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Rural and Regional Affairs and Transport References Committee
04/08/2015
Effect of market consolidation on the red-meat-marketing sector

ATKINSON, Mr Robert, Private capacity

WARREN, Mr Gary Frederick, Private capacity

Evidence from Mr Atkinson was taken via teleconference—

Committee met at 08:31

CHAIR ( Senator Sterle ): I declare open this public hearing of the Senate Rural and Regional Affairs and Transport References Committee. The committee is hearing evidence on its inquiry into the effect of market consolidation on the red-meat processing sector. 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 and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee. The committee prefers all evidence to be given in public, but, under the Senate's resolutions, 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 ask 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 a request may of course also be made at any other time.

On behalf of the committee, I would like to thank all those who have made submissions and sent representatives here today for their cooperation in this inquiry. I welcome our first witnesses. Would you like to add anything about the capacity in which you appear?

Mr Warren : I am here in a private capacity, but I am trustee for the Warren Family Trust and my children, my son-in-law and daughter-in-law, and the trust currently run around 1,800 head of cattle in the Biggenden shire.

Mr Atkinson : Thank you very much for inviting me to the hearing. I am part of a family beef enterprise between Hughenden and Winton in north-west Queensland. We were running up to 6,000 head; we are back to about 1,800 with this drought. One property de-stocked and one is about to be de-stocked. I am also chairman of a group called NorthBEEF Incorporated, which is a group of producers here in the north trying to get a new abattoir running.

CHAIR: Okay, we will talk about that as we go. The committee has received your submissions as submissions Nos 22 and 24 respectively. Would you like to make any amendments or additions to your submissions? Mr Warren?

Mr Warren : No. It is no good beating around the bush when you want to knock it down, so let it stand.

CHAIR: Mr Atkinson?

Mr Atkinson : I have some additions.

CHAIR: Okay. Seeing as how you cannot hand them to us—are they lengthy?

Mr Atkinson : No.

CHAIR: Okay. I am going to give you the opportunity to tell us what they are before we go to questions.

Mr Atkinson : Is this my opening statement as well?

CHAIR: You have done this before, Mr Atkinson, so, while you are at it, go for it—opening statement and your additions to your submission.

Mr Atkinson : My opening statement is that the Australian beef producers have been screwed by the processing industry for decades. What I would like to add to my submission are some observations. There are between eight and nine million head of cattle slaughtered annually in Australia. There are somewhere between 70,000 and 80,000 cattle farms in Australia and, according to MLA records, there is meat value off those farms to a value of $12.75 billion annually. What a terrible turn-up, with submissions, for this very important subject! When you take out the processors' submissions, the non-producers, the 12 state farm organisations, cattle council or other agency submissions, and the nine city or shire council submissions, there are only 33 submissions from beef producers. Why have we had such a poor turnout? I believe that producers are frightened, in many cases, to put in submissions because of the damage that could be done to them when they sell cattle next time. I also would like to ask: why are there some witnesses at this hearing today who do not have any submissions at all? At least, that is what the program I have says.

CHAIR: Is that it, Mr Atkinson? Anymore?

Mr Atkinson : No, that is it.

CHAIR: Pretty straight to the point. Thank you, Mr Atkinson. Mr Warren, would you like to make a brief opening statement?

Mr Warren : Yes. As I stated, I am trustee for the Warren Family Trust. I do not currently have any cattle in my own right. My children, as I said, run approximately 1,800 head in the Biggenden and Childers shires. To put you in the picture: I am not a coming from somewhere in the backwaters. I started working in a butcher shop and slaughtering cattle for my uncle when I was about eight years old. I did that up until I was about 14 when I started a boilermaker apprenticeship making farm machinery. I still worked in the butcher shop after work and killed on weekends. After the apprenticeship I went to work for Tancred Brothers at Beaudesert. I was there two days, I think, as a boner and slicer, and I became foreman of the bottom boning room. Another three days and I was in charge of the top boning room. I think the following week I was quality control officer for the whole plant, which I took on for a period of around four years. I was quality control officer in charge of all export meat and so forth, which comes back to residues and everything else associated with an export plant.

Because of my engineering background, while doing this job I started finding problems that were easily solved in the meatworks. Geoffrey Tancred put me in as more or less his troubleshooter. Then I began building abattoirs. I ran the Mount Isa meatworks and rebuilt the Katherine meatworks back in those days, so I have had a full background in export plants. In the following years, when Tancred Brothers went, I designed and built abattoirs—five, I think—in New Guinea. I worked on abattoirs in Malaysia. I designed the Santori plant in Indonesia. My brother is currently, and has been for about 20 years, general operations manager for Santori in Indonesia—and Austasia—with all their feedlots and abattoirs in Indonesia and dairies in China et cetera. I think I have had a pretty fair backgrounding in the export industry. That is where I come from.

