Red Meat Advisory CouncilSubmission to the ACCC Beef & CattleMarket Study Interim ReportNovember 2016

Prepared by: the Red Meat Advisory CouncilLevel 3, 14 Brisbane AvenueBarton, ACT 2604admin@rmac.com.au

(02) 6269 5606

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28 November 2016

Ms Sheridan de Kruiff Director (A/g) Agriculture Unit Australian Competition and Consumer Commission L24, 400 George Street Brisbane QLD 4000 Via email: marketstudy@accc.gov.au

Dear Ms de Kruiff,

RE: RMAC LETTER OF SUPPORT – ACCC BEEF CATTLE MARKET STUDY INTERIM REPORT

Thank you for the opportunity to contribute to the Australian Competition and Consumer Commission (ACCC) Interim Report and the fourteen recommendations.

About the Red Meat Advisory Council

The Red Meat Advisory Council (the Council) represents the 20-billion-dollar Australian red meat and livestock industry from “paddock to plate” for beef, sheepmeat and goatmeat. We provide a coordinated industry position to benefit Australian red meat and livestock businesses.

In doing this, we have the following key roles and responsibilities:

• Manage the Meat Industry Strategic Plan (MISP) 2020 – worth 7 billion to the sector. This is a joint planning process between our six members1and three red meat and livestock service providers2 with close engagement with government and other allied industries such as the Australian Livestock and Property Agents Association (ALPA).

• Advocacy of a cross supply chain policy agenda to the community, industry and government on issues that advance our industry.

• Advisory Council to the Federal Minister for Agriculture, the Hon Barnaby Joyce MP. • Manage investment and distribution from the Red Meat Industry Fund. • Industry coordination and communication.

The ACCC Beef Cattle Market Study Interim Report RMAC understands the Market Study aims to:

• Examine competition and transparency in the supply chain, and • Consider whether there are impediments to competition and efficiency at various stages of

the supply chain in cattle and beef markets.

RMAC & the ACCC Beef Cattle Market Study Interim Report As a Council, it is important to us that the sector is as competitive as possible so as to position the Australian red meat and livestock sector for longevity and prosperity. Competition is a flagstone of the MISP2020 which identifies up to 7 billion dollars in growth to be unlocked for our sector and key pillars of this are supply chain efficiency and integrity; and productivity and profitability. Whilst RMAC recognises that the Interim Report is focussed on beef cattle; this has relevance and application to the entire red meat and livestock industry. It is also important to note that competition

1 Our members are the Australian Livestock Exporters Association (ALEC), Australian Lot Feeders Association (ALFA), Australian Meat Industry Council (AMIC), the Cattle Council of Australia (CCA), the Goat Industry Council of Australia (GICA) and Sheepmeat Council of Australia (SCA) 2 Australian Meat Processors Corporation (AMPC), LiveCorp and Meat & Livestock Australia (MLA)

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equally is a complex concept in a supply chain that has as many players as the Australian beef and cattle industry.

The Council supports the submissions of our member councils (the Australian Lot Feeders Association, Australian Meat Industry Council, Cattle Council of Australia; and Sheepmeat Council of Australia); and this letter highlights key areas of agreement and others that require additional exploration as an industry in relation to the fourteen recommendations.

No comments are made in relation to the ongoing investigations as this a matter for the ACCC under their investigative arm.

Consultation In developing this letter; the Council has consulted with the following parties:

• Our six member Councils • ALPA • AMPC • MLA

General Comments Key themes to highlight to the ACCC:

• The need to understand the various industry roles and responsibilities; and the significant body of work already ongoing in relation to recommendations (Recommendation 3 – Recommendation 7).

• The need for appropriate government (as opposed to industry) resourcing in relation to Recommendation 13.

• Many of the recommendations focus on improved education and awareness for producers and could benefit from additional resourcing including 2(b) and 13.

Specific Comments

Recommendation RMAC Comment 1: Availability of price grids All processors and major cattle purchasers should routinely make price grids publicly available in a timely manner to increase market transparency

The submissions from CCA, ALFA and AMIC3 highlight the range of available avenues already available for those wishing to sell to processors and major cattle purchasers. The value of this Recommendation being made mandatory for practical and commercial reasons in improving competition is therefore questionable.

Recommendation 2: Price grids a. All buyers should consider whether their price grids can be improved to make it easier for the industry to understand and compare grids.

In their submission, CCA emphasise that grids could be simplified in order to better meet consumer expectations/ market requirements and provide relevant feedback to producers.4 The simplification of the grids themselves; and improved producer education to enhance

3ALFA – Page 4; AMIC – Page 4; CCA– Page 4 4 CCA– Page 4

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b. Buyers, agents and producer representative bodies (led by the Cattle Council) should improve their engagement with producers to enhance industry understanding of price grids and their interpretation.

understanding is a clear benefit the production sector could undertake and this is recognised by CCA who outline the steps taken to address this. ALFA and AMIC reiterate that grids are available; and detail processes and broader commercial implications to grids taking the form they do.5 On this basis CCA have indicated a willingness to work on improving this through existing initiatives.

