As noted in Chapter 1, the issues of meat marketing, labelling and
grading have been investigated by the committee over a number of past inquiries.
During its inquiry into Meat Marketing,
for example, the committee examined, amongst other things:
the lack of beef grading for quality in Australia and the options
for providing better information to consumers;
concerns about the 'budget' beef labelling agreement misleading
consumers as to the nature of what they are purchasing; and
perceived problems with the use of breed claims in marketing.
The committee's inquiry into meat marketing was largely focused on labelling
and the provision of information to the consumer. However, as part of its inquiry,
the committee examined both the AUS-MEAT System and the role of Meat Standards
The AUS-MEAT system
AUS-MEAT Ltd is an industry owned body which operates as a joint venture
under the control of a Board of Directors appointed by MLA and AMPC. AUS-MEAT
Ltd is the body responsible for the development of uniform specifications for
beef through the use of AUS-MEAT Language (the Language). The Language
classifies a number of carcase traits at various stages of processing. These
include descriptions of dentition (age), sex, weight and fat measurement at the
slaughter floor; marbling, meat colour, fat colour and rib fat at the chiller
stage; and cut description, cut lines and fat depth in the boning room.
The AUS-MEAT Language has been adopted across the Australian meat
industry, and in addition to providing customers with an accurate way of
describing and ordering meat products, AUS-MEAT's objective descriptions are
available for use by producers, abattoirs, boning rooms, wholesalers and food
Beef/Veal Chiller Assessment
Chiller Assessment Language was developed to enable AUS-MEAT accredited
enterprises to assess, grade or class beef and veal carcases using a uniform
set of standards under controlled conditions. The scheme provides a means of
describing meat characteristics and classifying product prior to packaging.
These characteristics include the colour of meat and fat, the amount of
marbling, eye muscle area, the fat depth and the maturity of the carcase.
Assessments are made by qualified assessors and results are allocated to the
carcase and provide a means of (carcase) selection according to individual
contract specifications, grading schemes and or company brand requirements. The
AUS-MEAT Chiller Assessment Language is only available to AUS-MEAT accredited
enterprises, their clients and suppliers.
The Australian Meat Industry
Language and Standards Committee (AMILSC)
The AMILSC is made up of industry representatives and provides advice to
the AUS-MEAT Ltd Board on matters relating to the AUS-MEAT National
Accreditation Standards. The Committee is made up of representatives from:
Australian Meat Industry Council;
Cattle Council of Australia;
Australian Lot Feeders Association;
the Sheepmeat Council of Australia;
Australian Supermarkets/Independent Retailers;
Australian Pork Limited; and
the Department of Agriculture and Water Resources.
As noted in the committee's May 2016 interim report, all beef is graded
according to a range of Australian and international standards.
These standards are set out in the Handbook of Australian Meat which is
published by AUS-MEAT Limited. Under these standards, beef is graded according
to a number of quality-related traits including the cut, age, sex and fat depth.
The standards also specify:
country of origin;
the company the product was packed by.
Meat Standards Australia
Of the two beef grading systems – MSA and AUS-MEAT Language – MSA is currently
used only in the domestic market. MSA sets standards regarding:
other indicators which relate to eating quality.
During the inquiry, concerns were raised about the separate company
specifications that overlay the MSA standards. Producers told the committee that
even though they may meet the MSA standards, they might not meet additional
company standards (relating to things such as dentition and P8 fat). Some
producers suggested that when "they do not meet the company standards,
they do not get paid for the MSA – even if they have met the MSA
The committee heard numerous other comments in relation to the grading
MSA grading is hopelessly inconsistent;
MSA requires immediate and continual development, as producers
are currently receiving discounts based on company specifications that have no
relevance to consumer requirements;
supplier confidence in industry developed grading systems is at
an all-time low;
it is time [grading systems] were made more objective,
transparent and verifiable given their importance in determining producer
because measurement is subjective, disputing a grading is made
very difficult – this provides scope for the interpretation of an individual classifier;
processing companies provide their own graders of carcases –
these people are effectively company employees, which means that MSA grading
can amount to a task effectively performed by abattoir owners who have a vested
interest in downgrading carcases.
MSA carcase feedback
The difficulties associated with receiving feedback on meat grading and
the reasons for particular determinations was another issue raised –
particularly by producers – throughout the inquiry. The committee was told
changes to the colour of meat occur naturally over time – the
timeframe for these changes (and other variables that have an impact on
grading) are not within the control of the producer;
producers do not have access to the very information that
determines the price they receive for their cattle – and the lack of adequate
feedback from processors means that producers of MSA beef are hampered in their
efforts to deliver a high quality product;
processors do not articulate why cattle did not meet the company
standard and frequently report only that the product "does not meet
the MSA carcase feedback sheet does not include the MSA grader's
registered number – which reflects a lack of transparency.
