Monday, July 22, 2013

BEEF INDUSTRY REFORM and the ROMA - BEEF THE FUTURE FORUM

HuntBlog Newsletter 23 July 2013


BEEF INDUSTRY REFORM
and the
ROMA—BEEF THE FUTURE FORUM

this is an important document that should be read and acted on by all cattle producers who are concerned about the future of their industry

Over 130 cattle producers attended the Roma Forum on 10 July 2013 regarding the debt and profitability crisis facing the Australian beef industry. Presentations were heard from the Australian Beef Association (ABA) and the Cattle Council of Australia (CCA) regarding the cattle industry organisational structure reform, as well as a talk on the extent of the current farm debt crisis by Rowel Walton, Chairman of the Rural Debt Roundtable Working Group (RDRWG). 



Shortcut to Hunt Partners Survey - Roma Resolutions [Vote Here]


An interview regarding the extent of the crisis which the Australian cattle producers are currently facing took place between Alan Jones of 2GB and Brad Bellinger, the outgoing Chairman of the ABA, during the lead up to the successful Roma Beef Forum – which can be heard here or at www.2gb.com.au.


As ABA’s Brad Bellinger and Alan Jones discussed in said 2GB interview, the Beef Industry is in dire straits with a growing number of bank foreclosures on cattle properties, combined with a decline in real cattle prices over the last decade of 40%. In addition, there has been a further fall in the last year of around $200 a head. Given that the current Australian cattle herd is 30M head. the $200 a head drop in cattle prices represents a $6 billion dollar write down in the value of Australia’s cattle herd within the previous twelve months.

With the value of cattle properties also falling 10% to 20% during the same period, the total loss being suffered by the cattle industry can be measured in the tens of billions of dollars. 

A link (below) to the video of the presentations given at the Roma Forum includes:

  • the powerful presentation given by Brad Bellinger about the current challenges facing the Australian cattle industry with detailed comparisons of prices and profits being received by our overseas cattle producer counterparts; and
  • the industry structure reform proposals by the ABA and the Cattle Council Australia (CCA);
The video can be found below. 

The terms of ABA’s six point Restructure Guideline Proposals presented by Linda Hewitt at the Roma Forum are set out below. 

AMPG

Norman Hunt was introduced to the Forum as the representative of the Australian Meat Producers Group (AMPG). AMPG is a think tank made up of representatives from some of Australia’s largest producers, processor and feedlotters, as well as medium and smaller producers. AMPG was established following the Beef’s New Direction Forums which were held in Armidale and at Paradise Lagoon Rockhampton in 2010. The presentation covered:
  • the background to a possible two tiered voting system which could be used to elect a new grassfed industry levy funded body;
  • the four key flaws in the current industry structures that have been identified by the AMPG were discussed; and
  • a proposal for cattle industry organisational restructure was read from Paul Holmes a Court, the CEO of Heytesbury Holdings.

The four key flaws in the current cattle industry structures identified by the AMPG are:
  1. the dysfunctional divide between policy setting and policy delivery; and
  2. the CCA’s inability to obtain adequate funding to carry out its charter; and
  3. confusion under the current organisational structures by both Government and industry about who speaks for the cattle industry; and
  4. the perception by many grass roots levy payers that they are disenfranchised under the current system.

Paul Holmes a Court’s key reform proposals are that:
  • Fundamental to any sensible structure for industry representation is the bringing together of the authority to represent the industry with the means to represent the industry, in a way that is accountable to the industry. 
  • This means that the authority which currently sits with the CCA and the money which currently flows to MLA comes together in a single body; the board of which is elected directly by industry participants. 

Norman Hunt’s presentation to the Roma Forum and a full transcript of Paul Holmes a Court’s letter presented at the Roma Forum can be viewed below.   

Summary of the Reform Proposals

The three different cattle producer organisational reform proposals discussed at the Forum can be summarised as follows:

AMPG

The AMPG proposes a separate grassfed cattle corporation which combines the current Cattle Council policy setting role with the MLA service provider role under one roof. This is to ensure the seamless delivery of policy and a well funded Peak Council to interact with Government.

In other words, combining the advocacy, representation, policy setting and policy delivery functions in one body using the precedent of the combined policy setting and service delivery corporate structures found in the Egg and Pork industries.

