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Rural and Regional Affairs and Transport Legislation Committee
09/02/2016
Estimates
AGRICULTURE AND WATER RESOURCES PORTFOLIO
Meat and Livestock Australia

Meat and Livestock Australia

[09:02]

CHAIR: I now welcome, all the way from sunny South Australia, Senator the Hon. Anne Ruston, representing the Minister for Agriculture and Water Resources; Mr Daryl Quinlivan, Secretary of the Department of Agriculture and Water Resources; and officers of the department. Minister or Mr Quinlivan, do you want to make an opening statement?

Senator Ruston: No.

Mr Quinlivan : No, Chair.

CHAIR: We note that we have reconfigured the witness list for today on your recommendation. When would be a suitable time to ask about the superbug?

Mr Quinlivan : Which particular superbug do you have in mind, Chair?

CHAIR: What is its name again?

Senator CAMERON: The Malcolm Turnbull weed.

CHAIR: The superbug detected in China. I raised questions about it last time.

Mr Quinlivan : I think that would best be a question for the chief vet.

CHAIR: Do you think so?

Mr Quinlivan : He is appearing under outcome 2, on the schedule we have here, this evening.

CHAIR: I note that the superbug has now reached 19 countries. As if we don't have enough trouble. So I have some questions.

Mr Quinlivan : Thanks for flagging that issue. He will be well prepared.

Senator CAMERON: Welcome, Mr Norton and Mr Quinlivan. Mr Norton, the MLA has indicated that the cattle industry will be influenced by a number of extreme forces in 2016. Could you take us through those extreme forces that will be affecting the cattle industry?

Mr Norton : Those forces have appeared over the last three years. The Australian cattle herd in 2014 was 29 million plus cattle. At the beginning of this year our forecast is for it to be 26.2. In 2013-14 the Australian cattle herd sell-off was the largest in our production history. This was due to drought conditions in our major production areas of Queensland, where Queensland holds between 55 and 60 per cent of the national herd. In terms of slaughter, the rolling five-year average slaughter rates are somewhere between 7 to 7.5 million and they reach peaks of just over 9 million in 2014-15. That also resulted in large record live export numbers. We are predicting that with those extreme conditions we are going to have a downturn in numbers of cattle sold for the processing sector and availability for the live export sector. This is going to place pressure on the value chain to supply our markets.

CHAIR: Could I just jump in there, because I know a bit about this and I declare an interest. You would anticipate, Mr Norton, that if that were to occur the price would be firm or get a bit dearer. They are talking about the Eastern Young Cattle Indicator going to 600 from 590, bearing in mind that it was 390, or whatever, this time 18 months ago.

Senator CAMERON: Chair, can I just clarify something? You and I have many disagreements in relation to how this committee operates.

CHAIR: It’s good.

Senator CAMERON: Yes, it is quite fun at times. I like it, but I do not think it's good for public accountability. However, the issue that I am raising is that you just gave me the call. I asked one simple question and then you have cut in. I do not think that that is a proper chairing of the estimates committee.

CHAIR: Okay, thank you.

Senator CAMERON: I think you should listen to me. And I think you should actually give the opposition an opportunity to ask the questions the opposition have without jumping in every two minutes.

CHAIR: Sorry, it is just relevant to this question.

Senator CAMERON: Well, you can do that after I am finished, surely? That is what other chairs do.

CHAIR: Well, we only have 15 minutes. I think there is something wrong in the market. I have complaints now from people who have forward contracts for $6 that are going back to $5. You would have thought the market remained firm. Let me tell you, a couple of big operators, Swift and others, are trying to screw the market down because they know what you are talking about is ahead of them and they are trying to pull the market in. We ought to be doing something about it.

Senator CAMERON: Mr Norton, we are going to have the lowest level of cattle supply in 20 years—

Mr Norton : Since 1994.

Senator CAMERON: Can you just explain a bit more about what the implications are for the domestic and export markets as a result of that?

Mr Norton : Sitting here last time, prior to the opening of the global markets this calendar year, we are anticipating very strong signals coming from China and the USA. The USA has been leading the demand for red meat globally and it has been setting the global prices. This calendar year you have seen a slowdown in global economies. We are still seeing where the product demand will settle for the first quarter of this calendar year. But all indications are that as the market has opened up the domestic restocking market has been very strong. On 13 January we reached an all-time high of 600 cents a kilo on the Eastern Young Cattle Indicator. The lamb market closed yesterday for domestic lamb at 500 and 490 cents a kilo carcass weight, which is very healthy. The impact for the market is that processors will be struggling to find product to process through their plants. That may see extended closures of some plants, but certainly, after a dip at the beginning of the year, the physical export markets are starting to rise again at the farm gate.

