Senate Committee Recommends A New Levy-Funded Producer Corporation

HUNTBLOG NEWSLETTER

17 September 2014

SENATE COMMITTEE RECOMMENDS

A NEW LEVY-FUNDED PRODUCER CORPORATION

TO MEET THE COLLECTIVE NEEDS OF THE GRASS FED CATTLE INDUSTRY IN THE 21ST CENTURY

Congratulations to Federal Agriculture Minister Barnaby Joyce for having the perception to ask the Senate RRAT Committee to inquire into Australia’s grass fed cattle levy structures and system. I first met Barnaby Joyce at the Bindaree Beef/ABA beef producer forum in Roma in 2004 where 1500 cattle producers aired their dissatisfaction with the current red meat levy-funded organisational structure. I was also present at the Armidale and Rockhampton Beef’s New Direction forums in 2010 where Barnaby, other politicians, and industry leaders addressed a total of 1700 disgruntled and disillusioned cattle producers concerned about the future viability of their industry.

Barnaby appears to have picked up the message and moved to do something about the plight of Australia's great beef industry shortly after he assumed the Federal Agriculture Ministry.

Congratulations to the Senate RRAT References Committee for agreeing to pick up on Barnaby Joyce's reference, and for the diligent and extensive review that the Senate Committee carried out into Australia's grass fed cattle levy structures and systems. All sectors of the Australian grass fed cattle industry were given, and accepted, the opportunity to put their views before the Senators.

The overwhelming  majority of the 407 individual and electronic questionnaire submissions to the grass fed cattle levy inquiry confirmed Barnaby’s perception that grass fed cattle producers were dissatisfied with their current levy funded structures and systems with almost all grassroots submissions calling for a major reform. The submissions from organisational bodies such as Cattle Council of Australia (CCA), AgForce, NTCA, NSW Farmers, WA Pastoralists and Grazier’s Association, and the Australian Beef Association (ABA) also called for significant changes to the current levy funded structures.

Following 7 separate public hearings held across the nation involving over 70 witnesses, the Senate Committee report released last week found by a majority of 7 to 1 that the current grass fed cattle levy structures and systems needed to be reformed to make them more efficient and accountable to levy payers. In order to achieve this goal of reform, the Senate Committee recommended the establishment of a separate producer-only levy-funded corporation whose board is directly elected by grass fed cattle levy payers.

The ABA and all it members, past and present, deserve a special mention for their fortitude and persistence  to stay the course and  push for the major reform of the current  red meat organisational structures recommended by the Senate Committee report.

I first became involved with the ABA when I was asked to address one of the ABA’s inaugural meetings in Brisbane back in the mid-90s, at the time that Meat and Livestock Australia (MLA) was being incorporated, on the issues regarding MLA accountability and the appointment and election of MLA board members in the context of the very different board selection and election process enshrined in the Australian Meat Processing Corporation (AMPC) constitution.

About 300 of the  “who's who”  of the beef cattle producing industry attended that Brisbane ABA meeting-  the names and have  faces blurred in my memory  over the years but I can recall Graeme Acton, John Ayres from Kidman's, Sandy Munro, Roger Hann, Colin Hewitt, Ken Warrener, John Carter, Dr Rod Kater, Charlie Mort, and Peter Hughes.

As I said in my HuntBlog tribute to Graeme Acton earlier this year -I found it somewhat daunting to address such a large congregation of prominent cattlemen and I can recall fielding searching questions about the differences between the AMPC and MLA constitutions and Beef Baron anger about the Federal government's presumption that abattoir owners were responsible and sophisticated enough to be entrusted with the grassroots election of the AMPC's directors whilst cattle producers were apparently not regarded as being capable of directly electing the levy funded producer corporations directors.

It has been 16 long years since that ABA meeting in Brisbane but to their credit the grassroots core of the ABA have stuck to their principles and beliefs and finally achieved a ringing endorsement from the Senate Committee for the central plank that has underpinned ABA’s platform since its inception--namely that the grass fed cattle industry  needs  a producer only levy funded corporation directly accountable to levy payers and that the board of any such corporation must be elected by the producers that fund its operations.

As the Senate Committee found, there have been significant changes in the environment in which the grass fed cattle industry operates during those 16 years as a consequence of a host of factors including vertical integration, extended feedlotting, rising competition from other protein sources, concentration of supermarket power, consolidation of abattoir power, fewer farmers, an even faster decline in SFO membership, a decline in the Australian sheep population from 170 million head to 70 million head, declining per capita Australian beef consumption, and, most importantly, a decline of 40% in real cattle prices since 2001.

Consequently over the years, and particularly during the last 4 or 5 years when the profitability of the grass fed cattle industry has fallen to their current unsustainable levels, grass fed cattle producers across the nation have come to realise that the current grass fed cattle levy funded structures and systems are no longer meeting the collective needs of the grass fed cattle industry.

The  269  Concerned Cattle Producer  (CCP) electronic questionnaire submissions to the grass fed cattle levy Senate Committee inquiry ( 45% of which came from SFO members) discloses that  the 64% that disclosed  their  cattle  numbers owned  a total  of  626,000  head of cattle.

An analysis of the 269 electronic submissions shows that over 96% of the 269 electronic questionnaire submitters believed that MLA directors should be directly elected by levy payers rather than being drafted by a selection committee. Nearly 98% believed that they should have the right to vote on the amount of levies that they paid in the same way that Australian Wool Innovations (AWI)  levy payers do, and 98.2% were not satisfied with the opportunities they have to influence the quantum and investment of the grass fed levies that they pay. A staggering 99% do not believe that they have received value for the levy money they have invested in MLA.

