Selling structures in Australia
This chapter considers selling structures beyond the saleyard. It
focuses on 'over the hook' sales and direct sales as well as the complexity of
the grid system. In particular, this chapter explores price discounting methods
and the challenges for producers in achieving a fair and consistent return for
'Over the hook' or direct sales
As part of the 'over the hook' system, cattle are delivered directly
from producer to processor pursuant to a supply agreement, including forward
contracts. Under this system, price will generally be determined according to a
processor 'price grid' with penalties and discounts imposed on the basis of the
quality of beef produced.
In the case of 'from the paddock' sales from a producer directly to a
buyer or agent, prices may be determined per head or by weight and stock are
frequently purchased on the basis of forward contracts to secure supply.
The prices available to producers through over the hook and paddock
sales may differ depending on the time between sale and processing and the
extent to which agents are involved, but are generally benchmarked on
traditional saleyard sales.
When selling direct, the VFF – Ovens Valley Branch informed the
committee that the procedure is to weigh the cattle full and then take five per
cent off or curfew cattle for six hours and weigh the animal.
To make an 'over the hook' sale, livestock are delivered from the farm directly
to the abattoir with change of ownership occurring at the scales where the carcass
is weighed, following a trim of the carcass.
According to the department, producers with larger herd sizes are more
likely to sell over the hook or in the paddock, as they can put together a
truckload of cattle of the right specifications. In 2012‒13, 31 per cent
of cattle were sold 'over the hook' and 27 per cent in the paddock in northern
Australia. This compares with 41 per cent of cattle sold at saleyard auction.
Direct methods of sale can reduce carcass damage and loss of meat
quality caused by additional handling in saleyard and auction sales. However, the
actual carcass weight measured at the abattoir can vary depending on the way
that the carcass is trimmed, and whether the carcass is weighed when hot or
cold. The department further noted that:
Initially, the carcass is weighed at the end of the chain
while it is still 'hot'. If the abattoir trades on cold weight, around 3 per
cent is deducted from the hot carcass weight to calculate the cold weight. The
actual shrinkage varies from 2–4 per cent according to the quantity of water
lost during cooling in the abattoir.
Teys Australia suggested that these direct consignment models (as
opposed to the saleyards) are more beneficial to both producers and processors
for various reasons, including eliminating costs associated with intermediary
parties, including commission costs for using selling agents and the cost of an
additional leg of transport to the selling centre.
In fact, according to Mr Rob Atkinson, the only costs for producers were that
of the levy of $5 a head and freight costs.
Teys and others suggested that direct sales assist animal welfare
largely due to reduced risk of injury and loss of meat quality caused by
additional handling in saleyards and auction sales.
Saleyards have a disadvantage in terms of the quality of final product which is
'likely to be affected due to increased stress and time off feed'.
Furthermore, Teys made the point that:
market access to the European Union (EU) cannot, for reasons of
regulation, be serviced by cattle sourced through saleyards; and
the Pasture-fed Cattle Assurance System market, which also
provides a price premium, cannot be serviced by cattle sourced through
Moreover, it was argued that direct marketing of cattle provides
producers with more feedback on the carcass value of their cattle, thereby
potentially enabling them to adjust management practices to provide a higher
quality product. In comparison, saleyards provide limited feedback on the
carcass traits to producers.
Serious concerns were raised with the structure and function of over the
hook sales. Underpinning them was the widely-held understanding that the direct
to works option lends itself to minimal competition.
Some producers argued that while direct sales are a better option given the lower
costs, direct sales also give processors control of the market. Mr Newman and
Mrs Shirley Patmore provided a case in point:
[I]n March, 2014 due to severe drought we sold half of our
herd for what could be called salvage prices.
There were so many cattle flooding into the abattoirs that
there was a six week lead time. At the same time there was and still is record
demand for export beef.
The power imbalance was further reflected in the fact that for
producers, maintaining the confidence of the processors to whom cattle is
supplied was of critical importance. Mr Richard Wilson suggested that the JBS
direct sales over the hook grid prices are specific and that he books a place
well in advance to 'aim to carefully supply our cattle to best fit the grids
for higher returns to us and then obviously meeting JBS's premium requirements
The committee received substantial evidence focused on the over the hook
and direct selling. The primary concerns raised by submitters went to the:
price transparency and bargaining power of producers,
particularly those with smaller herds;
complexity of the grid system and kill sheet;
discounting practices with particular focus on the trim;
booking system for cattle; and
lack of a formal complaints mechanism.