My submission is that there are a few problems. The processors use the NVD as a means of controlling competition. The problem only gets worse with the consolidation of the export processors. Processors maintain that all private buyers of cattle must hold the cattle for a period of 60 days before slaughter. They also maintain that any residue in cattle should be gone after 60 days, and they would know who to blame if the residue was found. We often kill cattle straight after a sale at local abattoirs, so does this mean that the Australian public is eating meat with residue in it? We have no trouble at public abattoirs; it is only the export abattoirs that seem to have a problem. They think that we are going to fill out these NVDs wrong.

When attending a cattle sale, all buyers can obtain a presale summary listing all cattle on offer. This summary lists, as per the vendors' NVDs, all nine questions on the NVD—that is, if the cattle are HGP-treated, owner-bred, or are within a chemical withholding period. After the sale, the buyer receives a postsale summary, again listing all nine questions on the NVD and the answers given by the vendors. The buyers can also ask for and receive a copy of the vendor's original NVD. All buyers receive the same paperwork—processors and private buyers. They all receive identical paperwork for the cattle purchase. The presale and postsale summaries will also state, 'Clear. No test', for cattle not grazed on a property where residue was found or not in a withholding period. If a private buyer purchases cattle listed on a database as having come from a property where residue is found, they will receive from the department of primary industries, fisheries and forestry a control of residue disease notice—and cattle cannot be moved for 100 days of decontamination.

In case some senators have not seen them, I have a copy of an NVD form. I have a copy of instructions on the front of an NVD book. I also have a copy of a presale summary, a postsale summary and also a control of residue disease notice issued by the Department of Agriculture and Fisheries. These documents are issued at every sale and, if you happen to buy cattle containing residue, what are issued by the Queensland department of agriculture.

CHAIR: Are you tabling them for the committee, Mr Warren?

Mr Warren : I would like that table copies of all of those documents.

CHAIR: Thank you. Mr Warren, I really do not want to be rude, but we are keen to get to questions. Do you have a lot more to put in your opening statement?

Mr Warren : I would like to get to the point where I can present the rest of this paperwork, if I can?

CHAIR: Go for it! But I would urge you that we want to get questions. We are keen!

Mr Warren : I am going for it as quick as I can!

CHAIR: No worries.

Mr Warren : When processors purchase cattle at a sale, they can purchase 100 head or more—a thousand—from, for argument's sake, 15 different vendors at the sale. From my experience, and it is still the same today, they all go to the processing plant as one mob—say, Roma sale cattle. They are all processed as one mob. When they are processed as one mob, if residue is found in a shipment of meat, the processors would know which cattle were killed within a certain time frame at the works, but they would not know which individual cattle would have had that residue.

So when they buy cattle at the Roma saleyards—100 head or 1,000 head—they are all one mob. If residue is found, they cannot pinpoint which beasts unless they do a thorough investigation and try to follow it back. Penalties are in place for producers wrongfully filling out the NVD form, and so there should be. But, if processors can rely on 15-plus different vendors from a sale to correctly fill out the NVD forms, surely they can rely on the person selling the cattle owned for less than 60 days to fill out an NVD form off the previous owner's NVD form and get it correct.

CHAIR: Mr Warren, Senator Bullock wants to ask a question.

Senator BULLOCK: If I bought some cattle and I wanted to fatten them up for 59 days and resell them, I would have the NVD form from when I bought them. Why can't I attach that to my NVD form and say, 'There you go—there's a complete history'? What stops me from doing that?

Mr Warren : I spoke with Geoff Teys from Teys Brothers. Geoff told me they would accept cattle if I sent along a copy of the previous owner's NVD.

CHAIR: They would?

Mr Warren : They would. But when my first load of cattle arrived at Teys in Biloela the yardman refused the cattle. He said, 'We don't accept cattle here—never, ever have.' So what Geoff Teys told me was either complete utter rubbish, which explains why the stockman tried to refuse the cattle, or the yardman had an argument with the truck driver.

CHAIR: He tried to, or he did refuse the cattle?

Mr Warren : He tried to refuse the cattle, but a few phone calls and it was all straightened out.

Senator BULLOCK: Is this just one bloke pretending he is God, or is there some law backing up that position? Is this just one difficult person to deal with, or is there any law covering this matter?

Mr Warren : There is no law covering the matter.