The new separate grassfed Cattle Corporation proposed by the AMPG would have:
  • a directly elected board based on a two tiered voting system to balance the interest of both the large and small producers, with
  • every levy payer having a vote in each of the voting registers, with
  • each voting register electing half of the new Cattle Corporation’s board members, with
  • one register based on “one man one vote” and the other based on the amount of the levies paid. 

Under this voting system there would not be any need for a specific number of directors to represent each of the Northern and Southern sectors of the cattle industry, as equality of the number of directors on the board would be achieved through the two tiered voting structure. This would “self-manage” any need for separate North and South regional representation because the Northern Cattle Producers have the largest herds and own almost half of Australia’s cattle herd.

Under the AMPG proposal, the requirement that processors pay a Transaction Levy if they have owned the cattle for more than 30 days prior to slaughter would be removed and processors would simply pay a slaughter levy to the Australian Meat Processor Corporation (AMPC). They would have no involvement in the new Grassfed Cattle Corporation.

The full text of the AMPG reform proposals can be found here.

I am not sure whether it is the AMPG's position, but I am personally in favour of the AWI requirement for levy payers to vote on the amount of the levy every 3 years and with one of the options to be voted on being that the levy be set at zero. I understand that in New Zealand levy payers exercised their rights under an equivalent provision and voted for a zero levy !

I understand that the United Stockowners Association (USA) have also called for the establishment of a separate grassfed service corporation with a levy member elected board. The USA are also in favour of a levy payer vote on the amount of the levy to be paid by cattle producers every 3 years, with one of the options being that the levy be set at zero.

ABA

The ABA Restructure Guideline Proposals are:
  1. A New Producers’ Board, directly elected by grass-fed levy payers only, including one representative from each State and the Northern Territory. An additional representative from any state with over 3 million cattle, thus including NSW with 5.9 million head, would get 1 extra member, and QLD with 12 million head, would get 3 extra members, forming an 11 person Board.
  2. All grass-fed producers who sell cattle will automatically receive their voting entitlements, similar to AWI etc.
  3. Votes are to be based on the two-tiered system, with a ‘one vote per levy payer’ register, and a ‘number of cattle sold’ register.
  4. The New Cattle Producers’ Board are to have control of all grass-fed producers’ levies, currently raising between $52 and $56 million per year.
  5. To nominate to stand for election to the New Producers’ Board, nominations must be accompanied by a minimum of 50 signatures from registered levy payers.
  6. Reserve seats will be available to State Farming Organisations on the sub-committees of the New Board, but not on the Board. There will be no reserve seats on the Board.

Essentially, the ABA calls for a separate grassfed corporation representative body that would tender out R&D and/or Marketing levies to the MLA or others. The voting system for a directly elected board would be on the basis of a number of seats being allocated to each state and territory elected through a two tiered two register voting system, along the lines of the two tiered voting system suggested by the AMPG. This would include one register being, one levy payer one vote, and the other register based upon the amount of levies paid.

CCA
The Cattle Council propose a directly elected CCA Peak Council funded by an “Opt Out” 38c portion of the Cattle Transaction Levy. It will include a 25 member board comprising of 11 SFO nominees, 8 directly elected directors and “6 purchase a seat on the board” corporates. Otherwise the CCA propose to retain the current red meat industry organisational structures with the CCA still being obliged to direct and instruct the MLA on the expenditure of MLA collected grassfed cattle transaction levies.   

Requirement for Unity

It appears to be common ground between the ABA, AMPG and CCA, at least, that the cattle industry reforms which they are calling for will only be introduced if there is unity for those reforms between the majority of levy payers. 

Testing the Reform Proposals Against the Four Key Flaws Identified in the Current Structure by AMPG

CCA

The CCA proposal, to some extent, addresses the CCA’s funding problems but does little or nothing to address the following:
  • the current dysfunctional divide between policy setting and policy delivery, or
  • the confusion under the current organisational structure as to who speaks for the cattle industry, or
  • real democratic enfranchising of levy payers.  (Giving levy payers the right to elect 8 directors on a board of 25 which includes 6 corporate directors who have purchased their seats would do little to make levy payers feel enfranchised).