Price and bargaining power of
Concerns were raised in relation to direct sales. According to the ABA,
existing selling structures and saleyards are becoming increasingly irrelevant
as processors and supermarkets are aware of the fact that buying over the hook
gives them an advantage – a producer cannot withdraw stock for slaughter if the
stock is dead on the processor's floor.
It further noted that, whereas saleyards were once the preferred means of sale,
now processors and supermarkets set the price (often working from the EYCI) and
producers can only accept or reject the price, terms and conditions, and the
potential of meeting company specifications as there are few alternatives.
VFF noted that direct sales in an otherwise public market serve as a
form of 'partial vertical integration' whereby no information is publicly
available on the price or volume of such trades.
The VFF Valley Branch continued:
The impact of consolidation and issues with the sale yard
auction system has seen many farmers sell direct to the processor, however with
the ongoing impact of consolidation we are becoming more aware of the
increasing manipulation of pricing by the processor through discounting and
tightening of killing grids eroding the end price. Different abattoirs have
varying systems and kill-out procedures of trimming further affecting the end
Similarly, the Mr David Farley made the point that the processing sector
lacked external independent and transparent benchmarking for producers to make
informed production and marketing decisions. He expressed the view that total
cost and revenue transparency was also important to ensure that accurate data
was analysed in order to capture all inefficiencies in the system.
The fact that producers have no ability to monitor what happens, let
alone what price they may obtain, was expressed by Mr Howard Smith, President
We have no ability to monitor what happens from when we drop
those cattle off to when they are processed. There are myriad things that can
happen between dropping off and that end point, when we receive the price, that
can have an effect on our bottom line.
JBS Australia purchases 85 per cent of its livestock weight and grade on
Mr Brent Eastwood, CEO of JBS noted that with this weight and grade sales
method, the farmer will not know what will be returned for an animal until it
Inconsistent and impenetrable grid
and unchallengeable kill sheet
The slaughter and processing stage of the beef value chain can 'greatly
reduce value if not done properly'. Mr Sweeting made the following observation:
Excellent hygiene, maintenance of the cold chain and stress
free handling of cattle prior to slaughter are all required to prevent
contamination, spoilage and loss in meat quality. Poor boning will also lead to
a lower percentage of prime cuts and a greater percentage of lower value trim.
Whilst value can very easily be lost during processing it is difficult to add
value during this stage.
Mr Bradley Teys of Teys Australia described the grading process in
relation to meat processing:
The grid shows weight, fat depth, age and dentition. That is
graded at the slaughterhouse scales. If you are buying cattle direct from the
producer, that is where ownership changes. And then, after a 20-to 24-hour
chill, more grading occurs around meat colour, fat colour, marbling and whether
something is MSA or not. At that point, that is the price that the producer
The VFF made the point that in theory, grid pricing is the most critical
signal to encourage farmers to produce beef products demanded by consumers.
Similarly, according to AMIC, processors consider livestock purchased on
contract to generally comply more closely, with their needs as producers work
to supply in accordance with the contract specification and grid.
However, for the pricing signal to provide appropriate signals, accurate
measurement of beef quality attributes is necessary. According to the VFF, this
has been the 'Achilles heel' of the processing sector given concerns as to
whether processors accurately measure and properly apply grids to determine
The existing quality grades and grids categorise carcass
based primarily on subjective visual observation and appraisal. This renders
the grading system to subjectivity and manipulation, in particular in
circumstances where farmers have no recourse to demand a reassessment of the
carcass. Let alone the bullying tactics used by processors when farmers express
their incredulity to the processor's grading assessment.
CCA suggested that as over the hook grids vary considerably, are
inconsistent and appear not to have a standard format, it has become
increasingly difficult for producers to compare or interpret them.
Evidence before the committee indicated that there were different compliance
rates and grid price reductions received between plants. There are also
differences in dressing percentages between plants, and at different times in
the same plant, and in cattle that have been consigned from the same mob at the
Along with evidence of discrepancies in processing yield between different
processors with some returning a consistently lower yield, it was argued that
carcass feedback was difficult to explain with producers receiving variations
between P8 and rib fat measurements that are not consistent with current
understanding of the correlation between the two measurements.
The concerns were reflected in the evidence of Mr Andrew Hunter who noted
that with sales based on carcass weight, 'you are putting faith in the honest
practice of the processor'.