Senator CAMERON: I am a little bit confused. On the one hand you are indicating that there are these extreme forces, but this answer is basically, ‘Don't worry. Everything is okay’. It is not okay, is it?

Mr Norton : As I have indicated, the processing sector will struggle to find product. But that is market forces in a free market. We had an enormous, unprecedented record sell-off in 2013-14, so the situation we are faced with at the moment is a 20 year low. For the processing sector, it is certainly a challenge but it means that they must get a lot closer to their supplier, the Australian beef industry.

Senator CAMERON: What is the impact on the domestic market and prices on the domestic market? What are the implications there?

Mr Norton : Price is the number one decision consumers make when they are buying red meat. So it is a challenge for MLA to make sure that domestic red meat is still selling well and still occupying supermarket shelf space. That is certainly one of the challenges we will have over the next two years. But if we are in a situation where global economies open up and are quite strong, everything goes well in China and their growth predicted rate keeps going, then the impact on the domestic market would be greater than the situation we are faced with at the moment. We are still seeing consumers supporting red meat and we are still marketing that, particularly with beef, around the nutritional value of red meat. Lamb is an example of a commodity product that we have taken to being a branded product in the domestic market. It has had significant growth and major price increases over the last decade at a domestic consumer level. It is still well supported.

Senator CAMERON: If abattoirs are reducing numbers, sacking staff, with some closing down, how do you maintain the domestic supply at a reasonable price?

Mr Norton : Again, it is market forces. Again, in the last two years the processors had an influx of product. I am not for a minute prepared to put numbers on what plants will close or whether there will be extended closures, but I am just identifying that it may well be an issue, going forward, for the processing sector.

Senator CAMERON: You can't come here and answer every question with, 'Oh, it's just market forces'. You have an obligation to try and deal with the market forces. You have an obligation—

Senator EDWARDS: There is a drought. Come to the Bush, Doug!

Senator CAMERON: Chair!

CHAIR: Away you go. We are listening.

Senator CAMERON: It is not just a response from you that it is market forces. What are you doing to deal with the market forces? That is the question.

Senator EDWARDS: Grow more cows.

Senator CAMERON: You look pretty stupid as it is. You should just keep your mouth shut.

Senator EDWARDS: Oh, come on. There is a drought. Everybody de-stocked. Now it has rained again so there are going to be more cows.

CHAIR: Order!

Senator Edwards interjecting

Senator CAMERON: You are a non-event in parliament; you should just be a non-event here!

Mr Norton : In terms of recovery and getting those cattle numbers back up as fast as we possibly can in the north, there are a number of projects that I am happy to take on notice and forward to you what MLA is doing around addressing productivity and the recovery of the Australian cattle herd.

Senator CAMERON: Why do you need to take it on notice?

Mr Norton : Because they are long and lengthy. They range from genetics to things we are investigating, given that we want to get an animal on the ground alive and off the property into the processing plant a lot quicker than we did in the past. Genetics is one pathway to doing that, and we have made significant ground—

Senator CAMERON: Is this proven science?

Mr Norton : This is proven science. Concentrating on genetics and the genomics part of the industry, which the MLA invests in heavily, reduces the emissions of an animal because it is slaughtered more quickly than previous growth rates that have been achieved through industry. In the feed lotting sector—which is a sector around, again, increasing productivity and getting an animal to market sooner—we are working on projects around the ruminant. That means things like red algae grown in salt water. We are at the initial testing phase. When fed in a concentrated form, that can increase productivity and growth rates by eight to 10 per cent and reduce emissions by 60 to 80 per cent

Senator CAMERON: Mr Norton, could you just leave it for a minute until the chair finishes his conversation because I cannot hear you.

Senator EDWARDS: I am trying to negotiate for him to shut up so you can keep asking questions.

Senator CAMERON: Well, I think that is a lost cause with the chair, but never mind.

Mr Norton : The last part I was talking about was the feedlot industry and what we are working with there. We have a red algae that we are working on with the industry for productivity gains. As I said, initial trials demonstrate that, when fed in a concentrated form, we can reduce emissions by 60 to 80 per cent but increase growth rates and productivity from eight to 10 per cent.

Senator CAMERON: So these are in the testing phase, are they?

Mr Norton : Yes. They get to the testing phase and then we hope to go to market to get commercialisation of these products. It is just one way that we are addressing productivity. There is an enormous amount of benchmarking going on in the northern beef industry. We are, as I said, doing a lot of work around evaluating genetics to produce the right type of animal for the environment that they are raised in. We are also trying to lift calving rates and conception rates and at the same time address the animal welfare and environmental issues that exist in the northern parts of Australia.

Senator CAMERON: In regards to the export protocol that we have with China, the minister indicated that the first exports would take place next year and would be about 40,000 to 50,000 head. What is the situation now?

Mr Norton : My understanding is that one planeload has gone from Elders Ltd.