Senator BULLOCK: So they are just making up their own rules?

Mr Warren : They are just making up their own rules. It is nothing to do with the NVD form. This was a commercial decision made by the processors, but nearly all the processors have the same decision. They have the Australian Meat Processor Corporation. They all get together and have a meeting and all these things seem to come from there. We graziers cannot get four of us together, go down there and demand $4 or $5 a kilo for our beef—it is illegal. Yet they can all have a meeting in the AMPC.

CHAIR: Mr Warren, I would ask you to keep going through your opening statement.

Mr Warren : JBS refuse to accept cattle owned under 60 days, although the JBS price grid sent to vendors states that cattle not in the same ownership for 60 days may incur residue-testing charges. Therefore, I should be able to send cattle to JBS and I may incur residue-testing charges. But as Senator Bullock just said, if I send a copy of the previous owner's NVD, I should not have to. Here is a copy of JBS's grid, and point 5 says:

5. Cattle not in the same ownership for 60 days, may incur residue testing charges.

I will hand that across too. But they refuse to take any cattle.

It was a JBS buyer who told me straight out that they only use this to stop competition. They do not want people hanging over the rails and purchasing cattle. I have his exact words to me. I actually taped this telephone conversation and then I wrote out exactly what he said. I asked the questions and he said, 'They won't kill any cattle not owned for 60 days.' I asked about sales where no meatworks buyers turn up, and there are quite a few sales up and down the coast where we do not even get a processor buyer. I said, 'If I buy the cattle?' He said, 'They still won't kill them if you haven't owned them for 60 days.' I said to him, 'It's the same as if I bid against JBS. They kill the cattle; I cannot. It's the same NVD, whoever purchases the cattle.' He said, 'We don't want to return to the good old days when you had four to five meatworks buyers and 20 others all punting them along.' He also said, 'Years ago we had all these would-be dealers buying cattle all over the place. This has put a stop to that.' That came from a JBS buyer, and I will give you his name in confidence if you require it. I have known him for a long time. And I can get more JBS buyers who are retired now who would probably say the same thing.

Senator O'SULLIVAN: Do you still have the tape of that conversation?

Mr Warren : I probably still have got it at home but I did it for my own purposes. I taped everybody that I spoke to, including AgForce, the Cattle Council—everybody. I probably would still have them but it was not done for the purpose of—

CHAIR: It is lucky we are being recorded for Hansard.

Mr Warren : putting anybody in it—it was only so I could write down later exactly what they said.

Senator O'SULLIVAN: Do you have a full transcript of that conversation? There are some interesting comments in that conversation.

Mr Warren : With the JBS buyer?

Senator O'SULLIVAN: Yes.

Mr Warren : That was his full transcript; I wrote it down.

CHAIR: Do you still have it? That is what Senator O'Sullivan wants to know?

Mr Warren : I could have it at home, yes.

Senator CANAVAN: Would you be willing to provide it to the committee?

Mr Warren : I suppose so.

Senator CANAVAN: You can take that on notice.

Mr Warren : My solicitor told me that it was not illegal to tape a conversation as long as you did not have it on the phone. I did not connect it to the phone, so—

Senator O'SULLIVAN: That is exactly right. I have been on the other end of the phone a few times. That is 100 per cent right.

Senator CANAVAN: Could you take that on notice, Mr Warren?

Mr Warren : Yes.

Ms Williams : Chair, perhaps Mr Warren could transcribe the recording and send those details to the secretariat.

CHAIR: Mr Warren will take it on notice. No doubt he will consult with other people. Mr Warren, please continue. We do want to get to questions before we run out of time.

Mr Warren : I have no problems being clean and green but when it affects competition for our livestock I begin to wonder whether our $5 levies, NLIS tags and NVD are worth the trouble. Some of our producer bodies need to do more in our own backyard to solve these problems. When I first raised the questions with Richard Norton MLA he actually told me to instruct the Cattle Council to use levy funds to instruct MLA to look at the legal advice on restructuring the NVDs. He told me exactly what to write in a letter to the Cattle Council. He was right behind me. I spoke to Bim Struss at AgForce. He had Howard Smith with him at the meeting. Bim Struss told me that he believed I was on the right track, he supported me in everything I said and he would look at speaking about rearranging the NVD. I also spoke to others. They all said that I am on the right track, but it was not long—it was all hot air. Nobody wanted to follow it up.

CHAIR: Mr Warren, I am very conscious that you need to get your story out but we really do want to ask you questions and there are a lot of other people waiting—let alone Mr Atkinson hanging on the phone. His ear would look like a cauliflower at the moment.

