Representation of levy payers and addressing flaws in the current structure
This chapter focuses on the bodies that represent the grass-fed cattle
sector. It explores the extent to which grass-fed cattle levy payers can
influence the quantum and investment of the levy through their representative
bodies. The chapter also considers suggested reforms to the current levy
Evidence to the committee suggested that the effectiveness of CCA and
RMAC as the bodies responsible to oversee the expenditure of levy funds and
direct the industry has been compromised by the conflicting interests of
different industry sectors and lack of resources on the part of CCA. According
to NTCA, CCA's lack of resources and funding has made it impossible to
effectively manage MLA and develop sound industry policy.
These dynamics came to the fore in the context of the 2011 suspension of
the live cattle export trade to Indonesia. The event brought to light not only
the volatility of the trading environment but also raised serious questions
about industry representation, preparedness and capacity to defend and promote
the industry's interests in an effective and coordinated manner.
The need to respond to the ban brought with it confusion regarding the roles
and responsibilities of MLA, CCA and RMAC. CCA argued that the ban revealed the
extent of scope creep by MLA which had overreached into a 'strategic policy
void' largely because CCA had been unable to effectively develop and manage strategic
For many producers, the event was confirmation of their view that the
current bodies and structures did not work, because they were unable to draw on
them to take control of the situation and represent producers' interests effectively.
It demonstrated to them that RMAC was incapable of giving advice to the
Minister because of the conflicting views of processors and producers. At the
same time, the argument was made that a conflict of interest between producers
and processors, as described above, characterises MLA governance, rendering it
incapable of effectively serving the interests of producers.
Cattle Council of Australia
Under the MOU, which was outlined in chapter 2, the red meat
corporations, PICs and producers are charged with the responsibility of setting
policy for MLA, while MLA's role is that of service provider. CCA faces two
primary challenges to fulfil its functions under the MOU and to represent the
needs of the grass-fed cattle sector. First, the MOU is a legally unenforceable
industry agreement. Second, by its own admission, CCA is underfunded as a
consequence of declining SFO membership. This has left it with a diminished
budget and five staff to carry out its charter to represent the multibillion
dollar grass-fed sector's interests. At the same time, CCA is expected to
oversee and direct the operations of MLA which, through levy raising
activities, has an annual budget of over $170 million and almost 250 staff.
Heytesbury Cattle Company argued that the inherent structural governance
and consultative flaws in the current grass-fed cattle organisational structure
do not appear to exist in other red meat levy funding corporations such as AMPC
and LiveCorp, where the majority of board members are elected directly by, and therefore
accountable to, levy payers without any PIC intervention.
Concerns were raised with the committee that under the current cattle
and sheepmeat council organisational structure, membership of PICs is
five-times removed from the membership of SFOs. That is, the structure of many
PICs, including CCA, is based on 1950s branch, district, regional, state and
national committees. This leaves PIC representatives who interface with
government, far removed from the rank and file. According to AMPG/CCP, this has
led to the widespread view amongst levy payers that they are disenfranchised
from their peak body, RMAC and MLA.
In light of the complexities and challenges for grass-fed cattle levy
payers to influence the quantum and investment of the levy through representation
and voting rights, the role of CCA as the industry PIC was a key focus of the
In 2012, in response to the 2011 suspension of live exports, and in an
effort to strengthen its representative function, CCA initiated the development
of a new strategy for the grass-fed cattle sector.
CCA's subsequent restructure and direct membership reforms represent its
attempt to meet representative obligations to the sector in the face of
declining SFO membership. Issues raised during the inquiry in relation to CCA
focused on its representative basis. The committee also examined CCA's ability
to fulfil its advocacy role as well as its responsibilities under the MOU – to
oversight MLA and set levy payer policy for MLA to deliver.
Relationship between MLA and CCA
The relationship between MLA as service provider and CCA as sector peak
council was central to the inquiry. In particular, concerns were raised about
CCA's responsibilities under the MOU to advise and oversight MLA's investment
of levy funding, while at the same time, entering into service agreements with
MLA. In 2012–13, CCA funding from service agreements with MLA, AHA and Australian
Government amounted to $502,000 or approximately 33 per cent of CCA's annual
At the strategic level, PICs are required to maintain arm's-length
oversight of the apportionment and efficacy of levy investment.