As noted above, as a joint venture between MLA and the AMPC, AUS-MEAT is
responsible for the development and meat of meat language. It is mandatory for
all AUS-MEAT accredited abattoirs to pay on Hot Standard Carcase Weight (HSCW)
and AUS-MEAT standard carcase trim and they must also provide carcase feedback.
A number of submitters to the inquiry have questioned the independence
of AUS-MEAT. Many producers argued that as an organisation, AUSMEAT is heavily
influenced (or dominated) by processors.
Questions were also raised about the relationship between processors, meat
retailers, the AUS-MEAT carcase assessment process and its internal auditing
It was also argued by some industry stakeholders that processors are able to
exert undue influence over MLA.
ACCC's Cattle and beef market study
Following its investigation of the cattle and beef supply chain, the ACCC
indicated that it too had concerns about various aspects of the grading system. 
The adoption of technology (which would allow OCM to be introduced as a
matter of priority) was one of a series of recommendations made by the ACCC in
relation to grading technology. In addition to recommending that the technology
be introduced quickly, it was argued that the processing sector should take the
lead in its introduction. The ACCC also recommended that:
the new technology be underpinned by a robust transparency and
processors should develop and implement an independent dispute
resolution process, (with AUS-MEAT taking on the role of an independent and
the industry implement a more robust auditing system for carcase
AUS-MEAT implement random and unannounced audits (in addition to
the current audit regime); and
buyers, agents and producer representatives (led by the CCA)
should increase the level of communication and education regarding the current
grading and feedback systems to assist producers to better understand cattle
market trends (and the reasons why particular cattle attract a premium price).
The ACCC's Recommendations – 6 to 9 – which relate to OTH transactions
and grading, are detailed in Chapter 2.
Objective carcase measurement (OCM)
Prior to the tabling of the ACCC's interim report in October 2016, MLA
had announced the establishment of a project to develop new technology which
would allow for the objective measurement of both sheep and beef carcases. The
following provides an overview of events which have taken place over the past
year in relation to the development of new measurement technology.
Chronology of events
In April 2016 an announcement was made regarding the commencement of a
joint project. The project, to be led by MLA, was designed to accelerate the
development of new technology, including x-ray and 3D digital imaging.
MLA indicated that it had received a $4.8 million grant from the Australian Government
"to develop advanced measurement technology that will transform the meat
MLA also indicated that it had been funded through the Rural Research and
Development for Profit Program. Under the funding agreement, three
measurement technologies would be developed for use on farm and within the
processing sector to "objectively determine carcase composition and
accurately determine eating quality".
It was argued that for processors, the technology would assess lean meat yield,
allow for precise valuing of carcases, and assist in making market-based
cutting and deboning decisions.
10 November 2016
On 10 November 2016, MLA announced at its Annual General Meeting in
Hahndorf what it described as a 'revolutionary plan' to install OCM technology
across the Australian meat industry.  As a first step, MLA
would create a platform to install Stage One of the new OCM technology into all
AUS-MEAT registered slaughter facilities in Australia.
In making the announcement, MLA Managing Director, Mr Richard Norton
noted that the ACCC's interim report supported the CCA's "focus on
how the competitiveness of Australian beef and cattle markets could be improved
by the adoption of OCM".
According to the MLA, the gains to be made from the technology revolved
around the scientific measurement of saleable meat yield, industry-wide
productivity gains through processing automation, genetic improvement and
data-based on-farm decision making. It was suggested that the technology would:
assist the Australian red meat industry to continue to be able to
compete in global markets;
drive a shift from the current subjective grading of lamb and
beef to a new system of livestock production and marketing where producers can
be transparently rewarded against objective data and value measurements;
reduce wastage and workforce injuries within processing plants
and boost productivity through the use of accurate, objective measurement and
ensure that data generated from OCM is accessible and easy for
producers to use;
further enhance the integrity of the grading system and form the
basis of MLA's 'digital strategy'; and
in the longer term, reduce the cost of grading to the industry.
At the time of the 10 November 2016 announcement, MLA also stated that:
the small-stock DEXA technology (for sheep) was ready for commercial
the research and development for beef technology was nearing
completion (and should be ready for commercial installation trials early in
under the plan, AUS-MEAT would be the whole-of-chain regulator
and would calibrate the system, conduct the audits and provide a complaints
In describing how the new technology would be financed, Mr Richard Norton
explained that MLA would "acquire a commercial loan on behalf of industry
to finance the $150 million one off cost of installing DEXA technology in up to
90 AUS-MEAT registered slaughter facilities".
It was noted that MLA had received in-principal support from the
Minister for Agriculture and Water Resources for the introduction of OCM
technology across industry. MLA also indicated that it would continue to
consult the industry's peak councils about how best to structure the one-off
cost of its introduction.