Senator CAMERON: A planeload?

Mr Norton : A planeload.

Senator CAMERON: Does it have 40,000 head on it, that plane?

Mr Norton : I do not know the exact numbers, but it is hundreds. It might be closer to 400. My understanding—and LiveCorp would be well-positioned to answer this question—is that extensive work is going on to get China ready to take imports of live cattle once they address their quarantine facilities and ESCAS issues.

Senator CAMERON: So there are quarantine facilities, there are ESCAS issues and there are domestic economy issues in China. Are there any other issues? Is that enough?

Mr Norton : That is my understanding, yes. I think that is enough.

Senator CAMERON: So these are the three big issues in terms of our exports to China. The minister claimed that there would be 40,000 to 50,000 head exported. We have 400 at the moment—one planeload.

Mr Quinlivan : Our exports group will be able to give you some more detail on this. But I think the planeload of cattle that went to China was partly a marketing exercise and also a pilot or trial exercise to test some of the things that you have just talked about ahead of the actual trade opening in a proper commercial form.

Senator CAMERON: But the 40,000 to 50,000 head is not going to be achieved—the minister’s boast that we would get 40,000 to 50,000.

Mr Quinlivan : I think we are expecting it to be quite a big and vigorous trade.

Senator CAMERON: That is not what I am asking. The minister indicated that this year we would get 40,000 to 50,000 head.

Mr Quinlivan : I think we will leave that question until the export people are here. They would be able to-

Senator CAMERON: The MLA would know where that is heading. You do not need the export people to do that.

Mr Quinlivan : I am not sure that they would.

Mr Norton : All I can say is that the export numbers out of Australia have grown significantly in the last two years. There are lots of competitive forces as to why one country is not taking cattle and other countries, like Vietnam, have significantly increased their intake of live cattle.

Senator CAMERON: On the issue of carcass weight, when do you expect the work that is being done on a trial basis to come to fruition? What is the timeframe for this increased carcass weight to come to fruition?

Mr Norton : Can I just clarify the question? Is that the average carcass weight of cattle slaughtered in Australia or carcass weight to China?

Senator CAMERON: What is the difference? I am talking about increased carcass weight, whether for export or domestic.

Mr Norton : Our carcass slaughter weights have been increasing over the last decade and have risen something like-and I will clarify the number-15 kilograms carcass weight over, if you suggest the rolling five-year average is about 7.5 million cattle slaughtered in Australia. So that is a lot of productivity gained over that period of time. But industry has a lot of research projects. The industry is addressing the beef language with a view of assisting exporters in the process of using that language to help market our product. But that also goes back to how we are going to get more data—

Senator CAMERON: For people listening, what do you mean by the 'beef language'?

Mr Norton : The current Australian beef language, which is the language by which we communicate to our export partners and domestically to consumers, has not changed in 30 years.

Senator CAMERON: Is that your marketing?

Mr Norton : No, it gives quality assurance and standards around the product going to an export market. Industry is reviewing that beef language. But part of reviewing that language is then to come back and give more information back to the producer about the product he is actually producing on farm, to help them improve their genetics. Again, with the overarching strategy of increasing productivity on farm.

Senator CAMERON: Given that climate change is going to mean that we are going to get more droughts and more extreme weather, what research and development have you done in relation to climate change and how we can maintain a sustainable cattle market?

Mr Norton : Reading from my notes on the issue, the federal government, together with the MLA, Australian Wool Innovation and Dairy Australia invested in a project entitled whole farm systems analysis of climate change impacts on the southern grazing industries. The project made a number of conclusions, including the need for further research adaption options for the livestock industries to maintain profitability. The project will be published in 2016.

Senator CAMERON: What projects are you doing, Mr Norton?

Mr Norton : We are funding that project with the federal government, along with AWI and Dairy Australia.

Senator CAMERON: Just remind me: what is the biggest cattle producing area in Australia.

Mr Norton : Queensland.

Senator CAMERON: So why did we do that project in the southern area when we should have been looking at Queensland?

Mr Norton : Well, the project started in 2012 when, I suspect, the whole of Australia was in a significantly dry period. I am sure the learnings from it can be adapted to the northern beef industry with some further research. But industry and MLA is working—and I can give you detail on notice—on projects around climate variability and how to adapt to climate variability.

Senator CAMERON: If you could take that on notice, that is fine.

Mr Norton : We will provide that.

Senator CAMERON: What sort of research and development priority are you giving to new research on sustainability in the industry?

Mr Norton : MLA is assisting a newly formed sustainability model, which industry is going to control and develop. MLA is providing secretarial support. So it is an industry-led sustainability forum, under AMIC, for the whole of the beef industry.

Senator CAMERON: What is the expenditure from you on this?