3: Improvements to existing market reporting The ACCC encourages Meat and Livestock Australia (MLA) to make changes to the way existing cattle sale prices are collected and published to improve transparency and usability, including specifically: a. standardising cattle types for reporting across channels b. publishing time series data of saleyard prices in a format which allows for easy interpretation (prices are currently only reported weekly in .pdf files, making comparison through time difficult) c. producing a co-products index for comparison with cattle prices, and d. improvements to the domestic retail beef price series

In their respective submissions, RMAC Member councils and associated industries highlight the range of reporting systems available; and point out impracticalities with the proposals outlined in Recommendation Three.6 Market reporting systems are being continuously improved and industry will work on an ongoing basis to make this a more comprehensive and coordinated process. This must however be on a cost-beneficial basis to the investors (i.e. levy payers) in the market reporting system should this be provided by industry funded bodies.

4: Additional market reporting The ACCC encourages MLA, ALPA and ALMA to work together to expand data collection and reporting of prices, including specifically: (a) direct (paddock) sales prices (b) actual prices paid for OTH sales (c) saleyard prices for additional saleyards of regional market importance which are not currently reported (d) actual prices paid for cattle sold to the live

Market reporting systems are being continuously improved and industry will work on an ongoing basis to make this a more comprehensive and coordinated process. This must however be on a cost-beneficial basis to the investors (i.e. levy payers) in the market reporting system should this be provided by industry funded bodies.

5 ALFA – Page 4; AMIC Page 4 – 6 6 ALFA – Page 4; AMIC Page 6; CCA Page 6

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export market. Recommendation 5: Mandatory reporting of non-saleyard transactions and prices The ACCC considers the arguments for and against mandatory reporting of all non-saleyard cattle sales are finely balanced, and does not recommend its implementation at this time. If market participants do not take steps to improve market reporting in line with recommendations 3 and 4, the arguments in favour of mandatory reporting will become more compelling over time.

MLA on the direction of CCA has engaged in scoping of a voluntary post farm gate price reporting system as outlined in both organisations submissions. This is work in progress; and will evaluate the benefits for producers.7

This being said, non-saleyard transaction and prices are frequently treated as commercial-in-confidence and will be difficult to obtain as general information. AMIC considers that producers who are contemplating direct supply to a processor have sufficient information available from other markets without non-saleyard information being made generally available.8

ALFA and AMIC do not support the adoption of mandatory reporting and provide clear rationale for this.9

Given these divergent views in terms of a whole of supply chain benefit (including that of the ACCC), at this point in time industry will continue to progressively work through appropriate channels to understand the appetite and cost-benefit of Recommendation 5.

6: Objective Carcase Grading The industry, led by the processing sector, should allocate a high priority to the adoption of technology to enable objective carcase grading to be introduced as soon as possible. This will, of necessity, include the development of appropriate auditing and verification systems that instil confidence in the integrity of such systems.

As the ACCC are aware, MLA have recently (November 2016) made an announcement into investing into an Australia wide Objective Carcase Measurement system at the point of processing. At a broad level the Council is supportive of the introduction and advancement of such technology. This is an extremely complex area of meat production; and there are a range of practicalities that need to be addressed as identified by ALFA, AMIC, CCA and MLA accordingly in their submissions. It is advisable that this is continued to be worked through on an industry basis to optimise the use of this technology for all players throughout the supply chain; and address these complexities on a business level.

7 CCA – Page 9 8 AMIC – Page 6 9 ALFA – Page 5; AMIC – Page 6

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7: Dispute resolution for OTH sales Processors and buyers should review, and in many cases improve, their internal processes for responding to inquiries and complaints about OTH sales. Cattle processors should develop a uniform and independent complaints and dispute resolution process, with AUS-MEAT filling the role of an independent and binding arbitrator.

The industry is supportive of clear dispute resolution processes in place in relation to OTH trading. This does exist already in many instances as part of standard business procedure. There is however a view this should be supported an individual business level as opposed to Aus-Meat who may not necessarily be the relevant body to fulfil this.10

8: Auditing of carcase grading The industry should implement a more robust auditing system for carcase grading, with AUS-MEAT implementing random and unannounced audits in addition to the current audit regime. The result of these audits should be made publicly available on a regular and timely basis.

