Tuesday, November 27, 2018

Cattle Producers Need a Strong Representative Body to Counteract Supermarket and Processor Power - Part 2 - Conclusions and Solutions

This newsletter is the second part of a two part series on the need to strengthen Australia’s grass fed cattle producer representative bodies in order to counteract increasing concentrations of supermarket and processor power.

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  1. The NP and the bureaucrats at the DoA are motivated by money (i.e levies) which delivers power particularly the power to set their own agenda.The NP and the DOA are strange bedfellows but both share an unshakeable belief in collectivist,socialist agriculture characterised by centralised control,central planning,appointed peak bodies and taxes without representation on farmers who make up the bottom layer of the pyramid.
    Freedom,democracy and equity don't even figure in this calculation.
    The seven Sterle Committee recommendations went down like a lead balloon just as I predicted.There was never any chance that the NP was going to accept the recommendations of a LABOR senator that would so radically change their beloved beef industry structure despite it's unbroken track record of failure.There was also no way that the DoA was going to give up on their control of the $100 million p.a. of levies.This river of money creates a slush fund which the Minister and the department can spend as they please without oversight or reference to the levy payers.This is a recipe for corruption,cronyism,malperformance,maladministration and waste and should not be tolerated in a free,pluralistic democracy.
    The concept of letting a bunch of farmers control the manner in which their own money is being spent was never going to get up and is completely counter to the almost soviet style of socialism entrenched in the federal bureaucracy.
    When he finally responded to the recommendations the Minister basically said that all was well in the industry and that the structure set up by the NP in 1997 was fine except that cattle producers were letting the side down.They needed to work out a new form of representation by themselves but could not use any levy funds as compulsorily acquired levies are taxes and belong to the government.In other words he sent cattle producers on a fools errand.It is interesting to note that the CCA is now on life support from MLA via a $750,000 p.a. fee paid from levies.
    Norman Hunt states that the CCA will shortly run out of money.So what? This would be highly desirable outcome because the entire beef industry structure cannot function without a peak body for grass fed cattle producers.The answer is not replace the CCA with a new producer organisation which in any event would become a "prescribed body"under the AMLI Act 1997 and thereby under the control of the government.The answer is not to coerce grass fed producers into an organisation that would be equivalent to compulsory unionism.The way to settle this matter is to hold a plebiscite on whether cattle producers want to pay the levy at all.

  2. John – obviously I do not agree with your proposal to dispense with a grass fed cattle representative body altogether, but as you will note from the latest and earlier Hunt Blog Newsletters I do agree that the new cattle producer Corporation (Newco) should hold plebiscites of all cattle transaction levy payers in accord with the Federal Government Levy Principles and Guidelines to determine:

    1. whether grass fed cattle producers wanted to pay a levy at all, and if so
    2. how much levy they want to pay, and
    3. whether all or part of that cattle transaction levy should be paid to Newco rather than to MLA,

    HuntBlog has also called for:
    1. a separate plebiscite of producers to determine if grass fed cattle producers supported the Senate Inquiry recommendation that all processor transaction levies currently paid to MLA should instead be paid to the processor levy funded Corporation AMPC in order to ensure that MLA was a truly producer corporation, coupled with
    2 a plebiscite of processors to ascertain whether or not the majority of processors supported the Senate Inquiry recommendation that all transaction levies currently paid by processors to MLA should be paid instead to AMPC, and
    3 if a majority of either the producers or the processors were found to support that Senate inquiry recommendation, then
    4 the Federal government should enact the relevant legislation to put that Senate Inquiry into effect.

    As you know, plebiscites are held regularly in a number of Australian levy paying rural industry levy funded organisations (most notably Australian Wool Innovation, Australian Pork Limited and the Australian Egg Corporation) to determine the amount of levies that levy payers will to pay with one of the options being zero. That zero option was famously adopted in October 2014 by New Zealand woolgrowers in relation to their wool industry levy funded body.

    The current problem with holding plebiscites for the grass fed cattle industry is, however, that there is no existing mechanism to hold such a plebiscite. There is no record that definitively links cattle transaction levy payments received by the Agriculture Departments levies unit with the Levy payers that paid those transaction levies. Consequently, the first step required is for the implementation of Recommendation 2 of the Grass Fed Cattle Levy Funded Structures and Systems Senate Inquiry Report, which called for the:
    establishment of a cost-effective, automated cattle transaction levy system to identify levy payers against levies paid, and provide for more immediate settlement of levy fees paid and the allocation of voting entitlements subject to regular independent auditing and verification.