Mr Norton : I can take on notice and give you a full budget on exactly what we are doing in sustainability. But industry is working to a sustainability framework to communicate the Australian beef industry’s commitment to sustainability in the community.

Senator CAMERON: Can you give me some ballpark figures on how much you are spending?

Mr Norton : I have a full budget, but this group will make recommendations. The industry framework has only just come together. They will start giving AMIC recommendations around what needs to be the ongoing budget and spend on sustainability over the next four year period. We are entering a four-year strategic plan. We are in the budgeting process now. MLA has just provided funding for accommodation and travel to get the committee together and then started taking recommendations.

Senator CAMERON: So it is really just starting, is it?

CHAIR: Bureaucratic bullshit!

Mr Norton : Industry has been very conscious of sustainability. Both MLA and the MLA donor company have been working on a number of projects with the processing sector around reducing emissions. Reports that have been commissioned demonstrate that industries emissions were over quoted, because the initial study done on the beef industry’s its emissions was done in the dairy industry. When the report was done it demonstrated that emissions were actually 24 per cent less than the report done some years ago. The red meat industry-

Senator CAMERON: I understand where you are coming from there, but I am asking about the sustainability of an industry, not just environmental sustainability, which is really important. But the sustainability of the industry as an industry that can provide income to the farming sector and a supply at a reasonable price to the consumer. That is the issue, surely?

Mr Norton : The committee is looking at environmental, ethical, social and financial aspects of operations within the beef industry. They will come back with a framework of which industry will operate under. So the financial aspect is certainly being addressed.

Senator CAMERON: So there is a business plan put together from this, is there?

Mr Norton : There is a business plan put together for this. AMIC are the overarching body that is doing this work. MLA at this point of time is providing the funding to get the committee together. The committee will make recommendations to both AMIC and MLA.

Senator CAMERON: Are there any consumers on this committee?

CHAIR: Senator Cameron. Order! I am going to go to Senator Whish-Wilson and then come back to you.

Senator CAMERON: I have two questions and then I am finished. Are there any consumers on this committee?

Mr Norton : I can give you the exact breakup of everyone that is on the committee. At this point in time, I cannot tell you exactly whether there is or is not. I thought I had a list of all the committee members. I must have it in other briefing notes. But I can give that to you on notice.

Senator CAMERON: But you do not know whether there is any consumer—

Mr Norton : There are lots of people. There are 10 people on the committee and there are people representing all parts of the value chain.

Senator CAMERON: Who appointed the committee?

Mr Norton : AMIC. It is AMIC’s committee. Again, MLA is just providing the budget and financial support.

Senator CAMERON: In terms of the declining herd and the increased demand, the herd is declining and you are trying to increase and maintain demand for a number of reasons. Will domestic beef prices continue to rise?

Mr Norton : Our analysis for 2016 is that, given the way global economies have opened up, we think it will be stable for beef in 2016, to the consumer at current price levels.

Senator CAMERON: Can you provide that analysis?

Mr Norton : Yes. I would take that on notice.

Senator CAMERON: On lamb, given that you have said that there are these extreme forces at play, could these extreme forces result in a $100 leg of lamb?

Mr Norton : The lamb industry, as I keep touting, has had significant growth. But if you are a producer you would suggest that it needed that significant growth to be financially sustainable. But our numbers indicate that the ewe flock in Australia, the breeding flock, has stabilised and is slightly starting to grow. As those ewe numbers come back, I do not know that that number is foreseeable, certainly within the next five years.

Senator CAMERON: What is the stable price at the moment? How much is a leg of lamb selling for?

CHAIR: Hang on. Go to cents per kilo. You cannot do it on a leg of lamb. It depends on whether—

Senator CAMERON: Mr Norton knows these things. He does not need your advice; he is the expert on this.

Senator WILLIAMS: We are in the industry as well.

Senator CAMERON: Well, I am talking to the expert. What is the price per kilo for a leg of lamb?

Mr Norton : Over the Australia Day period it was being discounted down to about $8 per kilo. But you will find prices anywhere between $8 and $20 per kilo, in my best estimate. I can give you the exact price at a point in time on any given day, if required.

Senator CAMERON: Can you give us details of your analysis about prices on lamb as well?

Mr Norton : Yes, absolutely.

CHAIR: I can do it in a flash. I have it in my head.

Senator WHISH-WILSON: Can I get an update from you guys—

CHAIR: It is true, though. You have got no idea.

Senator CAMERON: Chair, a point of order. I am getting a bit sick and tired of the denigration from the chair towards me. Mr Watling, I would ask that you give the chair a quick course in Senate standing orders during the break and see if you can get him to understand that his behaviour is absolutely ridiculous and he should not denigrate either a senator or his capacity as chair.

CHAIR: Thanks for that. Do you have the cane there?

