Red Meat Memorandum of Understanding
Origins and purpose
5.1
The Australian Meat and Livestock Industry Act 1997 (Act)
provides the legislative framework for the structural and funding arrangements
of the red meat industry and its marketing and R&D activities. At the time
of the originating bill's introduction, the Minister for Primary Industries and
Energy, the Hon John Anderson MP, noted that the bill marked the final steps
towards "empowerment by providing the industry with a structure which offers
ownership and management of its own affairs".[1]
5.2
In his second reading speech, Minister Anderson detailed the findings of
a 1996 joint industry and government meat and livestock industry reform task
force, which was responsible for reviewing the then Meat and Live-stock
Industry Act 1995. More than twenty-one years on, and the findings of the 1996
task force are as relevant today:
The task force found that the current statutory arrangements,
which had worked well in the past, needed to be adjusted to deliver what
industry required for the future. Prevailing and future commercial realities
demand a structure which can deliver more flexible and focused commercial
programs and operations. A sense of industry ownership and deeper involvement
by levy-paying stakeholders is also required.[2]
5.3
The passage of the Australian Meat and Livestock Industry Act 1997 (Act)
led to the establishment of the Red Meat Advisory Council (RMAC) and the
three incorporated companies, MLA, AMPC and Livecorp. While the red meat industry's
structural arrangements are set out under the Act, it is the Red Meat Industry
Memorandum of Understanding (MOU) that underpins these arrangements.
5.4
Providing linkages between the three corporations, together with the
Commonwealth Government, Peak Industry Councils (PICs) and RMAC, the MOU was
designed to "achieve cooperation in the overall interests of the red meat
industry".[3]
5.5
As noted by the Department of Agriculture and Water Resources (the
department), the MOU incorporated the definition of agreed roles and
responsibilities; funding, planning and service delivery arrangements; the Meat
Industry Strategic Plan; industry reserves; research and development; and the
seven schedules.[4]
The MOU committed all industry sectors to the principles laid down in the Meat Industry
Strategic Plan (MISP).
5.6
As part of its report on the 1997-98 reforms and restructure, the
Australian National Audit Office (ANAO) commented that:
The policy framework for the new structural arrangements was
defined by the Government. The new arrangements are designed to minimise
Government involvement in industry affairs, empower industry in running its own
affairs and encourage ownership and leadership by industry. The Government did
not prescribe the operational details of the new structures. The latter were to
be the responsibility of the industry. Remaining key linkages involving
Government were to be established in the MoU and through Deeds of Agreement
directing appropriate use and accountability for compulsory levies, industry
reserves and Commonwealth matching funds for R&D with the new companies.[5]
Peak Industry Councils (PICs)
5.7
Under the MOU, each PIC is responsible to "provide leadership,
formulate policies, set strategic imperatives and agree overall levels of expenditure"
for the whole of the industry sector it represents. Another key role of the
PICs under the MOU is to "co-operate through RMAC with other Peak Industry
Councils in developing a vision and strategic imperatives for the industry in
consultation with MLA through MISP".[6]
In addition, the PICs are tasked with developing "jointly with MLA goals
for achieving the vision and strategic imperatives for the industry sector it
represents".[7]
5.8
Minister Anderson noted in his second reading speech that while there
will always be dissenters and detractors of any systems put in place, "the
peak councils are expected to be as broadly representative of their sectors'
interests as possible".[8]
5.9
In the years since the introduction of the 1997-98 reforms, red meat industry
PICs have faced numerous challenges; including the provision of effective
representation and a declining membership base.[9]
Part of the challenge for PICs such as the CCA has been the diverse range of
producers they are required to represent. With approximately 82,000 properties
in Australia producing beef, the CCA has a considerable engagement and
representation challenge.[10]
5.10
The challenges for PICs have been repeatedly identified, in evidence to
the committee, in various industry reports and by those engaged in the industry.
Representation has remained a primary issue. In March 2014, the Australian Farm
Institute (AFI) released a report into the effectiveness of farmers' advocacy
groups, which noted the considerable difficulties facing farmer representation
and advocacy bodies in Australia "exemplified by declining membership,
fragmentation, and perceived ineffectiveness".[11]
This was followed in August 2014, by the publication of the Newgate
Communication review of farm sector representation; which recognised that effective
representation of the farm sector is impeded by structural issues, changing
membership, revenue and restricted resources.[12]
More recently, the Chairman of RMAC, Mr Ross Keane, noted in January 2016 that
the "operating environment for Peak Industry Councils today is vastly different
to that of the late 1990s".[13]
Red Meat Advisory Council (RMAC)
5.11
The Red Meat Advisory Council (RMAC) is primarily responsible for
providing advice to government on issues affecting the whole industry. The directors
of RMAC comprise the chairs of the PICs who serve as voting members. Under the
terms of the MOU, RMAC serves as the custodian of both the MISP and the MOU. RMAC
is also tasked with providing an interface for resolving sectoral differences,
in a manner that does not adversely affect industry but rather, promotes the
image and purpose of the industry.