Beef Central article
An article published in Beef Central on the same day
suggested that it would actually be up to each abattoir to decide whether it
wanted to install and use the technology. It was noted that some of the larger
processors were already down the path of OCM technology for their own commercial
purposes, and it remained to be seen whether the particular technology being
proposed by MLA would fit their objectives (or indeed be welcomed by them).
It was noted that both the CCA and the SCA had been consulted by MLA,
and both organisations had indicated their support for the proposed project.
14 November 2016
On 14 November 2016, the CCA announced that it welcomed MLA's commitment
to OCM technology. The CCA described MLA's intention to install DEXA technology
in AUS-MEAT registered slaughter facilities across Australia as another
positive step towards OCM for the beef industry.
The CCA also argued that ongoing collaboration would only be successful
"if the costs associated with reducing risk and increasing reward are
equitably shared, as well as any benefits".
8 December 2016
MLA announced that a consultation workshop would take place in Brisbane
on Monday, 12 December 2016.
The workshop would provide an opportunity for industry members to learn more
about MLA's work with industry, research institutes and technology providers in
developing the application of DEXA as an OCM tool. The workshop included the
following panel of speakers:
Mr Richard Norton, MLA Managing Director;
Mr Sean Starling, MLA's General Manager, Research Development and
Professor David Pethick, Murdoch University;
Dr John Langbridge, Manager Industry and Corporate Affairs, Teys
Mr David Hill, CCA, board member and producer.
In announcing the Brisbane workshop, MLA acknowledged that DEXA
technology had been used in other sectors (including the medical sector) for
many years. It emphasised that the small-stock DEXA technology was ready for
commercial deployment, and that the research and development for beef
technology was nearing completion.
31 January 2017
On 31 January 2017 it was reported in Queensland Country Life that
the processing company Australian Country Choice (ACC) was examining the DEXA
technology in its Cannon Hill processing plant. General Manager, Mr David
Foote, indicated that the company has a major red meat supply agreement with
Coles supermarkets and has been looking very closely at ways in which the DEXA
technology could improve processing operations.
22 February 2017
Queensland Country life reported that both AMIC and AMPC had rejected
the idea of an industry-wide roll-out of the DEXA technology.  The
article quoted a 20 December 2016 letter – widely circulated among peak
industry bodies – in which AMIC Chairman, Lachie Hart, stated that:
the processing sector was not able to support the P150 project
(DEXA) in its current form;
there were many conceptual, methodological and policy-related
deficiencies in the proposal (the least of which was that there was no evidence
of systemic deficiencies in the grading and reporting system);
the fact that producers have complaints about feedback does not
mean that those complaints are justified and supported by evidence;
the adoption of OCM technology is one way of addressing specific
issues, but this is subject to the technical and commercial viability of the
technology in practical processing conditions; and
the MLA proposal appears to view OCM as a means of transforming
the entire supply chain which is entirely disproportionate to the nature and
dimension of the issues to be addressed.
The February article also reported that:
processing companies – including JBS and Teys Australia – would
be forced to 'go it alone';
JBS had already 'proven' the technology for sheep carcase
processing and is currently trialling the technology with beef carcases;
Teys was involved in the MLA trial work and had announced (in February
2017) that it would introduce the technology into its Rockhampton plant; and
Coles supplier, ACC has indicated its intention to introduce the
The article pointed to the fact that despite AMIC 'claiming to be'
representative of the processing sector, neither JBS nor Teys are members of
the organisation – although they are required to pay levies to AMPC.
It was noted that producers are currently being asked to consider
bankrolling the $150 million cost of rolling out DEXA in all Australian
processing plants from industry funds. Interestingly the article also submitted
that, in return for their investment, producers would 'own' the data gathered
by the OCM.
However, it was also suggested that there are other models under
consideration for funding the roll-out. These included a shared funding
arrangement with processors – using AMPC levy reserves – as well as possible federal
23 February 2017
An article published in Beef Central reported that processors had
rejected MLA's proposal because they were not convinced that an industry-wide
investment was justified. It was also noted that the processors were not
necessarily opposed to OCM as such, but were simply objecting to it in its
MLA's prior statements regarding OCM technology for beef being close to 'operations
ready' were questioned, with some large processors claiming that a
"commercially viable system for beef is still years away".
Further, it was noted that one of Australia's largest processors was continuing
to trial and 'prove-up' OCM technology in its plants, but had reported that
there was "still a long way to go"
due to the complexity in the beef carcase.
24 February 2017
Ernst and Young Review
The following day – 24 February 2017 – it was reported that AMPC and
AMIC had jointly commissioned Ernst and Young (EY) to undertake an independent
review of MLA's plan to introduce OCM. It was noted that the review team would
be headed by Mr Andrew Metcalfe, former Secretary of the Department of
Agriculture and Water Resources.
