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SELECT COMMITTEE ON AGRICULTURAL AND RELATED INDUSTRIES - 01/04/2009 - Food production in Australia

CHAIR (Senator Heffernan) —I declare open this public hearing of the Senate Select Committee on Agriculture and Related Industries. The committee is hearing evidence on the inquiry of the committee into food production in Australia. I welcome you all here today. This is a public hearing and a Hansard transcript of the proceedings is being made. Before the committee starts taking evidence, I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee. Such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence. The committee prefers all evidence be given in public, but under the resolutions of the Senate witnesses have the right to request to be heard in private session. It is important that witnesses give the committee notice if they intend to give evidence in camera. If a witness objects to answering a question, the witness should state the ground upon which the objection is taken and the committee will determine whether it will insist on an answer, having regard to the ground which is claimed. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. Such requests may, of course, also be made at any other time.

I welcome the Cuthbertson gang. Boys, perhaps you could give your name, rank and serial number, and if you want to make an opening statement go for it. We will then ask you some questions.

Mr Dickinson —I would like to table the following submission that we are presenting here today. Cuthbertson Brothers believes this matter breaches the Trade Practices Act and that Swift Australia have used their market power to push players out of the sheep and lambskin market. They have also acted in a misleading and deceptive way to achieve these outcomes. We ask the Senate inquiry to call on the ACCC to launch a formal investigation into this matter. I add that I am very disappointed that Swift have not come along today.

CHAIR —Is that your opening statement?

Mr Dickinson —Yes.

CHAIR —Any further additions? Do you want to subtract or take away from anything you have in your submission?

Mr Dickinson —No.

CHAIR —Appearing with you on our schedule is Mr Ian Richards. Is he about?

Mr Barker —He is not here at the moment.

CHAIR —If he turns up, we will get him to tag himself.

Mr Barker —He indicated yesterday that he would be here.

CHAIR —He might have missed the bus. I have to declare an interest—I am a farmer and I sell thousands of sheepskins every year. We hang them up and sell the lambs over the hook. There is a process at the abattoir. I know the skin market pretty well. Could you give us the history of what went on before Swifts arrived? I am also disappointed that Swifts are not appearing, because there are always two sides to a story. Their assertion, to me, was that you fellas had the best of the market and they wanted to square it up somehow, but I am sure there are two sides to the argument. It seems a quaint system to me, if it is a fair dinkum tender, that you tender the price and the person who is supervising the tender gets to open the tender and can put a tender in after the tender documents have been opened. That is novel! We are all used to having likeable rogues in most industries, but that sounds like a bit of tomfoolery.

Can you describe what used to go on? The criticism is that it was a fairly concentrated market before Swifts arrived. It could well be argued that it is even more concentrated now, but could you describe the system that existed? Was it a serviced abattoir set-up where three or four people came in and bid or tendered? Tell us what used to happen compared to what happens now.

Mr Jones —Over the last several years there have been a couple of companies coming in and bidding. We had this problem with Tasman Group Services a couple of years ago. We came to an agreement to have an open tender. They would get descriptions sent to Melbourne, people would put in a price and we would put in our price. It would be opened up in front and the highest price got it. That changed when Swift took over. We were probably getting close to 70 or 80 per cent. All of a sudden they brought over this skin merchant from Melbourne, John Knox, as a consultant. We would put in a price, Southern Commodities would put in a price and several companies from Melbourne would put in a price. Then those prices were emailed or rung through to John Knox in Melbourne. He would go down and pick out which ones he wanted and then go 5c or 10c above the best price. Swift would take the skins, salt them down and send them to Melbourne, and he would class them out for them over there under Swift’s name.

CHAIR —What they are doing is not outside the law—or is it?

Mr Jones —It is supposed to be a tender.

CHAIR —I appreciate that it sounds like a quaint tender system if you can open the tender before you put your price in. Do they have to tender? Is it a service abattoir?

Mr Jones —It is a service abattoir.

CHAIR —So what is the legal obligation of the service abattoir to dispose of the skins which are the property of the lamb producer?

Mr Jones —The main thing comes back to the agent. He is responsible for selling the goods. He is representing the farmer, so it is up to him to represent the farmer.

CHAIR —There is an argument that under the system they have now the growers are getting more for their skins. Is that borne out in the outcome?

Mr Jones —No, they are not getting more for their skins.

CHAIR —Are they getting less for their skins?

Mr Jones —I would say so.

Mr Dickinson —We have evidence—

CHAIR —I am well aware of the vagary of the sucker market. What are you paying now for an unshorn sucker skin?

Mr Jones —Unshorn is about $6.50.

CHAIR —They were $14 last year, were they not?

Mr Jones —Yes, but the market has gone back quite a bit.