5.12
While the role of the PICs on RMAC requires that they represent the
interests of the industry more generally, in their daily capacity as Peak Industry
Councils, they represent the views and interests of their members. However, the
RMAC board represents a diverse range of interests – beef, sheepmeat and goat
meat production sectors, exporters, feedlotters, retailers, wholesalers as well
as livestock and boxed meat exporters – making it almost inevitable that these interests
will collide. Questions have repeatedly been raised as to whether RMAC is
capable of providing effective representation; particularly in relation to
issues where an industry-wide consensus is not possible.
5.13
In its 2014 report on the grass-fed sector of the cattle industry, the
committee recommended that the Minister for Agriculture and Water Resources disband
RMAC. In his response, the Minister indicated that RMAC would not be abolished
because it had a function to "perform in administering the industry
fund". He did, however, acknowledge that RMAC needed to 'lift their
game".[14]
Following the committee's recommendation, the government noted in its July 2015
response that:
The government does agree that improvements can be made to
the efficacy of the Red Meat Advisory Council in terms of the delivery of its
core mission and therefore notes the most beneficial course of action is to
work with the organisation to make it more transparent and accountable to
address the concerns raised in the inquiry.[15]
5.14
The committee is not satisfied that RMAC has demonstrated sufficient
improvement in terms of efficacy or accountability over the past two years. There
also remain longstanding concerns that the very structure of RMAC inhibits its
role to effectively advocate for and represent an agreed industry positon. The
committee recognises that the role and responsibilities of RMAC requires a
comprehensive review leading to either substantial restructure or abolition.
Changing circumstances
5.15
There is no doubt that market and industry circumstances have changed
considerably since the 1997-98 reforms. A number of factors, including vertical
integration, market share, an increasing concentration of supermarket power,
and extended feed-lotting have transformed the industry's operating environment.
In addition, the dynamics around consumer attitudes, growing competition from
other protein sources, international trade arrangements, animal welfare
challenges and technological developments will continue to have an impact on
the industry's performance.
5.16
These changing industry dynamics and challenges have also placed considerable
pressures on the industry's institutional and structural arrangements. RMAC has
previously noted that the dramatic changes that have taken place since the
1997-98 reforms, have transformed the sectors that the structures were designed
to service. It has been suggested that it would be rare that any representative
structure that was designed nearly 20 years ago could, in the absence of any
reform, continue to "serve its customers with optimal efficiency".[16]
5.17
In mid-2015, NH Food Australia Director, Mr Stephen Kelly, argued that
given the MOU was established approximately 17 years ago, it was time that it
was re-examined. Mr Kelly made the point that input into an MOU review should
be sought not just from the MOU signatories but also from industry stakeholders
and other interested parties.[17]
5.18
The extent to which these arrangements no longer reflect the realities
of the industry is clearly evident in the relationship between the CCA and MLA.
A primary role of the CCA is to guide and assess MLA's performance in the
expenditure of grass-fed cattle levy funds. However, the CCA's resourcing
constraints have made it extremely difficult, if not impossible, for the PIC to
apply adequate scrutiny to, or to exert influence over, the well-resourced MLA.
5.19
A recent performance review of MLA (and the MLA Donor Company) conducted
by ACIL Allen Consulting observed that the accountability arrangements outlined
in the MOU "have proven to be complex and unclear". Further, the
review argued that if partnerships under the MOU are to work effectively there
needs to be a level of trust between MLA, AMPC and LiveCorp. ACIL Allen also
indicated that in undertaking the review it had:
...received considerable feedback that relationships between
MLA and AMPC have broken down and are largely a result of personality-based
issues. Such relationships will need to be repaired so the effectiveness of
these partnerships can be improved in the future.[18]
5.20
The recent developments in relation to OCM and the new DEXA technology
demonstrate the complexity of the relationships between MLA, AMIC and AMPC and
their respective levy payers.