Mr Warren : If you want to speak, I can continue later.

CHAIR: Let us go to questions. Mr Warren, you touched on the point, as did Mr Atkinson, that there has been a lot of activity in the red meat industry. As you would be aware, this Senate committee has worked diligently in looking into the levies. I have to commend my colleagues the Nationals members of this committee, who have absolutely put 100 per cent into the system. We need to garner as much evidence as we can. I understand that there are certain people who, for whatever reason, may be a bit worried about coming forward. There is a system that allows you to tell us what is going on off the record. So, please, we have to get it through to the pointy heads in Canberra that your industry is in a lot of trouble at the moment. You have got the perfect storm with cattle being stopped from going to Indonesia and droughts and all sorts of things. I encourage you all listening out there to please come forward and tell us.

Senator WILLIAMS: Mr Warren, just in relation to the 60 days, weren't you saying that JBS, and Teys as well—I will be the devil's advocate here—have an obligation to say, 'Well, how long is the withholding period for lousicide drenches et cetera?' Is that why they do it: to cover them in that respect?

Mr Warren : Every person that they buy cattle from at the sale fills out an NVD form. They rely on them telling the truth. That is all it is. They are relying on them to tell the truth on that NVD form. If I buy cattle and get a copy of the previous owner's NVD or the pre- and post-sale summaries, which I have given you copies of there, they all say: clear, no test.

Senator WILLIAMS: Those NVDs from the previous owner would declare when they were drenched, when they were treated for lice et cetera.

Mr Warren : No, it does not say that. It just says that they are not within that withholding period.

Senator WILLIAMS: Okay, so they have cleared the withholding period. That is the point I am getting at.

Mr Warren : Yes.

Senator WILLIAMS: I actually treated my sheep with one lot of lousicide that was 11 weeks for export but only three weeks for domestic consumption, which is quite strange. I want to take another point. You were saying in your submission that processors are able to book two to three months in advance. The price is set when cattle are to be processed, not when they are booked. So you are saying they book ahead—say, three months ahead to have 100 steers slaughtered—but they only get the price a week ahead. Is that correct?

Mr Warren : Yes.

Senator WILLIAMS: Being the devil's advocate again, what is wrong with that? If you do not like the price, you can pull out a week ahead, can't you?

Mr Warren : No, you cannot. Listen, this is what I was coming to. These two documents here—

Senator WILLIAMS: Don't worry about the document. Explain it to us. If I book cattle in two months ahead and I have got 100 steers, and JBS Swift or Teys Cargill say to me—

Mr Warren : On the day.

Senator WILLIAMS: a week before—hear me out—'I'm gonna give you $3.20 a kilo live weight'—

Mr Warren : This will explain it spot-on.

Senator WILLIAMS: Go ahead.

Mr Warren : On 27 July they sent me a letter confirming that they had kill space for me for the week ending 27 September. It says here: 'No agreement for the sale and purchase of cattle has yet been reached.'

Senator WILLIAMS: That is right.

Mr Warren : That is one. This one here, they sent me a price grid on 23 February 2015 'confirming purchase'—this is only for seven cows—'at prices quoted to you on D549', which is the price grid. That was sent at 6.41 on 23 February. I had to ship those cattle on 25 February at 7 am. That gave me 36 hours notice and a price. There is another one.

Senator WILLIAMS: Let me stop you there. What if you said to them: 'I want to know my price a week ahead'?

Mr Warren : They will not give it to you.

Senator WILLIAMS: That is crazy.

Mr Warren : They will not give it to you. I get 36 hours notice. If I pull out in that 36 hours—they have got my kill booked for Monday—if I pull out at the last minute, that means they have not got enough cattle for their kill on Monday, so they black-ban me.

Senator WILLIAMS: That is their problem.

Mr Warren : No, you will not get a rebook.

Senator WILLIAMS: In other words, they then black-ban you and they never offer you kill space again.

Mr Warren : I will not get another booking.

Senator WILLIAMS: Now, listen to me, please. You have had a lot to say; I want you to listen. Where was that abattoir you were sending them to?

Mr Warren : JBS.

Senator WILLIAMS: Where is it? They have plenty.

Mr Warren : Dinmore.

Senator WILLIAMS: Dinmore. Have you got another option to send your cattle to, another abattoir?

Mr Warren : No.

Senator WILLIAMS: Where do you live?

Mr Warren : Up at Biggenden, Childers area.

Senator WILLIAMS: And you must send your cattle to Dinmore to be slaughtered.

