Wednesday, December 8, 2010

NORMAN HUNT LETTER TO THE LAND 12/8/10

The comments by the MLA Chairman, Mr. Heatley, in the Land newspaper “Beef Plan ‘Na├»ve’ says MLA” article on 28/7/2010, that “the US (grading) system wasn’t ‘test driven’” are incorrect.

The MLA 1998 MSA Business Plan disclosed USDA Consumer Test Results showing 94% consumer satisfaction with USDA Prime Grade, 89% for Choice, 75% for Select and 40% for Standard.

USDA continually check on consumer satisfaction with their grading system.

The US is generally regarded as having an export advantage over Australian exporters to the Japanese and Korean markets because the US has a grading system and Australia does not.

MLA Economist, Tim McRae, forecasts that Australian per capita beef consumption will fall to 31.8 kilograms over the next five years, which will represent a massive 10 kilogram drop in Australian per capita beef consumption since 1997, the year before MLA was incorporated and the MSA grading system was launched.

If we are able to get our Australian per capita beef consumption back to 1997 levels of 41 kilograms plus a year, it would, at current retail prices, boost gross national returns to the beef industry by $2.3 billion a year.

David Palmer, the CEO of MLA, is quoted in Wednesday 4/8/2010 SMH page 5 article as saying as “…we know that Australians eat roughly 100 kilograms of all meat each year…it’s finite…it is about how we divide that.”

In 2006, Australians each ate approximately 115 kilograms of meat, in 2007, 117.5 kilograms of meat, and in 2008, 210.8 kilograms of meat a year, or an average of 114 kilograms per person per year, up from 106 kilograms a year in 1990.

Mr. Palmer’s comments are therefore also not factually correct. Per capita consumption of all meat has, and can, increase.

When the MLA launched their MSA Business Plan in 1998, they forecast a $1.2 billion a year payout, which has not been achieved. Instead, they have, or will achieve a $2.3 billion a year drop off.

Mr. Heatley’s does correctly state that the current industry structures were set up to achieve the outcomes sought in the Beef’s New Direction Strategic Plan.

In the mid-1990’s, the former red meat industry structures, the AMLC and MRC were disbanded because their early 1980s budget of $14 million a year had blown out to $138 million a year, whilst real cattle prices had fallen by about 2% a year and beef consumption had been declining on a long-term decline rate of 1.7% a year.

The current industry structures, including the MLA were set up to remedy that situation. The MLA commenced in the late 1990s with an annual budget of $96 million a year, which has now blown out to approximately $170 million a year. Real cattle prices continue to fall and the long-term trend decline in Australian per capita beef consumption has continued at 1.7% a year.

There are many in the beef industry who think it is time for a new plan and a new restructure.

A copy of Beef’s New Direction Strategic Plan can be viewed HERE

Sunday, December 5, 2010

MLA REPORT REVEALS NORTHERN BEEF INDUSTRY IN CRISIS

The MLA Northern Beef Situation Analysis 2009, completed in June this year, paints an alarming picture of the commercial health of the beef industry in northern Australia, which constitutes just under half of the total Australian herd.

In 2009 the northern beef industry was in its worst state since the beef slump of the 1970s with average return on assets (ROA) of 0.3% to 0.2%, the report says. Average beef producers tend to be spending more than they have earned in 6 of the last 7 years, indicating the northern beef industry is in a very unprofitable and unsustainable state.

The report attirubes the situation to "external" factors including:

- the decline in beef prices since 1994;
- a doubling in debt levels per large stock unit (LSU); and
- below average rainfall in QLD for 7 of the last 10 years;

as well as "internal" factors including:

a rise in overheads per LSU by 54% over the decade;
a rise in direct costs per LSU by 150%; and- the very poor performance of the extensive breeder herd.

The full report can be found on the MLA websiteHERE.

MULTI MILLION DOLLAR ABATTOIR GST ROUND ROBIN

An anomaly related to GST on Livestock has created an $90M-$100M negative cash flow burden on the meat processing sector.

