Role of saleyards fading out, say big processors

Prominent East Coast beef processing operations drew attention to the trend in submissions which vehemently argued cattle prices were driven by supply and demand and unrelated to consolidation in the processing sector.

Submissions have now closed, with 94 received, and the Rural and Regional Affairs and Transport References Committee is expected to hand down its report in March.

Further public hearings have not been ruled out.

The inquiry was sparked by producer angst over what is seen as increasing market power of meat processors, which came to a head with the apparent large-scale buyer boycott of a Victorian cattle sale last year.

Processor submissions said consolidation had been a pathway for the sector to remain competitive in the global market.

They pointed out Australia had low levels of meat processor consolidation compared with its big competitors.

The accusation of buyer collusion or processors having monopolistic power at saleyards was  strongly refuted.

Teys Australia said saleyards were of decreasing use in modern beef industry value chains, especially for those producers targeting premium to high-value domestic and international markets.

General Manager Tom Maguire this week told Fairfax Media Teys buys 92 per cent of its cattle by direct consignment.

“We simply can’t get the article we need to satisfy our customers via saleyards,” he said.

“If the saleyard industry wants to maintain its relevance it has to address that.”

JBS Australia, which has 12 meat processing facilities across five states, said more producers were making the decision to sell their animals direct to processors through a grid based system but in addition there had been a move away from the ‘transaction’ based livestock sell model to an alignment and commitment to supply a brand owner with product that met strict product specifications.

JBS director John Berry this week said that trend was driven by the growth of beef branding and was a commercial decision made by the producer in a bid to generate higher farmgate returns.

“We have seen the growth of this trend through the success of our Great Southern lamb and beef supply chain and also in the feeder cattle side through our Riverina business,” he said.

In the wake of record cattle prices this month, beef exporters have said the longer-term challenge for the beef industry was in ensuring consumers would pay a retail price that would sustain the prices.

That was intrinsically linked to success in overseas markets, processors said.

According to peak retailer and processor representative group the Australian Meat Industry Council, being able to compete overseas had held Australia’s red meat industry above water during difficult times and processing sector productivity increases had been key to that competitiveness.

“With slow on-farm productivity growth, holding and building markets depends on continual change in the processing sector,” the AMIC submission said.

Market forces steered commercial decision-making at each stage of the red meat supply chain and that must continue, it said.

“Marketplace rigour spurs innovation and streamlining,” the submission said.

“This, along with reform of red meat regulatory costs, will provide the platform essential for further export growth.”

AMIC director Steve Martyn said along with allowing the marketplace to facilitate sector efficiencies, governments needed to address broader obstacles to competitiveness such as the high costs of compliance.

“Australia is a very high cost producer in relation to our competitors,” he said.

The JBS submission said in Australia the costs of processing an animal was 1.5 times higher than in New Zealand, twice that of the United States and three times that of Brazil.

The major cost disadvantages were in labour, regulatory costs and utilities, it said.

Excessive government and industry regulation and fees are borne by the processor and add to the costs of production, ultimately lowering returns for both producers and processors, according to JBS.