Even though 45% of the grass fed cattle producer electronic questionnaire submitters were SFO members, only 13.7% of the 269 submitters thought that the CCA adequately represented their interests.

The calls for reform submitted to the grass fed cattle levy Senate inquiry by the CCA, the ABA and the AMPG/CCP group all involved using grass fed cattle transaction levies to fund cattle producer advocacy, and CCA and the other red meat industry peak councils already receive interest from levy moneys to finance their lobbying work.

Consequently the claim by the Land Newspaper editor in last week's edition of the Land Newspaper that the receipt by the CCA, or some other cattle producer levy funded Corporation, of levy funds would be in conflict with their role as political lobbyists appears to be misplaced and out of step with arrangements that have been in place since 1998.

The Senate inquiry into grass fed cattle industry structures and systems governing levies and the Senate committee report findings identified the following 5 key major flaws in the current grass fed levy organisational structures:

1.   the dysfunctional divide between peak Council (CCA) policy setting and MLA service provider delivery;

2.   a dysfunctional complex red meat organisational structure which requires MLA to be both fund holder and funding provider for producers whilst also being required to provide services to live exporters and meat processors;

3.   an inadequately funded SFO peak Council CCA with shrinking resources and falling membership coupled with its inability to obtain adequate funding to carry out its mandate under the Memorandum of Understanding (MoU) and effectively represent the grass fed cattle sector;

4.   the strongly held view of many grass fed cattle producer levy payers that they are disenfranchised under the current system;

5.   widespread misunderstanding and lack of clarity about the current organisational structures and their roles and responsibilities and the dysfunctional interaction between CCA, MLA and the one stop shop Red Meat Advisory Council (RMAC) that fails to provide a single grass fed cattle producer voice to government.

In summary, the Senate inquiry into grass fed cattle levy structures and systems received three main industry structure reform proposals:

1.   the CCA call to redirect $4 million from the $5 million grass fed cattle transaction levy to strengthen its policy setting and MLA oversight role under the MoU coupled with reform CCA board election process which will allow a minority 2/10 CCA board members (and 4/12 CCA board members over time) to be directly elected by grass roots SFO members and non SFO -grass roots cattle producers;

2.   the ABA proposal that the entire grass fed cattle transaction levies be paid to a new grass fed cattle producer Corporation whose board is directly elected by levy payers, and that the new grass fed cattle producer Corporation would then apply the grass fed cattle levy funds to MLA and other service providers to carry out the functions necessary to deliver the policy outcomes determined by that new cattle producer Corporation;

3.   the AMPG/CCP restructure proposal based upon the Australian pork industry model and successful overseas rural industry advocacy bodies such as the American Farm Bureau which combined the representative policy setting and policy delivery functions under one levy funded roof with a board directly elected by the levy payers.

The AMPG/CCP submission to the grass fed cattle levy Senate inquiry assessed the three main competing reform proposals against the 5 identified key flaws with the current organisational structures outlined above and reach the following conclusions:

CCA Reform Proposal

The proposed CCA reforms address the CCA funding problems.

The proposed CCA reforms do not however adequately address:

·     the current dysfunctional divide between policy setting and policy delivery;

·     the separation of processor, producer and live export levy funded activities;

·     the perception of many grass fed cattle producers levy payers that they are disenfranchised; or

·     the provision of a single voice for grass fed cattle producers to government.

ABA Reform Proposal

The ABA reform proposals address:

·     the need for a well-funded grass fed cattle representative body, and

·     the need for all grass fed cattle levy payers to feel that they have been enfranchised, and

·     a single voice for grass fed cattle producers to government- because the ABA proposal would give a directly elected board of a new levy funded cattle Corporation the power of the cheque book (i.e. “he who pays the Piper calls the tune”)-which should ensure that the government understands that the new grass fed levy funded Corporation was the voice that spoke on behalf of the grass fed cattle industry.

The ABA reform proposals do not however adequately address

·     the current organisational structure dysfunctional policy setting and policy delivery divide, or

·     the separation of processor producer and live export levy funded activities

AMPG/CCP Reform Proposal

The AMPG/CCP think tank reform proposal was the only proposal put to the Senate Committee that addresses each of the 5 fundamental flaws in the current grass fed levy funded organisational structures identified by the Senate committee.

The AMPG/CCP think tank reform proposal specifically addresses:

·     the current dysfunctional divide between policy setting and policy delivery under the MLA/peak Council structure;

·     the separation of processor, producer and live export levy funded activities;

·     the need for a well-funded representative body for the grass fed cattle industry;

·     the need for all grass fed cattle levy payers to feel that they are enfranchised; and

·     the provision of a single voice for grass fed producers to government.

The challenge for the Federal Minister for Agriculture, Barnaby Joyce, and the Federal Government now is to bring about the implementation of the Senate Committees recommendations in a constructive and timely manner that ensures that grass fed cattle industry has the appropriate representative, R&D, and marketing bodies that it needs to take it forward in the 21^st century.

The challenge for the grass fed cattle producer industry, and the red meat industry as a whole, is for them to abide by the umpires decision, and to cooperate with the implementation process in order to ensure that the grass fed cattle industry, and the cattle industry as a whole, receives the best possible representative and financial outcomes so desperately needs.

Attached is a copy of the Senate Committee’s Recommendations.

Further material on the RRAT Senate References Committee into industry structures and systems governing levies on grass fed cattle submissions hearings and report can be found at www.HuntBlog.com.au and on www.cattlelevysenateinquiryinformation.com.