CHAIR —Swifts argue—unfortunately, they are not appearing, because we would love to hear their argument—that it is a fair tender system and that it is conducted by an independent person, but are you saying it is not and that in fact the tenders are sent to Melbourne and the so-called independent person opens them and can put in a bid after they are opened.

Mr Jones —Yes. Swift are actually buying the skins. He is a consultant for them and he picks out which line. They sell them here; they go to Melbourne; he classes them out and switches the skins off.

CHAIR —So other than the tender system, if they said that they were not going to have a tender system, that they will offer the producer at cost at the abattoir and then it will be up to them to dispose of the skins, and Swift will make further profit. Is there anything to prevent them from not having the tender system altogether?

Mr Jones —You have got to have the tender system to get the best price for the farmer. The skins belong to the farmer, controlled by the agent. The agent in Tasmania guarantees payment and in the event of the process for us not paying the government finds the money.

CHAIR —So what arrangement does that person, the agent, have with the abattoir to ensure that the grower gets the best price? Obviously we do not want to see anyone going out business, and competition, as we have proved many times recently in the fertiliser market, makes a lot of difference. Is there evidence that that is not happening now?

Mr Dickinson —I would say that the agents have a responsibility to follow through the sale if they are taking a commission from the product. In a lot of instances that is not being done. Two years ago we tried to change this system. Two years ago we went to the TFGA and we asked them to put someone up who was independent to take the prices. We would ring the prices through and within two hours, or whatever the time was for the tender, they would determine who got what. It means that the agent has got to have either a representative on site or come to some arrangement that we ring him.

Mr Jones —There was a case a couple of years ago too in Devonport when we put $7 on some sheepskins. The agent rang us and asked what price we had put on them. We said $7 and he said, ‘How come I only got $4.50?’ This was the type of thing that was happening when people were selling the skins on their behalf.

CHAIR —Is it the responsibility of the grower? For instance, if you go to a hospital these days it pays to follow your father or your mother—the patient—through the system because the system can let you down. Is it a case of the notice that should be given to Tasmanians is that if you are a lamb grower you should take an interest in your skins on the way through the process? Are they taking that interest? Is it a matter of, as you say, the agent getting a commission here having an obligation to maximise the profit for the grower? Is that happening? Are the growers taking an interest in their skins?

Mr Jones —They are starting to.

Mr Dickinson —It really needs improvement—I agree with you, Mr Chairman. The whole system needs improvement. That is what we have been on for nearly two years with this matter. We have gone to the TFGA. We have had meetings with the agents. We have been pressing for an independent open tender system that is conducted professionally and properly, and we have been unable to get that. And when we take a stand we are barred from—

CHAIR —The consolidation of the market is a problem which reduces competition, which is an ACCC thing. Can you provide the committee with evidence that under the tender system that exists now the tenders are put in and after the tenders are put in Swift can put a price in to top the tender?

Mr Dickinson —We can show you documented evidence.

CHAIR —Thank you. If you can provide that to the committee, we would be grateful.

Senator BARNETT —You have got that with you, have you?

Mr Dickinson —Yes, we have.

Mr Townsend —Section 9 has a number of details which are worthy of note around the tender process. One thing that is also worth noting in the context of these questions is the ever moving feast that has occurred over the last few months with tendering at Longford where the tender process appears to change on a weekly if not a daily basis. Doug and Wayne are better equipped to explain the details of that information.

Senator BARNETT —Through you, Chair, this document is a public document—correct?

Senator O’BRIEN —It is if it is a submission that we have received.

CHAIR —I am confirming that that is correct, and perhaps we should put that on the record. Are you happy for these documents, which are in your submission, to become a public document—

Mr Dickinson —Yes.

CHAIR —or are some of commercial-in-confidence?

Mr Dickinson —We are comfortable with that.

Senator O’BRIEN —Could you indicate to the committee how these documents show a post-tender closure bid by anyone?

Mr Jones —This document here shows that they belong to a Queensland company called Marcelford.

Senator O’BRIEN —Which one are we looking at?

Mr Jones —Section 9.

Mr Jones —These all belong to a service kill at Devonport. You will see the numbering down the side. There is the number of skins, the date, the buyer—that was who they purchased them from, the farmer—and then you will see the rate, and they have got Knox written there: $5.75, $4.55, $6.05, $6.05, $6.05, $6.55, $5.75. Cuthbertson’s price was $5.50. Southern Commodities, which is Beasey, was $5.70, so there was 5c the difference. The next lot was $4.55, Cuthbertson’s was $3.00, Beasey $4.50, which was 5c the difference.

Senator BARNETT —Who has written this in?

Mr Jones —I have written those in with our prices.