Read about it here.

RICHARD TORBAY AND I DISCUSS BEEF LABELLING ON REGIONAL RADIO

Transcript of The Country Hour on ABC Illawara available here.

POTENTIAL BEEF INDUSTRY PAYOUT FROM A NATIONAL BEEF GRADING CODE

If every Australian ate one extra 187g meal of beef every three weeks, the number of meals of beef eaten would increase from 2.2 to 2.53 per person per week. Apparent annual consumption would jump by 4.9kg from 35.6kg to 40.5kg per person. At the average retail price of $15.55/kg the annual payout to industry would be and additional $1.08Bn.

For more details on the projected industry return from a national beef grading code CLICK HERE.

IMPACT OF SLAUGHTER AGE AND GRADING LEGISLATION ON BEEF CONSUMPTION

When BSE (MAD Cow Disease) spread to humans in the UK in 1996 the government there introduced legislation prohibiting the sale of meat for human consumption from cattle over 30 months at slaughter (the Over 30 Month Rule).

Prior to this rule, 22% of the beef eaten in the UK came from old dairy cows.

Despite all the adverse publicity about mad cow disease, 5 years later in 2001, UK beef consumption had risen by 5kg per person or 31% from 16kg per person to 21kg per person.

In Australia approximately 30% of the beef consumed comes from old cows. There are no age restrictions on slaughter and labels such as “budget” are commonly used to describe beef from old cows.

In the same five year period of rising consumption in the UK, per capita consumption in Australia fell by 4.8 kg or 12% from 39.3kg to 34.5kg.

In NZ, where there is also no grading or slaughter age legislation, beef consumption declined by 10.7kg per person or 27% (although the longer term trend was closer to -7%).

At the same time per capita beef consumption in the US, Canada, Japan and Korea, which all have grading systems, either increased or broke even.

In the US, approximately 80% of the cattle slaughtered are under 30 months old and most cattle slaughtered are under 18 moths of age.

Detailed information on the effect of UK slaughter age legislation on beef consumption and expenditure can be viewed HERE.

Full figures on beef consumption by country can be found on the Hunt Partners documents pageHERE.

For details on the UK 30 Month Rule see: FSA Background paper on BSE controls.

For details on cattle slaughtered in the US see:USU Extension Committee Consumer Information Paper on BSE.

Thursday, December 2, 2010

BINDAREE BEEF PIP FINAL REPORT ON BEEF EATING QUALITY AND GRADING

The Bindaree Beef PIP Final Report released last week collates the primary and secondary research conducted over 12 months on the eating quality of Australian beef and the potential benefits and costs of implementing uniform labelling and grading standards throughout Australia.

The project was co-ordinated by Hunt Partners with joint funding by Bindaree Beef and the AMPC. The publication of the project's Final Report follows the implementation of the "Torbay Bill" in NSW which imposes strict requirements for packaging and labelling of beef upon retailers. A proposal to apply the provisions of the NSW legislation at a national level is to go before the Primary Industries Ministerial Council when it meets next year.

The strength of the domestic market has been the subject of renewed focus this year given the high Australian dollar and weakening export prices. The level of crisis faced by the Australian beef industry was highlighted in a recent MLA report on the Northern Beef Situation Analysis 2009, which found that the northern beef industry, which comprises just under half of the Australian beef herd, is in its worst state since the beef slump of the 1970s.

The Bindaree PIP Final Report provides research and analysis on the potential benefits of uniform national labelling and grading standards through increased domestic demand, and includes the findings of the first ever Benefit Cost Analysis (BCA) into beef grading conducted in Australia (the GHD Hassall BCA).

In the present context the Report is a valuable resource for both industry and Government as they attempt to develop solutions to the serious challenges facing beef producers and processors.

The full Report can be viewed HERE.