The Council is not supportive of audited carcase grading as sufficient feedback is currently available on a two-way basis. This is an enormously complex area as detailed by the CCA, ALFA and AMIC submissions. Development of technologies such as Objective Carcase Measurement will continuously improve impartiality of the grading process and industry is already actively engaged in this. ALFA also understands that AUSMEAT currently conducts random and unannounced audits as part of the existing audit regime and that the frequency of audit is based on a well-established and documented plant performance category rating system.

9: Carcase feedback and producer education a. All buyers and agents should consider whether carcase grading feedback can be improved. b. Buyers, agents, and producer representative bodies (led by the Cattle Council) should increase their communication and education surrounding the current grading and feedback system to ensure that producers better understand cattle market trends and why some cattle attract a premium compared to others.

As a Council, we strive to deliver on consumer expectations both in Australia and worldwide. Improved two-way carcase feedback that delivers an improved eating experience is vital. The quality and effectiveness of feedback in properly informing producers is also key. This will allow producers to make better business decisions around genetics, operational management and feeding. Current systems are outlined by ALFA, AMIC and CCA as well as new initiatives in place to deliver on this Recommendation from an industry perspective. It is always worthwhile noting that the sheepmeat industry have a range of initiatives to meeting this

10 ALFA – Page 7; AMIC – Page 9 ; CCA – Page 10

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Recommendation through the Sheep CRC and in focused Research & Development (R&D) projects under the guidance of the Sheepmeat Industry Strategic Plan (SISP). SCA intends to continue working on supply chain issues, particularly between processor and producer, which deliver benefits to the whole sheepmeat industry.

10: Saleyard buyer register The ACCC encourages the introduction of a mandatory Buyers Register to be publicly available prior to the commencement of all physical livestock auctions. This register should include details of commission buyers and livestock agents intending to bid at the sale and the principals that those commission buyers will be acting for. ALPA should work with its members to have this requirement incorporated into auction terms and conditions at saleyards.

The general view of the Council is that current process (buyers identified at the fall of the hammer) is sufficient. RMAC understands this is consistent with the position of ALPA. Both ALFA and CCA identify alternative approaches to this Recommendation.

Recommendation 11: Terms of sales at auctions Selling agents should display the terms of auction in a conspicuous position at all saleyards. This should include a notice about the penalties for collusive practices under the CCA, in addition to any notices required by state and territory legislation. The ACCC notes that many saleyards and agents are already demonstrating industry leadership by doing this.

The RMAC member group of councils supports Recommendation 11 and encourage all saleyards to provide such a notice. We understand ALPA too are supportive of such a response; and already encourage this practise.

12: Reporting of saleyard buyers The ACCC encourages MLA to work with ALPA to introduce a mandatory requirement that the terms of auction be displayed in a conspicuous position at all saleyards. This should include a notice about the penalties for collusive practices under the CCA, in addition to any notices required by state and territory legislation.

It is the view of the Council that this is not consistent with the role of MLA. Terms and conditions of sale are in most cases required to be displayed under various state laws. It is RMAC’s understanding that ALPA currently encourages its members to display terms and conditions of sale where this is not mandatory under state or territory licencing regulation. The inclusion of other relevant notices such as those under CCA is supported by industry.

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13: Livestock agent licensing Legislation should be introduced requiring standardised national licensing of livestock agents and professional buyers (applying to commission and salaried buyers), in order to raise the levels of CCA compliance and general professionalism within the industry.

The Council understands that all key red meat and livestock players are supportive of this process. Given the complexity of such a regulatory harmonisation, a tangible outcome that government could deliver is funding a national harmonisation project officer and relevant policy advisors with respect to providing this consistent national approach.

14: Implementation of recommendations The ACCC encourages the Agriculture Ministers meeting (AGMIN) to consider the above recommendations, particularly with a view to monitoring their implementation. This will be especially important to ensure that recommendations are progressed, given the diverse industry interests. Ministers may wish to consider alternative approaches if progress is not made.

We acknowledge the importance of a national approach to resolving issues and improving competition within the Australian beef cattle industry. However, there is very little government focussed activity – particularly State based – in relation to the previous thirteen recommendations. Where Recommendations relate to government, they may well fall outside of AGMINs portfolios. This being said there would be opportunity for AGMIN to –

• Consider a joint funding proposal to enhance producer marketplace awareness Australia wide

• Provide oversight for Recommendation 13 and relevant resource allocation, for example, allocation of secondments within applicable state Departments of responsibilities to contribute to the harmonisation process

This a key initiative that the AGMIN forum could support in progressing the Recommendations of the Interim Report moving forward.

For Further Information

On behalf of the Council, I thank you for the opportunity to contribute to the Interim Report.

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Please don’t hesitate to contact RMAC Chief Executive Officer, Anna Campbell, on anna@rmac.com.au or 0448 692 245 should you require further information.

Yours Faithfully,

Don Mackay Independent Chair RED MEAT ADVISORY COUNCIL