Committee view and recommendations
We as grass-fed producers and levy payers deserve to have a
representative body with direct membership, an equitable voting system and
transparency in expenditure and operation.
The overwhelming majority of submitters to the inquiry voiced their
support for payment of a levy directed at enhancing outcomes for producers.
However, the operating environment upon which industry structures and the current
levy system are predicated has changed considerably since the 1997–98 reforms. In
light of these significant changes, the difficult financial circumstances in
which many producers find themselves, and the lack of producer ownership over,
and oversight of, levy funds, many submitters advocated for reform to the
current levy system and industry structures.
At the heart of such reform is the need to effectively meet the needs
and aspirations of producers. While views across the industry are diverse, the
common themes that emerged in evidence to the committee included the need for:
a democratically elected body to manage the cattle levy, which is
directly accountable to levy payers and predicated on a fair and equitable
voting structure, such as the two-tiered system;
a fully audited levy collection and levy payer identification
system which provides for automatic voting entitlements;
a linkage between responsibility for policy development and the management
of policy implementation in order to ensure accountability to levy payers;
a levy system that serves the interests of producers rather than
other sectors of the red meat industry;
greater flexibility in relation to adjusting the allocations
within the $5 CTL;
a full and independent audit of the cattle transaction levy; and
research on transparency in pricing and options for a transparent
The current systems and structures which underpin the cattle industry
are complex. They encompass many regulatory and technical
industry issues and involve a range of peak industry associations, commercial
stakeholders, industry committees, service providers and statutory authorities.
The industry is made additionally complicated by vertical structures, size
disparity within the producer sector, and the nature of the relationships
across the industry – which is significantly fragmented.
In fact, the levy systems and structures underpinning the red meat industry as
a whole have become amongst of the most complex and bureaucratic in operation
in Australian agriculture.
In short, the current structure has 'too many mouths to feed'.
There are a plethora of bodies, groups, forums and committees which seek
to determine how the industry is administered and the levy payer funds
collected and spent. The reality is that producers find it extremely difficult,
if not impossible, to navigate, let alone effectively participate in, or engage
with, the industry framework.
The complexities of the systems and processes that underpin the CTL have
further contributed to frustrations and misunderstandings regarding respective
roles and responsibilities.
The inquiry focused on the limited ability of producers to directly
engage with levy investment decisions and trace levy investments through the
supply chain. Central to the concerns of producers is that the current system
is unable to bring together the authority to represent the industry, with the
means to represent it in a way that is accountable to levy payers.
At the same time, levy payers are unable to penetrate the system which has proven
to be opaque and resistant to change by its complexity. The scope for producers
to achieve any greater control over their levy expenditure through engagement at
MLA AGMs or industry representative bodies is remote indeed. For these reasons,
the current industry structures and levy system do not meet the current
collective functional and representative needs of the cattle industry.
The extent to which MLA remains accountable to levy payers under the
current system was central to the inquiry. It was the common issue around which
reform was discussed. Concerns regarding accountability were specifically
raised in the context of R&D and marketing expenditure.
The views of Mr Bernie and Ms Kathy Day were typical in this regard:
Even though we pay levies every time we sell a beast, there
is no accountability to us as to how the money is spent.
Questions were specifically raised about the status, expenditure and
ownership of R&D commercial-in-confidence information.
These concerns went to the heart of transparency and accountability and
demonstrated for many witnesses that the structures no longer provide for
effective oversight of MLA. In fact, the structures have lent themselves to the
establishment of an undemocratic self-serving system which is not producer-centric
and therefore not answerable to levy payers.
MLA's lack of engagement with levy payers has been a constant theme, not
only in evidence before the committee but also in reviews of MLA performance. The
June 2013 independent review of the MLA Livestock Production Innovation (LPI)
R&D investment systems noted widespread dissatisfaction with the transparency
of MLA processes for selecting and approving projects. An improved formal
process for stakeholder engagement in setting priorities, implementing strategy
and conducting two-way dialogue with industry was recommended.
Evidence to the committee suggested that, along with greater stakeholder
engagement, there was also a need for greater contestability and competition in
the allocation of R&D and marketing levy funds. In this regard, the
committee notes that CCA entered into service agreements with MLA without
competitive tender. According to MLA, it is not required to put contracts up
for competitive tender if it has 'cogent reasons' not to do so.
In light of concerns regarding contestability, the view was put by submitters
that any reform to the current structures should provide for a more contestable
system. This included the proposition that MLA no longer operate as the default
service provider. The view was put that there would be greater contestability
within the system if MLA was one of many service providers competing for a
tender for R&D and marketing services.