Senator WHISH-WILSON: You might be surprised to know that this committee worked very well together on a very significant inquiry only recently. My question relates to recommendation 2. The inquiry was on industry structures and systems governing levies on grass-fed cattle. We obviously have a couple on levies. Recommendation 2 was for the establishment of a cost-effective automated cattle transaction levy system. I know we have discussed updates in estimates following that. Could you give us an update on how you are going with that—or how you are not going with that?

Mr Norton : As instructed by industry, we went out with a paper around the alternatives. Three alternatives were given back to industry. I can give you that on notice or I can read out now what those alternatives were, if so desired. But it is with the industry.

Senator WHISH-WILSON: Can I ask you to clarify, Mr Norton. When you say, 'with industry', who do you mean exactly?

Mr Norton : With the peak industry council, so the Cattle Council of Australia, the Sheepmeat Council of Australia and the Goat Industry Council of Australia, around identifying their levy payers. As you know, MLA does not have access to who the levy payers are. The peak industry councils support a hybrid, with the support of legislation. So legislation change with agents providing data to the department of agriculture’s levies revenue service, which are then forwarded directly to MLA’s nominated commercial data service and registry commercial provider. That was the pathway, but it does need legislative change. We are also working with other RDCs around a model that MLA does not go off and spend levy payers funds on a model that just suits the red meat industry when some of our levy payers are the same as other RDCs. It is a very large piece of work but a piece of work that MLA is certainly working on.

Senator WHISH-WILSON: My understanding is that at the moment you represent 42,000 producers who are engaged in raising, finishing or trading grass fed cattle. Is that correct?

Mr Norton : There are around 49,000 members of MLA. There are obviously more levy payers. There are somewhere between 70,000 and 100,000, depending on the size of the entity. To be a member of MLA does not cost anything and it gives you the right to vote at an AGM. We are up to about 49,000.

Senator WHISH-WILSON: But you have to have eligibility requirements. You get a free membership.

Mr Norton : It costs nothing to be a member and we obviously get benefits of the membership. But our main selling point around that is: be a member and then you can vote in your own industry.

Senator WHISH-WILSON: That was one of my questions. You have 49,000 people registered as members of the MLA. How many producers have you identified as being potentially eligible for membership?

Mr Norton : We rely on ABARES data around who is a primary producer and then who is a red meat primary producer. I would have to take on notice the exact number, because we have been given extreme variances in what that number is—whether it is an enterprise level or an individual, et cetera. Identifying exactly who is a levy payer versus the company, versus an individual et cetera. Anywhere between 70,000 and 100,000 is our guess. But I will take it on notice and come back to you.

Senator WHISH-WILSON: Would it be fair to say that you have a low degree of confidence in being able to identify all eligible producers at this stage, based on that variability in the data?

Mr Norton : A low degree of confidence in identifying those levy payers that are not members of MLA—is that the question?

Senator WHISH-WILSON: Yes.

Mr Norton : It is very difficult for us to do that. We cannot identify them now because we do not have access to the data. We just keep encouraging industry to become members.

Senator WHISH-WILSON: Ultimately, who should be responsible for this question of identifying eligible members?

Mr Norton : The red meat industry has addressed this issue before, as well. When I say 'industry' I mean the peak industry councils. They were tasked with this question as well: did they want levy payers to be identified. The initial cost, back in 2006, was approximately $1.2 million. And the industry made the decision, 'No, we would rather use the current system and spend that money according to the income stream for which it was derived.' We are now at the situation where the whole of the industry is committed to identifying the levy payers by levy paid.

Mr Quinlivan : This is an issue for all of the R&D corporations that have a large number of levy payers. It is not so much of an issue for those who have a small number of industry participants. It is obviously very important that those organisations are able to communicate with levy payers. We have a project where we are starting to develop a database so that the identity of the levy payers is known to the organisations and they are able to communicate effectively with them. But there are privacy and other issues that we have to deal with. I think you would have talked about these in the committee. But the government is definitely intent on fixing the problem. It is just a question of how best to do it.

Senator WHISH-WILSON: How far are you down that track?

Mr Quinlivan : We have some good ideas. We have quite a lot of scenarios to work through. There needs to be quite a lot of legal analysis to work out how to deal with those privacy issues in an effective way. Then we have to develop the mechanisms that can work in practice. There will be legislation involved, I would think.

Senator WHISH-WILSON: Would it be fair to say, ‘Not far down the track’?

Mr Quinlivan : The logic and the concepts are well advanced. The best way of executing it, we are just starting out with.

Senator WHISH-WILSON: How many members submitted a notice for increased voting entitlements based on levies paid at the last MLA AGM?

Mr Norton : I will have to take that on notice.

Senator WHISH-WILSON: Okay. How many voting entitlements were there in the last AGM? How many votes could potentially be cast?