Therefore, the argument was made that transparency in relation to the grid as
well as the penalties applied is required.
In terms of a sale, beef processors sell whole carcasses, boxed beef and
other parts of the animal. Mr James Maclean, Managing Director of Allied Beef
explained that beef processing was unique in the sense that one product goes
into a plant with up to 100 or more components coming out the other end:
With value creation, the companies have to extract as much
value from as many parts of that carcass as possible from a processing point of
view. What areas of value-adding they do themselves may, in some cases, reflect
the capital improvements they have to do. I am a strong believer that those
additional bonuses that come from some animals in some cases are paid to
producers. But, in most cases, it comes in a general mix of income that goes
back out in a general mix of payments to producers. Again, whilst the
processing sector has had an extremely profitable period for the last couple of
years, I do not believe that those minor factors are contributing to that in a
Processing activities and costs include kill fees, boning, packaging and
chilling. According to information provided by Coles to the ACCC's 2007 inquiry,
the price it pays for a whole cow (including producer and feedlot costs)
accounts for 53 per cent of the end retail price. Processing activities and
costs account for an estimated 14 per cent of the end retail price while the
retail activities and costs (slicing and trimming, packaging, labour, shrinkage,
promotion and advertising, store costs and retail margin) account for about 30
per cent of the end retail price.
The Australian Beef Association (ABA) challenged these figures and
suggested that MLA had determined that producers get 38 per cent of the retail
dollar while Coles maintained that producers got 54 per cent of the retail
dollar. ABA noted that one of the critical factors in assessing who gets what
share of the retail dollar was that of carcass breakdown, what is fat and bone,
and of course what is saleable meat. According to ABA, while Coles had
suggested 60 per cent of the carcass is retail meat and 40 per cent is fat and
bone, its own sources suggested that Coles insisted on a 70 per cent saleable
meat yield from a carcass when getting contract boning done. At the same time,
MLA suggested that the yield of the carcass was only 55 per cent of saleable
Mrs Josie Angus informed the committee that, as a non-packer exporter,
the costs of production have risen over three times in the last ten years. She
explained that, for boxed beef:
At the moment we pay them [processors] roughly $200 per
animal. They retain the hides and the offals, which at current market prices
are pushing the $400 mark in terms of what we can gain as non packer exporters.
Then on top of that we have seen our live-to-dead yield decrease, but we also
lose an additional 25 per cent in that they retain all of the fat and bone from
the carcass. Whilst we retain ownership and we are only paying a service fee,
we retain about 38 per cent of a live animal weight to do a job with.
The point was made by ABA that processors in Tasmania, as in most centres,
prefer to buy over the hook because it permits them to discount what doesn't
fit their specifications. These include fat cover, age and company
specifications, which ABA argued, are designed to make sure even the best
bodies can have some sort of discount applied.
The Gulf Cattleman's Association raised a different question about
Meat processors pay less for females than males even if the
carcass specifications are exactly the same (as the heifer and steer grids from
the meatworks show). The top four grades on the heifer grid TH, Y6, Y7, &
Y8 have the same fat, teeth and shape requirements as the top four grades on
the steers grid YO, Y1, Y2 & Y3, yet producers get payed 10 cents per kg
less for the heifers. Considering the consumer cannot go to a retail outlet and
buy heifer meat cheaper then steer meat it makes this discounting unfair.
Many other submitters to the inquiry raised concerns about the price
grid and associated kill sheets. The grid system was recognised as
'extraordinarily complicated' while the kill sheet is often set out in a way to
confuse a client.
It was widely believed that this complexity provides the means to reduce the
Some of the concerns raised in this regard included that:
Processors pay the graders who oversee Aus-Meat
and MSA standards.
Graders grade on fat, teeth, butt shape and weight variation
which allows for discounting and confusion on grid prices.
Use of butt shape as a grading implement can be exploited.
Producers questioned how they could check the measurements used
particularly in relation to deductions for fat, colour and butt shape. Mr Gary
Warren noted that:
This grading is done in house by the processors and even if
the producer goes down to watch his cattle processed, it does not mean that he
can get up and measure the depth of fat on the carcass.
One of the key issues of contention raised by producers was in relation
to fat. When a producer sells to a processor, they can be penalised for an
animal being too fat. Under such circumstances, the fat is removed and the
producer receives a discounted price. According to the evidence before the
committee, however, the processor is able to render this fat for sale or use as
The committee received considerable evidence from producers regarding
fat scores and fat testing equipment.
