Payer influence over quantum and investment of the levy
Evidence to the committee focused on a number of key problems with the
current levy structures, many of which are closely interrelated, including:
the strongly held view of many grass-fed cattle producer levy
payers that they are disenfranchised under the current system, which doesn't
represent them or serve their interests;
a dysfunctional divide between peak council policy settings and
service provider policy delivery which has contributed to transparency and
accountability concerns in relation to levy collection and investment;
the fact that MLA operates as both fund holder and funding
provider for producers while also being required to provide services to both
live exporters and meat processors;
the impact of CCA's shrinking resources and falling membership
coupled with its inability to obtain adequate funding to carry out its mandate
under the MOU and effectively represent the grass-fed cattle sector; and
misunderstanding and lack of clarity about the current
organisational structures, including roles and responsibilities, as well as
confusion about which bodies represent the cattle industry.
This chapter considers the problems which have contributed to a
disconnection between levy payer producers and the bodies that are supposed to
represent them. In light of these flaws, evidence to the committee suggested
that the current levy structures and systems fail to meet the current
collective representational needs of the grass-fed cattle sector. This chapter
considers these issues from the viewpoint of levy payers and focuses on the MLA
voting system as one of two primary mechanisms available to them to influence
the quantum and investment of the levy. Chapter 5 addresses sectoral
representation as the second primary mechanism.
Grass-fed cattle producer contribution to the CTL
The grass-fed cattle sector generates the greatest proportion of levies
Of MLA's total revenue of $162 million in 2012–13, the grass-fed cattle
sector's contribution of 33 per cent was by far the largest.
Diagram 4.1: Levy contribution of
MLA revenue 2012–13 
Percentage of total revenue
Lamb and sheep
Diagram 4.2: MLA grass-fed cattle
levy income and membership
MA levies income
Grass-fed cattle levy portion of total levies income (as % of total levies income)
Grass-fed cattle producer members (as % of MLA membership)
$59.5 m (60%)
$56.2 m (58%)
$54.2 m (57%)
While grass-fed cattle producers pay the largest proportion of the
levies, many who gave evidence to the inquiry held the view that they have little
influence over how the levy funds are spent.
A primary mechanism for levy payers to engage in decisions about levy
fund investment is through MLA membership and participation at the MLA AGMs.
However, estimates suggest that only about one-third of levy payers become MLA
members, and of those, only about one-fifth vote at MLA AGMs.
The reasons given in evidence for the declining engagement of levy payers
included the MLA voting structure, board composition and election process as
well as the capacity of CCA to serve as the sector's PIC. It is to these
matters that the committee now turns.
While payment of the levy is compulsory, levy payers must register to
become members of MLA. All levy paying cattle producers, lot feeders, sheep
producers and goat producers are eligible to apply for and receive MLA
Evidence to the committee revealed that only one-third of levy payers
secure MLA membership.
It was suggested that many small producers do not apply for membership because
they feel that they have no voice or voting power within the current voting
Some producers argued that payment of the levy should entitle them to
However, MLA informed the committee that automatic membership for levy payers
was not possible because 'imposing membership obligations without consent upon
producers is not allowed under corporations law'.
MLA voting structure
While MLA highlighted that its membership has consistently grown over a
decade – from 30,011 in June 2004 to 48,608 in June 2013 – evidence to the
committee revealed that the number of members who have sought their full voting
entitlements has remained consistently low, while the level of membership
participation in MLA's AGM is even lower.
Diagram 4.3: Membership
participation at MLA AGMs 2007–2009 
Membership participation in
% MLA members registered for
Estimated % production covered
by votes cast
MLA does not, as a matter of course, release official figures on the
number of levy payers who register for their full entitlement to vote. However,
of the figures publicly available, they reveal consistently low registration
rates. In 2005, there were 39,086 MLA members, of whom 8,838 members (or 22 per
cent) registered for full voting entitlements.
That year, an increase in the levy from $3.50 to $5 was supported by 57.8 per
cent of AGM voters.