For many grass-fed cattle producers, the levy system is not only
impenetrable but also serves the needs of other sectors over their own. The
committee acknowledges the strong view of many producers that, as processors
are commercially motivated to pay the lowest possible price for cattle and
producers seek the best possible return, their interests are competing and
should not be accommodated by a single body. The point was repeatedly made that
sectors that contribute smaller amounts to MLA for R&D and marketing
purposes (such as the processors and live exporters through AMPC and LiveCorp) are
able to manage their own levies and instruct MLA as to how their R&D funds should
be spent. At the same time, there is a widely held view that processors and
other industry sectors enjoy disproportionate benefit from MLA R&D and
matching government funding investment, at the expense of the cattle producer
sector. For grass-fed cattle producers, who pay the largest amount of levies
and have the least influence or control over how their money is spent, the
current levy system and industry structures appear to benefit those who
contribute the least.
Reform to the levy system and industry structures must be predicated on
a commitment to enhance value for producers and not the interests of
intermediary bodies that serve the industry. Each step in the supply chain must
be optimised to deliver a competitive advantage to the industry. However,
considerable evidence before the committee highlighted that the current cattle
industry structures are not effective in meeting the collective needs of the
industry, or enabling the grass-fed sector to maximise its ability to respond
to market challenges and capture opportunities in R&D.
The grass-fed cattle sector clearly needs an effective and adequately
resourced representative body. The fact that CCA is currently underfunded and
under-resourced has seriously undermined its ability to fully exercise its
roles and responsibilities under the MOU. While the use of service agreements
has provided additional resources to CCA to operate in the short term, it has
created the perception that CCA is reliant upon MLA funding and therefore no
longer fully independent. Cattle industry organisations need to be structured
and resourced in a way that enables direct relationships between investors
(government and levy payers) and firms in the value chain. They must have the
capacity to operate at the strategic level while also being able to adapt and
respond rapidly to an uncertain and volatile operating environment.
The systems and structures that underpin the CTL have not been subject to
reform or adaptation despite industry changes, let alone growing discontent
with MLA's ability to represent levy payers' interests. Underpinning concerns
regarding MLA's role is that it serves as the intersection between producers
and the market whilst also trying to represent the interests of all (and often
competing) sectors across the industry. Multiple divisions and lines of
authority within MLA including a governance structure that disconnects the
board and senior officers from levy payers, has contributed to a context in
which 'the expenditure of levy money becomes an end in itself, without
sufficient emphasis on lifting the bottom line profitability of levy payers'.
At the same time, CCA is now dependent upon the service provider as both holder
and investor of levy funds and is unable to represent the policy needs of
producers and oversight levy investment. As MLA is not directly and immediately
accountable to CCA as the PIC, or to levy payers themselves, it has become
self-serving. A number of submitters argued that as MLA provides producers with
very little say as to who gets on the board or how their levy money is spent, it
should be replaced with a single autonomous organisation that represents all
grass-fed levy payers.
Under the current red meat industry structural arrangements, whereby MLA
operates as private company and the government has no direct power of
intervention or reform, there are very few ways by which meaningful reform can
This report has documented the manner in which recommendations made over
years to reform these systems have been resisted. Frustration with the rigidity
of the current legislative and administrative structures that underpin the levy
system was felt by many levy payers who provided evidence to the inquiry. These
frustrations were clear in the evidence of Mr Carter who had come to the
conclusion that MLA was untouchable:
I can tell you because I have tried barriers and I have tried
the Shareholders' Association, and they all just shook their heads and said
that it is unbelievable. I have gone to ASIC, and they have said that it is the
minister's responsibility. I have gone to the minister. He said, 'No, it's a
private company.' The constitution cannot be altered without a 75 per cent vote
in both membership classes of the company. There is one class that is partly
funded by MLA. It will never vote for its winding up. The other class includes
recipients of the commercial-in-confidence R&D grants. We have had 16 years
The committee appreciates the efforts made by individual producers and
producer groups to provide their views to the inquiry. Many of them are
frustrated with the current structures and respective bodies which have not
been responsive to producer concerns and are resistant to change. Yet, the goodwill
of producers, demonstrated by their continuing commitment to paying a levy for
the benefit of the industry's future and engage in efforts to ensure the
sustainability of the industry, is under stress. Should the following
recommendations be rejected or even watered down, the committee fears that this
existing goodwill, and with it efforts to provide a viable structure for producers,
will rapidly diminish.
The following recommendations seek to establish a direct relationship
between producer levy payers and their representative body. They are directed
at providing for greater transparency and accountability within the levy system
as well as flexibility and contestability in relation to levy allocation and
A producer-owned body
Producers should have ownership over their own levies and decide how
their levies funding and matching tax payer funds are spent. However, the
current structures have been resistant to repeated reform efforts and no longer
reflect the realities of the industry. Therefore, the committee recommends that
a new industry services body be established by legislation. The new
producer-owned body should have the authority to receive the producer marketing
and R&D component of the CTL, matching government R&D funds and to
manage funding investment. While it is possible that this new body might be a
reformed version of CCA, it is also possible that agreement is made to start
from scratch with an entirely new entity.