    1. Norman,you may not agree with me but it is a fact that any newco successor to the CCA will immediately become a "prescribed body" under the diabolical AMLI Act 1997 and therefore under government control.Joyce has made it clear that the any newco will not control or have access to levy funds.The newco will have to tow the line handed to them by the bureaucrats in the DoA and thus will not be able to lobby for their members or political change.This is why I have called it a fools errand.Frankly I don't think the current crop of NP members even understand the structure that their predecessors created and have no ideas on how to fix it.They don't want to be confused by the facts and seem tone-deaf to the hundreds of submissions to the two senate inquiries.
      The issue of levy payer identification would be a non issue if we could get the DoA out of the way.The levy payer and quantum of levy could easily be reported on the quarterly BAS as a line item just like the off road fuel rebate.Indentifcation would be immediately available by TFN or ABN.
      This would of course have the added productivity benefit of removing this red tape burden from thinly capitalised hard working stock agents.
      This would mean however that levies would be collected by the ATO and subject to Treasury oversight,an anathema to the DoA....have a nice weekend...JC

  3. Thank you again for your reply John. While you are correct in saying that the new grass fed cattle corporation would become a “prescribed body” under the AMLI Act, HuntBlog’s proposed Newco would be a truly democratic body that is representative of all grass fed cattle transaction levy payers in Australia by requiring the board of Newco to be elected by grass fed cattle producers. In addition, several Australian and foreign industry representative organisations allow the producers they represent to vote on the amount of the levy paid – for example, the constitution of Australian Wool Innovation (AWI) allows 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. In 2013, New Zealand woolgrowers famously exercised their rights under an equivalent provision and voted for a zero levy.

    Barnaby has actually not ruled out preventing Newco from having access to levy funds as you suggest – in his 16 July 2015 Beef Central opinion piece (which we covered in our 6 August 2015 HuntBlog Newsletter and touched on in our 26 April 2016 entry) Barnaby flagged the possibility of at least part of the cattle transaction levy being allocated to Newco if at least 60% of cattle transaction levy payers vote in favour of that proposal.

    The 20 and 26 April and prior HuntBlog Newsletters refer to a number of examples of levy-funded industry advocacy bodies both in Australia and abroad that are involved in strategic policy development. Australian Pork Limited (APL), for example, sets its own policy and is responsible for the delivery of that policy, so there is no dysfunction between policy setting and service delivery as there is with MLA. Other Australian examples of levy funded rural representative bodies that engage in political activity include Australian Wool Innovations, the Australian Egg Board and the levy funded dairy industry body. Overseas, in France, New Zealand and Canada, among other competing agricultural producer nations, levy funded representative bodies are entitled to conduct advocacy activities as this is understood to be a technical contribution to preparation and evaluation of agricultural policy.

    Our April 2016 HuntBlog Newsletters refer to the powerful and effective NBCA in the United States and as Hunt Blog says in that Newsletter the real answer is for Newco to fund its lobbying activities calling for political change from income from the provision of members’ services in the same way as the American Farm Bureau does and fund its administrative and policy development costs from part of the cattle transaction levy. The realities are, John, that under the current red meat organisational structure the Cattle Council of Australia currently funds its political lobbying activities from “interest earnt from levy fund reserves“ and “service fees” earned from the service delivery body whose activities it is required to oversee and outsources its policy development work to the levy funded MLA.

    The introduction of a transparent tracking system to identify levy payers against levies paid is fundamental to the proposed board election process for the new grass fed cattle corporation. Not sure how shifting responsibility from DOA to the Treasury and ATO would help that process – but perhaps I am missing your point. Can you elaborate?