In 2009, of 46,785 levy payers, 10,091 secured their full vote
entitlement while only 5,058 cattle producer members cast their vote to
maintain the levy at $5. The 5,085 cattle producers represented 12.5 per cent
of MLA members and 25 percent of Australian cattle production.
At the 2013 AGM, MLA confirmed that only 8,963 of 48,575 members
registered for their full voting entitlement while only 3,282 levy payers
Those who voted at the 2013 AGM represented 6.7 per cent of MLA members and
less than 2 per cent of levy payers.
By way of comparison, Australian Wool Innovation (AWI) which provides automatic
voting entitlements for its members, achieved 36 per cent voter representation.
These figures are important, as a key mechanism for levy payers to
influence the MLA constitution, levy quantum and investment decisions, is
through special resolutions for voter consideration at the MLA AGM. Amending
the MLA constitution requires a special resolution, which is defined in section
9 of the Corporations Act as one that is passed by at least 75 per cent
of the votes cast by members entitled to vote on the resolution. 
Disconnection between membership
and voting rights
Upon receipt of membership, levy payers are entitled to vote at the MLA
However, applying for full voting entitlements is a separate action.
Some levy payers argued that while payment of the levies is compulsory, the
fact that such payment does not automatically entitle them to their (full) vote
is undemocratic and amounts to 'taxation without representation'.
Mr Derek Schoen, Cattle Committee Chair, NSW Farmers' Association, suggested
that the need to separately register for voting entitlements every year had
contributed to producer disengagement from the MLA voting system.
Members' full voting entitlements for the purposes of the MLA AGM are
determined according to the amount of their levy contribution during the
financial year immediately prior to the AGM.
As a first step in allocating voting entitlements, MLA sends out a levies
notice to producers each year requesting details of the amount of levies paid
over the previous financial year.
As voting entitlements are allocated on submission of the levies notice, producer
members who do not return a levy notice are entitled to a single vote. The MLA
voting structure is based, therefore, on the dollars paid as levies by the producer.
Individuals or companies have to declare the amount of cattle sold each year to
MLA to claim their full vote. The scale of voting allocations is described in
the next section in this chapter.
In 2005 an external review of MLA membership conducted by McGrath Nicol
Corporate Advisory recommended the development of a new system to automate the
issuing of voting entitlements. It also recommended the establishment of an
independent audit of MLA's member register and vote allocation.
However, the costs involved in establishing and maintaining an automatic voting
entitlement system were considered prohibitive. The total amount for an
automated system was estimated at 3.8 per cent of the levies collected in
2005–06 or approximately 2.5 times more than established levy collection costs.
As MLA would have had to divert these funds from R&D and marketing
programs, the decision was made by the board (with PIC agreement) to retain the
voluntary levies notice system.
In 2007 an industry committee was established to re-assess the
cost-benefit implications of establishing automatic voting entitlements.
Of the industry committee's findings, MLA noted that such a system was:
Seen as an unnecessary cost burden on levies received, with
no guarantee of greater involvement of levy payers. Therefore it was concluded
and supported by peak councils and industry bodies that resources would be
better spent on marketing and R&D programs, however this may be revisited
in the future.
Noting substantial technological advances since 2007, a number of
submitters suggested various means by which an automated system could be
established. Mr Edgar Burnett suggested the introduction of a levy collection
and voting system based on existing Property Identification Codes (PI codes).
The PI code system is already in place and the number of cattle sold off each
PI code is determined from the National Vendor Declaration system.
Similarly, ABA argued that, as cattle in Australia cannot be sold without a PI
code, the levy collection system could easily be linked to it.
However, CCA raised concern with PI codes as the preferred levy
collection method on the grounds that the PI code databases are managed by
state and territory governments. Regulations regarding the management and use
of the databases, including privacy restrictions, differ from one state to
As an alternative, United Stockowners of Australia
(USA) recommended the establishment of a National Livestock Producer Register
mirrored on the National Grower Register which serves as a centralised,
national registration system to provide grain growers with access to multiple
grain handlers and marketers across the country using a single delivery card.