As a case in point, Mr Atkinson raised concerns with the means by which fat
depth is determined. He argued that this is the greatest 'discounting tool that
has no constant reliability or integrity':
This is because when a hide puller removes the hide, fat is
often torn from the carcass in varying degrees. 1mm of fat can mean the
difference of up to $1\kg carcass weight in some cases on meatworks grids. So a
320 kg carcass can be discounted by up to $300 because it had 5mm fat at PH
site instead of 6mm. If [sic] the meatworks employee moved the measuring device
a few centimetres, many of these carcasses would have to be paid out without
ABA developed its own tool to calculate the value of a carcass because
of its own concerns that MLA had 'no real idea of the actuals of a carcass
Mr Stephen Kelly, Chair of AMPC acknowledged that there could be
improvements to the grading systems which have a 'level of interpretation'.
Furthermore, he recognised that grids which animals are predominantly purchased
on have become far more complex over the past 10 years.
Questions were asked regarding the manner in which the standard trim was
applied. Mr Bradley Teys informed the committee that standard carcass trim was
devised in the mid-1980s to provide a uniform trim across all processors. He
argued that it provided producers with a means to get the best price per kilo
for their cattle.
Mr Ian King, CEO of Aus-Meat informed the committee that the trim was
'virtually always part of the inspection process' undertaken by Aus-Meat
auditors because it is a key component of the hot standard carcass weight. For
this reason, he noted that the trim was regularly audited as part of the
slaughter floor process.
JBS Australia CEO, Mr Brent Eastwood explained its role in relation to
We administer the AUS-MEAT trim according to the rules. We
have our graders who are grading cattle at the scale. They have no idea what
the grid price is or anything else. They have no idea. They are grading the
AUS-MEAT grid. We have nine beef plants and five lamb plants, every day we go
our QA department audits them three times a day by pre and post the scale. We
audit our own graders, and AUS-MEAT comes as well and audits those graders. We
apply the AUS-MEAT trim. We take total exception to people suggesting that we
trim beyond AUS-MEAT.
Generating value out of the trim is one of the key challenges for
Trim is most often used for sausages, hamburgers and other processed meat
products. According to Mr Sweeting, obtaining market premiums for the trim and
non-carcass parts is a particular challenge, with premium products such as
certified grass-fed and organic where processors have paid a premium for the
entire animal and may lose money if they can only get a premium for the prime cuts.
However, concerns were raised to the committee in relation to the
application of the standard rather than its definition. Many producers held the
view that the current standard carcass trim far exceeded the intention of the
Evidence suggested that there had been discounting in relation to the trim
where a millimetre of fat was missing but which could have been torn off when
the hide was pulled off.
It was also suggested that grain-fed steers currently average less than 52 per
cent dressed yield and that trimming of the carcass in conjunction with fat
penalties amount to 'double dipping'.
Non-meat parts and co-products
Processors sell all parts of the animal. Indeed, according to evidence,
the contribution of non-meat parts including bones, skins, offal and tallow are
crucial to a processor's business.
Mr Sweeting noted that non-beef products have created value for processors but
are 'frequently not directly paid for when cattle are sold on a carcass weight
He concluded that:
When producers are paid on a carcass weight basis, which is increasingly
the case there is a misalignment between how processors pay growers and how
processors make money.
Mrs Jo-Anne Bloomfield made the point that with over the hook prices,
the producer is only paid the carcass weight of the meat component and not the
co-products despite their significant value. It was put to the committee that
in some instances, foetal blood from heavily pregnant cows could cover the cost
of some animals with the meat effectively free to the processor.
According to the VFF, foetal blood can be worth $600 per litre.
While costs vary, according to evidence before the committee, the value
derived from the non-meat parts includes that from offal, intestines and foetal
blood. However, at the end of the process, producers suggest that they derive a
return of only 38 per cent of the live animal weight.
The VFF noted the substantial gap between the Australian saleyard price, retail
beef price and the impact of sale by processors of by-products. In this regard,
at least 22 per cent of the price that processors pay to buy a steer is
returned to them when selling the by-products (exclusive of foetal blood). 