Senator BARNETT —So you have written in Knox, Cuthbertson and Beasey—

Mr Jones —No, Knox’s price was there.

Senator BARNETT —Knox was there but you have written in Cuthbertson and Beasey?

Mr Jones —That is right.

Senator O’BRIEN —So just to clarify what this document is showing us: you have indicated that the rate, that is, the successful tenderer which is typed in and headed ‘Knox’, is the successful bid on each of those—

Mr Jones —He was buying on behalf of Swift.

Senator O’BRIEN —Cuthbertson’s is what your bid was?

Mr Jones —That is right.

Senator O’BRIEN —And Beasey is what their bid was?

Mr Jones —That is right.

Senator O’BRIEN —You are seeking for us to extrapolate from that that in each case Knox bid 5c higher than the other bids—

Mr Jones —That is right.

Senator O’BRIEN —and it is your indication, in addition to this document, to tell us what the difference was. I suppose that does not prove anything happened other than your proposition, I take it, that it is unlikely that in every case there would have been a 5c difference on the high side for each of Knox’s bids in a tender process that was closed. Is that right?

Mr Jones —Yes.

CHAIR —For clarification, does Knox have a commercial interest in these skins?

Mr Jones —Only in that he has a service fee he puts on for Swift.

CHAIR —To process them and grade them?

Mr Jones —Yes.

CHAIR —So he has a commercial interest?

Mr Jones —Yes.

CHAIR —So it is in his interest that Swift wins the tender?

Mr Jones —That is right.

CHAIR —Yet he, allegedly, is the independent processor of the tender system. That in itself is bullshit, in my book.

Mr Jones —He does not even see the schemes in Devonport. They are told the prices that Southern Commodities and Cuthbertson’s are and he just goes and—

CHAIR —But clearly he has a conflict of interest.

Mr Jones —Yes, very much so.

CHAIR —That goes to more than the evidence. The system is flawed because there is a conflict of interest in the delivery of the system.

Senator O’BRIEN —Who prepared this typed document?

Mr Jones —Swift Devonport. It came to us by mistake.

Senator O’BRIEN —It says; name ‘Cuthbertson’, address ‘Hobart’. That was a mistake, was it? It should have gone to someone else?

Mr Dickinson —It should have gone to Swift Devonport direct—or to Melbourne.

Senator O’BRIEN —Who is the agent that is supposed to be managing this?

Mr Jones —There is no agent there.

Senator O’BRIEN —So in the process of sale—and I just need to be clear on this; perhaps the Chair is but I am not—someone buys the lambs and the skin price is a separate component, I take it?

Mr Jones —Yes.

Senator O’BRIEN —And that is done through an auction process or a private sale process?

Mr Jones —Through a tender.

Senator O’BRIEN —Not the skins, the lambs. The farmer puts the lambs up for tender and there is—

CHAIR —No, he doesn’t.

Senator O’BRIEN —Could you explain it, Mr Jones? I would rather the witnesses explain it than you, Chair, because this is about what has happened to them.

Mr Jones —The stock buyer will go to the farm and negotiate the purchase at so much per kilo. The lambs then go into the abattoirs and are slaughtered and put over the scales.

Senator O’BRIEN —When the negotiation is done at so much per kilo, the skins are a separate component of the sale?

Mr Jones —That is right.

Senator O’BRIEN —But there is not a price for the skin?

Mr Jones —No.

Senator O’BRIEN —The understanding is that the skin is separate from the other part of the transaction?

Mr Jones —Yes.

Senator O’BRIEN —And that will be the subject of a separate sale process? Is that how it should be described?

Mr Jones —That is right.

Senator O’BRIEN —Perhaps you can clarify this for us. It sounds as if there are not very many specific details about how that separate sale process is carried out.

Mr Jones —No. It is up to the buyers at both companies to go to the tender. They put in their prices—

Senator O’BRIEN —No, I am getting back to the root of the transaction. The farmer sells on the terms at which he sells. There is an understanding or agreement of some sort with regard to the sale of the skin. Is there anything specific about that? Is there any documentation you could refer us to that would indicate what the farmer could legally expect in the conduct of the sale of the skin?

Mr Jones —No. They expect the best price but, if it is through an agent, the agent then should look for the best price.

Senator O’BRIEN —So it is all implied obligation, is it—nothing written?

Mr Jones —That is right.

Senator O’BRIEN —There is an implied obligation for the buyer to dispose of this skin at the best price?

Mr Jones —Yes, the best price.

Senator O’BRIEN —But there is no written or formal obligation?

Mr Jones —No.

Senator O’BRIEN —In the process where the skin is sold through some tender process, flawed or otherwise, is it the buyer’s obligation to see that there is a best price achieved? If so, where is that obligation set out?