If a vote at the AGM is decided on a show of hands, every producer
present (or proxy) at the AGM has one vote. If a vote is to be decided on a
poll, full voting entitlements apply in accordance with the following scale:
Diagram 4.4: Levy contribution and
full voting entitlement 
$0 to $29, 088
One vote for each $1 paid
$29, 089 to $87,263
29,088 votes plus 0.75 votes
for each $1 paid in excess of $29,088
$87, 264 or more
72,719 votes plus 0.5 votes
for each $1 paid in excess of $87,263
The committee heard that the current system for allocating voting
entitlements was not democratic because it allowed the biggest levy payers to
dominate smaller levy payers and thereby control the direction and decisions of
The committee noted newspaper report on the 2008 MLA AGM revealed that a cattle
farmer with an average 350 head of cattle had less than 1600 votes compared to
the Australian Agricultural Company with 555,533 votes and JBS with 504,045
votes. It was noted that at the AGM, the top 50 levy payers could out-vote the
rest of the industry.
Many other submitters argued that the 'undemocratic' voting system had
contributed to the disenfranchisement of grass-fed cattle producers.
Mr David Gregory expressed the view that while smaller cattle producers make up
the vast bulk of beef industry businesses, they have little or no say in MLA's
direction or priorities and therefore take little or no interest.
Former CCA chair, Mr Greg Brown argued that if CCA, as the sector PIC, is to
deliver on the expectations of levy payers, the grass-fed cattle sector should
have voting influence commensurate with the proportion of levies contributed
rather than have to share the vote with the grain-fed cattle sector and sheepmeat
However, some witnesses supported the current vote allocation system
including AgForce Queensland, which argued that the level of representation
should be proportionate to the amount of levies paid. Agforce's Ms Smith
contended that 'if you pay 75 per cent of the levy, you should have 75 per cent
of the say'.
Likewise, MLA noted that grass-fed cattle producers who pay the most levies and
then go on to secure their full voting entitlement will have the most say in
matters that go before the AGM.
However, MLA's argument was put into perspective by Mrs Jo-Anne Bloomfield
who made the point that under the voting system, smaller producers have little
opportunity to influence voting outcomes. She explained that out-voting a
mid-range levy payer who has 150,000 votes would require the joint efforts of
60 smaller levy payers (all of whom sell 500 cattle and receive 2500 votes in
return) to match that one person or company.
This illustrates to the committee the large disparity between the voting
entitlements of smaller producers in relation to larger ones. In this way, it
can be argued that the current voting system magnifies the disparity between
larger and smaller producers.
It was put to the committee that a viable alternative to the current
system is that of the AMPC model whereby AMPC directors are directly elected by
Under its two-tiered structure, the first tier provides for one vote, one value,
and the second tier is a vote on the value of levies paid. For resolutions to
be binding, they have to be passed by both tiers. According to AMPG/CCP, when the
two-tiered or two-register voting system was not adopted in the MLA
constitution, the ownership and accountability principles that underpinned the
1996 steering committee recommendations were lost.
The two-tiered system was supported by a number of producers and sector
bodies on the basis that it enabled all parties' interests to be addressed.
Noting the need for a fair and inexpensive voting system that delivers
equitable representation for grass-fed cattle producers, CCA voiced interest in
a two-tiered model.
Mr J. Ashley McKay who advocated for this system noted its advantages:
It prevents the big boys dominating the little guys, and it
also prevents the big guys being outvoted by the little blokes on things. There
are totally competing differences between a bloke with 10,000 cattle and a
bloke with 100 cattle, but they both have a right to be represented. They both
ABA argued in favour of a two-tiered system on the grounds that it would
bring equilibrium between the small and large cattle producer in a sector populated
by operators of varying size and scope. ABA Director, Mr Brad Bellinger clarified
that for the election of directors to the board, the first tier (one vote per
levy payer) should be applied, while matters including constitutional change
would require the majority vote of both tiers.
Identification of CTL payers
Further concerns regarding the veracity of the voting entitlement
structure stem from the fact that producers who actually pay the levy are not
identified against their levy payments.