Mr Warren : The biggest problem is, as I say in my report, that it is a bit harder for the smaller producers.

Senator WILLIAMS: Yes.

Mr Warren : What happens up there on a Sunday is that Dowlings Transport and a little bit of JBS get together and we make up loads. It costs us $43 a head with levy—that is $38 freight and $5 levy—from Biggenden to Dinmore. If I send a body load through to Biloela, it is a shorter distance but it costs me nearly $97 a head. So if we can make up loads—

Senator WILLIAMS: Ninety seven dollars a head for a shorter distance.

Mr Warren : It is a shorter distance, but you send a body load.

CHAIR: Mr Warren, I have to apologise for those of us on the other side of the continent. How far is it that you are talking about?

Mr Warren : We are talking about 450 kays to Dinmore and we are talking—

CHAIR: So that is $38 a head—is that what you are saying?—for the 450 kilometres.

Mr Warren : Yes, to Dinmore from home, and it costs roughly $97 for the other. The trouble is that we are putting together a load on a B-double to go to Dinmore.

CHAIR: We understand it is a bit of patchwork and the truckie—

Mr Warren : It is a load going to Biloela, which would work out at $97 because no B-doubles run to Teys that way.

CHAIR: How far is that?

Mr Warren : So we are caught.

CHAIR: How far is that, Mr Warren?

Mr Warren : Roughly 380 kay.

Senator WILLIAMS: How far are you from Bindaree Beef at Inverell? They truck cattle a long way. Is it too far?

Senator O'SULLIVAN: It has to be 600 or 700 kilometres.

Mr Warren : Too far. For the small producer, it is too far.

Senator WILLIAMS: I understand.

Senator CANAVAN: Following up on Senator Williams's line of questioning, what about other operations in South-East Queensland—Teys, maybe, or Kilcoy?

Mr Warren : We only have Teys and JBS. Kilcoy, basically, mainly kill feedlot cattle, not grass-fed cattle.

Senator CANAVAN: So you do not have any other options, in your view?

Mr Warren : We have Biggenden Meatworks, a little local abattoir, but he cannot kill enough to cover us.

Mr Atkinson : Can I break in there?

CHAIR: Mr Atkinson, sorry. You are out of site but you are not out of mind. Did you want to add anything?

Mr Atkinson : Yes, I do. What Gary is trying to say is that, if he knocks back that booking, he has to rebook, so that means he has to hold his cattle longer till wherever he rebooked to has a bit of space. You cannot get trucks at the drop of a hat. You have to give trucking companies at least a week's notice, normally, that you have a load. So there are a lot of complexities around not accepting the price.

CHAIR: Can I just clarify one thing. If you have a processor who refuses to give you a price, you say you cannot do it and you get put in the naughty corner. We know how it all happens. As Senator Bullock said, it is no different to a casual storeman saying he cannot turn up for work, so he does not get the phone call again. No-one gets the arse, but they just cover themselves by not ringing. Can you ring around to other processing places to get prices?

Mr Warren : That is the trouble, because they will all only give you a price a week out. I say a week out—we are getting 36 hours notice because we are killing on Monday. They usually put out a grid on Friday night that is for the week ending, so, if you are killing on Friday, you may have six or seven days notice.

CHAIR: I am sorry, I am coming from a point of view of having no knowledge of your industry and the way you do it. If someone rings you and says, 'We'll give you this cattle and this is what we're going to pay you,' you cannot ring around and compare prices. You cannot shop.

Mr Warren : No, because you have to make a booking and the booking might be four or five weeks out and they will only give you the price a week in.

Mr Atkinson : Worse than that, in the north the booking can be three and four months out. The queue in Townsville until just recently has been three to four months out. So I wait four months for my date to arrive and I get my price just prior to loading. If I knock it back, I have to rebook and sometimes it is three or four months. You take the price; you take the hit, you have no option.

CHAIR: That has made it very clear, thank you, Mr Atkinson.

Senator WILLIAMS: One last question. What if a foreign investor built another abattoir in Central Queensland and that foreign investor was Chinese? How would you feel about it?

Mr Warren : I would love him.

Mr Atkinson : What difference would there be to what we have at the moment? Absolutely none—go for your life.

Senator WILLIAMS: That is why I put the question. If a foreign investor puts another bidder out there and the beef is processed off to China, it would not concern you personally?

Mr Atkinson : It would be great.

Mr Warren : It would be great.

Senator WILLIAMS: Good, I am glad to hear that.

CHAIR: I am from WA and we would kill to—that is a terrible pun. We would love to have abattoirs in the north.