  4. Norman,most of the points I have already made address your reply and to go over them again would be superfluous.My understanding remains however that Joyce considers compulsorily acquired levies as a tax (his words not mine) and that he and his department will not allow any of them to fund a newco that may engage in political advocacy.Proposals to fund a newco through cute tricks like surcharges on NLIS tags and NVD books are not going to go down well with cattle producers and are doomed to failure.We should also remember that Australia has it's own Mason Dixon line.Northern and southern producers produce completely different cattle for completely different markets in completely different production enviroments.I can see no logic in forcing both into one representative body.There is a lot at stake here.We are at risk of losing the entire domestic market for beef if the long term trend in per capita consumption cannot be checked and reversed.Consumption has fallen from 70kg/capita in the mid 1970's to 28kg/capita now.At this rate the industry will cease to exist in 20 years.The trend in lamb consumption is just as bad if not worse.Yet there is no sense of urgency.Politicans like Joyce and O'Sullivan lecture us the importance of supporting MLA when any one can see that it has been a complete failure.The industry structure is fully loaded with rent seekers and cronies who don't want to upset the gravy train.

  5. Thank you again John.

    I understand your point about the Mason-Dixon line with regard to the differences between northern and southern cattle producers The Cattle Council who are the current official grass fed cattle producer representative body are often criticised for being too northern centric and HuntBlog understands that the southern /northern interest divide is a continuing internal issue for CCA – but perhaps it would be preferable to have northern and southern cattle producers in one single powerful representative body rather than having no representative body at all?

    Indeed, as you may be aware, the AMPG grass fed cattle industry organisational reform proposal addresses this southern/northern interest divide by suggesting a two register voting system for the election of directors and resolution of key issues with the votes in one register based on one levy payer one vote (which will favour the south who have by far the greater number of cattle producers) and with the voting entitlement in the other register (which will favour the north) based on the amount of levies paid by each levy payer.

    You are right to be concerned about the falling beef consumption rates in the Australian domestic market as should every other Australian cattle producer – but perhaps a strong sustainably funded truly representative cattle producer representative body may be able to help bring about mandatory truth in labelling and all, of product grading laws to reverse that decline?

    For the record Barnaby Joyce stated in his 16 July 2015 Beef Central Opinion Piece
    “I understand, however, that there will be proposals developed by Cattle Council in accordance with the levy principles and guidelines over the coming months to be taken to a vote of industry levy payers. I understand that such a proposal would seek to redirect a portion or otherwise of the levy to a new representative organisation and I have given my commitment, should such a vote achieve convincing support, to assist where possible"

    “If such a proposal is successful, then I remind you that the representative organisation will have to be accountable to the government for those funds. On that basis I believe that a new representative organisation needs to develop alternate funding streams".

    Barnaby’s thinking therefore seems not to be inconsistent with HuntBlog’s view that the grass fed cattle producer representative Newco should be funded from a mixture of a cattle transaction levies and income from the provision of member services with the levy portion of its income being used for policy development and administration and the income from the provision of services to members being used for advocacy and lobbying for the implementation of grass fed cattle producer policy.

  6. I also read Joyce's 15/7/15 announcement.The remarks you quote however were preceded by his flat out rejection of Recommendation One and his dictat that the levy was a tax and government property and that cattle producers would have to find other "innovative"sources of funding if they wanted a newco to replace the CCA.Politicans love speaking in riddles but this sounds like he is advocating an exercise in how to get more money out of struggling cattle producers.He also stated the the newco would not be independent if it was funded by levies but as a prescribed body it would never be independent anyway supporting my view that the NP do not understand their own legislation.Further AMPC and LIVECORP both peak bodies control the disbursement of their levies.If they can do it then why can't cattle producers?We thus find ourselves trapped in a bizarre parallel universe.Very many cattle producers have no idea that they are being "represented" by an outfit called the Cattle Council of Australia,indeed many have never heard of the CCA and know nothing of its constitution,members or functions.Is it seriously being suggested that they be forced into membership of an organisation that will replace an organisation that they have never heard of and to pay for the privilege of doing so?So you see that we have now come the full circle and are back at my starting point of the need to hold a plebiscite on the levy.There is no other way to legitimise this process.Perhaps you would call this natural justiceAs you would be aware the levy as it currently stands is directly contrary to virtually all the DoA's criteria and guidelines for levies.

    1. Norman,I would add something that I neglected to mention on the subject of funding the CCA or any successor organisation.The issue could be solved right away if the DoA directed the RMAC as trustee for the Net Industry Reserve Fund to increase the annual distribution to the CCA.As you know this fund is now more than $43million and the CCA receives about $560,000 p.a which is less than AMIC i.e.the processors and the retailers.The fund should be used not sat upon until the perpetuity date.

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  8. check this out
    MLA reports on Price transparency