At the outset of the chapter, and following its remarks in Chapter 1,
the committee reiterates that this is an interim report. The decision to table
an interim report was made in light of the likelihood of an imminent double
dissolution of the Parliament, and the need to get some of the committee's
findings, particularly those concerning the situation at Barnawartha, on the
record while advocating for an opportunity to resume examination of further
significant issues in the new Parliament.
The committee has more to say on a number of important matters, and
intends to do so as soon as possible. These matters include:
Agents' conduct and collusion;
Variations in grid inspections;
Standardisation of saleyard design and selling practices;
Reverse consolidation markets;
Agents' owning saleyards in which they operate;
The adequacy of the Australian Competition and Consumer
Commission's (ACCC's) powers to protect witnesses;
Processor consolidation, including the loss of competition and
The late setting of prices for cattle booked for sale;
The ACCC market study; and
The lack of a complaints mechanism for 'over the hook' grading.
The interim nature of this report's findings is reflected in the
recommendations. It is the committee's intention to supplement this report's
recommendations in light of further examination of the matters listed above,
and in particular the findings of the ACCC's market study.
Committee view and recommendations
This inquiry brought to the fore a number of important issues and
factors. First, there is a lack of transparency across the supply chain which,
coupled with a lack of market tension, has contributed to a context in which
producers are not guaranteed a fair return at the farm gate. Second, from the
evidence provided to the inquiry, there is an overwhelming sense that the
structures and systems that underpin and oversight the red meat industry have
not kept pace with the rapid changes that have affected the market and those
who are engaged in it.
The growing disconnections between the industry and the structures that
underpin it are demonstrated by the extent to which the system has become dysfunctional,
unrepresentative and uncompetitive. It is the combination of these factors
which came to the fore in the Barnawartha matter and which demonstrated all
that is wrong with the current industry market structure.
It is clear that the livestock and red meat industry structures are
complex and convoluted with the supply chains encompassing a wide range of
stakeholders including producers, contractors, processors, middlemen, retailers
and consumers. These complexities are represented in the red meat Memorandum of
Agreement (MOU) which is extremely difficult to navigate and comprehend. Yet, central
to the challenges for the industry is producer representation in decision
While the supply chain has grown more complex over time, many of the
rules and structure which govern it were designed at a time when Australia's
emerging export markets were in comparative infancy and the processing sector
was not heavily consolidated. It was made clear to the committee that, as a
consequence, the red meat market is 'beset by market failures and plagued with
a lack of integrity, transparency and accountability'.
Evidence to the committee suggested that market power can be revealed in
a number of ways within these complex supply chains. Submitters detailed
examples of non-competitive terms and prices, asymmetric information, and price
discrimination. The integrity of the entire red meat system was brought into
question by evidence regarding commission buyer practices, the imposition of
saleyard curfews, the manner in which post-sale weighing was introduced in
Barnawartha and the 'over the hook' grading system, as well as the current
system of price setting.
While the committee appreciates the complexities in the supply chain, it
recognises the need for transparency and consistency in selling structures and
practices. The committee shares the concerns expressed about consolidation in
the processing sector and a lack of transparency in the supply chain. The
committee agrees that these issues, in addition to what appear to be common
practices, such as single agents representing multiple buyers, demonstrate the
need for protections against uncompetitive practices, particularly to ensure a
fair return to producers.
In this regard, the key themes in evidence during this inquiry included:
the lack of price transparency;
the need for legislation regarding concerted practices; and
a need to restore confidence in grading systems and processes.
As much of the evidence provided to the committee has focused on the red
meat sector, the point remains that the themes of transparency, price discovery
and accountability are applicable to all livestock.
The need for transparency throughout the supply chain was highlighted in
The point was repeatedly made that the pricing mechanism in the cattle market
in Australia lacks integrity at the saleyards and in over the hook sales.
Fundamentally important to the industry is ensuring maximum efficiency
through the red meat supply chain and improving competitiveness within the
industry. In this regard, the provision of information throughout the supply
chain is essential to ensure that producers receive the highest returns at the
farm gate. Yet, under the current system, producers are unable to determine the
true asset value of their stock. At the same time, retail prices have continued
to rise while livestock prices have not.
The committee holds the view that there is a culture of collusion which
permeates the saleyards and must be addressed. It recognises that the ACCC
market study on the cattle and beef industry will consider saleyard practices
including the behaviour of commission buyers. However, it is clear to the
committee that some form of price disclosure at saleyards is one mechanism which
could address these challenges. There is a requirement for a public and
transparent pricing mechanism at the saleyards which at a minimum should
display the price in a public location for all to see. Whether this mechanism
is based on the Dutch auction system or another mechanism is a matter for the
The reporting of livestock sales at and beyond the saleyard is another
matter of considerable concern. The committee notes the evidence provided to
the inquiry which demonstrated that at best, market reports and benchmark
indicators are based on a smaller and often cheaper sample of the market.
The committee recognises that the saleyard price sets, drives or
influences the rest of the marketplace. However, with the use of saleyards
diminishing in some states, the committee recognises that there is a growing
need for a comprehensive market indicator.
It was highlighted to the committee that technology offers the
opportunity to provide for an effective and real-time system which captures the
full value of the carcass.