Senator O'SULLIVAN: I want to concentrate on a particular line for a little while because there is too much to cover here in the time that we have. I am very interested to know whether this committee will get to the truth of these matters if it does not provide an opportunity for witnesses to give evidence in camera at, for want of a better term, secret, confidential hearings.

Mr Warren : No, you will not.

Senator O'SULLIVAN: Mr Atkinson?

Mr Atkinson : That is why I commented on the number of submissions. I believe people are too afraid to give evidence.

Senator WILLIAMS: They are spooked.

Senator O'SULLIVAN: Can you give the committee an idea of what might happen to an agent if they were to cooperate, for example, and give evidence of conversations they have had with buyers, with a particular focus on buyer collusion from processors. What would happen to that agency business?

Mr Atkinson : They would be out of business.

Mr Warren : They would be out of business overnight.

Senator O'SULLIVAN: I just want to concentrate on that for a little while, Mr Chair.

CHAIR: Sure.

Mr Warren : While we are on that last section, I think this is important. On the booking of cattle with JBS, on 26 May I received from JBS a confirmed kill space for the week ending 2 August. No agreement for the sale and purchase of cattle has yet been reached. I received that on 22 May for the kill week ending 2 August. As I said before, all my others give me 36 hours notice. Then, on 19 July—there was no letter with it—I received the grid. D566 is the number on the grid. I received that grid on 19 July. Then, on 21 July I received a letter saying, 'We now confirm purchase of 15 cows and one bull to kill week ending 2 August 2015.' This was 14 days ahead of the kill. I thought to myself, something is a bit funny, and I saw the D566 grid price. Everything was fine, so I said yes. The trouble was that they sent me the fax on 19 July at 8.17. I was supposed to reply by 7 pm that night. I did not. I rang them back on the following Tuesday, but, by then, the grid price had gone up by 30c. On the cattle that I sent, I did not lose, but it was $1,282.65 less than I should have got. They gave me that grid price 14 days ahead because the new prices were going up. That is the first time they have ever done that. It was 14 days ahead because they knew the price was going up. We all had to accept. We could not pull out.

Senator WILLIAMS: They locked you in early.

Mr Atkinson : They locked me in early.

Senator WILLIAMS: They are very cunning, aren't they?

Mr Atkinson : That is the first time they have ever done that. It just goes to show that they can do it. They can give us a price further out. If you want that paperwork, it is all there.

Senator CANAVAN: I would like to continue on what Senator O'Sullivan said. Obviously, Mr Atkinson and Mr Warren, you have both been here providing very detailed evidence of your dealings with processors. It is also very important for you to know that, following this hearing, if you believe there is any discrimination or prejudice applied to you by processors, that could potentially be a contempt of parliament. We take a very dim view of people who are trying to intervene or interfere with people providing evidence to parliament. To both of you and other witnesses here today, we would be very interested in hearing whether any such actions are taken subsequent to today. I want to focus on some of the evidence you provided on the NVDs. One thing that strikes me with the way beef is sold is that, unlike a lot of other agricultural products, there does not seem to be any great ability to transfer risk about pricing in the future. Why is that? Are there other examples that we are missing? Why can't you go to someone and say, 'I'd like to lock in a contract for six to eight weeks at this price'? The other party will take the risk then, but why can't you do that?

Mr Warren : The grain-fed industries can get a price 150 days out, or whatever the case may be. If they did not, and the price dropped, they could not do it. A lot of people say that the grain-fed cattle are more consistent, so therefore the meatworks processors can give you a forward price. When you look at those grids that they put out for the grass-fed industry, at the moment cow prices range from 20c a kilo right through to $4.95. They have every fat depth, dentition, weight range, butt shape—all covered in that grid. You can send from a poor old jersey cow to the fattest beast. They have it covered in that grid, and those grid prices keep changing. So I cannot see a reason that we cannot get forward contracts or at least a month's notice on a price. From my experience in the export game, when I was a quality control officer—and my brother Bruce is still well up in it—they forward-purchase meat three months in advance from when they are killed. There are very few spot sales in meat anywhere in the world. It is always forward-sold at least three months ahead. So there is no reason we cannot get a price.

Senator CANAVAN: One thing I want to concentrate on, going back to your points about the NVDs, is that that forward-pricing market would not necessarily have to be created by a processor. A trader or a stock and station agent potentially could offer that product themselves. However, are they restricted from doing that because of these NVD issues?

Mr Warren : No.

Senator CANAVAN: If I were to sign a forward-pricing contract with you—and I am not a processor—that I will buy the cattle from you in three months at a certain price, this is going to be the issue that would stop you from reselling it to a processor and creating this market.