In announcing the review, AMPC Chairman, Mr Peter Noble, was reported as
Without adequate consultation, cost-benefit analysis or due
diligence there can be no level of comfort in investing substantial industry
funds in DEXA technology which is yet to be sufficiently proven. 
EY was requested to provide an independent assessment of whether MLA's
proposal to install DEXA units in AUS-MEAT registered processing facilities
(Project 150) is a "prudent operational and commercial decision for the
industry at this time". The review also requested EY to evaluate the "strategic,
financial, technical, commercial, operational, governance and implementation
aspects of what has been proposed".
Further, it was noted that AMPC had already invested (and committed to
invest) $6.6 million of processor levy funds in jointly-funded projects related
to carcase measurement technologies. AMIC Chairman, Mr Lachie Hart, was also
reported as saying that:
...capital investment of the scale proposed in Project 150, that
is without appropriate governance, consultation and feasibility assessments
could encumber an industry already facing unprecedented cost pressures related
to regulation, utilities, livestock and labour. 
It was reported that processors would be looking to the independent
trials undertaken by Teys at its Rockhampton plant which, it was suggested,
would better inform the industry as to the merits of the technology and provide
the necessary confidence on which to base investment decisions.
AMIC and AMPC in 'damage control'
In announcing the appointment of EY to evaluate the feasibility of DEXA,
The Land suggested that AMIC and AMPC were in 'damage control'
after having been placed under the spotlight by the leaking of Mr Hart's 20
December 2016 letter.
It was also suggested that the AMIC Chairman's refusal to support the MLA
roll-out in its current form and the EY review were 'delaying tactics' which
...set against a backdrop of both AMPC and AMIC agreeing to the
introduction of OCM by 2020 – as stated in the Meat Industry Strategic Plan.
On 24 February 2017, MLA responded to AMIC and AMPC in an article in ABC
Rural by saying that transparency is the number one issue for producers. Mr
Norton indicated that he had met with "14,000 key levy payers in the past
two years who want objective carcase measurements installed in the
In response to concerns that a feasibility study had not been conducted,
Mr Norton stated that the Meat Industry Strategic Plan (MISP) released two
years previously contained economic modelling around the feasibility of OCM and
what industry needed to do to reduce some of the high costs of processing. Mr
Norton went on to say that the "whole of industry has to decide whether or
not they want MLA to take out the commercial loan".
27 February 2017
CCA announced that it was backing MLA's plan to install "the ground
breaking objective carcase measurement system DEXA on a voluntary basis in
Councillor David Hill said the CCA would continue to work with MLA,
other peak councils and industry stakeholders on how best to structure the $150
million one-off cost of the roll-out. Mr Hill also indicated that while the MLA
model centres on producers funding the roll-out of DEXA, the method of funding
is yet to be determined.
8 March 2017
An article published in the Weekly Times reported that in
announcing its plan to roll-out OCM technology in 90 AUS-MEAT accredited
processing plants, it was MLA's intention to use levy funds to raise the $150
million needed to fund the project. It was also noted that while the project
would not go ahead without the full support of industry, Mr Norton argued that
it is MLA's preference for a whole of industry roll-out rather than processors
installing OCM technology on an individual basis. Mr Norton continued:
MLA's proposal was for data from DEXA (dual energy xray
absorbtiometry) units to be amalgamated and collated for the whole industry to
use, while if processors pay for it they can share whatever data they want with
the producer and not the whole supply chain.
If we funded it, we could have uniform DEXA in every
processing unit that wanted one – it isn't mandatory – and then could collect
all the data to come out of those DEXA units. 
Mr Norton further argued that processors controlling the implementation
of OCM could also lead to further concentration within the sector, and
suggested that if the industry decides not to go ahead with a whole of industry
funding model, there are enough processors now investing in these units
"that they will have a huge range of data to gain a competitive
Mr Mark Inglis, JBS' Farm Assurance supply chain manager, argued that
OCM technology was the "biggest issue holding the lamb industry
Further, Mr Inglis stated that:
...while the DEXA technology in their Bordertown, South
Australia, plant was primarily to run an automated cutting robot, it had the
side benefit of providing more accurate prediction of lean meat yield: up to 88
per cent accuracy compared to the less than 20 per cent accuracy offered by fat
It was noted that there appears to be a lack of clarity regarding
whether OCM technology is ready for use. The Executive Officer of the ABA, Mr
David Byard, for example stated that he had been assured that the OCM
technology was not ready to be commercialised. At the same time, questions
remain regarding machinery and intellectual property ownership in relation to
MLA's proposal. Mr Byard argued that:
...common sense suggests a demonstration model would be a good starting
point to show the capabilities of the equipment".