The MOU requires CCA to develop – jointly with MLA – goals for achieving MISP
strategic imperatives, and assess the performance of services delivered by MLA
towards achievement of the MISP. However, ABA and a number of producers made
the point that the requirement to consult did not imply that MLA had to take
notice of CCA's concerns or directions.
CCA itself raised as a concern the level of consultation MLA must
undertake with the PICs under the red meat structure arrangements. It argued
that when undertaking levy expenditure, MLA should not only be required to
consult – but also receive approval from – organisations that represent levy
payers, before it can act.
MLA confirmed that it has a service agreement with CCA amounting to
$484,250 over 12 months, of which $75,467 is R&D funding.
Under the service agreement, CCA is required to conduct stakeholder
consultations through a number of grass-fed cattle producer consultative
processes. MLA noted that these consultation processes provide strategic output
to assist MLA to develop its long-term business plans and develop MLA's annual
Many submitters raised concerns about CCA's independence in light of its
reliance on MLA funding.
Bindaree Beef raised an important question of independent oversight:
Reliant on these payments to continue to operate, how can CCA
possibly provide effective oversight? This is a classic and obvious conflict of
interest that greatly exacerbates the already uneven playing field that CCA
CCA stated that the use of service agreements has allowed it to be more
responsive to the demands of the industry. In its original submission to the
inquiry, CCA argued that by improving its financial capacity, service
agreements had improved its ability to scrutinise MLA.
However, at a hearing, Mr Jed Matz, CEO of CCA recognised that service
agreements are a stop-gap measure and not the most appropriate way of funding
In this sense, CCA acknowledged that service agreements have been inhibitive as
CCA cannot work with complete autonomy or flexibility.
Adequacy of CCA funding
The extent to which CCA has the financial capacity to undertake its
responsibilities under the MOU was repeatedly raised in evidence. The following
diagram sets out CCA's funding in 2012–13.
Diagram 5.1: Cattle Council of
Australia funding 2012–13 
Voluntary contributions from SFOs, direct members and associate
Service Agreements with MLA, AHA and Australian Government through
Department of Agriculture
Red Meat Advisory Fund
Sponsorship, pasture-fed cattle assurance system, rural awareness
Bindaree Beef Australia argued that the combination of issues associated
with funding and the representative capacity of MLA and CCA amount to a market
failure in the administration and management of industry structures. Compared
to MLA's capacity with 248 full-time staff and 2012–13 revenue amounting to
$168 million, CCA's average income over the past five years was approximately
$1.39 million and it has five full-time equivalent personnel.
Bindaree Beef noted in this regard that:
This simple exercise shows how unreasonable it is to expect
that very small, poorly funded industry peak councils will be able to
effectively provide oversight and direction to an organisation hundreds of
times their size. This is compounded by a long standing cultural attitude
within MLA that it is above direction. During the live export suspension the
Government’s efforts to direct MLA to support the industry during the aftermath
were loudly and publicly ignored. If they can ignore the Government what hope
does a poorly funded, poorly staffed industry council have?
CCA acknowledged that it is grossly under-resourced to represent a $12
Mr Greg Brown argued that during its 35 years of existence, CCA had delivered a
valuable service to the beef industry. However, he argued that there is little
opportunity for CCA to exert any authority, let alone independent supervision,
over levy expenditure. He noted that CCA's declining financial position and
reliance on service agreements had made this situation worse, by seriously
weakening CCA's independence. He maintained that a dedicated source of income
would enable CCA to supervise levy expenditure and governance issues with
In 2014, it is anticipated that membership subscriptions will raise
$436,000 (from SFOs, direct members and associate members) while approximately
$500,000 is expected from the Red Meat Advisory Fund.
Given its estimated requirement of $4 million to carry out advocacy and other
core functions, CCA utilises service agreements to overcome its funding
A 2012 report by Inovact Consulting commissioned by CCA highlighted that
CCA required funding that was adequate to deliver on its obligations. It noted
that the disparity in resourcing levels between it and MLA brought into
question the ability of CCA to deliver its functions under the MOU in a
meaningful and influential way.
In terms of other sources of funding, CCA explained that RMAC funding
was adequate to allow it to fulfil its strategic planning function, put in
place a strategic plan and contribute to the wider meat industry strategic
plan. However, it falls short of meeting the funding required for CCA to fulfil
two of its core functions – industry oversight and strategic policy
development. According to CCA, voluntary contributions earmarked to lobby
government are currently being utilised for other functions, with industry
oversight and strategic policy development 'completely forgotten'.