5.21
There are conflicting views, for example, regarding the progress of OCM
technology development. Several large processors claim that a commercially
viable system for beef is still "years away", while MLA has continued
to assert that the technology for beef is "close to being
operations-ready". At the same time, AMIC assert that several of
Australia's larger processors are already well advanced in their investigation
of OCM technology "for their own commercial purposes", and have yet
to determine whether the DEXA technology "will fit their objectives".[19]
Given these conflicting positions, it remains difficult for industry
stakeholders to get a clear picture of progress.
5.22
Questions also remain about the decision making process in relation to
levy-payer funds, and again, discussion around these issues elicit differing
views.
5.23
In November 2016, MLA announced its proposal to install DEXA technology
in 90 AUS-MEAT accredited abattoirs across Australia, at an estimated cost of $150
million. Reports at the time indicated that processors had been "taken by
surprise" by the announcement and claimed a "lack of prior
consultation" over the proposal. In correspondence to MLA Chair, Dr Michele
Allan, AMIC questioned MLA having responsibility for "using industry (or
public) funds for such a purpose in the red meat processing industry".[20]
Further, AMIC noted that:
The processing sector's service provider, AMPC, has no
mandate to facilitate structural engineering in the industry in this fashion,
and accordingly AMIC/AMPC could not endorse the use of funds for this purpose.[21]
5.24
It is also difficult to ascertain whether levy payers themselves have
been consulted about the use of their funds. The EY review noted, for example,
that:
...consultations with the industry suggest a considerable
portion remain unconvinced that a technology investment of this size is the
right solution to meet the needs of industry at this time. Should the
consideration of possible solutions be undertaken and provided to the industry,
it would provide them with the opportunity to participate in the decision
making process on how best to meet the needs, opportunities and challenges
which may or may not require a large technology investment.[22]
5.25
The role of RMAC has also been repeatedly brought into question. As
previously noted, one of the primary roles of RMAC is to provide advice to the
Minister for Agriculture and Water Resources on cross-sector or
whole-of-industry matters. At the same time, RMAC is responsible to develop and
monitor the MISP which provides the industry's overarching strategic framework
while serving as the custodian of the MOU.
5.26
As far back as 2002, the Rural and Regional Affairs and Transport (RRAT)
legislation committee found that the existing RMAC structure inhibited its
capacity to effectively represent the whole of industry. At that time, the
committee recommended that the Minister for Agriculture [and Water Resources]
engage the industry in open consultation on options for a reformed advisory
structure.[23]
However, it was the events surrounding the 2011 suspension of the live cattle
export trade to Indonesia, which demonstrated the extent to which the current
bodies and structures do not work. As the conflicting interests of different
industry sectors came to the fore, RMAC was incapable of establishing a
consensus position, and therefore unable to fulfil its advisory role to
government. The committee concluded that:
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 policy.[24]
5.27
The committee's views were recently confirmed by RMAC's response to the
ACCC's recommendation that it take on the leadership role in implementing
industry reform as detailed in Chapter 2.
5.28
An ACIL Allen review of MLA which was completed in 2016, noted that MLA
was operating under the framework of an outdated industry agreement. It also made
the following observations regarding MLA's performance under the MOU:
The current red meat industry MOU is nearing two decades old
and is a reflection of industry needs at that time. Stakeholders consulted for
this review have identified a lack of underlying clarity in the MOU which
drives industry behaviour and often unfair criticism of the organisation. The
most telling example of this criticism came during the ban on live exports (during
2011) when MLA became the spokesman for industry and potentially extended its
remit (which is unclear under the MOU) beyond an industry services body into
the realm of an industry spokesman. While ACIL Allen agrees with this reading
of the MOU (i.e. it does not clearly articulate who is responsible for what
under the agreement), there is limited evidence to suggest that MLA has not met
its performance/accountability obligations under the MOU and acted as a
professional services body for the industry since 2010.[25]
5.29
These events and dynamics demonstrate the extent to which the current
industry structures and roles are not functioning as originally envisaged. As
it would appear that the MOU is no longer the means through which cooperation
with regard to the overall interests of the red meat industry can be achieved,
it must be reviewed. As a first step, the roles and responsibilities of the
PICs must be assessed. At the very least, these roles should be strengthened,
particularly in relation to the service companies including MLA.
5.30
Following its years of inquiring into the red meat industry, the
committee has come to the firm view that current arrangements no longer reflect
the realities of the industry. In no way is this better exemplified than in
relation to the grass-fed cattle sector. As the committee noted in its 2014
report:
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 service the industry. Each step in the supply chain
must be optimised to deliver a competitive advantage. 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.[26]
Grass-fed cattle industry restructure and funding quandary
5.31
The industry has, over some years, seen an increased concentration of
market power in the processing and retail sectors. This contrasts sharply with
the diversity of the producer sector – in terms of its geographical spread,
size, and target markets – and the relative weakness of producer advocacy
groups (and their unequal bargaining power).