According to Teys Australia, while it includes offal as part of its
revenue complex along with hides, meat meal, bone meal and yield of the meat,
service kills are different. Mr Bradley Teys explained:
When they service kill them, because they may be slaughtering
only, say 50 cattle a week, they charge the company that they service a fee to
kill their cattle and debone them. The company keeps the hides and offal
because this party has no way of selling that or does not have a market for
While a booking is made weeks or even months in advance, processors will
usually put out a grid on a Friday night for the following week.
Sometimes, producers are given the price a week before the kill and therefore
just prior to loading. A producer will have one of two choices – knock back the
price and run the risk of rebooking a new kill date which may be months or
weeks ahead – or to accept the price and potentially take the hit.
An example was provided by Mr Blair and Mrs Josie Angus who explained
that in 2014, kill slots were booked more than six weeks in advance without
pricing indicated at the time of booking. In their view, such a practice
removes a degree of competition from the over the hook market as producers are
unable to compare pricing at booking.
[I]f a producer did not like the price offered when it was
finally disclosed at a date close to the slaughter date, the only remaining
option was to make another future dated kill slot booking with no price offered
Mr Gary Warren informed the committee that the price may be given weeks
ahead in some instances to lock the producer in early. He provided the example of
one occasion when he received the grid price 14 days ahead of the kill, because
the processor knew that the market price was about to go up.
However JBS Australia argued that livestock is often booked into more
than one company with farmers able to choose to book space in a 'multitude of
meat processing companies'. Mr Eastwood upheld the view that cattle were never
priced against the grid a day or two out, but rather five to 15 days out.
Thereafter, producers can choose to take the price or pull their cattle out of
the booking, which, he noted 'happens all the time'.
Mr John Berry, Director and Head of Corporate and Regulatory Affairs at
JBS Australia suggested that producers have full information on the various
modes and they may book cattle in to a number of processors at the same time to
ascertain the best price.
[L]livestock is often booked into more than one company.
Farmers may choose to book space in a multitude of meat processing companies
and wait. It is never a day or two out. It is normally five, 10 or 15 days out
front that the cattle get priced against the grid. They may then choose to take
that price or pull them out of that booking, and that happens all the time.
Mr Eastwood further noted that all processors have cattle priced and
committed a certain amount of time out from slaughter (or more than seven days)
in order to ensure continuity of supply. Once a contractual price has been
agreed, the cattle are committed and the booking is locked. Prior to that
point, however, it remains only a booking space.
The contention of many producers was that, being informed of a price 48
hours in advance of a sale did not allow them time to make any informed decision
about whether to sell or not. If the offered price was not acceptable, the
problem for producers would be that they may not be able to re-book the same
slaughter-ready cattle, for at least three months into the future.
Mr David Evans noted that during periods of oversupply, there were long
waiting times to book cattle for direct sale with up to six weeks generally
quoted. As local abattoirs are unable to cope with supply during these periods,
local auction prices were often severely depressed.
Lack of formal complaints mechanism
and independent review
Hermit Hill Pastoral Pty Ltd informed the committee that its lambs were
weighed prior to dispatch, and based on quoted prices, an estimate of return
was made. However, when the kill sheets were received, the final weights were
less than expected. The stock agent then declined to provide an analysis of
each beast to Hermit Hill which was eager to investigate the discrepancy.
Hermit Hill made the following observations about its experience:
The kill sheet only shows numbers of beasts in weight range.
We suspect that beasts could be "trimmed" to fit into various categories
that could benefit the processor, penalise the farmer.
This lack of transparency over final kill weights for lambs
makes it impossible to reconcile records kept on-farm, and the resultant lamb
final dressed weight.
The processor would have this detailed information to enable
running an efficient business, but the farmer can't obtain this beast by beast
There is no current mechanism available for producers to contest grades.
Therefore, producers have to take their concerns directly to the processors.
When they do complain, they don't have any recourse.
Therefore, one of the concerns raised to the committee was that of a lack of a
formal and independent complaints mechanism. The VFF's Mr Shahriar Mofakhami
explained the context for producers:
In that type of situation you cannot even bring the
misleading and deceptive conduct action in relation to false certification,
because all the fat trimmings are subjective. What are you going to objectively
look at and say, 'Is this really the right fat content over here?' The fact
that there is no recourse means that, by the time you go with an objection to
them to try and see the evidence of it, the carcass has left the abattoir.
There is no dispute resolution mechanism to do that. That is why regulatory
intervention is required before you can hand it to the industry for them to
start regulating themselves. It is like stockbrokers and the stock market.