CCA argued that if it had adequate funding, it would be able to engage
in well-researched policy development to identify the challenges facing
grass-fed cattle producers and thereby achieve some gains for them.
Mr Andrew Ogilvie, President of CCA, pointed out that research was required to
identify the competitiveness problems within the supply chain as 'we are one of
the most efficient industries in the world, behind the farm gate' but
thereafter things are falling down badly.
It is clear that a divide has emerged between policy settings and
delivery whereby an underfunded CCA is charged with the responsibility of
setting levy payer policy, while a well-resourced MLA is charged with
delivering that policy.
Although MLA enjoys guaranteed levy revenue, CCA is finding it harder to
sustain itself in the face of shrinking resources and loss of membership.
AMPG/CCP argued that the way to address the current divided structure was to
provide for a levy-funded cattle producer corporation, which combines policy
setting, policy delivery and advocacy. Under this model, the separate cattle
and sheep producers, live export and processor corporations would be combined
with their relevant PIC to carry out policy direction, marketing, R&D and
lobbying functions. AMPG/CCP identified the pork industry model under
Australian Pork Limited as an example in point.
State farming organisations
CCA membership is comprised of 152 direct members and 15,000 cattle
producer members through SFOs.
SFOs provide a system to ensure that all cattle producers have a say on how the
levies are spent and have to account to their members regarding any decision
However, the continuing decline of SFOs and their membership funds is
impacting on CCA's financial resourcing, and hence its ability to represent the
interests of grass-fed cattle producers.
It was put to the committee that 15 or 20 per cent of grass-fed cattle
producers are members of SFOs while approximately 15 per cent of MLA levy
payers are members of an SFO.
A number of submitters argued that declining membership reflected the view of
cattle producers that there is no value in contributing to an organisation
which has no influence over MLA decisions and is so underfunded that it cannot function efficiently or represent the grassroots producer
Notwithstanding this point, it was noted that at least 50 per cent of cattle
producers are not members of any organisation at all.
The 2012 report by Inovact Consulting commissioned by CCA (referred to
above) found that low (and declining) SFOs membership was undermining CCA's
ability to represent a substantial portion of the industry, which is critical
to maintaining its role as the sector's PIC under the MOU.
These concerns were reflected in evidence to the committee. FLAG argued
that CCA only represents a minority of producers.
The Heytesbury Cattle Company put the view that with the falling membership of
its SFO base, CCA had become disconnected from grassroots producers and does
not represent the majority view of industry participants.
Under the CCA's recent restructure, the board will comprise eight SFO
representatives and up to four producers elected directly from a voluntary
Some submitters argued that the while CCA's structural reforms are a
constructive step; they are undermined by continued SFO control over CCA.
Furthermore, in light of the low level of producer representation in
both CCA and SFOs, some argued that it was difficult to see how MLA can fulfil
its statutory obligations for consultation with levy payers.
Drawing on the governance structure of the NTCA and ALFA which are based on
direct membership, it was argued that CCA's governance would be improved if it
introduced 100 per cent direct membership and direct elections
for board positions.
However, CCA's response was that, if producers supported their new
structure and got involved, they would receive greater control of their
representative body, and consequently, both their service provider and levy
Red Meat Advisory Council
The primary role of RMAC is to 'provide advice to government on issues
affecting the whole of industry'.
However, one of the key issues of concern to cattle producers was RMAC's
current requirement that decisions be made only by consensus. As RMAC is made
up of cattle producers, lot-feeders, sheep producers, live exporters and meat
processors whose commercial interests are frequently in direct conflict,
constituents are often unable to establish a consensus position and therefore
unable to fulfil their advisory role to government.
The lack of leadership during the 2011 live export ban was repeatedly drawn on
by witnesses to demonstrate this concern.
RMAC was also unable to come to an agreed position because of competing single
sectoral interests with regard to the allocation of European Union and US beef
As the original intent of RMAC was to 'provide an interface for resolving
sectoral differences in a way that 'does not adversely affect industry but in a
way which promotes the image and purpose of the industry', evidence to the
committee suggested the need for reform.
The 2002 Senate legislation committee report on the meat industry
consultative structure found that the existing RMAC structure inhibited its
capacity to effectively represent the whole of industry. It recommended that
the Minister engage the industry in open consultation on options for a reformed
or alternative industry advisory structure.