5.32
In its 2014 report into the grass-fed sector of the cattle industry, the
committee outlined its concerns about the fact that producers have limited
ability to directly influence, or engage with, levy investment decisions. The
inquiry found that the possibility of producers being able to gain greater control
over their levy expenditure through engagement at MLA Annual General Meetings (AGMs)
– or through industry representative bodies – is virtually non-existent. As
previously noted, the committee found that the CCA is both under-funded and
under-resourced, and is therefore hamstrung in its ability to undertake its
roles and responsibilities, and meet its obligations under the MOU. The
committee made recommendations which supported the establishment of a producer-owned
body which "would address problems of representation and strengthen
producer accountability by establishing a direct relationship between producers
and the body".[27]
5.33
The committee argued that a producer-owned body could be achieved
through legislative means, "by combining PIC policy development responsibilities
with the statutory marketing and separate statutory R&D corporation
authority".[28]
In recommending the establishment of a producer-owned body, the committee
argued that reforming the CCA to achieve the required outcomes "should be
examined as part of this process".[29]
Structure for a new representative
body
5.34
Following the release of the committee's 2014 report, a range of grower
groups, including the CCA, came together to discuss the formation of a new,
democratic, representative industry organisation – which would come to be known
as Cattle Australia.[30]
5.35
In December 2014, grass-fed producer representatives – and other red
meat industry stakeholders – met with the Minister for Agriculture and Water
Resources in Brisbane. The agreed outcome taken from this this meeting was
that:
...the grass-fed producer groups would go away and return in
February [2015] with a new model for national grassfed producer representation
that they could all agree upon, while the minister and his staff would explore
whether the new body could receive statutory levy funding – either through
taking over control of all grassfed levy revenue as recommended by the Senate,
or by receiving some direct levy revenue to help fund its operations.[31]
5.36
In February 2015, in what was described by one commentator as a
"rare and perhaps unprecedented display of unity" from grass-fed
producer groups, a new restructure model was presented to the Minister for
Agriculture and Water Resources. The model presented to the Minister proposed:
-
replacing the CCA with a fully directly-elected board of
grass-fed levy payers who would represent 15 cattle-producing regions across
Australia;
-
that every grass-fed levy payer would have the right – whether or
not they chose to exercise it – to vote to elect their grass-fed industry
representatives, stand for election themselves, and contribute to policy
development;
-
that the new body would primarily be funded through the statutory
grass-fed levy.[32]
5.37
It was envisioned that the proposed new body would provide all grass-fed
levy payers with a vote. It was argued, therefore, that once established, the new
body would be able to legitimately claim to be more representative than
existing bodies. Further, it was reported that:
The new body would not stifle diversity of opinion but should
encourage it. Producer sub-groups would still have the opportunity to use their
own networks and resources to attempt to have their own representatives elected
to the board and to stand on the merit of their arguments.[33]
Funding a new representative body
5.38
Having reached agreement on the structure of the new representative body
and presenting it to the Minister for Agriculture and Water Resources, the grass-fed
cattle sector turned its attention to the question of how the new body would be
funded. To assist with this next phase of the process an 'Implementation
Committee' was formed.
