Transparency will not iron out peaks and troughs of cattle market

This argument is being made loudly by the processing sector but it is also now starting to be heard from the farmgate.

While few spoke publicly at the Queensland meetings on supply chain profitability extremes held last week, there were producers who felt the call for transparency was a waste of time.

The meetings were hosted by Queensland LNP senator Barry O’Sullivan and attended by key processing, cattle producer and research and development industry representatives.

St George bullock producer Ben Groat “Elvanbrook”, speaking after the Roma meeting, said supply and demand controlled the cattle market.

“There is supply and demand operating above and below the processors and they are the meat in the sandwich,” he said.

“Greater transparency will only weaken them.

“The suggestion we can level out the prices is off the mark - the only way is regulation and no one supports anything but a free market.

“Processors will only pay as much as they have to - that’s business. It’s the same as producers not paying any more than they have to for fuel.

“I’ve been biting my tongue on this for years because we’ve been in drought but now we need a bit of reality. Graziers are not a protected species.”

Speaking to the issue of the cyclic nature of cattle prices, Australian Meat Processor Corporation chair Peter Noble also told the Roma meeting transparency would not achieve anything.

Australian Meat Industry Council chair Lachie Hart said the hope was growing demand globally for red meat from Australia could reduce the extremities.

“If you take the last three three years and the next two out of the equation, you do have some degree of normality,” he said.

“Demand for our product is increasing and as the volume of cattle increases here I am confident we will find a home for our beef, provided we continue to produce high quality.

“That demand has the power to iron out the highs and troughs.

“Increasing our access to international markets is what we have to focus on.”

Outside of the Queensland meetings, processor management representatives are also saying increased transparency comes with few benefits.

Chief executive officer of the Northern Co-operative Meat Company at Casino Simon Stahl explained processors were in the business of “deconstructing an animal and selling parts into many, many different markets.”

“We take up to 50 products from a carcase, including offal and meat meal, and those individual products can go to any one of 30 odd destinations,” he said.

“Every one has a different price point.

“Factor in the currency exchange rate and you have a situation where any moment of any day, the product is worth something different.

“We crunch those figures, factor in processing costs, and come up with a maximum price we can pay for cattle in order to break even.”

However, when the processor buyer turns up at the saleyard with his limit firmly in mind, different dynamics kick in.

“We may know we have $4 to spend but if we are the only bidder we pay $1,” Mr Stahl said.

“Or it goes the other way - there are very small numbers of cattle and many bidders so we are forced to pay $6 or leave with nothing.

“What does it mean to those on the farm, or those buying the product on the shelves, to know where the larger part of the profit margin sat for that particular item?

“Nothing.”

Mr Stahl said perhaps it was a lack of understanding that was fuelling calls for greater visibility of the profit flow through the beef supply chain.  

“Just as I don’t know the intricacies of the world of farming, there is very little understanding in the producer world about the complexities of processing,” he said.

As an example, he cited regulation.

“We see regulation talked about on farm and it gets a lot of attention,” Mr Stahl said.

“Well, take the sort of inspections and red tape happening on farm and multiply it by about 50 and you have what we face in processing.

“Our team spends 80 days a year on audits alone.”

The suggestion that producers and processors could pool their lobbying power and work to see costs such as those taken out of the supply chain was raised at the Queensland meetings.

Mr Groat said another area producers could work hand-in-hand with processors was on social licence.

“We have zero chance of competing with the likes of Brazil as far as the commodity market goes,” he said.

“The only way for us is to break free and target the high end market and social licence will be key to that.”