USA noted that:
The majority of cattle transaction levies are collected from
grass-fed livestock producers whose real identity and actual levy payments are
not recordable by the time the levies collection unit receives the collected
tax (levy). This levy money, now consolidated revenue, is transferred to
recipient organisations, including Meat and Livestock Australia (MLA),
Australian Lot Feeders Association (ALFA), etc, and is further distributed in
relation to marketing and other functions.
Therefore, MLA does not receive information about what levies each
producer has paid from the levies section of the department (formerly Levies
Revenue Service) through collection agents. The department's levies unit uses
an intermediary system which largely comprises stock agents (selling agents)
and abattoirs (processors) to collect the levy. The levy is held in trust for
one month and 28 days before transfer as a bulk payment to the levies
The levy is payable by:
- the buying agent, selling agent
or first purchaser who buys or sells cattle or livestock in a month;
- the processor who slaughters
cattle or livestock or takes delivery of the cattle or livestock; or
- the processor on whose behalf
cattle or livestock are slaughtered by, or delivered to, another processor in a
When an intermediary deducts the levy from the proceeds of sale or
recovers the levy from the producer, the producer must be provided with a
receipt or written statement acknowledging payment of the levy. The department
noted that in 2012–13, there were 702 intermediaries for the CTL on grass-fed
cattle and 254 intermediaries for the cattle transaction levy on bobby calves. Levy
agents are subject to compliance checks through a risk-based inspection program,
with approximately 600 levy agents subject to inspection each year.
An auditable system
The fact that members must self-declare their levy payment to MLA raised
questions about the accuracy of declarations and the transparency of the voting
entitlement allocation system. MLA informed the committee that there are
thresholds beyond which votes are subject to verification. For example, where a
producer claims a significantly different voting entitlement when compared to
the previous year.
However, the system lacks accountability, not least because a producer has no
right to challenge or dispute a determination, estimate or adjustment made by
MLA in relation to the number of votes the producer may cast.
Notwithstanding the levy agent inspection program and verification of
levy payments above a certain threshold, the transparency and efficacy of the
system remains limited by the fact that the identity of levy payers is not
established for verification against levy payments and voting entitlements. The
department confirmed that the system does not require the identity of the levy
payer to be recorded:
The department does not systematically collect nor is aware
of who the actual levy payers are beyond the provision of the annual returns
from direct producer to producer sales.
The Food Producers Landowners Action Group (FLAG) Australia and USA noted
that it is at the very beginning of the process, when the levy is collected,
that the first major problem in the levy system occurs. That is, as discussed
in the previous section, the levy payer is not identified and hence the
identity of the levy payer is not recorded against the actual levies paid.
Without an accountable, regularly audited system to ensure what is
advised by a producer is accurate, legitimate and can be verified against the
amount of levies paid, the current system lacks transparency.
The point was made that without checks and balances within the system to
confirm that the values put forward are correct, the system could be rorted.
As matching Commonwealth R&D funding is provided to MLA, transparency
in relation to the levy collection system is important for the industry,
Australian Government and the tax payer. This is a matter of some importance to
MLA, given that under the present system, accountability to its members is
necessarily limited. As noted by the Northern Territory Cattlemen's Association
(NTCA), when the service provider does not know who is supplying the income,
'it is hard to justify where it is going'.
Southern Director of USA, Mr John Michelmore argued that:
Many grass-fed producers see the dire need for levy payer
identification and levy payment records that lead to automated allocation of
voting rights and democratic representation from our sector, including a
democratic levy-setting mechanism. To continue under the current processes and
structure will result in further discontent and potential problems.
MLA board and selection committee
The composition of the MLA board selection committee and its impact on
the accountability of the board were issues of particular contention amongst
many submitters. They argued that, despite grass-fed cattle producers
contributing the majority of the levies received by MLA, they have no greater
say over MLA board selection decisions or voting rights than the other sectors
which contribute a far smaller share of the levy.