Saturday, August 7, 2010

BEEF'S NEW DIRECTION STRATEGIC PLAN

The Beef's New Direction Strategic Plan was launched at the Rockhampton Beef Industry Forum on Friday 16th July.

The Plan adopts four broad strategies to address the key challenges facing the Australian beef industry:

  • Strategy 1 - Increase Real Cattle Prices
  • Strategy 2 - Reduce Beef Industry Costs
  • Strategy 3 - Industry Organisational Restructure
  • Strategy 4- Decentraliasation
The Plan identifies:
  • A potential whole of domestic beef industry payout of over $1 billion a year through the introduction of a national beef grading system;
  • Improved beef marketing programs;
  • Improved accountability and efficiency of industry bodies;
  • Decentralisation incentives to address the declining and aging rural population, and improve services and infrastructure in rural and regional areas.
A copy of the Plan can be viewed or printed HERE.


BACKGROUND

The Strategic Plan was prepared by Hunt Partners for the Beef’s New Direction Task Force, a beef industry think tank that was established following a forum of producers held in Armidale, NSW in February this year.

At that forum over 1,200 beef producers from Victoria, South Australia, Tasmania, Queensland and New South Wales expressed their anger at the decision to allow beef imports into Australia from BSE affected countries and their dissatisfaction with the current industry organisational and consultative structure and the declining profitability of the industry.

The forum expressed particular concern about the sharp decline in cattle prices and domestic consumption over the past 10 years, which industry bodies such as RMAC and MLA have failed to address despite having received billions of dollars in producer levies.

The Strategic Plan was endorsed at a follow-up producer forum at Paradise Lagoons in Rockhampton on 16th July by over 500 cattle producers who collectively own over 1.25 million head of cattle out of a national herd of around 24 million.

Producers are calling for relief from industry costs and levies which have increased significantly in recent years. The 2001 Heilbron Report into the impact of government on red meat industry competitiveness, commissioned by MLA, found that Australian producers paid about 33% of their revenue in government influenced costs and charges whilst US producers paid around 12.5%.

The report concluded that the failure to reverse the increase in government costs and charges must inevitably contribute to the long-term decline of Australia’s livestock industries.

Government influenced costs and charges have continued to increase since 2001 and beef producers now pay 8 times more in levies than their US competitors.

At the same time agricultural exporters have had to deal with the consequences of an unprecedented resources boom which has driven the value of the Australian dollar from 50.5 cents USD to 88 cents USD which means Australian agricultural exporters are receiving significantly less for their product than they were in 2001.

The Australian beef industry can not survive the double impact of uncompetitively high government charges and a high Australian dollar which is driving down the revenue they receive for their exports.

This industry needs State and Federal governments to develop a long term strategy to ensure the survival of its rural export industries during this unprecedented resources boom.

The Strategic Plan provides concrete strategies to address the issues which producers identified as presenting the greatest challenges to their businesses and communities.

A copy of the Plan can be viewed or printed HERE.

The resolutions adopted by 500 beef producers at the Rockhampton Forum can be viewed HERE.

For all information on the Rockdale Forum see: http://www.beefforum.com.au/

Friday, August 6, 2010

NSW BEEF LABELLING LEGISLATION TO COMMENCE 31 AUGUST 2010

The NSW Minister for Primary Industries has advised that the long-awaited Torbay “Truth in Labelling” legislation (the Food Amendment (Beef Labelling) Act 2009 (NSW)) will come into effect on 31 August 2010.

The Minister proposes to adopt the latest edition of the AUS-MEAT Domestic Retail Beef Register as the reference document for that legislation.

The AUS-MEAT Domestic Retail Beef Register provides retailers with alternative descriptors to the current trade AUS-MEAT language for retailers.

Consequently, after August 31, retailers in NSW will be required to describe beef from animals:

  • up to 18 months who have yet to cut any teeth as “Yearling” or simply “Beef”;
  • with 2 teeth as “Young” or “Beef”;
  • with 4 teeth as “Intermediate” or “Beef”;
  • with 6 teeth as “Mature” or “Beef”;
  • with 8 teeth (the better cow beef) as “Economy”;
  • with 8 teeth (the worst cow beef) as “Manufacturing suitable for mince only”.