The establishment of a producer-owned body would address the fundamental
flaws in the current structure by bringing together the authority for levy
investment with the means to invest it. The establishment of such a body would
address problems of representation and strengthen producer accountability by
establishing a direct relationship between producers and the body; thereby
bring together the authority for policy settings and delivery. This could be
achieved through legislative means by combining PIC policy development responsibilities
with the statutory marketing and separate statutory R&D corporation
Under the proposed reform, the Australian Government, through the
department, would disperse the CTL levy components to AHA and NRS with the
R&D and marketing funds directed to the new producer-owned body. It would
have the authority to disperse the funds to MLA as well as other service
providers. As MLA would remain a service provider under the proposed reform,
the important work it is engaged in, particularly in relation to export markets,
Under the new producer-owned body, levy payers would be eligible to
register for membership and should be required to vote on the rate of the levy
every few years. Levy payer members would also be required to vote on whether
to vary the allocations of the CTL levy between AHA, NRS, marketing and R&D,
with final agreement on varying the allocations achieved with ministerial
The composition of the board of the new producer-owned body could be
determined on a geographic or zonal basis. The committee makes no specific
recommendation on the method to be used, as that is a matter for industry to
determine. Notwithstanding this point, in light of the overwhelming evidence in
favour of a directly elected body, the committee strongly supports a
directly-elected board model. While the committee acknowledges the strong evidence
in support of a two-tiered voting system as a viable option to address the
disparity between small and large producers, the voting system is also a matter
for industry. The committee simply notes that the voting system should be fair
and equitable, while the vote allocation system should be transparent.
As demonstrated in the foregoing paragraphs, while the committee has
come to the view that the systems and structures that underpin the CTL are not
delivering the maximum benefit to Australian cattle producers, it does not
believe that it should propose a detailed, prescriptive set of recommended
reforms. For self-determination to succeed, the industry must establish its own
inclusive and consultative structures on which to build consensus and determine
its own future. Nevertheless, in concurrence with the majority of statutory
funding agreements between industry-owned companies and the Commonwealth, the
new body should not be permitted to engage in agri-political activities.
In light of the diversity of the producer sector in size, geographical
location, and target market, the committee emphasises the importance of
initiatives to keep levy payers directly informed and engaged in the
decision-making processes of their representative body. Noting that other industry
bodies broadcast their AGMs via webcast to enable members who are unable to
attend in person to view proceedings online, the committee encourages similar
The committee recommends that a producer-owned body be established by
legislation. The body should have the authority to receive and disperse the
research and development, as well as marketing component, of the cattle
transaction levy funds. The producer-owned body should also be authorised to
receive matching government research and development funds. Reforming the Cattle
Council of Australia to achieve these outcomes should be examined as part of
The establishment of a new producer body provides an opportunity to
address concerns regarding the imposition of the levy, the levy collection
system, and how votes are allocated.
Automated and transparent levy collection and voter entitlement system
The committee acknowledges the concerns of grass-fed cattle levy payers
regarding the current levy collection system on which vote allocations are
determined. The committee takes the view that a transparent and automated levy
collection system (which identifies levy payers against levy payments) should
be introduced. The introduction of an automated system would allow for the
rapid settlement of levy payment and timely transfer of levy revenue to the
department. The system should be subject to regular independent auditing and
verification. As this system would provide an accurate audit trail, levy payers
should receive their voting entitlements automatically. The committee considers
that the proposed system will go some way to addressing concerns regarding
declining membership and participation.
In addition to re-engaging producers, in view of the fact that the
Commonwealth provided MLA with $176.3 million of R&D funding matched to
industry levies from 2008–09 to 2012–12, a transparent and accountable levy
system (which provides for the accurate recording of cattle transactions) should
offer some assurance to the Australian Government and the tax payer that the
government contribution to R&D is proportionate and commensurate.
The establishment of a fair and equitable voting system underpinned by
an automatic and audited levy collection and voter management system will
contribute in a meaningful way to enabling producers to determine the
investment of their levy funds.
The committee recommends the establishment of a cost-effective, automated
cattle transaction levy system. The system should identify levy payers against
levies paid. The automated system should provide for more immediate settlement
of levy fees paid and the allocation of voting entitlements. It should be
subject to regular independent auditing and verification.
Imposition of the cattle transaction levy
The committee appreciates the merits of reviewing the cattle transaction
levy, particularly in light of evidence regarding the impact of the $5 flat fee
(which applies regardless of the value of the animal sold). The possibility that
multiple votes can be claimed for the same beast should also be addressed. The
principle that should to be applied is that only the levy payer who benefits
from the sale of a beast should receive the respective voting entitlements.
