Q&A with ACCC Commissioner, Mick Keogh

06 December 2017

Q: What were the key themes of your presentation at Red Meat 2017 in Alice Springs?

A: The industry is at a point now where it doesn’t have the ability to access extra resources like land and water to increase output so growth in the future is going to have to come from productivity growth. In other words, producing more output from existing resources. One of the keys to achieving that productivity growth is the availability of data and information. It comes back to the old axiom of, you can’t improve it until you measure it.

Once we get to the point producers have access to increasingly useful information about things like carcase composition and growth rates and can link that back to for example, genetics, breeding and management systems, then we’re likely to see a substantial opportunity to improve productivity.

To me, access to information and data is a crucial part of achieving that increased output. At the same time, information in particular is seen globally as a very important aspect of competitive markets.

In the Australian share market for example, the transparency of market information is regarded as a very critical part of making that market work well. In the red meat industry, as we move further and further away from reliance on saleyards, market information is going to be critical to maintain competition in the market place.

From a productivity perspective and a competition perspective, access to data and market information is going to be more and more important in the future.

Q: How important is a commitment to price transparency in the red meat industry?

A: I use the example of the Australian share market – the two critical elements of that market are the trading rules, and the market transparency, made available by market information. People have confidence investing in the share market because the prices are readily available, and they have confidence in the trading rules. So if we want people to invest more in the red meat industry - and that will be needed to intensify production and improve productivity - then maintaining that confidence is going to be important. Market transparency and trading rules are going to be important to get right.

Q: How do you see the role of MLA in providing market information to the red meat industry?

A: The ACCC identified in its recent Cattle and Beef Market Study some areas of improvement in relation to the work MLA has been doing and I have to say I think MLA was already reviewing those areas anyway when the report was released. Our observation is that MLA has made some quite important improvements to the way market reports are made available and the enabling of comparisons between different market channels. We’re pleased with that response.

One of the critical issues though, to a large degree, is that MLA relies on voluntary information provided to it by the processing sector and others in order to compile those reports. It’s of concern when we see access to that information that is critical to the MLA reports being limited or curtailed by some in the industry.

Q: What are your views on objective carcase measurement and why is it important for the industry moving forward?

A: When we compiled our Cattle and Beef Market Study, one of the issues that came up repeatedly was the issue of the integrity of the grading system - 90% of slaughter cattle are now sold over the hooks and the grading system is the critical aspect of price discovery. Usually, price grids are heavily dependent on the grading applied to the half-carcase during processing. We received a lot of complaints about it and producers highlighted a range of issues that they felt reduced their confidence that they were being treated fairly when it came to grading.

In our view, objective carcase measurement has enormous potential to overcome all those issues and restore confidence, in the same way objective measurement has in the Australian wool industry in the last 30 or 40 years. The wool industry went from visual appraisal, to measured fibre diameter and yields, and that is now the bedrock of growers’ understanding of wool quality and very importantly, price determination and we can see the same potential in the cattle industry.

The quality of information arising from DEXA or similar technology is much improved. It can give very specific information about depth of fat cover, marbling, eye muscle size, and lean carcase yield. We can get a big improvement in the quality of information going back to producers which at the same time is very objective and much less open to dispute or concern from producers. It creates great potential in lifting the productivity of the cattle industry in Australia and improving the profitability of everyone in the supply chain.

Q: ACCC’s Cattle and Beef Market Study was released in March this year, what are the next steps in its progress?

A: When we released the report there were a couple of aspects to it. One is, when we looked at the issues we felt required attention by the sector, it was obvious there is no single authority that could act on those recommendations, so it was going to rely on an industry-wide approach to have a lot of those changes made. We had been encouraged by the Senate and Senate Inquiry process to take more concrete steps to get some of those changes and make stronger recommendations. We took the view that the ideal situation for a lot of the recommendations we made would be for the industry to collectively agree on some of the reforms that were proposed and implement them, rather than have the heavy hand of government coming in and making regulations or restrictions that may not work as well. We felt it was important the industry be given a good opportunity to look at and respond to those proposals before going down the regulatory path. We foreshadowed that we would revisit, within 12 months or so, and have a look at how industry responded to those recommendations and that would be a process that would occur in 2018 and lead to further recommendations about what needs to happen in the industry.

Q: Australia’s red meat sector is a high-cost production system compared to virtually all international competitors – how can Australia remain competitive globally?

A: We’re seeing now a shift to higher quality and higher value markets and production. Our biosecurity standards and our quality have kept us in the Japanese and the Korean markets and given us access to the EU market, and are getting traction in higher quality food service and retail outlets in developing nations. That’s an area our competitors aren’t as successful in.

For example, South American countries don’t have the same degree of biosecurity and traceability that we do, and similarly with competitors emerging from for example, the Indian subcontinent, we have systems in place and we have integrity and quality that they are not able to match at this stage. That’s where our best opportunities lie and when you look at those sorts of markets, the critical issue is the extent of the information and the integrity of the information associated with the product. The emergence of branded products, provenance, and standards around grassfed and grainfed products give consumers exactly what they want. All those things that differentiate us from average quality production, depend on information and the integrity of that information. It’s quite important we need to keep that in mind as we look to where the growth in the industry can occur.

To read Mick Keogh’s full presentation to Red Meat 2017, click here.

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