5.39
The Implementation Committee – which includes representatives from the
CCA, the Northern Pastoral Group (NPG), the Northern Territory Cattlemen's
Association (NTCA), the ABA, and the Australian Meat Producers Group (AMPG) –
was given the task of raising an appropriate level of seed funding to establish
the 'Cattle Australia' representative body. The Implementation Committee was
also requested to:
-
suggest options for securing long-term funding;
-
develop an Implementation Process Plan; and
-
lobby the Commonwealth to implement a 'workable funding model'
for the new grass-fed cattle representative body.[34]
5.40
The Implementation Committee's preferred funding option was that the
new representative body be primarily funded through the $5 per head statutory grass-fed
cattle industry levy. It was argued that the body would be providing
representation for grass-fed levy payers and, as such, it should be given full
control of the levy (as per the committee's recommendation) or at the very least,
receive a redirected portion of the levy.[35]
5.41
Those in support of this argument suggested that the body should receive
approximately seven percent of annual grass-fed levy revenue – which amounts to
approximately $4 million of funding. In 2016, the CCA also estimated that $4
million was the minimum amount required to set up the new national producer
organisation (and develop sustainable funding streams).[36]
5.42
Those who opposed this funding option argued that the grass-fed sector
does not have sufficient control over grass-fed levy funds through the MOU,
which – amongst other things – defines MLA's responsibilities to each PIC. Further,
it was argued that it is the CCA's responsibility to scrutinise MLA's grass-fed
levy expenditure and, if necessary, provide direction to MLA on how investments
can be improved.[37]
5.43
However, recent reports indicate that the original proposal – which
would see a portion of the funds generated from the $5 per head levy re-directed
to pay for the restructure and the ongoing activities of the new representative
body – still has strong support amongst grower groups.[38]
5.44
In terms of possible funding avenues, prior to the June 2016 federal
election, the Coalition announced a proposal to set up a $5 million 'Leadership
in Agricultural Industries' (LIA) fund. It was stated that the purpose of the funding
– which would be available to all representative organisations across the
agricultural sector – was to assist agricultural representative groups
(including PICs) develop leadership skills and transition through structural
adjustments. At the time, the CCA welcomed the Coalition's announcement and suggested
that the LIA funding would enable organisations such as the CCA to continue
their advocacy roles.[39]
5.45
At the same time, the CCA re-stated its commitment to fostering
leadership within the beef industry through its own initiatives and argued that
the announcement regarding LIA showed "there is strong support for these
programs in industry". Given the more recent announcement, however, that individual
grants are expected to be between $100,000 and $500,000, the LIA fund is
unlikely to meet CCA's predicted funding requirement of $4 million.[40]
5.46
Given the proposed new model can only proceed if, and when, a viable and
sustainable funding model can be identified, stakeholder groups such as the CCA
argued that the first matter that must be dealt with before a new structure can
be implemented is that of sustainable funding:
Provision of funds from the Cattle Transaction Levy must be
assured. The structural transition can only commence with a sustainable funding
source.[41]
Minister's response to committee's report
and recommendation for a new representative organisation
5.47
The Government tabled its response to the committee's 2014 report into
the grass-fed cattle sector in July 2015. At the time, the Minister for
Agriculture and Water Resources, the Hon Barnaby Joyce MP, stated that the
grass-fed cattle industry "would now have increased stability moving forward",
and announced that his goal in initiating the process had been:
...to see the creation of a viable representative organisation
that, without fear or favour, can advocate on behalf of grass-fed beef
producers, can oversee levy investment that delivers real and beneficial
outcomes to producers and deliver more transparency in how levy dollars are
spent.[42]
5.48
In responding to the committee's report, Minister Joyce advised that the
Government would ensure the terms of reference for the 2015 performance review
of MLA would examine options to improve transparency, accountability and
engagement with levy-payers. Minister Joyce also acknowledged that research and
development corporations within the red meat sector needed "to vastly
improve the manner in which the benefits of projects invested in are
communicated to levy payers".[43]
5.49
However, the Government's response to the committee's grass-fed beef
levy inquiry also made it clear that the R&D and marketing component of the
levy would not be redirected to a new organisation on the basis that the full
redirection of the levy would "fundamentally destabilise" MLA, to the
"detriment of other components of the red meat industry".[44]
5.50
Interestingly, in a July 2015 opinion piece, Minister Joyce gave an
assurance that any new industry organisation when established would have
greater oversight over how the levy is invested "by seeking to update the
industry Memorandum of Understanding to strengthen the rights and
responsibilities of the peak industry council".[45]
At the same time, however, the Minister argued that funding the new
organisation through compulsory acquired levies (which are collected by the Government)
would make the new organisation beholden to the Government and unable to freely
express its views.[46]
As an alternative, the Minister asserted that strengthening the MOU (between
the new cattle representative organisation and MLA) would be adequate, and give
grass-fed producers the control that they desire over their levies.[47]
Australian Farm Institute (AFI)
review
5.51
In January 2016, RMAC announced that the Australian Farm Institute (AFI)
would lead a review; to identify possible new operating models to support the
industry's peak advocacy and policy bodies. RMAC announced that the review
would identify practical options for future funding models from the various red
meat PICs. It was also proposed that the review would consider new and
innovative revenue streams, as well as the cost and business structures for red
meat PICs.[48]
5.52
The AFI's inquiry was set to commence in February 2016, with a final
report due in mid-2016. According to RMAC Chairman, Mr Ross Keane, the project
would provide the industry's representative bodies with options to assist them
to establish sustainable operating models for their respective organisations.[49]
Paid for by the Red Meat Industry Fund, it was also proposed that the research
assess the status of all PICs, several of which are struggling with declining
membership bases.[50]
It was confirmed during the inquiry that the report was finalised in 2016 and provided
to the RMAC board. The AFI's report has, however, yet to be made public.[51]
Alternative operating model –
Sheepmeat Council of Australia
5.53
The cattle transaction levy system was the subject of the committee's
2014 report into the grass-fed sector of the cattle industry. In that report,
the committee argued that it is essential that peak industry bodies are both
robust and sustainable, and that it is vital that levy funds are used
effectively. To this end, the committee reaffirms the recommendation it made in
its 2014 report, that the ANAO conduct an audit of the cattle transaction levy
system and that it trace the levy from its inception and focus on the revenue
from, and expenditure of, the respective components of the levy.