24 March 2017
EY published its first issues paper on 24 March 2017. The one-page paper
provided a brief overview of the independent review EY had been requested to
undertake into the proposed $150m installation of DEXA technology across
AUS-MEAT registered processing plants – a project referred to as Project 150.
EY's introduction to the review stated that:
Project 150's stated aim is to provide accurate and
objective carcase grading through the use of objective carcase measurement
(OCM) technology. On 10 November 2016, the announcement to install objective
measurement across the industry, indicated that 'the initiative paves the way
for scientific measurement of saleable meat yield, future value based marketing
and industry-wide productivity gains through processing automation, genetic
improvement and data-based on-farm decision making'. The DEXA independent
review will be examining these claims.
28 March 2017
An article published in Beef Central included a statement from
MLA's Mr Richard Norton. In the statement, Mr Norton announced the findings of
a year-long examination of the value of adopting advances in objective
measurement and systems across the red meat industry. The inquiry, which was
jointly commissioned by MLA and AMPC, had been undertaken by Greenleaf, Miracle
Dog Consulting and S. Williams Consulting.
Mr Norton noted that the 'Greenleaf Report' had identified a $420
million potential annual benefit to the industry from the full adoption of
objective measurement technology. The inquiry also found, however, that unless
the roll-out of the technology was fast-tracked, "only $72 million per
annum of benefit is likely to be realised by 2020 on current rates of
Mr Norton also suggested that the report's findings had prompted MLA to
work hard (with industry) to find solutions; and were also behind its proposal
to fast track the adoption of DEXA technology as an objective measure of lean
meat yield in meat processing plants.
The Beef Central article also included a statement from AMPC
regarding the release of the first Independent Issues Paper on DEXA technology.
Mr Noble told Beef Central that AMPC and AMIC had commissioned the EY review
because they have a responsibility to their membership; to ensure that investments
made on their behalf are thoroughly evaluated and that they deliver commercial
benefits to the entire industry.
3 May 2017
EY released a report titled Independent Review of the proposed
installation of DEXA in AUS-MEAT registered processing facilities: Issues
Paper #2 (Issues Paper 2).
The purpose of Issues Paper 2 was to invite further input from industry
stakeholders regarding MLA's Project 150 proposal. As such, the paper provided
a broad overview of Australia's red meat industry, examined various aspects of
the MLA proposal and outlined the key issues being considered by EY, including:
whether the proposed application of DEXA meets the needs of
whether consideration should be given to alternative OCM technologies;
the costs associated with the implementation and operation of
DEXA (as proposed by MLA);
the commercial, contractual and financial considerations of the
proposal – including intellectual property rights, data ownership etc;
the identification of an 'industry standard' use of DEXA;
the facilitation of data access for the industry;
the benefits to be gained by the collection, storage and analysis
of DEXA data;
the benefits to processors of the proposed technology;
the key implementation and operational considerations in relation
to both small and large processing plants; and
the suitability of rolling out DEXA technology (following
consideration of the options and the associated risks).
22 May 2017
MLA announced that it would proceed with its plan to install OCM systems
across the red meat processing sector, despite the review commissioned by AMPC
MLA stated that it would be investing up to $10 million to co-fund the installation
of DEXA systems in sheep meat and beef meat processing plants following
"multiple requests to accelerate the adoption of the technology".
Under the $10 million co-funding project, MLA would be working with
"willing partners to develop a single scientific measurement of lean meat
MLA also signalled that the project would assist in the development of systems
to collect and use information across supply chains for future research and
Mr Norton, noted that MLA was continuing to work with the PICs regarding
its proposal to install stage one of the DEXA technology into all of the
AUS-MEAT registered facilities who wanted it. Mr Norton also indicated that:
This $10 million project that we've announced today is funded
through the MDC [MLA Donor Company] and simply allows MLA and those companies
who want to get on with implementing DEXA to do so.
Mr Norton went on to say that:
If the industry's peak councils and processors do decide to
accelerate the adoption of objective carcase measurement across the industry
through an investment of producer levies, we can do so.
Ernst and Young Review – final report
EY's Independent Review of the proposed installation of DEXA in
AUS-MEAT registered processing facilities was officially released on 9 June
EY explained that it had approached the review in a consultative and collaborative
way. In addition to conducting its own research and analysis, it had sought the
views of various stakeholder groups, through interviews, surveys and seeking
feedback to two issues papers.
The EY review found that OCM technology had been used successfully in
relation to sheep and lamb processing and is currently being used to support
automated beef processing by a major processor.