The recommendation was accepted and the government emphasised that it was
willing to participate in industry discussions. However, it clarified that the
main impetus for change should come from industry, given that the principles of
industry ownership and self-determination underpin the existing institutional
Red Meat Industry Reserve Fund
The Red Meat Industry Reserve Fund was established from reserve monies
accrued after the industry restructure in 1997–98 and has three primary
a source of one-off transitional / start-up monies for the then
new industry structure;
a source of as-needs contingency and crisis management funding;
a source of capital, the investment yield from which provides
ongoing financial support to RMAC and PICs.
In 2002, the Senate legislation committee found that the formula for
dispersing proceeds from the Red Meat Industry Reserve Fund to PICs was rigid
and did not take into account actual expenditure of funds by the beneficiary
organisations. It noted that the funds were not allocated in response to budget
submissions by the PICs but were determined by the success or failure of the
fund's investment strategies for that year. The committee recognised that a
more competitive and responsive allocation formula would deliver greater benefits
to the industry and should be considered as part of negotiations for a reformed
or alternative advisory model. To this end the committee recommended that:
the Minister negotiate with MOU signatories on alternative
arrangements for the disbursement of earnings of the Red Meat Industry Reserve
RMAC or an alternative advisory body develop a detailed industry
strategic plan, and that the use of competitive contracts to deliver elements
of the strategic plan should be considered.
The government accepted the recommendations and noted that RMAC was
reviewing its existing industry strategic plan. Ultimately, the government took
the view that any changes to the existing arrangements, both in relation to the
fund and wider advisory structures, were primarily a matter for industry
Evidence to the committee suggested that little had changed despite the
2002 recommendations. CCA noted in evidence that the industry fund did not
provide sufficient resources to fund strategic planning, strategic policy
development and industry management to the level and quality demanded by
It explained that the current RMAC contribution represents 0.0002 per cent of
the gross value of Australian beef and calf production (including live cattle
exports) estimated at $7.4 billion.
Addressing the flaws within the current structure
The need to strengthen representation of, and service to, the grass-fed
cattle sector is fundamental to achieving any greater accountability to levy
payers. Ultimately, what is required is a system that enables the levy to be
spent on activities that enhance the position of cattle producers.
Some of the suggested alternatives to the current system included
providing a portion of the CTL to CCA to undertake non-political activities,
including strategic planning, strategic policy development, and industry
While the need for adequate funding for the grass-fed cattle sector PIC was
highlighted in some evidence, other witnesses recognised the need for
structural reform. There were also a variety of suggestions regarding the form
any such reform should take. Some submitters argued that MLA should be
dissolved, while others argued in favour of establishing a producer-owned body
to represent the interests of cattle producers.
Alternative models included the establishment of a peak council equivalent in
structure and function to AMIC and ALEC.
Another model proposed was the establishment of a company with responsibility
for representing producers and delivering research, development and marketing
on their behalf.
Provision of levy portion to CCA
Strengthening CCA's financial status, and with it the PIC's ability to
carry out its core MOU functions fully and effectively, were discussed in many
submissions to the inquiry. CCA itself advocated amendment of the red meat MOU
to ensure that MLA must not only consult with CCA but also seek formal approval
on annual expenditure of the grass-fed cattle levy component.
Noting that the MOU is a non-legally binding industry agreement, and that PICs
are responsible to advise the Minister through RMAC, such a suggestion
demonstrates the extent to which the current industry structures underpinning
the levy system are not functioning as originally envisaged.
While the recent restructure of CCA will permit non-SFO members to
secure membership, it is likely that the CCA will remain underfunded, and
consequently unable to properly oversight MLA. A number of submitters argued
that CCA should be provided with adequate funding to carry out its charter
under the MOU as it is the appropriate body to represent the interests of
grass-fed cattle producers.
To that end, the suggestion was made that a percentage or portion of the levy
should be redirected to CCA. This would provide it adequate resources to fulfil
this role and direct MLA to deliver outcomes that better reflect the
aspirations of producers.
CCA advocated in favour of receiving seven per cent of the levy to fund
strategic planning, strategic policy development and industry management.
It further noted that amendment to the MOU and levy principles and guidelines
to require MLA to receive formal approval from CCA on the development if its
annual operating plan would provide CCA with the means to oversight and control
MLA expenditure and fulfil its obligations to the grass-fed cattle sector.
While this proposition was supported by some SFOs such as AgForce Queensland,
it was rejected by others, notably the NSW Farmers' Assocation.
