The current low cattle prices being realised by producers again demonstrates the need for robust and accountable cattle producer representation at the National level. Reports of near record monthly export tonnage, along with buoyant export beef prices, combined with high domestic wholesale and retail price levels which are threatening to dampen domestic consumer demand, is not compatible with the low prices, hovering around 2015 levels, that cattle producers are receiving for their stock.
In spite of assurances attributed to Mr Pat Hutchinson, Australian Meat Industry Council (AMIC) CEO, that the cattle industry has come a long way and working in unity, cattle producers are now receiving the lowest prices since 2015 whilst we are seeing record tonnage being exported for record prices.
Dr Paul Wright, Chair of Cattle Producers Australia, says, “This is evidence as to how far we have come, which is basically nowhere. We have not progressed whole of supply chain cooperation.”
With record retail beef price heights to $19.51 per kg according to MLA, indicates the market place seems to only respond to livestock supply issues rather than product demand and producers are questioning why the benchmark Eastern Young Cattle Indicator (EYCI) this week slid to 385.25 cents? Leaving producers receiving a meagre 26 % share of the retail price, MLA reported a 10 year average of 32% back in 2015 and according to USDA reports America is receiving 46.7 %.
Following the Government response into the Effect of Market Consolidation in the Red Meat Processing Sector Senate Inquiry, that the recommendations were a matter for industry, Mr Hutchinson said, in an article headed Government Stays out of Cattle Lobby Group Reform dated 31 January 2019 in the Queensland Country Life, that industry was now more cohesive than it had ever been in history, which rendered much of what was in the final report out-of-date.
“Gone are the days of processor versus producer,” he said.
He went on to say that “There is now widespread recognition that we have one red meat supply chain of symbiotic relationships.”
Dr Wright says, “because it has been left to industry, we still have not gained adequate producer representation nor have we gained transparency in pricing along the supply chain.” This was highlighted in the ACCC Cattle and Beef Market study where Commissioner Mick Keogh stated that 90 % of our slaughter cattle are sold direct and without appropriate price transparency could risk the basics of a functional and effective competitive market which is a fundamental component of a free market economy.”
Whilst some meat processors have begun to publish their price grids in response to the Senate Inquiry into the Effect of Market Consolidation and the ACCC Cattle and Beef Market study those that do publish their price grids each use their own language and descriptors and variation discount rules which makes it virtually impossible for the average cattle producer to compare prices being offered for their cattle.
Dr Wright said, Price transparency is fundamental to the efficiency of a free market economy and lack of transparency results in lower prices for the price taker and higher profits for the price giver.”
It’s not rocket science, if processors are buying 90% of their product direct over the hooks, they will not be competing in the public selling centres where the EYCI is set, yet processors often use the EYCI to benchmark their grid pricing.
Many of Australia’s cattle producers are currently experiencing a major flood and drought crisis of similar proportions to the live export ban and drought crisis back in 2011. A situation which is all being compounded by continuing lack of transparency in prices being paid for cattle and the red meat industries failure to reform out of date organisational structures.
Dr Wright says, “this brings us back to the core problem of representation, price transparency and the other reform recommendations from past senate inquiries and the ACCC study that have not been dealt with and hearing from our younger cattle producing members who have raised these specific issues with me, have little faith in existing industry structures ability to manage them.
Furthermore, they feel the depth of these issues have only grown over time and have strong concerns of the continuity and future prosperity of Australia’s cattle production industry”, he said.
Dr Paul Wright
Cattle Producers Australia (Implementation Committee)
“Woongarra” Taroom Qld 4420
Phone 07 4628 6185 Mobile 0438 286 185