A stench hangs high over the meat business. Such was the furore this week in the aftermath of the Four Corners expose´ on live cattle exports to Indonesia that the cattle industry will change forever.
And not before time. This is big business, no longer the domain of battling farmers, big graziers and a bunch of local abattoirs. Rather, of multinational meat processors, giant supermarket chains and a multi-billion dollar live export trade.
The government’s snap ban on the $300 million live export trade to Indonesia on Wednesday may have struck fear into the hearts of farmers and cattle barons but, as with every dramatic market fracas, there are winners as well as losers.
Ironically, the big winners are the Brazilians. The South American multinational JBS Swift speaks for 30 per cent of meat processing capacity in the Australian market. Its abattoirs slaughter 8700 head of cattle a day. Worldwide JBS Swift kills 90,000 head a day. Picture 900 semi-trailers, chock-full.
The export ban has just dumped another half a million head of cattle onto the domestic slaughter market and the farmers, and the listed cattle group AACo for that matter, will have to pay another $200 a head to freight the poor beasts to the coast of Queensland where the abattoirs reside. Then there is the matter of booking them four weeks in advance but not knowing the price until the day before they are slaughtered.
The second player in meat processing is Teys Brothers, which just sold out to North American juggernaut Cargill. They dressed this deal up as a merger, though Cargill – with its 60,000 employees – will hardly be entertaining shared control with Teys and its 1000 staff.
Teys sends $1 billion worth of red meat to Japan each year but it is not really an exporter. No value-add. It just passes the product to the Japanese at the wharf and they take it from there. Until the duopoly of Woolies and Coles began to drive red meat prices down 18 months ago you could buy your Aussie steak cheaper in Tokyo than Sydney.
All of which brings us to the core of the present crisis: the Meat and Livestock Association. “From paddock to plate”, the MLA’s charter is to improve market access and grow demand. Its detractors contend it has failed. And so it is that, as the Indonesian crisis evolves, the MLA’s myriad conflicts and related party transactions shall come into view.
The MLA was bunkered down yesterday, in full crisis-management mode following the Herald investigation yesterday into payments to its directors. Nobody was in a mood to discuss the business with yours truly who simply wanted to know where he could find the latest annual report.
According to the 2007-08 annual report, the most recent on display, the MLA was sitting on $58.7 million in cash thanks to $90 million, before expenses, in levies from farmers, $11 million from exporters and processors and a handy $39 million in R&D grants. Thank you taxpayers.
Related party transactions were not disclosed in much detail. Suffice it to say that the MLA has more side deals than a Saigon cockfight.
This entity lies at the core of a spaghetti mud-map of daunting proportions, originally concocted under farmer and former deputy prime minister John Anderson and ultimately answerable to the present Minister for Primary Industry, Senator Joe Ludwig. The structure is in dire need of reform.
Sources assisted with some more contemporary data. Here are some rough numbers: farmers fork out $5 per animal to the Meat and Livestock Association every time they sell a cow. That’s just a tax, raised by the Department of Agriculture then passed to the association. This raised $96 million in 2010. The other major source of income was R&D grants which the MLA matches dollar for dollar. The grants were $38 million last year.
Over the decade, the MLA has spent some $700 million. Sources say they can only find 500 R&D projects on the website out of 4000 touted. A hefty 25 per cent of the $70 million R&D budget goes to associates of the directors of MLA. The $5 million paid to associates in the 2009 year jumped to $17 million in 2010. Bear in mind the MLA was unavailable for response yesterday.
The total value of beef and sheep meat sales from Australian farms is $16 billion. Over the past decade, live cattle exports to Indonesia probably weigh in at $2 billion. Some 520,000 head of cattle were exported there last year, worth $318 million. As far as animal cruelty goes, the obvious question to pose is – what with these kind of numbers – surely the MLA could afford to have delivered a few stun guns to our northern neighbours?
As the recriminations drag on between politicians and industry this year, about who should have done what when, a more accountable industry structure will need to be brought in. The murky relationship between processors and the MLA is yet to be tested and the spotlight is yet to fall on a host of other obscure yet well-funded industry players.
While 7000 head of cattle lie stranded in holding yards in the Northern Territory, for instance, we are yet to hear from the Red Meat Advisory Council, whose role is to advise government on “whole of industry matters” and appears to be funded by the $40 million levy reserve collected by the Australian Meat Industry Council which is linked to the Australian Meat Processor Corporation which in turn spends its $18 million budget on R&D programs in conjunction with the MLA.
Farmers, taxpayers – it’s a slaughterhouse out there.