The Australian Competition & Consumer Commission (ACCC) has released its Interim Report in respect of the cattle and beef market study which seeks to make 13 recommendations.
These recommendations seek to put beef producers in a position of having improved price clarity, grading and saleyard procedures. An excerpt of the full list of recommendations can be found below.
Interestingly, the ACCC report appears to confirm producer concerns that ‘there are circumstances where further consolidation in the processing sector through mergers or acquisitions, or other conduct, could substantially lessen competition…’
The ACCC appears to have further recognised producer concerns, stating:
‘that cattle prices are not usefully transparent, particularly prices for prime cattle. There are significant gaps in reporting: the prices for paddock sales and OTH and saleyard transactions are inconsistently reported and in some cases incomplete in terms of the cattle types and geographic locations. This makes it difficult for producers to compare historical prices between channels on a like-for-like basis. This lack of transparency distorts pricing signals intended to guide production decisions and may create information asymmetries between industry participants.’; and
‘the ACCC has concerns about aspects of the grading system. Primarily, there is a lack of independence and transparency in the process of grading carcases at abattoirs. We are also concerned that existing audit systems do not ensure integrity of the grading process. Integrity and trust in the grading system are essential, given its role in determining prices received by producers.’
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Transparency in cattle markets
Recommendation 1: Availability of price grids
All processors and major cattle purchasers should routinely make price grids publicly available in a timely manner to increase market transparency.
Recommendation 2: Price grids
All buyers should consider whether their price grids can be improved to make it easier for the industry to understand and compare grids.
Buyers, agents and producer representative bodies (led by the Cattle Council) should improve their engagement with producers to enhance industry understanding of price grids and their interpretation.
Recommendation 3: Improvements to existing market reporting
The ACCC encourages Meat and Livestock Australia (MLA) to make changes to the way existing cattle sale prices are collected and published to improve transparency and usability, including specifically:
standardising cattle types for reporting across channels
publishing time series data of saleyard prices in a format which allows for easy interpretation (prices are currently only reported weekly in .pdf files, making comparison through time difficult)
producing a co-products index for comparison with cattle prices, and
improvements to the domestic retail beef price series.
Recommendation 4: Additional market reporting
The ACCC encourages MLA, ALPA and ALMA to work together to expand data collection and reporting of prices, including specifically:
direct (paddock) sales prices
actual prices paid for OTH sales
saleyard prices for additional saleyards of regional market importance which are not currently reported, and
actual prices paid for cattle sold to the live export market.
Recommendation 5: Mandatory reporting of non-saleyard transactions and prices
The ACCC considers the arguments for and against mandatory reporting of all non-saleyard cattle sales are finely balanced, and does not recommend its implementation at this time. If market participants do not take steps to improve market reporting in line with recommendations 3 and 4, the arguments in favour of mandatory reporting will become more compelling over time.
Over the hooks transactions and grading
Recommendation 6: Objective carcase grading
The industry, led by the processing sector, should allocate a high priority to the adoption of technology to enable objective carcase grading to be introduced as soon as possible. This will, of necessity, include the development of appropriate auditing and verification systems that instil confidence in the integrity of such systems.
Recommendation 7: Dispute resolution for OTH sales
Processors and buyers should review, and in many cases improve, their internal processes for responding to inquiries and complaints about OTH sales.
Cattle processors should develop a uniform and independent complaints and dispute resolution process, with AUS-MEAT filling the role of an independent and binding arbitrator.
Recommendation 8: Auditing of carcase grading
The industry should implement a more robust auditing system for carcase grading, with AUS-MEAT implementing random and unannounced audits in addition to the current audit regime. The result of these audits should be made publicly available on a regular and timely basis.
Recommendation 9: Carcase feedback and producer education
All buyers and agents should consider whether carcase grading feedback can be improved.
Buyers, agents, and producer representative bodies (led by the Cattle Council) should increase their communication and education surrounding the current grading and feedback system to ensure that producers better understand cattle market trends and why some cattle attract a premium compared to others.
Conduct in cattle markets
Recommendation 10: Saleyard buyer register
The ACCC encourages the introduction of a mandatory Buyers Register to be publicly available prior to the commencement of all physical livestock auctions. This register should include details of commission buyers and livestock agents intending to bid at the sale and the principals that those commission buyers will be acting for.
ALPA should work with its members to have this requirement incorporated into auction terms and conditions at saleyards.
Recommendation 11: Terms of sales at auctions
The ACCC encourages MLA to work with ALPA to introduce a mandatory requirement that the terms of auction be displayed in a conspicuous position at all saleyards. This should include a notice about the penalties for collusive practices under the CCA, in addition to any notices required by state and territory legislation. The ACCC notes that many saleyards and agents are already demonstrating industry leadership by doing this.
Recommendation 12: Livestock agent licensing
Legislation should be introduced requiring standardised national licensing of livestock agents and professional buyers (applying to commission and salaried buyers), in order to raise the levels of CCA compliance and general professionalism within the industry.
Recommendation 13: Implementation of recommendations
The ACCC encourages the Agriculture Ministers meeting (AGMIN) to consider the above recommendations, particularly with a view to monitoring their implementation. This will be especially important to ensure that recommendations are progressed, given the diverse industry interests. Ministers may wish to consider alternative approaches if progress is not made.