The committee acknowledges that MLA is conducting an analysis of a price
transparency system, and there are decisions that industry will have to make
about this process and where it may lead. The committee notes, however, that
there is a strong desire amongst producers for price transparency and that some
form of price mechanism must be put in place. Therefore, the committee recommends
that the industry move towards establishing a national pricing disclosure and
reporting mechanism which takes into account all methods of sale.
The committee recommends that a transparent pricing mechanism be
introduced at livestock saleyards and that Meat and Livestock Australia (MLA)
in cooperation with the livestock and red meat industry, establish a national
price disclosure and reporting system.
Best practice saleyard design
Concerns were also raised about the safety and quality of saleyard
design. Physical design issues including the type of flooring used and height
of the roofing have a significant impact on both the livestock and those who
use the saleyard. The committee was informed that producers were not always
consulted about the design of saleyards before construction.
The committee recognises the importance of best practice saleyard design
for the purposes of animal health and welfare as well as the safety and comfort
of saleyard users. To this end, the committee recommends that the industry and
producers work together to establish best practice modelling for saleyard
design in cooperation with producers and their representatives. The study
should identify best practice in relation to the physical construction of a
saleyard including flooring which can be used as a guide for saleyard
construction in Australia into the future.
The committee recommends that industry and producers work together to
establish best practice modelling for saleyard design in cooperation with
producers and their representatives.
The committee welcomes the establishment of an ACCC Agricultural
Commissioner who will serve as an ombudsman in relation to agriculture. The
committee is encouraged by the ACCC's commitment to undertake a market study on
the cattle and beef industry. The committee recognises that—given the number of
inquiries that have been undertaken across the industry during recent years—many
producers and producer groups may be suffering from 'inquiry fatigue'. However,
the committee strongly encourages producers and producer groups to engage with the
ACCC market study.
The committee takes the view that a price transparency system, which
reflects the true price of the cattle market, should be underpinned by the real
prospect of investigation into anti-competitive behaviour. To this end, the
committee strongly encourages the Australian Government to realise the
recommendations of the Harper Review and to introduce legislation which would
prohibit concerted practices.
Legislation in relation to concerted practices would not only bring
Australia's competition laws into line with those of other jurisdictions (such
as the United Kingdom) but would assist in addressing many of the concerns
raised regarding saleyard practices.
The committee recommends that the Australian Government introduce
legislation to prohibit concerted practices as soon as practicable.
The committee acknowledges the considerable disquiet about the practices
of commission buyers at the saleyards, and in particular their influence on
price. In fact, the role of commission buyers was at the heart of concerns
regarding collusion and coercive practices at the saleyards.
Evidence to the committee suggested that livestock agents including
commission buyers are included in state and national codes of practice for
saleyards. It became evident to the committee, however, that such codes are
neither upheld nor enforced. Further, while livestock agents may be licensed
under state government regulation in some states, the requirements vary, and
some jurisdictions there are no licensing arrangements at all.
The view was put by a number of producers that while livestock agents work for
the vendor—the seller—in reality, they may capitulate to pressure from buyers
to change the rules in a selling system. Evidence to the committee suggested
that this had occurred at Barnawartha and other selling systems in Victoria
where the 'code of practice was overturned in the face of pressure from meat
The committee recognises the need for a nationally consistent
registration regime for livestock agents. As part of the registration
arrangements, livestock agents should be trained. In addition, the registration
body should be responsible to oversight livestock agents and establish a formal
The committee recommends the establishment of a registration and
training system for livestock agents. In addition, the committee recommends
that a system of oversight be introduced by the registration body which
includes a formal complaints mechanism.
Grading systems and processes
Objective grading, coupled with transparency in relation to grading, and
the provision of evidence regarding downgrading of carcasses was at the
forefront of evidence provided by producers.
The widely held view amongst producers is that the grid system is designed for
processors: to provide for discounting and to confuse producers.
The committee acknowledges the widely held concerns of producers and
farmer groups about the grading system which not only sets prices but is the
determinant indicator of quality both for the consumer and producer. While the grading
system should provide a market signal to producers, evidence to the committee
suggested that concerns about the independence of graders, complexity of
feedback sheets, and intricate grid system remain some of the primary
The committee appreciates that recommendations from the Australian beef
language white paper will be realised over time.
However, serious concerns remain about the composition of the Australian Meat
Industry Language and Standards Committee which go to the question of
representation. While outside the scope of this inquiry, the committee
questions whether a holistic review of the red meat MOU is now required. To
this end, having conducted numerous inquiries into the red meat industry over
many years, the committee recognises that at the heart of the industry's
challenges is the question of effective producer representation.
It is clear that the grading systems need to be subjective,
scientifically-based, consistently applied and subject to truly independent
oversight. There must be clarity regarding feedback sheets which should be
provided to producers in a timely manner. If the feedback sheets are too
complex, they must be simplified and should be used as a tool to encourage best
practice. Furthermore, it is vital that an independent complaints mechanism be
The committee notes that the ACCC market review report is due for public
release in November 2016. While this interim report contains extensive
consideration of the key issues, as well as significant recommendations, the
committee signals its intention to advocate for the opportunity to consider the
ACCC report and other matters listed at the beginning of this chapter in due
course. Therefore, the committee recommends that the Senate extend the final reporting
date for the inquiry to 20 December 2016.
The committee recommends that the Senate extend the inquiry reporting
date to 20 December 2016.
Senator Glenn Sterle
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