).
The red meat industry employs approximately 200,000 workers across the
farm, processing and retail sector. In 2011–12 Australia produced around 2.1
million tonnes of beef and veal with grain-fed cattle accounting for
approximately one-third of all adult cattle slaughtered.
In 2012–13, Australia produced about 2.2 million tonnes of beef and veal. The
estimated value of red meat production in Australia in 2012–13 was around $16.2
Australia is the world's seventh largest beef exporter. In 2011–12, it exported
$4.7 billion worth of beef (amounting to 65 per cent of domestic production) to
more than 100 countries which contributed 15 per cent of Australia's total farm
In 2012–13, the value of live exports rose to $5.06 billion, reaching 67 per
cent of domestic production.
There are considerable variations in cattle production across the
country. Northern Australia is predominantly focused on live export while the
majority of processors (such as abattoirs) are located in the eastern states. There
is wide variation in industry dynamics both within and between the northern
states and the south.
Northern cattle production
Northern cattle producers account for approximately 75 per cent of
farming land in Australia (dedicated to beef) and make up just under 50 per
cent of the national herd. Typically, cattle grown in the northern region
forage for feed across very large properties, which means that the beef is
generally of lower quality that southern-produced beef. Whilst the primary
market for northern beef is the Asian live export market, a small percentage of
cattle are sent south where they are grain fed before slaughter. This beef is
then boxed and sent to countries such as the United States –generally as
Northern Queensland cattle production is oriented towards breeding with
many corporate pastoral companies and larger private producers having a semi-integrated
supply chain involving multiple properties from the north to the south of the
state, where most of the processing capacity is concentrated.
In the absence of a regional abattoir, slaughter-ready cattle from northern
Queensland are transported to coastal and south-east Queensland abattoirs. Regional
Queensland producers bear substantial live cattle transport costs and carcass
shrink losses resulting in significantly reduced net returns.
The high associated cost also places the Queensland beef industry at a global
Western Australian cattle production
Western Australian cattle producers are heavily reliant on the local
Western Australian market to sell boxed beef. They are also reliant on already established
live export markets – primarily to Indonesia and the Middle East.
The committee was told that a proposed upgrade of the Harvey Beef
abattoir –particularly if the upgrade meets European Union (EU) accredited
export standards –would improve export opportunities for Western Australian
producers. Cattle producers are also keen to see the Chinese market open its
import cattle protocols to include feeder and slaughter cattle exports.
A reduction in the distances live cattle are transported (across the
supply chain) would also benefit Western Australian producers – particularly
those wanting to sell their cattle into global meat markets. Reduced live
transport distances would also enhance meat quality and the possibilities of
producers qualifying for Meat Standards Australia (MSA) premiums.
Southern cattle production
Farms in southern areas of Australia are usually more intensive than
those in the north, and producers typically run European and British cattle
breeds. New South Wales produces the second largest number of beef cattle,
after Queensland, with 5.3 million head, or 21 per cent of Australia's cattle
and calves. Whilst beef cattle are raised throughout all the state's
agricultural areas, they are mainly concentrated in the Upper Hunter, North
West Slopes and the Northern and Central Tablelands.
Most of the state's beef cattle are grazed, with only around 3 per cent
held on feedlots at any one time. Cattle on feedlots are grain fed, leading to
the majority of feedlots being located throughout the grain belt – from the
Riverina to Moree.
In 2010–11 there were just over 16,000 properties across Victoria,
carrying just over 2.36 million beef cattle. Of these, 8,029 were specialised
beef cattle farms and 1,645 were mixed beef and sheep farms. The number of beef
cattle in Victoria has fluctuated between two and three million over the past
30 years. In 2011-12, the value of Victorian fresh, chilled and frozen beef and
veal exports was $606 million, which represents 12.3 per cent of the Australian
total of $4.94 billion.
Whilst most of Victoria's cattle are kept on managed pastures, a small
percentage of the beef cattle herd is grown out in feedlots. Victorian feedlots
are largely geared to produce beef for the domestic market – with shorter
feeding regimes and higher turnover rates compared to feedlots in Queensland
and New South Wales. Victoria's major export markets are the high value markets
such as Japan, the Republic of Korea and the United States.
Grass-fed cattle industry
Evidence to the committee upheld the view that the Australian grass-fed
cattle industry is currently at a crossroads, if not in crisis. Producers
argued the current situation (particularly in relation to the industry's
declining profitability) has come about for a number of reasons, including; declining
real term export sale prices, rising input costs, and the live cattle bans to
Egypt between 2006 and 2010 and to Indonesia in 2011. Other challenges include
the high Australian dollar, high government-influenced compliance costs and
charges, as well as droughts which have impacted grass-fed cattle country.
The expectation of grass-fed cattle producers within this context is
that industry structures and systems already in place should provide the
necessary assistance and support for it to survive and prosper. Low returns to
grass-fed cattle producers and high costs of production (as well as the
challenges of drought) have brought questions about the effectiveness of grass-fed
cattle levy investment in research and development (R&D) and marketing,
into sharp focus.
The committee received considerable evidence from grass-fed cattle
producers who raised concerns regarding the return for their levy investment,
representation of their sector and their ability to influence the decision
making process in regard to levy investments. While the committee was mindful
of focusing on the grass-fed cattle component of the cattle transaction levy, evidence
provided by many submitters revealed problems and constraints which went beyond
the grass-fed cattle component of the cattle transaction levy and implicated
the entire red meat structure.
In many ways, the concerns expressed about effective management and
representation of the grass-fed cattle industry also highlighted the need for a
fair return at the farm gate. The concerns raised in relation to the levy were also
symptomatic of a wider belief that the industry structures underpinning the
levy system are too complicated to provide for adequate transparency and
coherence, particularly in relation to roles and responsibilities. At the same
time, the industry has been through substantial changes since the structures
were established in 1997–98. In light of these dynamics, the inquiry has
brought to the fore what is growing momentum for a holistic, independent
examination of the red meat industry structures with a view to substantial
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