AGRICULTURE commissioner with Australia’s competition watchdog Mick Keogh has hauled over the coals beef processors wanting to hold back kill data, promising their actions would be looked at closely by the Australian Competition and Consumer Commission.
He called attempts by processors to stymie the flow of just-in-time slaughter reporting “shortsighted” and said their actions would be the focus of the review of progress on the ACCC beef and cattle market study recommendations, to be conducted next year.
That study, handed down early this year, recommended improvements be made to market reporting, finding a key to unlocking farm-level productivity growth going forward would be producer access to objective information about livestock performance and relevant, timely market intelligence.
Speaking at a beef industry breakfast in Alice Springs hosted by Meat and Livestock Australia (MLA), Mr Keogh argued the future growth and profitability of the red meat sector would be dependent on the investment confidence of sector participants, which in turn would be facilitated by the fairness and transparency of markets and quality of information flows up and down the value chain.
The recent decision by some processors to temporarily stop providing “even basic information such as weekly slaughter numbers” raises very real concerns about the future transparency and competitiveness of the cattle industry, he said.
Big foreign-owned company JBS led the bid to cut off MLA’s weekly reporting of slaughter and was quickly backed by peak processor body Australian Meat Industry Council (AMIC), which argued the data provided more than a month later by the Federal Government would alleviate competitive disadvantage to exporters while at the same time being adequate for producers.
JBS also questioned the integrity of the data collected, which is provided voluntarily by processors - some of whom don’t take it very seriously and will say ‘just use last week’s figures’, according to the big processor.
However, Mr Keogh didn’t buy that.
“If the real issue was the accuracy of weekly slaughter numbers reported by MLA, then it would not seem to be difficult to modify the system to prevent future inaccuracies,” he said.
“It seems that the real issue is a desire by some processors to limit information flows to both livestock producers domestically and overseas customers, presumably to improve processor margins.
“What these processors want the rest of the industry to believe is that their overseas customers will pay higher prices if they have less market information.
“If this is correct, then it tells us that these processors are competing for market purely on price rather than on quality.
“It also assumes that their international customers will be unable to source market information via other avenues, which is almost laughable in its naiveté given recent developments in digital information and telecommunications.”
Mr Keogh highlighted what would be the ultimate irony: If the logic was correct that restricting market information would convince customers to pay higher prices when the market was falling, then presumably these same processors would be agitating for increased market reporting next time the market was on an upward trend, he said.
Mr Keogh said the choice before the beef industry now was stark: A stagnant future characterised by low productivity, uninformed producers and a market characterised by anti-competitive behaviour, mistrust and low levels of investment, or a profitable and growing industry that is innovative, has high levels of investment, and efficient information flows that enable it to successfully evolve to continue to meet consumer needs.
His message was reinforced by many of the industry leaders speaking at the event, including some processors, who believe chasing quality and branded beef was the way forward and that would be underpinned by delivering the true carcase value back to the producer.
Mr Keogh said beef was now a mature industry that did not have the ability to expand by using extra resources such as land, so growth was most likely to occur via what economists refer to as “capital deepening” – that is, increased capital investment by existing businesses.
That can take the form of investment in additional fencing, watering points, improved genetics and pasture improvement by livestock farmers, or investments in plant upgrades and new technology by processors, he said.
But confidence of industry participants would be the key factor that encouraged that investment.
“Critically important factors in maintaining the necessary industry confidence are the transparency of market information, and the robustness of rules governing market behaviour,” he said.
“Given the recent period of relatively high livestock prices, some complacency about the need for productivity growth might be understandable.
“However, numerous reports produced by the Australian Meat Processors Corporation and MLA have highlighted that the red meat sector in Australia is a high-cost sector in comparison with virtually all our international competitors.”
Indeed, those high costs have been exacerbated by skyrocketing energy prices, and labour costs remaining persistently high in Australia compared to its international competitors, and the processors have labelled the situation an “axis of issues” that requires immediate government action on regulatory reform.
Mr Keogh believes there is actually not much that can be done in the short-term to reduce these costs.
The main ways in which the sector has remained competitive has been through productivity growth, and by developing world-leading integrity systems, he said.
“This has been the reason that Australia has maintained access to critical high-value markets such as Japan, Korea and the European Union and more recently has been able to secure good access to emerging markets such as China,” he said.
“Information – be it farm level information about production systems and chemical use provided by producers to processors, or feedback information on carcase performance provided by processors to producers – will be absolutely critical in achieving future improved productivity through the value chain.”