Mr Norton : It is 3.74 per cent—and I will clarify that on notice—of available members of MLA.

Senator WHISH-WILSON: So only 3.74 per cent?

Mr Norton : To equate that to actual numbers, in 2015 it was 7,628 of a potential 49,756. That is 3.74 per cent of members. That is higher than 2014, which was 2.86 per cent.

Senator WHISH-WILSON: Is that historically in line with what you have seen before?

Mr Norton : It has been lower than that number.

Senator Ruston: Senator Wish-Wilson, for your information, the legislation for this particular register is currently being drafted. It is perhaps a little bit further down the track than you might have otherwise thought. We are hoping that that legislation will be introduced in the first half of this year.

Senator WHISH-WILSON: Thank you for that, Minister. How many of these voting entitlements were exercised? How many votes were actually cast?

Mr Norton : 1,865 voted. I can give you, on notice, all of that detail. The numbers have been rising slightly. We benchmark it against other ASX listed companies and other RDCs. They are mostly consistent with annual general meetings, which are becoming very procedural-based AGMs.

Senator WHISH-WILSON: What is the average entitlement holding of those who voted at the last AGM?

Mr Norton : I will have to take that on notice. But MLA has a sliding scale of voting entitlements, which I can provide to you verbally now or in written format.

CHAIR: Who has the greatest entitlement?

Mr Norton : Because of the sliding scale, the top 200 levy payers could not be outvoted by the rest of the membership if the rest of the membership voted.

CHAIR: Who is the top levy payer?

Mr Norton : A vertically integrated Australian-

CHAIR: Swifts?

Mr Norton : I think it is still AAA Egg Company. I will take it on notice and give you the top 10, Senator.

Senator WHISH-WILSON: I would be very interested to see that as well.

Mr Norton : And the voting entitlements. But may I say that in 2014, industry actually voted to change the MLA constitution twice. That again was on the back of some of the recommendations out of the grass-fed Senate inquiry. That gave the grass-fed sector three seats on the selection committee for the MLA board. This year the extra person was from the grass-fed sector, Mr Mick Hewitt, a well-known northern beef identity. Again, if industry decides to change the MLA constitution, that 2014 AGM demonstrated it has the capability and the desire to do so. Both those resolutions were passed in the early to mid-80s, I believe.

Senator WHISH-WILSON: Is it possible to work out the average allocation of voting entitlements of MLA members? You can take that on notice, if you want.

Mr Norton : I will take that on notice. We should, because it is all done by a third party. We audit variances on the previous year, so if someone has enormous variances the third party will audit that levy payer.

Senator WHISH-WILSON: How many candidates stood in the last election and how many positions were there?

Mr Norton : There were 91 applications for the MLA board for three positions. Then the selection committee assed those 91 applications. It is a skills-based board. Because it is a skills-based board, in this situation there are a number of requirements for the directors to go on to the board and we are seeking the skills to fulfil on the MLA board. So the selection committee goes through the process and then they nominate who goes on the MLA board.

CHAIR: Is the selection committee part of the board?

Mr Norton : No, it is not. In the 2014 AGM, MLA directors were reduced from three to two. MLA directors that sit on the selection committee have no voting rights. So the selection committee is made up of three grass-fed, two feedlot and two from the Sheepmeat Council. They select who goes on the MLA board. In terms of the selection committee, yes, there were a number of choices at last year's AGM for industry to vote on as to who they would like to go on to the selection committee, who are ultimately their representatives to decide who goes on the MLA board. The MLA board process is just a ratification of the recommendation of the selection committee.

Senator WHISH-WILSON: Do you use information from Cattle Council to inform your membership register? How do you interact on that? And how do you verify what they give you, if you use their information?

Mr Norton : I can't think of any examples where they have given us information to verify our levy payers, because we do it at arm's length through a third party, like an ASX company under ASX guidelines.

Senator WHISH-WILSON: You pay the Cattle Council $750,000 per annum, is that correct?

Mr Norton : We just started a service agreement, yes.

Senator WHISH-WILSON: What form does that take? When you say ‘service agreement’, is that a fee-for-service?

Mr Norton : That is under a service agreement to provide services for MLA. We have deemed the peak industry council to be in a better position to carry out those services. They have milestones and guidelines under that service agreement around what is required under that service agreement. It is not just a cheque for $750,000. In this particular service agreement, they are to build industry leadership and capacity within the grass-fed beef sector and report back to MLA on that. They will obviously incur costs to do that, which is why we formalised it in that service agreement. I am more than happy to provide that service agreement.

Senator WHISH-WILSON: Are they uncontested? Is there any tender process for that kind of agreement or would you consider it a grant?