Mr Jones —It is up to the agent. If it is sold through an agent, it is up to the agent to get the best price, because he is getting a commission off the lamb and off the skin.

Senator O’BRIEN —The agent has gone out and done the purchasing?

Mr Jones —He has worked in with the farmer and the buyer.

Senator O’BRIEN —He has some undefined obligation to the seller?

Mr Jones —Yes.

Senator O’BRIEN —There is no written contract anywhere that we could refer to?

Mr Dickinson —They are governed, I expect, by one of the auctioneers and estate agents acts. These agents are all registered and have certain abilities and qualifications. The agent would contact the farmer that they are selling for. They would go to the meat company and ask, ‘What price are you paying for lambs with live weight of 50kg, dressing 24s or 22s, heavyweights’—

CHAIR —We are on about $4.80 at home at the moment.

Mr Dickinson —Are you? They would probably take the meat company along and say, ‘Yes, on those lambs there that reach these weights we’ll pay $4.95’—or $4.50 or whatever you like for an example—‘on weight and grade.’ Those lambs would go in and be delivered, and then we would inspect them on the floor prior to the day of the kill. That is the normal process. You are handed a list of what is available for the kill and you go through and price everything. You then hand that, theoretically, to the agent, but if he were not there you would hand it to the meat company representative.

Senator O’BRIEN —It would be helpful, if there are such things, for the committee to be referred to any documents or laws which refer to the obligation of the agent. The other question I have is whether the agent is able to say that even in a flawed tender process—and, judging by this document, this would be a factor for this sale—they have obtained the best possible price.

Mr Jones —Have they ‘obtained’?

Senator O’BRIEN —If, on the basis of the document you showed us, they have a price 5c higher than any other bid, does that enable them to say they got the best available price for the grower?

Mr Jones —No, it does not, because you have a fellow like Knox whose price could be another 50c more. Why is he going to pay 50c when he can buy them for 5c or 10c?

Senator O’BRIEN —But they would say—playing devil’s advocate—‘Here are the bids; I got you the highest bid.’

Mr Jones —But they are not told who runs second or third.

Senator O’BRIEN —I understand that. I do not want to enter into the debate about the nature of the process—we have heard plenty about that. I just wanted to go back to the question of what the obligations are in this process, given that you are alleging (a) that it is unfair to Cuthbertson, which we understand, and (b) that there is no guarantee that the growers are getting the best price. That is the other proposition that I am seeking to explore.

Mr Dickinson —We proved that later in an experiment—Ian Richards is not here—where a farmer had 800 lambs and he sent 400 of the lighter lambs to Devonport. We bought those at what price?

Mr Jones —I think it was $6.50.

Mr Dickinson —Because our price was being disclosed to Swift, when the farmer sent his 400 heavier-weight lambs which should have made more money to Longford, we purposely quoted a very low price. It was a lot less than we did at Devonport. Swift bought them at 5c more, and they were something like $3 or $4 less in value than the ones at Devonport.

CHAIR —Do you have any paperwork to back that up?

Mr Dickinson —Yes. We have a letter from Ian Richards in relation to that.

CHAIR —That will be fairly telling.

Mr Dickinson —We will find that for you.

CHAIR —I am going to throw to Senator Barnett, but I first say that this is a wake-up call to the growers. Get off your arses and take an interest in your skins, because you own them till they are delivered somewhere.

Mr Dickinson —Absolutely. We have been trying to do that for two years.

CHAIR —The news to the Tasmanian Farmers and Graziers Association is that they ought to get off their backsides. It is an argument that incidentally they are getting 5c more for their skins under this system, but Senator O’Brien’s point was that it would be till they put you fellas out of business. Then they will use market power to screw the growers. The growers ought to get off their backsides.

Senator BARNETT —Congratulations on your submission. This has to be one of the most professional and comprehensively prepared submissions that we have seen in some time, and it is most useful to the committee. I also declare an interest via my late father, who pioneered the export of live sheep out of Tasmania. With that background said, I note you have provided to this committee pretty telling evidence about the unfair tender process. You have also made a number of other allegations, and I would like to draw those out and ask some questions about them. You have referred to section 46—misuse of market power—of the Trade Practices Act and you have said that you have been locked out of the Longford abattoir. You have also said that there is evidence that farmers are getting less for their skins, and I would like you to back that up. You have also said that Swift going direct to the farmers may force agents like Roberts and Elders out. We would like to see a little bit more evidence of that if you can back those claims up.