There are many good provisions in the Food Amendment (Beef Labelling) Act 2009.

Unfortunately, the decision to enable NSW retailers to label old cow beef from mature animals with 8 teeth “Economy” rather than “Budget” and beef from immature 6 teeth animals as “Mature” is not one of them.

MLA research shows that consumers think that beef labelled “Economy” would represent value and would be better to eat than beef labelled “Budget” and that beef labelled “Mature” would be chewy and probably came from an old cow.

The two terms should have been reversed, with the old cow beef being labelled “Mature”.

We understand that Richard Torbay requested Minister Whan to ask the industry to amend the AUS-MEAT Domestic Retail Beef Register to require the best of the cow beef from 8 tooth animals to be labelled “Mature” and the beef from younger 6 tooth animals to be labelled “Economy”.

Minister Whan was, however, unable to obtain industry’s agreement to this request, and those that profit from the selling of old cow beef to unsuspecting consumers carried the day.

The balance of the provisions are, however, to be applauded.

For over twenty (20) years, export abattoirs have been required to label the beef that leaves their abattoir in accord with AUS-MEAT language.

Australian retailers, however, have had no such requirement. Consequently, beef from six (6) tooth animals described by the abattoir as PR is regularly sold by retailers as “Yearling”.

Provided that proper audit and enforcement provisions are put in place, this legislation will bring these practices to an end.

Currently, export abattoirs are required by the AUS-MEAT language to label the worst of the cow beef “Manufacturing”, but the retailers who are signatories to the voluntary Budget Beef Retail Agreement have no such requirement. Consequently, beef delivered to the back of the store in boxes marked “Manufacturing” is sold by those retailers as “Budget” beef.

Once the Food Amendment (Beef Labelling) Act 2009 is proclaimed, retailers will be required to label Manufacturing beef “Manufacturing – Suitable for Mince Only”.

The latest edition of the Domestic Retail Beef Register will also bring to an end the misleading retail practice of advertising beef as “Export A”, “Export Quality”, etc.

Richard Torbay, the State Member for New England and Speaker of the NSW Legislative Assembly, is to be congratulated for his vision and persistence in bringing the long overdue reforms to NSW Beef Truth and Labelling to fruition.

MLA FUNDAMENTALLY WRONG ABOUT BEEF’S BIGGEST MARKET

David Palmer, CEO of MLA, has been quoted in the Sydney Morning Herald (Wednesday 4th August) as saying:

“We know that Australians eat roughly 100kg of meat each year…its finite…it is about how we divide that.”

Australia’s per capita meat consumption is in fact far in excess of 100 kg. The recent annual totals are as follows:

2006: 115 kg
2007: 117.5 kg
2008: 110.8 kg
(ABARE)

The present average of 114 kg represents an 8kg increase in consumption since 1990, when Australians ate only 106 kg.

It is a concern that the CEO of MLA has the mistaken belief that the total meat consumption in Australia is finite and if consumption of one type of meat, eg poultry, goes up the consumption of the other meat products must fall by an equivalent amount.

This has not been the case in Australia nor in the United States, where beef consumption has generally held up, despite similar increases in chicken consumption over the last 15 or 20 years, at a total of 125 kg per person.

MLA's failure to understand that the total "meat consumption pie" can increase will affect the marketing and promotional decisions they make. Such basic misconceptions are no doubt contributing to the failure of the MLA do address the long term decline in Australian per capita beef consumption.

Mr Palmer also appears to be treading on egg shells in his comments in the SMH because he is fearful that the new beef promotion campaign may affect lamb meat sales.

This bares out the concerns raised in the Beef Industry Strategic Plan, produced by Hunt Partners for the Beef’s New Direction Task Force, which concludes that there should be separate sheep and beef corporations because essentially lamb and beef are competing products.