Some submitters rejected the proposal that CCA receive levy funding
either directly or indirectly, on the grounds that it would compromise its
independence to oversight the allocation of the levy.
TFGA highlighted the importance of maintaining a separation between the
producer representation and policy functions and the levy funded service
provider functions. It argued that the separation 'provides significant
advantages in terms of ensuring accountability, setting strategic directions
and clearly delineating agri-political activities from the levy-funded organisations'.
According to the Australian Registered Cattle Breeders' Association
(ARCBA), CCA should be funded from fees, service to members and the RMAC
reserve fund contribution, rather than relying upon levy funding.
While acknowledging the recent reform process undertaken by CCA, ARCBA also
held that the growing divergence between levy payers and CCA could be rectified
if a fully direct membership model were introduced. It advocated that under
this model, CCA would be more accountable to its levy payers as its funding
would be directly dependent upon its performance. It was argued that under an
alternate system, whereby CCA takes levies funds and receives service agreement
funding, there would not be the same degree of oversight and accountability to
Mr Malcolm Foster, President of ARCBA continued:
We are just very fearful that if they move down the route of
touching part of the levies that they then put themselves into a serious
conflict of interest in fulfilling their duties.
Alternative views were put that CCA should be removed as a prescribed
body with funding sourced from private membership.
Others argued that as the current system is unfair to levy payers and the
relationship between MLA and CCA is dysfunctional, an entirely new body should
be formed; by combining MLA into CCA or dissolving MLA, with CCA receiving its
Some submitters argued in favour of the creation of a new peak body to
replace CCA, which is directly elected by grass-fed cattle levy payers
equivalent to AMIC and ALEC. Under this structure, levy funds would be directed
to the peak body which has authority to select marketing and R&D service
providers, including MLA.
ABA argued that this model would bring grass-fed cattle producer
representation into line with other meat industry structures.
Under this model, the grass-fed cattle sector peak body would operate like AMIC
and ALEC and make decisions through a directly-elected board on levy priorities
These ideas were presented at the Roma Beef the Future Forum in 2013.
Cattle producers who attended the forum voted in favour of the following two
to support the establishment of a new cattle corporation funded
by the existing grass-fed transaction levy with the board directly elected by
levy payers to perform representative, policy setting and control policy
delivery functions on behalf of the grass-fed sector of the cattle industry.
i.e. take over functions of Cattle Council Australia (and 'liaise with' MLA);
to call on the Australian Government to establish an independent
task force forthwith to inquire into the organisational structures required to
meet the needs of the grass-fed cattle industry over the next decade and report
back to industry and government within three months.
Other submitters supported structural reform by way of the establishment
of a democratically-elected producer organisation that controls funding and
policy and represents all livestock producers.
Under a 'one stop shop' proposition, a new grass-fed cattle producer
corporation would be established by combining the current CCA policy setting
role with that of the MLA service provider function under one authority.
AMPG/CCP argued in favour of combining the advocacy, representation, policy
settings and policy delivery levy funded functions in one industry body. This
proposal is based on the precedent of the combined policy settings and service
delivery found in the egg, wool and pork industries and rural industry models in
New Zealand and America.
Some submitters argued in favour of a structure based specifically on the AWI
The pork industry levy funded company, Australian Pork Limited (APL) was
established under the Pig Industry Act 2001 which amalgamated three separate
bodies – the pork industry PIC, industry statutory marketing corporation and
separate statutory R&D corporation – within a single company. APL is the
peak national representative body for Australian pig producers. It serves as a
producer-owned, not-for-profit company combining marketing, export development,
research and innovation and strategic policy development.
APL operates differently from other industry service bodies in that the Pig
Industry Act 2001 enables APL to use marketing levies to fund strategic
Under the statutory funding agreement between APL and Australian Government, APL
is prevented from engaging in agri-political activity which is defined as 'engaging
in or financing any form of external or internal political campaigning'. However,
the funding agreement specifically states that agri-political activity does not
include strategic policy development.
The egg industry levy funded corporation and the AWI operate in a
similar way to that of APL. Both corporations have a role in setting the levies
for their own industry. Under the Wool Services Privatisation Act 2000
and its statutory funding agreement, AWI must conduct an independent poll of
levy payers every three years to determine the amount of levy to be collected
The committee considered these reform options throughout the inquiry.
Its views and recommendations are detailed in chapter 7 of this report.
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