Mr Norton : In terms of an organisation representing the peak industry council and representing the grass-fed industry, we deemed that they would be best positioned to facilitate, under a service agreement, those requirements to build capacity and leadership. It is ultimately trying to strengthen our peak industry councils so that they can better deal with the industry issues as they arise and represent industry under their charter. So we are certainly, at their request, assisting them in building and bringing youth through the cattle industry.

Senator WHISH-WILSON: The MoUs between the Cattle Council and the MLA states that peak councils must 'assess the performance of industry service companies in service delivery and goal achievement'. You have outlined some of the milestones that are attached to that agreement. If the Cattle Council is dependent on you for 50 per cent of its funding, do you have confidence that the Cattle Council can provide independent oversight of the MLA and its service delivery?

Mr Norton : I can tell you that the dialogue between the Cattle Council and the MLA has not changed one bit since the inception of that service agreement. We are trying to make sure that we have strong peak industries within our red meat sector. I use the Sheepmeat Council as an example. When we have a strong peak industry council they hold the MLA accountable because they are doing strategic plans that are reviewed annually. I think the performance of the sheepmeat industry has demonstrated that, as a peak industry council, when they set out to do strategic plans, when they have goals and have objectives and then hold MLA accountable to those, we can achieve something. The MLA board is committed to having strong peak industry councils that can have oversight of the MLA and MLAs expenditure. If MLA is to be a truly transparent organisation, we are must not hide from these issues and we must continue to give the peak industry councils comfort around where the money is going and where it is being spent. We are consulting heavily with industry in a transparent manner.

Senator WHISH-WILSON: I have one last question and I will put the other ones on notice. Minister Joyce has repeatedly said that statutory levies cannot be used for advocacy. Does the Cattle Council use funding provided to it from MLA for advocacy?

Mr Norton : The service agreement absolutely clarifies that they cannot be used for advocacy.

Senator WHISH-WILSON: How do you verify whether they are using any of those funds for advocacy?

Mr Norton : Through the milestone reports. We will do a full review of the financial flow back to the peak industry councils as well. So we are quite rigorous around these service agreements.

Senator WHISH-WILSON: Thank you. I will put my other questions on notice.

CHAIR: Senator Sterle, do you have a question following on from Senator Cameron's questions and the crisis facing the industry? It is very nice to hear that the MLA is doing emissions testing on what you eat and what comes out the back passage. But surely the biggest challenge when I sell my cows for $450 and I have to buyback breeders for, $2,000? Restocking is the biggest problem. If you are doing research on making it rain, that would be nice to know, as much as making what a cow farts. Surely the critical mass of the herd is the issue?

Mr Norton : Absolutely. What we are going through at the moment is just an extreme of what we have been through in the past. But the highs and lows have been so much more extreme. Facing the industry is this restocking issue, particularly given the Eastern Young Cattle Indicator has gone to an all-time high and is still healthily sitting around 592. That is an indication of how much the industry can afford to pay because they are getting those margins. They are paying higher prices but they are also getting higher prices.

CHAIR: If you can get $1,000 for every calf at 300c and 200c a kilo, you sell it there and don't wait for it to breed. The second thing I want to note is that in the last week or so there is a hell of a lot of pressure. Swift and those sorts of characters, if they get the opportunity, are serious market manipulators. For two or three years Australia's beef price on the hook has been the hoof price in America, because they went through the same rebuilding of the herd. Some of these abattoirs try to get 75 or 80 per cent of the kill by a price on the hook. To get a slot on the hook they will say, 'Oh mate, we can't fit you in for six weeks.' But if you care to send them into the Wagga saleyard or somewhere, they would buy them and kill them the next day. The game is to try and keep the hook price down by taking the tension and the market out of the auction system. This is a hell of a problem.

There is serious consolidation, as you know, of the processing industry and also of the trim in the abattoirs. You don't have to be a bloody bureaucrat to put an emissions code out or whatever. These are the practical issues for the bloke in the paddock. If you buy a place at Charleville and you get it for $8 an acre, why are you not paying $2,000 an acre? Because you can expect one in every two or three years is going to be a bugger of a year. I have full sympathy. I suppose I'd better put my hand up and declare a serious interest, but I know it all and I deal with it every day. How are we going to rebuild the herd and at the same time maintain the price? It is going to be very difficult for the herd rebuild, given the pressure in the market and given the Asian opportunities. On the question of beef into China and the number of head, there is a bloody lot of beef that goes in their not by the head but by the box.

Senator CAMERON: On this issue of the price, the senator has just indicated that there are a range of factors on the price and some of that is manipulation in the market. Is that true?

Mr Norton : As an RDC, it is not my position to say yes or no. What I can say is that we work with the industry to address some of the lack of research and development and technology in the processing sector to build a more efficient and more productive processing sector.

Senator CAMERON: Whether the market is manipulated or not, you say that the main driver of price in the industry is the market.