ABA

The ABA proposal that the entire producer Cattle Transaction Levies are to be paid to the new proposed body would ensure a well funded representative body for grassfed cattle producers. Their direct levy payer election proposals would ensure that all grassfed cattle producers are enfranchised, and whilst the ABA proposal does not functionally address the policy setting and policy delivery divide, at least the ABA proposal would give the grassfed Cattle Corporation the power of the cheque book (ie. “he who pays the piper calls the tune”) Consequently this should ensure that the Government understands that the new grassfed Levy Funded Corporation is the voice that speaks on behalf of the Cattle Industry.

AMPG

The only model which fully combines the “authority to represent the industry with a means “to represent the industry in a way that is accountable” to the industry” in accordance with the fundamental reform principals, as identified by Paul Holmes a Court, is the AMPG model. This model combines the representative policy setting and policy delivery functions under one levy funded roof with a board directly elected by the levy payers.


Comparing the Proposals

Similarities

Given that the CCA, ABA and AMPG proposals all rely on levy funds to finance their operations, these groups can no longer raise any credible argument against a representative lobby body being funded by levies.

Differences

The main differences between the three reform proposals would seem to be that:
  • under the CCA and ABA models there would be separate bodies carrying out traditional Peak Council functions with other bodies delivering policy, however
  • under the AMPG model all representative, advocative policy setting and policy delivery functions would be carried out by the one body, and
  • both the ABA and AMPG new Grassfed Corporation would be fully funded from Cattle Transaction Levies, whilst
  • under the CCA proposal CCA would only receive 38c from each $5 Transaction Levy, and
  • Levy payers would be fully enfranchised under both the ABA and AMPG models whilst,
  • under the CCA model, levy payers would have a minority of seats, whilst corporates who purchased their seat on the board, and SFOs who represent less than 25% of levy paying cattle producers, would have the majority on the board.

Resolving the Differences

During his closing remarks at the Roma Forum, Andrew Ogilvie the Chairman of the CCA referred to the six point ABA restructure guidelines that were set out on the screen and said:

looking at the six points there, there is not too much there that I wouldn’t agree with, may be a couple of points.  But it is not too far away from where we think you should go.”

Discussions are also continuing between the AMPG and the ABA to see if they can reconcile their restructure models in the interest of achieving unity and in order to take the cattle industry reform proposals forward. 

Reform Resolutions

After much debate and discussion, the cattle producers who attended the Roma Beef the Future Forum voted overwhelmingly in favour of the following resolutions:
  • calling for the creation of a levy funded grassfed cattle corporation;
  • receiving all grassfed transaction levies; and
  • directly setting policies for the grassfed sector of the industry; and
  • directing and controlling policy delivery through the MLA and/or other service delivery bodies;
  • together with the establishment of an independent Task Force to define the detail of the organisational restructures necessary to establish the new proposed grassed cattle corporations.

The full text of the two resolutions that were passed overwhelmingly at the Roma Forum are:

(a) This meeting supports the establishment of a new Cattle Corporation funded by the existing grassfed transaction levy with the board directly elected by levy payers to perform representative, policy setting & control policy delivery functions on behalf of the grassfed sector of the cattle industry.  I.e. Take over functions of Cattle Council Australia (and ‘liaise with’ MLA)

(b) This meeting calls on the Federal Government to establish an independent task force forthwith to inquire into the organisational structures required to meet the needs of the grassfed Cattle industry over the next decade and report back to industry and government within 3 months

If you support and prefer the CCA reform proposals to the reform proposals put forward by AMPG and ABA please register your support (or opposition) by voting yes or no to the CCA reform proposals at the voting link above or below.

It is common ground that the cattle industry organisational structures are in urgent need of reform and that the industry needs to make a unified approach to Government if the reforms are to be achieved.

If you support the call for the reform for the grassfed cattle industry organisational structures it is important that your voice be heard.





Brad Bellinger's Presentation at the Roma Beef Forum [View Here]


The Cattle Council Australia Presentation at the Roma Beef Forum [View Here]
Norman Hunt's Presentation at the Roma Beef Forum [View Here]
Transcript of Paul Holmes a Court's letter presented at the Roma Beef Forum [View Here]
Hunt Partners Survey - Roma Resolutions - [Vote Here]


1 comment:

  1. Hi,
    Would it be possible to upload the original powerpoint presentations as well as the video? Many Thanks,
    Bec.

    ReplyDelete