EY reported that the consultations undertaken as part of the inquiry
revealed that there is general acceptance across the industry about the need
for OCM. There was also a common view across stakeholders that the introduction
of OCM could have the potential, over time, to restore some trust in commercial
relationships and may lead to increased productivity across the value chain. At
the same time, however, it was acknowledged that some questions about the
technology had yet to be answered and that there is currently no industry
consensus on these issues.
The review also acknowledged stakeholder concerns around whether the
widespread installation of high cost capital equipment – owned by a Research Development
Corporation (RDC) – at the post slaughter stage of processing plans, is an
activity that should be undertaken by RDC's. It was argued that there are still
some important questions to be answered regarding data collection, ownership
and use of equipment and technology, and intellectual property rights. Some
stakeholders also questioned whether the uptake of this type of technology
should only be at the request of processors.
The EY report concluded that DEXA technology has strong promise, and
there may be a number of significant benefits to the collection and use of data
derived from OCM technology. It was also argued, however that it is still
unclear whether these benefits can be achieved on an industry-wide basis, with
more proof needed to convince producers and processors that the technology
could work for the entire red meat sector.
The report concluded that all the potential impacts on producers,
processors and other industry stakeholders are yet to be identified and will
need to be considered further. The review also found that:
...a significant amount of industry wide change management
activity and stakeholder engagement is necessary: so that all stakeholders are
clear on the potential impacts of the Proposal, not only for the broader
industry, but for their specific businesses as well.
In terms of taking the issue forward, the review argued that the
"potential technological and data-driven advancements represent too
important and transformative an opportunity to be missed".
It was also argued, however, that the "necessary level of shared purpose
and collaboration for such transformational change"
does not as yet exist, and that:
...this area is one which requires overall industry
participation and alignment. It impacts on both pre-competitive and competitive
areas of the many processor and producer businesses involved. Being a
"shared space" it thus needs to involve both key Research and
Development Corporations and all industry representative bodies.
The report suggested that the ALMTech
program, which involves all RDC
players, and/or the governance arrangements suggested by the OM Strategy Report,
would appear to be the structures best placed to support these reforms.
The EY report made the following recommendations:
industry should advance OCM initiatives: (including the technologies to be
researched and trialled, and potentially to be voluntarily deployed by
processing companies according to their business model when commercially
proven) in an open, consultative and collaborative manner and driven by a clear
these issues directly relate to the research and development activities of both
the processing and production sectors, AMPC and MLA need to work together to
achieve alignment, as they both have key roles in taking these initiatives
way to achieve recommendations (1) and (2) would be for industry governance
arrangements relating to technological developments to be revitalized.
provide the necessary levels of transparency, there should be a series of
conferences or open workshops to allow industry participants to be briefed by
experts on progress with OCM to date; enabling a clear and agreed roadmap for
the future to be established.
should consider updating its work plan, timetable and key performance
and MLA, either through the ALMTech structure or in some other way, should work
with AMIC and individual processing companies to explore how the potential
benefits of an industry wide database of key objective measures could be
achieved; and to consider its implications, including the impact on the
intellectual property and commercial operations of individual processing
In releasing the report, EY's Independent Review Leader, Mr Andrew
Metcalfe, noted that EY had adopted a consultative and evidence-based approach
to conducting its review and formulating its recommendations. Further, Mr
Metcalfe argued that:
We have engaged extensively with major industry bodies,
independent experts, and directly with a number of large and small producers
and processors. We strongly recommend that these initiatives are taken forward
as consultatively and collaboratively as possible, given the significant
transformational change that is being considered by the proposal.
Response to EY report
Representatives of both AMPC and AMIC welcomed the findings and the
recommendations contained in the EY report. AMPC Chairman, Mr Peter Noble,
restated that the purpose of the review was to provide a fact-based assessment MLA's
proposed roll-out of DEXA technology, and indicated that AMPC:
...stands ready with industry to provide the research,
development and education in support of their voice and to answer the many
questions raised by the review.
AMIC Chairman, Mr Hart reiterated AMIC's continued support for the use
of technology for OCM and noted that that AMIC's views had been
"specifically endorsed through Strategic Recommendation 1 of the
Mr Hart also stated that AMIC:
...plans to form a specialised OCM/DEXA committee from within
its beef and sheep/goat policy groups to manage progression of the technology
within industry and provide direction to AMIC executive on responses, positions
and partnerships regarding OCM/DEXA.
In responding to the release of the EY report, the CCA called for MLA
and AMPC to jointly invest in, and accelerate, the roll-out of DEXA technology.
The CCA President, Mr Howard Smith, argued that the EY report reflected
the findings of the Greenleaf Report; which found that the potential benefits
of the technology relating to measuring lean meat yield were shared between
producers and processors.