Read the SMH article HERE.

Friday, February 26, 2010

RESOLUTIONS OF THE ARMIDALE FORUM

Seven Resolutions were adopted by more than a thousand cattle producers at the Armidale 'Beef's New Direction' Forum held on 20th February.

The full list can be viewed HERE.

The full text of my speech at the Forum and accompanying powerpoint slides can be viewed on the Hunt Partners Website HERE.

Saturday, February 13, 2010

QUEENSLAND COUNTRY LIFE: TIME TO ENTRENCH MSA's GRADING MODEL

We welcome support from QCL which has endorsed a grading system 'describing all beef descriptions from end to end'. Torbay's draft grading model embraces MSA and has been designed to encourage continued increased uptake of MSA grading by processors.


As the QCL editorial points out the problem is the 'lack of product descriptors between existing MSA grades and the budget beef end'.

The challenge facing industry is how to fill the gap and grade the product in the middle so consumers know the quality of the beef they are purchasing before they make their decision to buy. Currently consumers are being asked to enter into a lucky dip - they get a good steak one week and a tough and tasteless steak the next, vote with their wallets and don't come back for repeat purchases.

Only 12,500 cattle properties out of approximately 160,000 cattle properties in Australia are MSA accredited and as David Thomason from MLA points out cattle from Northern QLD, the Channel Country, the Northern Territory and cattle sold through saleyards will often eat very well but can't be MSA graded because of MSA's 24 hour transport and saleyard rules.

A system has to be worked out to grade the beef that is not eligible to be MSA graded.

The Peak Councils need to work constructively with the politicians to achieve this.

Read the full article HERE.

Friday, February 5, 2010

BEEF INDUSTRY FORUM

The “Beef’s New Direction” forum to be held at the University of New England Armidale on 27 February is expected to attract over 1200 beef producers to discuss the challenges facing the beef industry today and to find some workable solutions.

The forum will be chaired by 2GB presenter Alan Jones, and the speakers will include State Member for New England Richard Torbay, Senator Bill Heffernan, Senator Barnaby Joyce and AMIEU President Grant Courtney.

The focus will be on halting the decline in rural and regional Australia, the fall in cattle prices and lifting the burden on producers imposed by government influenced costs and charges and industry levies which place Australian cattle producers at a disadvantage relative to their international competitors.

Despite the industry now spending $160 million a year on MLA, cattle prices have fallen 21.6pc since 1988-89 according to ABARE figures. The fall in domestic beef consumption is equally alarming, having fallen from 43.2kg per person in 1989 to 31.3 kg last year as forecasted by MLA. Since the introduction of MSA in 1998 consumption has fallen by almost 7kg.

MLA Chairman David Palmer’s response is to blame low prices on factors outside the control of producers and the MLA. He cites currency fluctuations and weak foreign markets as the cause of the recent low cattle prices (see The Land, 21 January, “Stop the beef ‘bulldust’”).

But if prices are truly beyond influence from the efforts of producers and industry bodies, what is the point of spending levy money on domestic marketing programs and market access initiatives? What exactly are producers paying MLA to achieve on their behalf?

Most producers disagree with Mr Palmer’s conclusion that the fate of the beef industry is beyond our control.

For those of us who are not willing to throw our hands in the air and allow reasonable cattle prices to become an historical curiosity, the focus must be on efforts to strengthen the domestic market.

This includes implementing the Torbay legislation passed last year, which aims to restore consumer confidence in beef products by ensuring meaningful and truthful labelling.

These and other issues will be the subject of discussion at the Armidale Forum. Further information, bus timetables and maps of Armidale can be found on the Bindaree Beef website: http://www.bindareebeef.com.au/

If you are a cattle producer or otherwise involved in the beef industry and are concerned about the state of your industry, turn up at the Armidale Forum and vote for a new direction.

RSVP can be emailed to: info@bindareebeef.com.au