5.54
The committee is aware that the issue of peak body sustainability has
recently been the central focus for the sheepmeat industry. The Sheepmeat
Council of Australia (SCA) recently enlisted independent, external consultants
to undertake a comprehensive review of its organisational structures and
governance, which took the emotive and potentially divisive decisions out of
the hands of industry stakeholders. Following the completion of the review, the
recommended changes were voted upon and ultimately adopted by the SCA Board.
5.55
It is noted that the SCA's restructure was carried out at minimal cost,
and without any money from the public sector. The results of the SCA reforms
include the appointment of a skills-based, remunerated board, more
opportunities for producers to join as independent members, and an organisation
that still represents state farming organisations. The overall outcome of the
process is a more open, democratic and participatory organisation. It is
proposed that the changes to the SCA will come into effect from November 2017.
Review of the MOU
5.56
As far back as 1997, then Minister for Primary Industries and Energy,
the Hon John Anderson, MP noted that industry itself had recognised that
proposed new representative arrangements offered a necessary opportunity to
bring about a fundamental cultural change.[52]
The industry has once again recognised the need for change.
5.57
The industry has become fragmented. This is reflected by the fact that
approximately 77,000 cattle properties in Australia supply to around 100
processors, of which four companies dominate the market.[53]
Amongst other things, the disparity between producers and processors has
contributed to a belief that processors have a competitive advantage, which has
in turn fuelled a general lack of trust between the various sectors of the red
meat industry.
5.58
Strengthening the role of the new producer representative body in
relation to MLA is viewed by many as a necessary reform. It has also been
argued, however, that this initiative will not change the underpinning
structures and relationships as set out in the MOU – which no longer reflect
the current realities of the red meat industry.
5.59
Stakeholders have long acknowledged the need to strengthen the
governance and representation arrangements for the red meat industry. A growing
number of stakeholders are also recognising that if the red meat industry is to
remain competitive and sustainable, a thorough review and reform of the MOU is
required.
5.60
As part of its policy document regarding a new structure, the CCA
recognised the need for changes or additions to the MOU to "ensure
adequate control over MLA programs and activities".[54]
5.61
Mr David Byard, CEO of the Australian Beef Association (ABA), also noted
that:
It is common ground amongst all rural industry groups and
institutions that the current organisational representative structures have
outlived their time and are no longer sustainable either from a funding or
operational perspective in the long term.[55]
5.62
The point was also acknowledged by the Government in its response to the
committee's 2014 grass-fed levies report, when it indicated that a 'revision'
of the MOU was necessary to:
...more clearly define the roles and responsibilities of each
entity around consultation requirements and agreement on forward work plans and
levy expenditure.[56]
5.63
Following its years of inquiring into the red meat industry, the
committee has also come to the firm view that current statutory arrangements no
longer reflect the realities of the industry. This is no better exemplified
that in relation to the grass-fed cattle sector. As the committee noted in its
2014 report:
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 service the industry. Each step in the supply chain
must be optimised to deliver a competitive advantage. 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.[57]
5.64
ACIL Allen's performance review of MLA examined the role of MLA, the representative
structure of the red meat industry and the need for reform. The 2016 report concluded
that there were a number of issues currently facing the red meat industry,
which could only be addressed:
...if the red meat industry revisits the MOU. The fact that the
PICs are assessing their current positions, along with this report and last
year's AMPC performance review, means that by mid-year the industry will have a
strong understanding of the strengths and weaknesses of most organisations
involved in the MOU. At that stage the industry needs to make a decision on
whether clarification/re-confirmation of the MOU and introduction of more
effective conflict resolution will suffice or more fundamental reform is
required.[58]
5.65
The committee has made the point previously that the legislative
landscape has not kept up with industry changes. This is evident with regard to
the MLA Donor Company (MDC). The Australian Meat and Live-stock Industry Act
1997 provides MLA with the legislative authority to establish a donor
company for the purposes of distributing Commonwealth funding to facilitate
voluntary investment in R&D innovations across the red meat supply chain.