The committee appreciates the views of submitters in relation to the
flat rate of the levy and strongly encourages the proposed producer-owned body
to facilitate an investigation into the cost-benefit to industry of altering
the flat fee to a more dynamic structure. If an alternate structure is
identified, it should be discussed with, and proposed to, the levy payer
members of the producer body in the first instance.
The committee notes that the current levy system was put in place at a
time when the extent of vertical integration could not have been foreseen. The
prevailing perception is that the current structure has enabled processors to
gain disproportionate influence over the producer levy system, at the expense
of grass-fed producers who pay the greatest proportion of the levy. Indeed,
this matter, along with concerns regarding the 'undemocratic' nature of the MLA
voting system, has contributed to the loss of trust in MLA expressed by many
There remain mechanisms in place under the red meat industry structures to
realise opportunities for both the producer and processing sectors to engage in
joint and complementary R&D activities. For these reasons, the committee
recognises the need to separate producers from processors under the producer R&D
and marketing structure. It upholds the view that processor-paid levies should
be recognised as such under the levy management structure and directed to AMPC
accordingly. Therefore, the committee recommends amendment to the Primary
Industries (Excise) Levies Act 1999.
The committee recommends that the Primary Industries (Excise) Levies
Act 1999 be amended to ensure that levies paid by processors are recognised
as processor (or slaughter) levies and not as producer (or cattle transaction)
Full and independent audit of the cattle transaction levy
There were many concerns raised during the inquiry regarding the purpose
and expenditure of the cattle transaction levy. There is considerable risk that
if not subject to independent examination, these concerns and the confusion
regarding the intent and expenditure of the cattle transaction levy will
continue to hamper the industry, potentially impede discussion and hinder necessary
The committee takes the view that an independent audit of the cattle
transaction levy would provide an opportunity to clear the air about levy
revenue and expenditure while also providing a necessary factual foundation from
which to discuss and initiate reform. Such an audit would provide a
comprehensive overview of the cattle levy including its purpose, collection,
investment and impact. An independent audit would also complement the
committee's other recommendations including the need for a transparent and
fully audited levy collection system.
The committee recommends that the Australian National Audit Office
undertake a full and comprehensive audit of the cattle transaction levy with
particular consideration of revenue from, and expenditure of, the respective
levy components. The audit should consider the cattle transaction levy in
relation to the levy principles, as well as its original intent and purpose.
The committee recommends that the Australian National Audit Office
conduct an audit of the cattle transaction levy system, tracing the levy from
inception and focusing on the revenue from, and expenditure of, the respective
components of the levy.
Red Meat Advisory Council
The committee holds the view that RMAC does not serve the purpose for
which it was intended and should be dissolved. Alternative arrangements for the
disbursement of earnings from the Red Meat Industry Reserve Fund need to be
established by the Department of Agriculture in consultation with the industry.
The committee recommends that the Minister for Agriculture dissolve the Red
Meat Advisory Council. The committee further recommends that the Minister for
Agriculture establish a new system to manage and disperse earnings from the Red
Meat Industry Reserve Fund, in consultation with the industry.
MLA Donor Company
The committee holds the view that the role of MDC is an anomaly under
the current red meat structure that should be rectified. The committee supports
the 2011 recommendations of the Productivity Commission which state that
contributions made through donor company arrangements, by an individual private
entity, should not be eligible for matching government funding. Furthermore, there
are alternative avenues for private entities within the red meat industry to
make contributions to R&D.
The committee recommends, therefore, that the MDC no longer be
recognised as an approved donor under section 61 of the Australian Meat and
Live-stock Industry Act 1997. This amendment would bring the legislative
landscape into line with current industry structures.
The committee recommends that the Minister for Agriculture revoke the
status of the MLA Donor Company as an approved donor under the Australian
Meat and Live-stock Industry Act 1997.
Transparency in pricing and trade practices
The committee appreciates the concerns of producers regarding the need
for transparency in pricing and trade practices. It recognises the need for
further investigation into mechanisms to provide for such transparency. To this
end, the committee recommends that the Department of Agriculture, in
consultation with the cattle industry, conduct an analysis of the pros, cons
and costs of introducing legislation similar to that of the Packers and
Stockyards Act 1921 and Livestock Mandatory Price Reporting Act 1999.
The committee recommends that the Department of Agriculture, in consultation
with the cattle industry, conduct an analysis of the benefits, costs and
consequences of introducing legislation akin to the Packers and Stockyards
Act 1921 and Livestock Mandatory Price Reporting Act 1999.
Senator Glenn Sterle
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