Mr Dickinson —We had a meeting with the TFGA. The first meeting they refused to come to. We had a second meeting with TFGA on the 16th of last month and Swift attended. Swift said at that meeting that it is their aim—and they have been doing it—to buy 88 per cent of their requirement direct with no agent involved and no skin buying involved. That is their aim. Here in Tasmania I would say 80 per cent of your product is generally handled through an agent. The agent handles the product and contacts an abattoir, whether it be this abattoir, that abattoir or a mainland buyer. Quite a bit goes out of the state to the mainland. The agent handles that. Swift’s aim, as I see it, is to get us out of the market as the person in between who is giving the prices on the lamb. The next move is to get the agent out and buy direct.

Senator BARNETT —You have had your meeting with the TFGA. I notice you have a reference to that meeting in your documents. You see that as evidence to back that up.

Mr Dickinson —Yes.

Senator BARNETT —Why is being locked out of the Longford abattoir so significant? I also want to deal with the issue of the farmers getting less money for their skins.

Mr Dickinson —The lock-out resulted because we refused to give Swift our price. Until we got a fair, open and honest tender system, we said—and we ran press releases to say—we would give the prices to the agent or the farmer, but we refused to give them to the processor because of the dishonest nature of the tender system. When we did that, Swift locked us out. When our employees went to the gate at half past six in the morning to tender for the skins, everyone was allowed in but us. We refused to give them the tender system for the very reason that the tender system was not honest. So we started to give it to the farmers. At that stage the agent became a lot more interested. For a week after that we bought 80 per cent of the skins, didn’t we?

Mr Jones —For the week we put the tenders in, yes—80 per cent. Then on the Monday we bought 90 per cent. That is when they stopped us.

Senator BARNETT —So after that they stopped you.

Mr Jones —Unless we gave the tender prices to them.

Mr Dickinson —At that meeting on the 16th, Swift said, ‘You can come back in—we’ll let you through the gate—but you give us the tender prices.’ We said, ‘We can’t give you the tender prices because the skins don’t belong to you.’

Senator BARNETT —Is part of your evidence that the farmers are getting less?

Mr Dickinson —That is part, but we have documented evidence—

Senator BARNETT —Is that part of the submission?

Mr Townsend —We have a document to follow up on Senator O’Brien’s query regarding the skin price for Devonport and Longford, but it is not part of our submission.

Senator BARNETT —Are you happy to table that?

Mr Townsend —Yes.

Senator BARNETT —You have been reported in the media in the last 48 hours saying there are 20 jobs at risk. Where are they and, if we cannot find a solution, what are the consequences?

Mr Dickinson —We are a fairly conservative company. I do not have any borrowed money and I have money in the bank. We are living on our own resources, our own savings. We have not put anyone off. I am hoping that Swift will come to their senses or that we can get sufficient support for them to open the gate and let us in. They have nothing to lose in letting us compete. They are not frightened of us, surely. We are the smallest sheepskin base in Australia and I reckon they are the biggest meat company in the world. What have they got to lose? We are employing all our men and getting about half our skins at the moment.

Senator BARNETT —How many have you got employed?

Mr Dickinson —About 20 direct and indirect.

Senator BARNETT —Where are they?

Mr Dickinson —Launceston, Devonport and Hobart.

Senator BARNETT —What is the break-up?

Mr Jones —Five in Devonport, about 15 Launceston and three or four in Hobart.

Senator BARNETT —And the consequences?

Mr Dickinson —If we close it, the consequences for the farming community are pretty dire. You will have virtually no-one quoting on the skins except Swift. There are all the little abattoirs at Cygnet, where we provide salt and some machinery. We also supply salt and equipment to Flinders Island.

Senator BARNETT —And they employ eight or nine.

Mr Dickinson —We buy their product, arrange for it to come to us and advance the salt payment.

CHAIR —If Swift managed to make you unviable that would have an impact on all the smaller operations. You would be out of the market and they would say, ‘We’ll have to send these to Swift to get rid of them.’

Mr Dickinson —They will put them on the tip, I reckon.

Senator BARNETT —How long have you got to sort it out?

Mr Dickinson —At the press conference yesterday I said that we have probably got two months.

Senator MILNE —A little while ago the Chair started talking about the consolidation of the market in Tasmania’s concentrated system, but it has been put to me that these kinds of practices have gone on for some time. I see in the Minter Ellison advice the comment:

... a misuse of market power manifests in conduct in the supply (or refusal to supply...) of particular goods or services.

Can you tell me whether Cuthbertson used to take skins from Cooee Abattoir?

Mr Jones —Yes.

Senator MILNE —Can you tell me why you stopped taking skins from Cooee in April last year?

Mr Jones —Those skins were preserved down there, salted in their works, and we received them on a weekly basis. Then for approximately two months we saw that the hair was coming out of them continuously so they were not treated properly. We rang and told them time and time again and they just said that the skins were all right and that it was our problem. So we just refused to take them because they were damaged.

CHAIR —They had gone off, had they?

Mr Jones —They had gone right off. They were salting them down the next day.