Mr Warren : No, the NVD has nothing to do with that.

Senator CANAVAN: But won't the issue you are talking about arise? If I enter a forward-price contract with you and say that I will buy your cattle in three months at this price and your cattle gets delivered and I look to resell that—I am not a processor; I am just trying to create a market—I will be restricted from doing that, because I have not owned the cattle for 60 days or more. Is that correct?

Mr Warren : That could be correct, yes, in that context.

Senator CANAVAN: I have some more questions, but I will put them on notice.

Senator BULLOCK: I come from a long line of Bullocks, and as far as I am concerned they have a pretty impressive fat depth and butt shape!

Senator WILLIAMS: What about the muscle!

Senator BULLOCK: Limited muscle. But I accept that it is a subjective judgement. Now, the processors make judgements about things like that, and those judgements affect the price you get. How can we introduce greater transparency and objectivity in the process of that assessment so that growers can be confident that they are getting the proper value for their product?

Mr Atkinson : One of the industry's biggest gripes is about fat depth, measured just prior to the carcass being weighed on the chain. When the hide puller pulls the hide off a carcass, fat comes off in varying degrees with the hide, so the fat depth is measured at the P8 site, which is near the hip, on the rump. You should have in front of you a buyers' grid. On the right-hand side, under weight, where it has 300 to 320 kilos, if you follow that across the first column, it is for certified PCAS cattle, which is pasture accredited cattle, and it is $4.30 on this grid. You will notice that for milk- and two-tooth steers it is six to 22 millimetres. And there is all the other stuff—bruising, butt shape, meat colour, fat colour. But if that beast, that carcass, measures five millimetres of fat at the P8, not six, then you have to go right across to the S1 column, where it is three to 22 millimetres, and you will receive $3.15 instead of $4.30. So, for a 300-kilo carcass you lose $1.15 a kilo, which is $345 on that carcass, because of one millimetre of fat that you were lacking, and it could well have been torn off when the hide puller pulled the hide off. The industry must clean up the way fat is measured, whether it is scanned, or something, but—

Senator BULLOCK: If it is in their interest to pay you less, how are you going to get them to change their ways?

Mr Atkinson : Maybe we should bring in something like the US Packers and Stockyard Act. That might cover it. But that is only one anomaly. There is a host of other anomalies, but that one is so glaringly obvious. All those beef producers sitting in the room with you now who watch their cattle kill from time to time know exactly what I am talking about. It is just unfair the way fat is measured.

Senator BULLOCK: I get the problem. Do you want to speak for a minute about the solution?

Mr Atkinson : Bulls sold at all auction sales are scanned for fat depth and intramuscular fat with a scanner similar to what is used in hospitals to scan with pregnancies and all the rest of it. There have to be other ways to measure fat depth, other than someone standing on a stool and reaching up and measuring it with a short ruler. That is what happens in reality. And if he moves it a centimetre he will get a different reading. It is just not right.

Senator CANAVAN: Who does that measuring, and what kind of auditing is there to make sure they are doing it accurately?

Mr Atkinson : I could not tell you. I do not know what auditing is done, but—

Mr Warren : AUS-MEAT should be auditing the meatworks, but yes. I also have it in my report. We sold a bullock with about 23 millimetres of fat, and that costs $108, just on that little bullock.

Senator CANAVAN: Who employs the person auditing?

Mr Warren : The processors.

Senator CANAVAN: It is an employee of the processor who is measuring the fat?

Mr Warren : Yes. AUS-MEAT should be auditing, but they cannot do it. And even if we go down there to watch our own cattle killed, that does not mean we can pick up the ruler and go up there and check him out.

Senator WILLIAMS: I was a pig producer, and for decades the pig industry has mastered back-fat testing. You get paid if your bacon is a dress weight of 90 kilos. If they are over 14 or 15 millimetres you get a discount et cetera. Can the beef industry learn something from the pig industry?

Mr Atkinson : I do not know anything about the pig industry, but we can learn something from somewhere, surely. I mean, $345 on a 300-kilo carcass is just not on. Okay, if they have to set standards, we all understand that, but if for one millimetre of fat you get penalised $345, that is unfair trading.

Senator WILLIAMS: And the big issue here—talk to any butcher—is that unless the meat has fat on it, it is no good.

Mr Atkinson : If you talk to some heart specialists they might say fat is not really good for you—

Senator WILLIAMS: You cut the fat on when you eat it, but what I am saying is that when you are slicing the beast up and cutting your T-bones et cetera, if you have a good covering of fat it is usually good meat to eat. You can cut the fat off when you eat it.