While producers continue to get inconsistent results under a grading
system for which carcass trimming is subjective, the graders are company
employees and there remains no recourse to a third party. Moreover, producers
may decline from making any complaint or raising any concerns in the first
instance for fear of jeopardising their relationship with processors.
CCA explained that while technological advances create the possibility
that the results of the cattle assessment could be readily available to
producers, this is not possible at present for a number of reasons, including
the time delay between the assessment, meat being identifiable and the producer
receiving the grading. Therefore:
Increasing the accountability and transparency of the beef
supply chain is essential in ensuring that producers receive the correct market
signals. The whole of the beef sector needs to examine methods to improve the
transparency and accountability, to ensure that activities which detrimentally
impact upon members are identified and effective corrective actions are taken.
In response to questions regarding a complaints mechanism, Teys
Australia informed the committee that it wanted to establish a third-party
dispute mechanism to handle grading disputes.
AuctionsPlus began operating in 1987 as a means of selling livestock by
description. Under the system, livestock are assessed prior to sale by an
accredited assessor who enters a description of the livestock into a public
electronic catalogue. Potential buyers register to participate in the auction
with the results displayed on the website immediately after the sale is
completed. The department highlighted some of the benefits of the system:
AuctionsPlus provides some of the benefits of saleyard
auctions—access to a wide range of buyers—while allowing direct consignment to
the buyer. Livestock are sold on-farm on the basis of dollars per head, cents
per kilogram liveweight, cents per kilogram carcass weight or according to a
pricing matrix. Transport costs are paid by the purchaser.
According to AuctionsPlus, online saleyards have an additional benefit
over physical saleyards of 'removing any opportunities for buyer collusion as
buyers cannot see who they are purchasing against'.
Furthermore, the advantages of purchasing 'direct' on farm through an
online auction system reduces the costs involved in saleyards and limits the
impact of animal welfare issues (which can occur when transporting livestock).
Support for change
The VFF – Ovens Valley Branch recommended that a standardised killing
process which is both fair and equitable, be investigated.
Mr Hunter suggested that, while regulating processor practices in terms
of the trim and sale of skins would not be realistic, reporting on yield
results, relative to the livestock type/feeding regime would give producers a
basis to assess processors. He suggested that under such a regime, when lambs
are sent for processing, a standard electronic form could be completed by the
submitting stock agent which could be sent to an industry website. While not a
compulsory system, Mr Hunter suggested that under such a system, the results
should only be made available to participating agents/producers.
However, many producers made the point that there needs to be structural
reform. That is, changes to the process by which cattle are sold in order to improve
operational transparency, support the market and value add.
The VFF noted in this regard that:
The Government has achieved significant foreign investment in
our agricultural sector, however this has been advanced without first
establishing proper structures for the protection and guided growth of our
agricultural markets. As a result, unchecked horizontal and vertical
consolidation has created tight oligopolies/oligopsonies and the emergence of
overly powerful players at critical stages in agricultural supply chains,
creating choke points. Consolidation in the processing and retail grocery
markets has led to fundamental shifts in economic power. Vertical coordination
has strategically enhanced the market power of the processors and retailers
within our agricultural markets without any corresponding regulatory
protections at the farm gate source of these critical supply chains.
The VFF argued in favour of a transparent market trading structure,
increasing the power of farmers using market conduct and integrity rules, and
empowering and investigation functions.
It made the point that the first step in creating an effective market for
trading of livestock and red meat is transparency, which is of benefit to all
Transparency through revealing rapid and complete trade,
order and volume information enables farmers, processors and end-users to
manage risk by forecasting price movements and in so doing creates another
dimension to our livestock and red meat markets, being futures prices. Futures
prices in turn leads to collection and dissemination of information to improve
and enhance spot market price discovery.
The VFF also argued that the solution is not to restrict the ability of
producers to use contracts or mandate a minimum amount of livestock to be
purchased at saleyards, but rather processors should report all contracts as a
pre- and post-trade, (whether they be spot or forward) and the data be used for
the wider price discovery of the market. Furthermore:
Standardisation of the grid premium/discount factors and
limiting the proportion of the base price that can be paid as premiums or
discounts will assist in ensuring that processors have limited ability to
deflate base prices and increase premiums to distort the base price.