CHAIR —I understand what happens when they go off.

Senator MILNE —Did you provide anything in writing to them saying that their skins were not of a quality that you would wish to buy? Is there any paper trail of that?

Mr Jones —No, I do not have any paper trail of it. It was done through our Devonport store.

Senator MILNE —What would you say if I put to you that Cooee Abattoir had given one lot of skins to Aberfoyle and that they took a phone call from Chris Jones saying, ‘Don’t shoot the messenger, but we are not taking your skins anymore.’? Is that true?

Mr Jones —Yes. That was when we were repeatedly ringing them up and telling them that the skins were damaged and were of no value.

Senator MILNE —So there is no paper trail of any of that criticism of the standard of the skins but the week after they gave one lot of skins to Aberfoyle they were told that you would not take their skins anymore. That is a coincidence, is it?

Mr Jones —No, they were told several times over the weeks that if they did not improve the curing of the skins we could not accept them.

Senator MILNE —I find it extraordinary that when an abattoir has been supplying for a long time that there is then an occasion when they supply to somebody else and without any paper trail they get a call to say—

Mr Jones —No, it was nothing like that. I did not even know they were supplying anyone else. There was a change of management. I was dealing with Mr Gee and we had no problems whatsoever. Then he left and went to the mainland, from what I can gather, and his sister took over and our Devonport manager told her and he was abused by her. We rang them again and told them several times that if they did not improve we could not accept the goods.

CHAIR —For clarification, how many lambs do they process a day at this place?

Mr Jones —Approximately two days a week they kill about 200 lambs—

CHAIR —So it would not be a viable proposition as it is—and I come from Junee and Junee Gold is bloody good lamb! So you pick the skins up green—

Mr Jones —No, they used to bring them across—

CHAIR —It would be much better if they were green when they went to your setup.

Mr Jones —The cost was too great—

CHAIR —I understand that the viability is not there.

Senator MILNE —I may seek some further clarification on notice so I will come back to you on that. I would like to go on now to the particular circumstance. There has been a lot of talk in parliament and in the media about the ACCC. It is not clear to me where it is up to in the process with the ACCC. Has a formal complaint been made—if so, by whom? Has the Tasmanian government also complained to the ACCC or just the company? Can we just have a clarification, please, where it is up to with the ACCC so that we as a committee have some sense of that.

Mr Dickinson —We complained to the ACCC in writing on 16 January I think. John and I went to see them and presented the letter to them. They have asked for a lot of correspondence, which we have supplied. We had a visit about 10 days ago. I got the impression from the ACCC that they were investigating it. They were interviewing people who we had mentioned in the correspondence but they had not contacted Swift directly. That is they had made one phone call to one of the Swift employers and were asked to put it in writing. As I understand, the ACCC have not put anything in writing to Swift and that was up to about 10 days ago.

Senator MILNE —Okay. What about the Tasmanian government? Are you aware whether they have made any representation to the ACCC in view of the importance of this issue to jobs and diversity in the Tasmanian economy?

Senator BARNETT —Or indeed directly to Swift, through you, Chair.

Mr Barker —The Tasmanian government have been monitoring the position. They have been briefed regularly on the developments of this. In fact, we are seeing the minister again we expect next week. We arranged that meeting today. We received a call before I came in. They have simply been monitoring it. My understanding is they are clearly aware of how difficult Swift is to deal with. That is for them to answer. We hope that we can get some support from them. That is what we are asking for.

Senator MILNE —What sort of support?

Mr Barker —An indication of support and of their concern with what is going on so that it can supplement our submissions to the ACCC.

Senator BARNETT —But you have not received that yet?

Mr Barker —Not yet. They are sympathetic to our discussions.

CHAIR —Being an interloper, could you explain to me the size of the lamb kill? It does not have to be precise but how many lambs would you kill a year in total?

Senator BARNETT —Chair, just on the point that Senator Milne has asked about, has the state government made any representations to Swift to your knowledge?

Mr Townsend —As far as we can understand they are currently in discussions with Swift regarding the King Island issue.

Senator BARNETT —I am not asking about King Island, I am asking about your matter—Cuthbertson’s concerns.

Mr Townsend —My understanding is that the government has been monitoring it and has had some discussions with the TFGA about organising some kind of process to facilitate an outcome. Recently, we have had a series of meetings, and they are documented here, with the TFGA, the second of which Swift attended and a proposal was put. I think the meeting we are talking about with the government now is for us to go back to them and say, ‘We attended the TFGA thing, nothing came out of it, now’s the time to come forward.’

Senator MILNE —To follow up on that in relation to the TFGA, there has been quite a lot of criticism in the media about the role that they have played in this from day one. There are a variety of proposals that have been put forward. Can you sum up for me the criticism of the TFGA from Cuthbertson’s point of view?