Mr Warren : Another problem along these lines is that we have the MLA, and the MLA has the MSA grading system. I send a lot of cattle away as MSA and they come back and have met MSA standards but not company standards. When they do not meet company standards we do not get paid for the MSA, but they have met MSA standards. They never ever say what the company standards are. They just say 'does not meet company standards'.

Mr Atkinson : I want to back you up on that, because you are dead right, and the company specs say that the MSA specs do not meet company specs; it is another big discount.

Mr Warren : It is too much.

Mr Atkinson : It is, absolutely.

Mr Warren : The MLA is producing what we want for specifications and then the meatworks will not accept it—the processors.

CHAIR: I am not going to take the bait. If we want to have a debate on how things have worked through MLA over the years, you will certainly pull the right chain here, but in terms of timing I am going to come back to Senator Bullock. Sorry, Mr Warren?

Mr Warren : I have been doing a lot of poking around. The MLA gets a lot of instructions from outside the MLA, like the Cattle Council and that, about what they do and what they cannot do. I do not know whether all the blame lies with MLA.

CHAIR: Under the new leadership of MLA, they have definitely improved their act. Previously, they needed a good kick in the bloody bum, because they took a lot of money off you guys—a heck of a lot of money—and they did not represent you. But, in saying that, Mr Norton is doing a fantastic job to reshape a bloody body that should have had its head cut off years ago.

Mr Warren : It is, but I think a lot of people on the other side of things were forcing MLA to do things that—

CHAIR: You didn't sit through Senate estimates while they just bullshitted to us. Sorry, Mr Warren.

Senator BULLOCK: Don't wind him up!

Mr Warren : I think he is right.

Senator BULLOCK: I just want to ask a question on something that has not been addressed by either of the witnesses, but I would like your comments on it anyway. Last week I was at a free trade inquiry looking into the China free trade agreement. We had meat processors there, and the thing that really excited them was the opportunity for the export of more hearts, which they said there was a big demand for in China. They were really keen on the prospects for offal. They saw this as a real opportunity for Australia. You do not get paid for the offal. How fair is that? How can not paying you for offal be justified if the relative value of offal has gone up significantly in recent years?

Mr Warren : I do not know. If you send a cow to the abattoirs in America, and the cow is heavy in calf, foetal blood from one cow in America is worth between US$400 and US$500. They get paid that money in the US. We do not get paid it over here.

CHAIR: Senator Heffernan has made that very clear in a number of inquiries.

Senator BULLOCK: Mr Atkinson, do you want to comment on offal?

Mr Atkinson : I want to comment about the standard trim in America compared to the standard trim in Australia. It is vastly different. We get paid for no hide or offal, but we also do not get paid for any thick skirt inside the carcass wall. That is not the case in America, so that is one more reason to have a look at the Packers and Stockyards Act, as far as I am concerned. Is our session drawing to a close?

CHAIR: We are, unfortunately.

Mr Atkinson : Do we get a closing statement?

CHAIR: You most certainly can, yes.

Mr Atkinson : I would just like to say to the senators that, obviously, the less money that is out here in rural and regional areas then the more our rural and regional communities suffer. One of the reasons they are suffering so badly at the moment is that the beef industry has been in dire stress, and one of the reasons is that we are not paid properly for our products. You fellows are looking at that right now. We all need you to have a deep and thorough look, and you need to have a deep and thorough understanding of the complexities that are involved with kill sheets, on slaughter floors and in saleyards. It is not easy to get your head around, but I would urge you today to really listen to the submissions that Peter McHugh and Blair and Josie Angus are offering. I read the Cattle Council of Australia's submission in the last couple of days, and I am very happily surprised at how thorough and correct it is. So I endorse those submissions. On the back of that, thank you very much.

CHAIR: Thank you, Mr Atkinson. This committee stands as something special, I believe, in the Senate, where we actually do not play the politics. We go out there—people get sick of me saying this—and we work collegially to deliver the best outcomes for Australia's producers. We can do all the work we can—travel around and try to meet as many people as we can and hear your stories—but, sadly, it ends up sometimes as a report collecting dust down in Canberra. The last report we did into your levy did recommend the Packers and Stockyards Act, and I only hope that Canberra does listen to us and actually grabs the bull by the horns, if I can use that expression, and, rather than using a lot of fluffy words in Canberra, gets out there and delivers for Australia's remote and rural producers and their communities. Mr Warren, thank you very much. Mr Atkinson, I thank you.

Mr Warren : Thank you very much.