The Australian government matches voluntary partner contributions (of up to 50
per cent) through the MDC where eligible projects deliver outcomes that address
broader industry and/or government priorities and benefit the entire industry.
5.66
The MLA remains the only industry body eligible to receive matching
Commonwealth funds for research from industry levies and funds received from
the three declared approved donors. The committee recognises, therefore, that a
review of the MOU must encompass the role of the MDC.
Committee view
5.67
It is indisputably clear that following the implementation of the 1997-98
reforms, the red meat industry (and the structures that underpin it) has undergone
significant change. The committee is firmly of the view that these structures
no longer serve the purpose for which they were originally intended.
5.68
The committee recognises that enhancing value and representation for
producers are central to any reform agenda, at the expense of the interests of
intermediary bodies that service the industry.
5.69
The committee recognises the initiatives undertaken by industry
stakeholders to advance an agreement regarding the structure for a new
grass-fed cattle producer body as evidence that the industry is able to
initiate reform. The committee also acknowledges that strengthening the role of
a new producer representative body (particularly in regard to its relationship with
MLA) should be the first step towards greater structural reform of the
industry. To that end, the industry's unity in relation to the need for a new
representative body, and its current appetite for reform, provide the perfect
environment to undertake a wider and more comprehensive review.
5.70
The committee acknowledges the work currently being undertaken by
members of the Implementation Committee of Cattle Australia and others within
the grass-fed cattle sector as they work toward structural change and identify
a sustainable funding model for a new representative body which will deliver
the services the grass-fed sector needs.
5.71
The committee does, however, question whether any new producer
representative body will be able to operate effectively under the systems and
structures that are currently in place. The committee is of the view that the
existing structures, roles and responsibilities – particularly that of PICs in
relation to MLA – require urgent reform.
5.72
It would be a tremendous disservice to levy-paying producers if the new
representative body has to contend with the same resourcing issues, and face
the same obstacles as the current PIC. However, the committee is also acutely
aware that any reform effort will face resistance from those in the industry
who have a vested interest in the status quo. To avoid at least some of these difficulties,
the committee is firmly of the view that the funding source for the new body needs
to be independent of both CCA and MLA.
5.73
It is the view of the committee that the proposed new representational
body – called Cattle Australia for the purposes of this report – should be
given the opportunity to work as intended. For the body to take on the role of
a properly representative body, it needs to be properly funded and have the
structure necessary to be truly representative and consultative. To this end,
the committee recommends that Cattle Australia be provided with adequate
independent funding as soon as practical. With decisions currently being made
about the use of substantial amounts of levy-payers funds including on
technology such as DEXA, the committee recognises that there is some urgency for
a well-resourced Cattle Australia to effectively represent the interests of
grass-fed cattle producers. Moreover, once operational, Cattle Australia will
be able to make appropriate, informed decisions on behalf of their levy payers about
price transparency across the supply chain. It will be in a position to
effectively guide and assess MLA's performance in the expenditure of grass-fed
cattle levy funds and to ensure greater transparency with regard to the use of
levy-payers funds.
5.74
The committee recommends that the Australian Government support the grass-fed
cattle sector in its efforts to establish Cattle Australia as the sector's new
PIC. To that end, the government should provide appropriate funding support to
assist Cattle Australia in its establishment and to support transitionary
arrangements with CCA.
5.75
As part of the transitionary arrangements, Cattle Australia should
develop an organisational and representative structure which is democratic and
fully accountable to grass-fed cattle levy payers. Under the leadership and
guidance of a renumerated skills-based board, this can be achieved by
establishing:
-
a membership and voting structure to enable levy payers a direct
say in the utilisation and investment of their levies;
-
a leadership body of elected members that reflects the unique
geographic, demographic and economic makeup of this sector; and
-
a transparent reporting system to enable levy-payers to trace the
utilisation and investment of their levies.
5.76
Once Cattle Australia is established, with a membership structure in
place, it should be officially recognised as the sector's PIC under the Australian
Meat and Live-stock Industry Act 1997, and Red Meat MOU.
Recommendation 4
5.77
The committee recommends that the Australian Government provide
immediate support, including appropriate financial assistance, to the grass-fed
cattle sector in its efforts to replace Cattle Council of Australia with a transparent
and accountable producer-owned body as the sector's Peak Industry Council.