Mr Smith also highlighted that OCM technology had been recommended by
the ACCC, the Meat Industry Strategic Plan (2020) and MLA's Strategic Plan
(2016-2020). He stressed the need to fast track the roll-out of the technology
"in order to realise the full financial benefits for the industry",
and argued that the adoption of DEXA technology would provide a number of
market advantages and would "change the way we do business for the
In mid-June 2017, MLA formally sought agreement from AMPC to jointly
fund an accelerated roll-out of DEXA OCM technology. MLA proposed that the $150
million cost of installing DEXA units (in up to 90 AUS-MEAT accredited
facilities) should be split between the processing and production sectors. MLA
argued that its proposal reflected "the shared benefit that the new system
for accurately measuring lean meat yield will provide".
On 27 July 2017, Beef Central reported that the AMPC board had
given its unanimous support to MLA's request for processor levies to jointly
fund an accelerated $150 million of DEXA technology. MLA's joint funding
50 percent from the MLA Donor Company (which comprises matching
Government R&D funding);
25 percent private funding from each processor who installs a DEXA
unit under the voluntary roll-out;
12.5 percent producer levy funding; and
12.5 percent processor levy funding.
The AMPC board did, however, qualify its support for the proposal by
suggesting that the "number of plants willing to 'opt-in' and the corresponding
funding in question were still very fluid and, as such, the AMPC Board decided
that greater clarity was required before finalising the exact extent of its
The AMPC board did, however, confirm its support for the newly formed red
meat industry OCM Taskforce being led by industry expert Gary Burridge. AMPC
also agreed to jointly co-fund with the MLA, the OCM Taskforce request for an
independent review on the plant per plant costings associated with DEXA's
implementation. It was noted that the review is expected to be completed within
Further, it was reported that it would "now be up to peak industry
councils to decide on whether levies should be used for this purpose", and
that while the SCA, AMIC and CCA have all expressed support for OCM technology
in the past, they had not yet given a firm commitment to "spending their
sector's levies until they see the full financial details of the plan".
It was also noted that the diversion of funds into the OCM/DEXA project could
mean that some existing programs would be displaced.
At the committee's August 2017 public hearing, MLA Managing Director, Mr
Richard Norton advised the committee that over the past ten years, MLA had been
working to reduce the cost of production – particularly in the processing
Mr Norton told the committee that MLA has also been working toward
providing transparency through the processing sector, and argued that applying
objective measures would provide producers with independent data about their
livestock. Further, Mr Norton argued that while DEXA technology represents only
one piece of the jigsaw puzzle – it represents a very large piece – which will
ultimately provide producers with transparency through objective measurement.
The committee questioned MLA representatives about the oversight
measures that would be required to be implemented following the introduction of
DEXA – particularly in relation to nationally consistent inspection and
calibration of the technology.
The committee was advised that each DEXA unit will contain a
certification block that will calibrate the machinery automatically, which will
mean that processors will not be reliant on operational staff to do the
calibration on a day-to-day basis. MLA representatives told the committee they
envisage that AUS-MEAT will be the body which will verify, manage and control
the certification blocks. AUS-MEAT will also keep a licence number on each
block issued to specific facilities and then, as required, replace the
MLA General Manager, Mr Sean Starling, acknowledged the possibility that
any measurement device could provide a false output, and told the committee
...it's the practices and the operating procedures you put
behind how it's calibrated, how it's used and how it's certified that hopefully
underpin any measurement device. DEXA would be no different.
The committee also sought an update on the progress being made during
trials of the DEXA technology and asked whether it was intended to calibrate
the machines after each unit of inspection:
Mr Norton: If that is possible, that would be best
Senator O'Sullivan: Mr Starling, you're saying that
there's technology that's being trialled – in the development stage – with the
intent to make that possible?
Mr Starling: That's correct.
Senator O'Sullivan: Do you know what stage of
development it is in?
Mr Starling: In the design phase, on paper, ready to
Senator O'Sullivan: Are you brave enough to provide a
time frame for when we might know whether or not it's possible to use that technology?
Mr Starling: By Christmas time – this Christmas.
Following MLA's response, the committee indicated that it would be
keeping a watching brief on the roll-out of the technology, and requested MLA
representatives to keep the committee informed of any changes to the timetable
for the DEXA roll-out.
The committee has – over a period of years – conducted numerous inquiries
and examined various aspects of the red meat industry's grading system.
Unfortunately, the committee's current inquiry has only served to highlight the
fact that while advances have been made in terms of measurement technology, the
industry is no closer to reaching a common viewpoint about the benefits (or
otherwise) of OCM technology.
The inquiry has underlined the extent to which the lack of a common
understanding, vested interests and a lack of shared purpose can hinder industry
cooperation, complicate the process of finding solutions to problems, and delay
the implementation of necessary reforms.