Under a transparent system, processors would be regulated to provide a
live weight just before and just after the killing process. According to the
VFF, such a system would provide a live weight standard in relation to every
processor with a report on carcass yield against live weight.
The point was also made that an objective rather than subjective grading
system was required. The VFF noted a distinct lack of innovation on the part of
processors to determine scoring measurements. Yet, given the significant impact
that grid premiums have to the price discovery process, it is critical that
mechanical mechanisms are used and for the 'grading system to be structured
around available methods of objective assessment rather than subjective visual
To this end, the Shire of Campaspe suggested greater transparency in
relation to weighing mechanisms including the expanded role of electronic
animal tracking systems to assist with traceability through the processing
It recommended a uniform and consistent method for determining animal weight
given the options available and the power differential between buyer and seller
in different scenarios.
Mr John Carpenter argued that for all cattle sales made on a direct to
work/over the hook basis, appointment of a single government agent to
independently weigh, assess and grade carcases should be made.
He suggested that weight should be determined after slaughter without any
Mr Carpenter further argued that processor or retailer discounts levied against
the hook sale should only apply to carcases that:
fall outside the weight range;
fall outside the fat coverage range; or
fail to grade MSA.
A number of submitters also recognised the need for greater competition
in the processing sector. The point was made that producers should have
opportunities to sell cattle outside the current systems by way of online
auctions and direct sales to the public. Nanthes' Park British White Cattle
Stud noted the 'burdensome and restrictive regulation' concerning the sale of
meat to the public required reconsideration so that alternatives could be found
to allow for flexible but safe operational models.
One such option is to allow for a licenced butcher to carry out the kill
and approve the meat for sale with the meat sold under contract to clients.
According to Nanthes' Park British White Cattle Stud, buying under contract
conditions allows for clients to be fully informed of the process and for them
to agree to purchase via that process.
Whereas in the past, butchers would operate at saleyards, now they source most
of their beef directly from beef packers because there are few service kill
slaughter facilities left.
The Gulf Cattleman's Association argued in favour of new abattoirs in
Queensland, 'fit for purpose' regulations for smaller boutique abattoirs and an
investment in the training of graziers to use the online auction tool –
AuctionsPlus – to improve competition.
It also made the point that greater focus should be given to the use of
electronic marketing and on-line selling which would provide for greater
opportunities for on-farm sales.
Emphasis on online auction opportunities would not only go some way to addressing
producers' concerns regarding the health and welfare of cattle transported
considerable distances (without water and feed) but also provide greater surety
in relation to the sale price. In this regard, AuctionsPlus, the online auction
system, was recognised as a success by some producers on the basis that it enables
cattle to remain on the vendor's property and provides an easy option for the
vendor to pass in if their value is not achieved.
Mr Rob Atkinson argued that AuctionsPlus offers the most buyer competition.
However, he noted that few, if any, slaughter cattle are marketed in this way –
at least in Queensland.
Mr Peter Gregory argued in favour of small, regional abattoirs which can
process local animals without transporting them to 'mega plants which pay next
to production cost for the animals'.
This would assist in providing more competition in areas where producers have
limited options on how their animals are processed.
The Department of Industry and Science argued that mobile slaughter units,
small scale slaughter facilities in regional areas, and small scale meat
processing and packaging facilities could provide the avenue for more
innovation, new entries and competition within the sector.
However, the point was made that all options should be grounded on a
mechanism of pricing transparency as the Sheepmeat Council of Australia explained:
Producers need diversity in methods to sell their livestock.
However, these systems need to be open, robust and allow free-market forces to
work honestly. Uncontrolled consolidation in markets and prices generally
reduces competition, reduces options for the producer and, ultimately, reduces
farm gate returns. Currently the range of selling methods in the sheep industry
include saleyard auctions, online auctions, paddock sales or property sales,
over-the hook-sales and forward contract selling. All these pricing mechanisms
have a place in maintaining demand, competition and can enhance transparency in
the sheep industry.
Mrs Jo-Anne Bloomfield argued in favour of greater competition as well
as final product market availability and variability:
Increasing the opportunity of entry for buyers into the
livestock markets overall increases the ability of a fair and competitive price
for animals offered for sale through Australian meat processing and live export
channels. Government regulations and cost impost in both meat processing and
exporting creates barriers to entry by new businesses. There is no doubt that
some regulations and service fees are necessary but consideration should be
given to the duplication of some of these costs that could be lowered.
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