ACCC report misses failings

ACCC misses important market failings


Markets
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ANYONE who read the final ACCC cattle and beef market study report may have had some trouble as I did in finding where the ACCC in its quest for transparency in pricing, paid some attention to the biggest and therefore most important function of saleyards, the selling of store cattle.

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ANYONE who read the final ACCC cattle and beef market study report may have had some trouble as I did in finding where the ACCC in its quest for transparency in pricing, paid some attention to the biggest and therefore most important function of saleyards, the selling of store cattle.

Instead, the report has focused only on slaughter cattle and then only in the context of providing some data to enable comparison with over-the-hooks grid prices.

Recommendation 4 of the report states:

Meat & Livestock Australia (MLA) should continue its work to improve the collection and public reporting of cattle sale prices, including reporting cattle prices across sales channels on the same basis so that indicative prices for each channel are easily comparable.”

It seems that ACCC had received some producer submissions claiming that it was difficult to make comparisons across sales channels and this was negatively affecting their decision making ability. I assume the decision-making ability so compromised by inadequate saleyard information is the choice between saleyards and over-the-hooks as a method of sale for slaughter cattle.

The report however is silent on how ACCC tested this assertion and convinced itself that firstly, this was a significant issue and secondly, that something could be done about it.

By significant, I mean the existence of a substantial number of slaughter cattle producers who currently sell over-the-hooks but stand ready to go back to saleyards if only the data was there to convince them that this was the right move.

Intuitively, this would seem highly unlikely.

For reasons associated with the production of quality beef, receiving feedback to guide that production and ultimately moving to full value based marketing, producers have long been committed to direct-trading relationships with processors.

The transition out of saleyards for slaughter cattle in favour of these direct-trading relationships began in the 1980s and by the early 1990s the big terminal markets of Cannon Hill, Homebush and Newmarket were gone.

Today, saleyards are essentially store markets with a small proportion of fats comprised mostly of cows.

And that in itself is the reason why there is limited ability to improve the market reporting of ‘quality’ slaughter cattle in saleyards.

There is simply no longer enough of these represented in saleyard offerings to equate to the broad range of over-the-hooks categories with any degree of statistical significance.

To emphasise the point, over 40,000 male cattle are slaughtered each week in Queensland with the highest concentration in the south-east of the state.

Dalby, the biggest regular saleyard in the area offered just 33 bullocks (over 600kg) last week in a total yarding of over 4000 head.

There were a further 86 head of heavy steers (500-600kg) that went to meatworks, the rest of the 507 grown steers offered were stores.

In the yearling steer category there were just 24 head that went to slaughter out of a reported total of 1165 head.

What chance therefore of extracting from such a small data set relative price differences for 0, 2, 4, 6 and 8 tooth cattle, grainfed, EU, MSA or PCAS eligibility and whether any differences so identified were valid or simply down to variation in dressing percentage?

The existing saleyard reports on slaughter cattle do at least identify trend and that in itself is useful for those who sell slaughter cattle in saleyards and possibly of passing interest to over-the-hook sellers. But that is about it.

In all there would seem to be no substance to this claimed issue of compromised decision making due to inability to make comparisons across sales channels and little or no capacity to do anything about it even if there was.

All of which makes Recommendation 4 seem rather pointless.

That is disappointing because there are real saleyard market-reporting issues in the main game of store cattle.

The yearling steer category in last week’s Dalby report is a good illustration.

From light to heavy there has for some time been a 20-30c/kg graduation (on average) between the four weight classes and that is largely explained by the relative demand from restockers and feeders.

But within the single 200-280kg weight class there is price variation of 114c/kg without explanation. No clue at all for a prospective seller as to whether he should expect 268c/kg for his cattle or 382c/kg.

How is it then that in 2017 the best we can do is report store cattle in a format designed specifically for slaughter cattle nearly 40 years ago?

The market reporting development work that happened in the late 1970s and 1980s was right for the time.

Possibly as much as 40pc of the state’s total kill was sourced through saleyards then and there was little or no communication of price information relative to carcass classification criteria.

With federal funding and coordination through Standing Committee of Agriculture, the states took up the challenge.

A huge effort went into design to ensure that that market reporting categories were aligned with meatworks specifications for slaughter market destinations and that the reporting language was uniform across the states. When AusMeat was formed the states modified the reporting format to embrace the new national livestock/beef language.

But 20 years or so down the track things had changed.

The bulk of the saleyard fat cattle had gone direct, the states had lost interest in financing market reporting and AusMeat no longer saw it as their role to be the custodian of the livestock component of the national beef language.

The Beef Language White Paper exercise which concluded in January 2016 did a good job in identifying how the livestock language has drifted ownerless and without direction since it was kicked out of its AusMeat home back in 1998.

Twenty years ago the time was right for industry to take control of the livestock language and redesign market reporting to reflect the changed circumstances in saleyards.

That did not happen.

The final draft of the Beef Language White Paper at least recommended that a specialist committee be formed to do something about it.

Fourteen months have passed and that hasn’t happened either.

With such overwhelming indifference from industry perhaps we cannot be too critical of ACCC on this one.

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