Following its study of the cattle and beef supply chain, the ACCC also
detailed its concerns about various aspects of the grading system. The ACCC
made a series of recommendations in relation to grading, and argued for the
implementation of technology which would facilitate the introduction of OCM as
a matter of priority.
In addition to recommending that the introduction of OCM technology should
be prioritised by the industry, the ACCC argued for the processing sector to
take the lead in its introduction.
The committee also notes that by forging ahead with the development and
introduction of DEXA technology, MLA pre-empted the findings of the ACCC's Cattle
and beef market study; a study which ultimately recommended that the
processing sector should lead the industry through the process of introducing
In announcing its decision to invest $10 million to co-fund the
installation of DEXA systems in sheep meat and beef meat processing plants, the
committee also notes that MLA pre-empted the findings of the study conducted by
EY and jointly funded by AMIC and AMPC.
While it would appear that MLA has the CCA's support in making all of
these decisions, the committee questions the extent to which either of these organisations
consulted with industry stakeholders – including levy payers – to gauge their
views. This is of particular concern to the committee, given that the EY report
concluded that all the potential impacts (of OCM technology) on producers,
processors and other industry stakeholders had yet to be identified. The EY
report emphasised that the changes being proposed are both significant and
transformational, but that any new initiatives need to be taken forward as
consultatively and collaboratively as possible.
Further, the committee notes that in its attempts to inform stakeholders
– particularly producers – about OCM technology, MLA continues to state that
the technology will provide greater price transparency. In making this
assumption, MLA has also suggested that producers would be granted ownership of
both the technology and the data it is capable of providing.
The committee acknowledges that the industry-wide roll-out of DEXA
technology appears inevitable. The committee also notes, however, that given
that both taxpayer and levy-payer money is being used to fund the roll-out of
DEXA, it is vital that all sectors of the red meat industry benefit from its
The committee supports greater transparency in the grading system, and
accepts that OCM technology is one way of addressing some of the problems that
currently exist in this area. The committee is aware, however, that while the
technology has been tested for sheep carcase processing, it is yet to be
completely tested for use in beef carcases. It is also noted that the technical
and commercial viability of the technology has yet to be assessed.
The committee is firmly of the view that it is vital that the data
provided to producers through the installation of the new DEXA technology is
nationally consistent. The committee is also clear in its view that the
installation, inspection, calibration and replacement of the new DEXA
technology should be overseen by an expert body.
The committee notes the evidence provided to the inquiry, and
acknowledges that industry stakeholders largely accept that AUS-MEAT is the
appropriate body to have responsibility for the oversight of the new DEXA
technology. However, given the committee's long-held concerns about AUS-MEAT
and its Australian Meat Industry Language and Standards Committee (AMILSC) the
committee notes that it has reservations about this role being undertaken by
The committee is, therefore, of the view that a review of AUS-MEAT's
operations and capabilities needs to be conducted. Such a review would
ascertain whether it is in fact the most appropriate organisation to provide
structured and independent oversight of the installation, inspection,
calibration, replacement and quality assurance auditing processes in relation
to the new DEXA technology.
4.108 The committee recommends that the Department of Agriculture and Water
Resources conduct a review into the operations and capability of AUS-MEAT to
determine whether it is the most appropriate body to oversight the
installation, inspection, calibration, replacement and quality assurance
auditing processes of the new DEXA technology. The review should also identify
what reforms and resources AUS-MEAT would require to fulfil this role.
The committee further notes that the installation of the new DEXA
technology will also require the establishment of a national complaints
The committee also notes that under current arrangements, it remains
unclear who will have ownership – and ultimate control – over the technology.
The committee is therefore, very concerned about the prospect that producers
may once again see assets that they have made a significant financial
contribution to, being controlled by processing companies.
At this point, it is worth noting that in its Meat Industry Strategic
Plan: MISP2020, which was released in September 2015, RMAC acknowledged
that the "biggest non-economic challenge facing our industry is cultural
RMAC further argued that:
...this is a far greater task than delivering any related
technologies. Our enterprises, supply chains and industry as a whole must
engender, support and reward a business and customer focus. Industry
organisations must lead by example in promoting collaboration and transparency
across our industry. These are essential criteria if we are able to fully
realise the value on offer in MISP 2020, and if we are to cement
community and consumer – and levy payer – confidence in the industry.
The committee agrees with RMAC's assessment regarding the need for
cultural change. The committee also points to the history of grading and OCM in
the red meat industry as a prime example of an initiative that is being impeded
by vested interests and a lack of common understanding. The events described
above clearly demonstrate to the committee that, regardless of any
technological advances that can be made in relation to OCM, there is also a
need for common agreement and consensus across the industry. Without industry
agreement on an integrity regime –based on transparent, consistent standards, that
would underpin the implementation and use of this technology – grading and OCM
will continue to be initiatives about which there is disunity and divide.
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