Recommendation 5
5.78
The committee recommends that the Australian Government officially
recognise Cattle Australia as the grass-fed cattle sector's Peak Industry
Council under the Australian Meat and Live-Stock Industry Act 1997 and
Red Meat Memorandum of Understanding once it is operational and has a membership
structure in place.
5.79
As previously noted, the committee has concerns in relation to the
complexity, and lack of clarity that exists in the relationships between
industry stakeholders – particularly MLA and CCA as well as AMIC and AMPC – and
their respective levy payers. While the committee recognises that the
accountability arrangements under the MOU have proven to be complex and
unclear, it is obvious that the lack of a coordinated, industry-wide approach
continues to add to the confusion about corporate and financial
responsibilities, including the ownership of technologies.
5.80
In addition to the lack of clarity between these organisations, the
committee also has concerns about the way in which these organisations make
decisions in relation to the expenditure of levy-payer funds. The committee
notes, for example, that it would appear that the views of levy-payers have not
been given primary consideration, even though the proposed expenditure on the
development and implementation of OCM technology is substantial.
5.81
Under the MOU, in circumstances where services cover the whole supply
chain (and unless otherwise agreed) MLA is nominated as the lead organisation. The
purpose of allocating this leadership role to MLA is "to avoid duplication
and improve operational efficiency".[59]
However, the committee recognises that the issue of OCM technology is a perfect
example of where a lack of coordination and unity across representative groups
results in confusion (and a lack of trust) on the part of stakeholders –
particularly levy payers. It would seem to the committee, therefore, that the
lack of clarity and coordination that currently surrounds the OCM technology
initiative lends weight to the argument for review and reform of the MOU.
5.82
The committee questions whether organisations such as MLA, AMPC, AMIC and
the CCA are actually collaborating, and working toward the good of the entire
industry, or whether this has become another example whereby vested interests
have overridden the important principles of transparency and consultation. The
committee also upholds the concerns that it has raised in the past with regard
to the matter in which the MDC operates, particularly given the substantial tax
payer contributions involved by way of matching government funding.
5.83
The committee notes that stakeholders have long acknowledged the need
for a strengthening of governance and representation arrangements for the red
meat industry sector. Given the diversity of the industry, the committee
recognises that full consensus may never be reached; what is abundantly clear,
however, is that the current structures – as set out in the MOU – are not
effective in meeting the 'collective' needs of the industry. What a growing
number of stakeholders are also recognising, however, is that for the whole of
the red meat industry sector to remain competitive, sustainable and prepared to
take advantage of positive commercial outcomes, a thorough review of the MOU is
required.
5.84
It is vital that a broad consultative process be undertaken to review
the MOU and the structural and representational relationships contained within
it. The review should not contain itself to the views of the parties to the MOU
and the review body should consult widely across the industry to establish a
comprehensive understanding of the complexity of the structures, relationships
and arrangements that shape the industry.
5.85
To this end, the committee recommends a root and branch review of the
MOU. The review should include an examination of all aspects of the MOU;
including all parties to the agreement as well as funding, planning and service
delivery agreements, industry reserves and R&D. It should also examine the structural
arrangements, financial management and operational effectiveness of the bodies
that are current signatories.
5.86
The committee recognises that such a review will be complex and that it
will have to consider the respective legislation and service agreements. At the
same time, the review cannot be led by one sector of the industry. The
committee has previously raised serious concerns about the role and
representation of RMAC. Given that RMAC would be one of the organisations under
review, the committee does not believe it would be the appropriate body to
undertake such a review.
5.87
Instead, the committee recommends that the review of current
institutional arrangements should be undertaken by a joint industry and
government body. This representative body or task force should review the
structural arrangements, financial management and operational effectiveness of
the statutory bodies and the structures that underpin them.
Recommendation 6
5.88
The committee recommends that a joint industry and government meat and livestock
task force be established to conduct a comprehensive review of all aspects of the
Red Meat Memorandum of Understanding (MOU).
Recommendation 7
5.89
As part of the Red Meat MOU review, the joint industry and government
meat and livestock task force should consult widely across the industry and consider
options for reform.
5.90
The task force should present a report to the Minister for Agriculture
and Water Resources within two years of its establishment. The report and its
recommendations should be made public.
5.91
To ensure full transparency and encourage industry ownership over the
reform process, the task force should endeavour to publish its preliminary findings
during the review period as well as bi-annually.
Senator Glenn Sterle
Chair
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