The selection committee is responsible for nominating members of the MLA
board. It comprises nine people including three producer-elected
representatives, three PICs representatives (one each from CCA, SCA, and ALFA)
and three MLA board directors. Board directors and the producer representatives
on the selection committee are appointed at MLA AGMs.
Producer Mrs Rachel Weston explained that:
The selection committee comprises nine people. Three are
current board members so that is one-third of the selection committee. Three
people are industry-body representatives. There is one person from ALFA, the
lot feeders, one person from the Sheepmeat Council and one person from the
Cattle Council of Australia. If you are not a member of the state farm
organisations—and I guess now with new members paying $100 to the Cattle
Council you can join in here—that is the only chance you are represented by the
Cattle Council of Australia. It is if you are already a member of them or state
farm organisations. That leaves 80 to 90 per cent of producers, who are not
those members, now only having one chance of a bit of a say from the three
producer elected representatives.
The view was put to the committee that the presence of three MLA board
members on the selection committee enabled MLA to concentrate power at the
expense of levy payers.
Mr Greg Brown made the point that there was no reason why the MLA board
should have any positions on the selection committee at all, let alone the greatest
number. He argued that the selection process for the MLA board is 'totally
distorted' by the fact that MLA representatives dominate it. Furthermore, he
noted that CCA, which represents the largest portion of revenue, is relegated
to having two members on the selection panel, along with the SCA and ALFA, while
MLA has three.
The committee heard that there had been various attempts to increase the
direct influence of producers over MLA governance and board selection
composition. At the 2001 AGM, a resolution was introduced to remove two
directors from the selection committee and replace them with two additional
producer members (a grass-fed cattle producer and a sheep producer member). The
resolution achieved 69 per cent support and was defeated as a majority of 75
per cent of votes is required.
2002 Senate Legislation Committee
recommendations and attempts at reform
Noting the 'undemocratic' process by which MLA board members were
appointed, in 2002, the Senate Rural and Regional Affairs and Transport Legislation
Committee (Senate committee) recommended that the MLA board consult with its
membership on democratic reform of the MLA's Articles of Association.
The committee underscored concerns raised in evidence regarding the selection
committee charter set out in section 5 of the MLA Articles of Association.
According to Article 5.4(d), the selection committee cannot endorse more
candidates than the number of vacancies to be filled at an AGM. It was put to
the Senate committee at the time that this process was undemocratic because it
effectively removes the right of the AGM to elect candidates to the board.
As part of its recommendations, the Senate committee noted that if
progress on democratic reform of the Articles of Association did not proceed,
then the Minister should 'engage in detailed and open consultation with levy
payers on reform options for a more democratic board selection process'.
The committee took the view that changes to the appointment process could be
accomplished by way of amendment to MLA's Articles of Association or by the
'replacement of MLA with another company, identical in all respects except for
the omission of these articles from any new company's Articles of Association'.
In its response, the Australian Government noted that, while it had no
power to intervene in such matters (as MLA is a company formed under the Corporations
Act), it nonetheless had 'encouraged MLA to consider making the board selection
process more democratic and open to participation by MLA members'.
In response to the committee's recommendation, MLA proposed amendments
designed to provide greater producer representation in the board election
process to its membership at its 2003 AGM. While the 75 per cent of votes
required was not met, a substantial 73 per cent of votes were cast in favour of
In 2004, MLA members considered a special resolution proposed by a group of
members that the constitution be amended to provide for the direct election of
up to six directors (including one processor) and four specialist board members
chosen by the selection committee. The resolution received 31.2 per cent of
votes and in 2005 the same resolution was put to the membership, of whom 24.2
per cent voted in favour of the change.
MLA informed the committee that the board had offered to step down from
all selection committees. Noting that MLA had not been able to achieve the
required 75 per cent vote to change the composition of the committee or the MLA
constitution, MLA Chair, Dr Michele Allan explained that the board would
continue to work with industry on 'developing a consensus view' on greater
industry representation on the selection committee.
However, she clarified that it was up to PICs to propose special resolutions at
AGMs, including any proposal that the selection committee should no longer
include board members.