Mr Townsend —We have a letter from the agents passing comment to the TFGA. Mr Dickinson is probably in a better situation to articulate it than I am.

Mr Dickinson —In the first meeting we had with the TFGA and the agents, the TFGA indicated that they were not interested in doing anything because the fee that they received ex the primary producer goes via Swift.

Senator MILNE —Could you say that again?

Mr Dickinson —The fee that the TFGA gets via the primary producer goes from Swift’s.

CHAIR —What do you mean when you say ‘the fee’?

Mr Dickinson —Generally there is a kill fee that is paid to the TFGA when you are killing cattle. If you are a member of the TFGA, you agree to pay so much a head, so many cents or so many dollars.

CHAIR —That is dodgy!

Senator MILNE —So what you are saying is that there is a direct conflict of interest from TFGA in coming to some sort of resolution which prioritises a fair outcome.

Mr Dickinson —That was pointed out to us on the 16th, yes, and we said no more about that.

Mr Barker —If I can answer that question: in section 8 of this presentation, there is a letter that was sent—initially unbeknownst to us—by the agents to the TFGA which expressed their concern about what went on.

Senator BARNETT —I have read that letter, but I have also read the TFGA’s response to it, which is in section 7. I note that for fairness—to ensure that there is a balance in the argument.

Mr Barker —I was going to continue that we also tabled in this documentation the TFGA’s response to the letter that the agent sent. As I said to you before, we did not know of this letter until the TFGA sent us a copy. The scenario was that we were in attendance at that meeting and we would concur with the agent’s position.

CHAIR —What is the bloody fee for?

Mr Dickinson —I suppose the fee is a contribution that you make to the body that represents you.

Senator O’BRIEN —I think these are questions you could ask the TFGA instead of a third-party witness.

CHAIR —No worries.

Mr Dickinson —Since then, the TFGA held a further meeting, which Swift came to, and have endeavoured to broker a satisfactory arrangement. They have tried very hard with it.

Senator MILNE —We will take that as a response for now and pursue it with TFGA this afternoon. I would like to go big picture now and try to understand what you think Swift’s ambition is in the Tasmanian market generally, not just with skins. I also see that the Australian Lamb Co. has been shut out of Longford. We have seen what has happened on King Island. I realise it is a personal view—it will be taken as such—and no-one can gaze into a crystal ball, but I am interested in what you think the strategy is. Where do you think Swifts want to end up in Tasmania?

Mr Dickinson —Swift are the biggest meat company in the world. Swift have the only export sheep and lamb works in the state. Swift have unlimited resources. Swift, by getting us out of the skin market as an independent person and getting themselves or their agent in, control the skin market. They will eventually push the livestock agents out. Their aim—and they have stated this—is to buy 88 per cent direct on the mainland; they do not want anyone else involved. They have pushed the Australian Lamb Co. out. They were killing between 40,000 and 70,000, and we used to quote on their skins. They were given about a fortnight’s notice to get out. They have had to go to the mainland. They are taking them out of the market on the prime export lambs for Tasmania, of which there are roughly 800,000 processed a year.

Senator MILNE —And they have been able to do that because they own Longford. Was there any contract that required them to process for the Australian Lamb Co.? I do not understand why they were able to take that over without having to guarantee the service to that company.

Mr Dickinson —All I can say is that I have spoken to John Verrall, the owner of the Australian Lamb Co., about it. We have dealt with them over the years and quoted on their skins. We have been successful about 65 to 70 per cent on their skins—and theirs are very good skins—at all times. We have a letter here that says to me that they just got a fortnight’s notice. I do not think a contract matters to Swift. I do not think it represents anything for Swift. Swift’s management are very different. I feel that it is their endeavour to get control of the sheep and lamb market and, eventually, the cattle market in this state. There is only one export works and they are controlling what goes through. Here we are with Swift pushing out the Australian Lamb Co. today, yet two days this week they will not have one sheep or lamb to kill in their plant. Is that sensible?

Senator MILNE —If they succeed in that, get rid of the Australian Lamb Co., get Cuthbertson out of it, shut down the abattoir on King Island and take the stock elsewhere, where does that leave the Tasmanian brand? Where does that leave Savour Tasmania and our high-niche marketing, brand identification and so on? Is the Tasmanian government looking at this as an opportunity cost to agriculture in Tasmania?

Mr Dickinson —It is very similar to the King Island brand. Both are very good brands. John Verrall spent 15 years developing the Australian lamb market around the world as authentic Tasmanian. In the stroke of a pen, they pushed him out. He tells me that he now has to go back, pay the freight to the mainland and get another plant to process his stock. Worse than that, he has to go back to all the buyers of authentic Tasmanian meat and tell them, ‘Sorry, it’s now Tasmania lamb killed in Victoria, processed in Victoria and freighted out of Victoria,’ when he said they were 100 per cent Tasmanian. That ruins the marketing that he has done for 15 years, and it gives very few other meat exporters any chance to use the Tasmanian brand.