Article 5.4(d) of the MLA Articles
Another concern raised in relation to the current arrangements was
Article 5.4(d) of the Articles of Association. Under this provision, when there
are vacancies on the board, the selection committee will endorse enough
candidates to fill only the number of placements available. If there are two
vacancies, only two applications will be endorsed for members to vote on.
Producers argued that under this system, their votes are of no consequence. As
Mrs Weston explained, producers have one small chance to vote on people who are
already preselected so 'we really do not get a chance to choose'.
At the 2013 AGM, there were more than 90 nominations for three
available board positions. The selection committee eliminated all but three of
the nominated candidates. As voters were then asked to vote for the three
candidates to fill three vacancies, the election was declared a 'farce'.
Dr Brian Creedy from the Richmond River Beef Producers Association stated that
it was 'just three out of three or waste your vote'.
Similarly, Mr Schoen from the NSW Farmers' Association expressed the view that
it 'looked far from democratic to have three nominations for three positions'.
Meeting producer and processor needs
Of the $5 levy, $3.66 goes to marketing – marketing a product
we do not sell. We sell cattle, not beef.
Under the current red meat structure, MLA is required to deliver policy
for, and report to, grass-fed cattle producers, lot feeders and sheep
producers, live exporters and meat processors. However, central to the concerns
raised by grass-fed cattle producers regarding the current structures was the
contention that the needs of both producers and processors are divergent (if
not conflicting) in regard to marketing and R&D, and that one industry
service body cannot represent both (competing) sets of interests.
While both are involved in the meat industry, producers want to sell at the
highest possible price while processors want to buy at the lowest price.
CCA argued that the interests of processors and the interests of producers are
never the same.
AMPG/CCP observed that:
In theory, MLA has three divisional masters, CCA, SCA and
ALFA and is also meant to act co-operatively with the abattoir owners and live
exporters to provide "willing partnership" services to those sectors
of the red meat industry.
In a similar vein, Ms Juliane Cowan put the argument that meat
processors would not support the expenditure of significant funding on opening
up more live export markets, as this would create more competition in the live
cattle market and therefore potentially drive up the price that they pay for
meat. However, such markets are a vital area for growth if grass-fed cattle
producers are to be profitable.
Mr Ryan and Ms Tracey Hacon and others drew on the role of MLA in
relation to the 2011 live cattle export ban, noting that the situation
benefited the processors who were able to make substantial monetary gains from
the oversupply of cattle brought about by the ban.
Citing the same event, Mr Peter Mahony argued that the cattle export ban
served as an example of how control of MLA policy delivers poor returns to
those stakeholders who pay the lion's share of the levies.
The fact that many grass-fed cattle producers are undergoing financial hardship
contributed to the poignancy of their evidence regarding the need for a fair and
efficient levy system, which provides an equitable return to producers.
Dominance of beef processors
Through their feedlots, processors are entitled to apply for full voting
entitlements if they pay the levy.
Under the Primary Industries (Excise) Levies Act 1999, processors are
required to pay the CTL if they keep cattle in their yards for 60 days.
Furthermore, as the levy is paid as a flat rate, due to varying production
systems, one beast may be sold several times to breeder, backgrounder, feedlot
and meatworks with the levy being paid for each transaction.
In June 2011, newspaper reports revealed that representatives of four of
the country's largest meat processors – JBS-Swift Australia, Nippon, Rockdale
and Teys sat on the MLA board. The committee was informed by CCP that now four
of the five biggest MLA vote holders are beef processors.
The view that beef processors are able to use their voting dominance and
position on the MLA board to influence the distribution and expenditure of the
levy was shared by many grass-fed cattle producers who gave evidence to the
Producer Ms Jo-Anne Bloomfield argued that there is a distinct conflict
of interest, given that retailers and processors can influence the spending of
producer levy payments through the current voting system.
Similarly, Mr Norman Hunt, Convenor of AMPG/CCP stated that processors and
producers with directly competing interests are members of the same corporation
where processors 'hold sway because of the predominance of the levies they pay'.
These concerns also came to light in evidence regarding the processing
sector's contribution to levy funding when compared to the other sectors. The
committee was informed that processors contributed approximately 10 per cent to
MLA, while enjoying a return of about 33 per cent in terms of levy investments.
The original intent of the AMLI Act was to provide for clear sectoral
While noting that the 1997–98 red meat restructure had originally sought to
separate the producer service provider (MLA) from the processor service
provider (AMPC) because the interests of processors and producers were often in
conflict, AMPG/CCP argued that the evolution in integration over the past
decade resulted in significant voting entitlements vested in the hands of large
processors. According to AMPG/CCP, in 2010–11, eleven meat processors were
amongst the top seventeen MLA levy payers.
Similarly, Mr Rod Dunbar noted that since the 1997–98 reforms, unprecedented
wealth transfer to the secondary sector (registered feedlots and processors)
has taken place, enabling it to effectively control the levy structure and
grass-fed cattle sector.
AMPC noted in a submission to the 2011 Productivity Commission (PC) review
that as vertically integrated processors operate feedlots and some have
pastoral properties, 'they pay substantial levies on livestock transaction,
often a number of payments along the chain'.
According to MLA, on average, a beast is traded 1.7 times during its lifetime.
As many of the larger agricultural businesses are now vertically integrated,
this potentially means that they could claim multiple votes at the MLA AGM for
the same beast by moving that beast within their properties several times.
When faced with the question of whether the contention regarding
processor voting dominance was well-founded, MLA's Dr Allan informed the
committee that MLA simply didn't know whether the number of non-farmer
(processors) voting members outweighed that of farmer (producer) members.
Disparity in interests between
producers and processors
It was also highlighted that meat is a different commodity to livestock
and when livestock are converted into meat, the livestock producer has no
further interest in its marketing.
In other words, cattle producers supply the beef industry but are not involved
in the production or distribution of saleable meat products.
Many grass-fed cattle producers supported the separation of the livestock
industry from the meat processing industry for these reasons, arguing that the
former should raise a levy solely for its own purposes.
Furthermore, processors did not support many of the collective funding
activities proposed by the producers. However, according to AMPG/CCP:
Those implementing the restructure did not, however, realise
the full extent of integrated backgrounding and feedlot interests of
processors, and the evolution of that integration over the following decade.
The result has been very significant voting entitlements vesting in the hands
of the larger meat processors. 18% of all MLA levies are now paid by abattoirs
and at least half of the top MLA levy payers are abattoirs; JBS Swifts,
Australia's and the world's largest meat processor, is MLA's largest levy
Mr Alex Munro stated that the levy is a producer rather than industry
levy as only the producer pays it. 'Therefore the majority of this levy should
be helping the producer, not processors and retailers who are paying producers
the same prices as 20 years ago'.
Mr Smith from AgForce Queensland noted that the bulk of the grass-fed cattle levy
marketing funds are used to market boxed beef (or dressed meat).
Many submitters argued of the need for a producer-only body for these
Mr Norman Hunt informed the committee that the processors themselves may prefer
to have their levies directed to AMPC rather than MLA as ultimately 'their
interests are directly competing'.
In a submission to the 2011 PC review of rural research and development
corporations (RDCs), AMPC suggested that it receive all levy funds paid by its
members. It argued that:
In the event of any restructuring, the AMPC would look to
receive and manage all statutory levy funds paid by members, including $4-6m a
year of transaction levies from red meat processing firms with feedlot and
grazing activities. The case for this closer alignment with sector structures
is outlined in this paper. Processors, working through the AMPC, and in
collaboration with a range of skilled providers, are best positioned to secure
returns for the sector, the industry and the wider economy from these funds.
Under the current red meat structure, processors retain half of their
own levy fund revenue and contribute only six per cent to MLA and RMAC while
retaining two seats on the MLA board.
Through their influence on the board and in relation to the voting system, it
was put to the committee that vertically integrated entities had become the
largest recipients of marketing funding while the grass-fed cattle sector
receives little return and is peripheral in relation to R&D investment.
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