Senator FISHER —If the scenario that Senator Milne painted and the consequences that you are talking about eventuate—I am a Senator for South Australia; like Tassie, we try to punch above our weight—would there be an economic impact on Tasmania, and what would it be?

Mr Dickinson —We have estimated that the loss in Longford alone in the lamb and sheepskin market will be $10 million to the primary producer alone, without the meat. The Australian Lamb Co. are going to pay somewhere between $10 and $13 to process these lambs in Victoria. That comes off the farmer.

CHAIR —The farmers in Tasmania ought to be marching on parliament. This is ridiculous. This is classic market consolidation.

Senator FISHER —You have talked about farmers, other buyers in the market and livestock agents being affected. Do they know about your evidence today, and where are they?

Mr Dickinson —I have made representations to the agents. Two years ago we put the proposition to them: ‘We have to have a fair and open tender. Let’s get it all cleaned up.’ Swift swing a very big baton, believe you me. I have a letter signed by a farmer saying that he had Swift come down to his property to inspect his cattle. This is a man selling 500 to 600 cattle and 2½ thousand lambs and sheep a year. The Swift buyer came down and priced the cattle—and this is typical of what has been going on—and the owner said, ‘Your price is not as good as your competition at Greenham,’ and the senior buyer for Swift turned round and said, ‘I’m not interested in your sheep and lambs, so you’d better sell them to Greenham too.’ But Greenham does not handle sheep and lambs. Most farmers are frightened. We got to the stage where we were inspecting sheep on trucks outside the gate or on the property. Swift have been saying, ‘We won’t price your skins.’ What happens then? You are out.

CHAIR —I have just received a letter signed by Mr George Mills and dated 31 March. It says:

Contract with Swift for 75 lambs @ $4-00 dressed weight …

               …             …             …

Therefore I approached Cuthbertsons to inspect the lambs prior to their delivery and quote for the skins.

Lambs delivered on Wednesday March 18 to Swift. Agent was instructed by me to ask Swift to quote a price for the skins. Swift asked the agent that if a price had already been quoted for the skins; the agent replied “yes” and Swift refused to quote and said “that they would not tender for the skins, that they would only purchase the skins if no-one else had tendered for the skins.”

That says it all. What concerns me is not only the skins but the service kills going out of Tassie. Tasmanian farmers ought to get down to parliament and protest.

Mr Dickinson —I agree with that.

Senator BARNETT —You have tabled a letter here early today which is addressed to Wayne, signed by Ian and on Richard’s livestock letterhead—is that correct?

Mr Jones —Yes.

Senator BARNETT —The way I read this brings me to a similar of view to the chair’s in that it is a rev-up big time for Tasmanian meat producers and Tasmanian farmers. It is a wake-up call. The evidence here says:

Assessed Elson Pastoral Lambs Monday 12th January

Weighed every lamb. Put into weight classes.

And then for the heavier lambs, Swift paid $3.60 per skin according to this document and for the smaller lambs Woolworths paid $6.50 per skin—nearly double. Ian at the bottom says:

The obvious ridiculous Price for Larger skins at Longford remains unanswered, how can an agent explain this to a client

This is another cold, hard fact that you are tabling before our committee of severe concerns, problems, perhaps misuse of market power, vis-a-vis farmers, your business and the agents, and that is the reason for their concern. So you see this as all part of the same pattern of behaviour?

CHAIR —Can I just clarify that? There has obviously been a copy. I assume that they were either unshorn or shorn on the same day—they were the same sorts of skins.

Mr Jones —They were exactly the same types of lambs. We paid $6.50. The others went into Longford and we knew that we would not get those.

Senator BARNETT —So you see it as a wake-up call.

Senator O’BRIEN —Woolworths do not buy skins, do they? It is Cuthbertson who bought the $6.50 skins and it is Swift who paid $3.60—

CHAIR —For the same skins, yes.

Senator O’BRIEN —from the same flock but of larger lambs.

Senator BARNETT —They are just highlighting their predicament; they cannot explain it; it is inexplicable.

CHAIR —Thank you very much for your evidence today. The farmers and graziers down here ought to get off their backsides. By the way, to put that into the context of the food inquiry, obviously when it comes to the future food supply if you monopolise the market and put people out of business you reduce the capacity of farmers to produce food. That is how I see it.

Mr Barker —Absolutely. Thanks very much to the committee. We appreciate the time you have given us.

[10.58 am]