Mr Norton : The main driver of price in the last two years has been the global shortage of beef, particularly driven by shortages in the US herd.

Senator CAMERON: So the market, basically.

Mr Norton : The market.

Senator CAMERON: Have you done any estimate as to what government policy contributes to the price at the farm gate, if anything?

Mr Norton : I would have to take that on notice. But certainly Australia is an export nation in red meat. About 70 to 75 per cent of our beef is exported, as is 65 per cent of our lamb.

Senator CAMERON: Yes, we have been through all of this. I'm asking a simple question: how much does government policy contribute to the gate price of beef and lamb in this country?

Mr Norton : I would have to take it on notice if to give you exact numbers.

Mr Quinlivan : Can you be a bit more specific about which policies you—

Senator CAMERON: I am asking about any policy. It is a simple question, Secretary. I thought Mr Norton understood quite clearly.

Mr Norton : If it is government policy to match levy funds for research and development, which obviously it is, with a five dollar levy imposed on a grass-fed animal, 92 cents of that must be spent on R&D for the grass-fed sector. Where it is spent it is matched by government funding.

Senator CAMERON: You have taken it on notice. You are going to come back and you are going to tell me and the committee how much you can say government policy contributes to the gate price?

Mr Norton : Yes.

Senator EDWARDS: If you talk about it with a live cattle ban, that is a pretty good policy that we could refer to.

Senator WILLIAMS: On that issue, don't forget the government marketing negotiations and building extra live markets and building extra demand into Indonesia et cetera, Senator Cameron. Congratulations, Mr Norton, on your wonderful Australia Day advertising campaign. I thought it was a cracker. Some didn't, but don't worry about them. Mr Norton, MLA has been reporting on livestock markets for a long time. Is that correct?

Mr Norton : Correct. It is 25 years.

Senator WILLIAMS: We have just had the ABC withdraw the morning reports, which I think is very disappointing because, for example, the sheep sale at one o'clock on Tuesday at Inverell I would hear about the next morning at twenty to seven on the ABC. But they say it is old news and they are not reporting it anymore? Do you have many complaints about that?

Mr Norton : Yes. We have lodged our complaints with the ABC.

Senator WILLIAMS: So have I. I do not know whether we are going to win or not, but we can take it up with the ABC perhaps in these estimates as we move along.

Senator Ruston: I think you will find the ABC next door today. It is probably a good question for them.

Senator WILLIAMS: I'd like to discuss it with their rural manager, but I think we are knocking on a brick wall. In relation to Senator Cameron's climate change discussions with you, I was amazed to find that China added up their total burning of coal last year. They actually made a mistake, Mr Norton. When they added that up again they were 17 per cent short. So they added the 17 per cent on the mistake they made and the 17 per cent of extra coal they burnt was actually more than the emissions that Australia emits in a year.

Senator CAMERON: This is a losing battle.

Senator WILLIAMS: Has the MLA done any lobbying to the big emitters, such as China and India, to reduce their emissions? I would say not.

Mr Norton : No.

Senator Cameron interjecting

Senator WILLIAMS: It is a ridiculous question because it is a ridiculous situation. That is the point I am making.

Mr Norton : The cattle industry has faced similar things. The CSIRO did a report on cattle methane emissions and they were recalculated in 2015 to be 24 per cent lower, which was equivalent to 12.6 million tonnes of carbon dioxide per year. As I said, the cattle industry has faced similar issues.

CHAIR: Can you just enlighten us—

Senator WILLIAMS: Hang on a minute. Who has the call?

CHAIR: I am doing what I do to Doug. Can you just tell the committee, and I know the answer, who has the biggest cattle herd?

Mr Norton : In the world?

CHAIR: Yes.

Mr Norton : India, followed by Brazil.

CHAIR: 195 million.

Mr Norton : No, it would be more. Brazil is about 211 million, so India would be higher. I do not know the exact numbers.

CHAIR: That doesn't include buffalo.

Mr Norton : That does.

CHAIR: There are 26 million here. We are a small player, in reality. But we exported the bulk of it.

Mr Norton : That is right. We are one of the world's largest exporters outside of India because of our domestic population we obviously have to be.

CHAIR: Just to emphasise the correctness of Senator Williams's statement, we are small players.

Senator BULLOCK: In fairness to Senator Cameron, his questions on sustainability were, as I heard them, questions on the sustainability of the whole industry—its financial viability, herd size and its future. The answers dealt largely with bovine emissions but that was not the thrust of his question. I do not think we should get carried away on the emissions front. What we want is a sustainable livestock industry.

CHAIR: Hence my frustration.

Senator WILLIAMS: Thank you, Chair. Mr Norton, isn't it true that when a beast—a cow, a sheep, a steer or whatever—eats grass, they do emit greenhouse gases. But the grass does happen to grow again and absorb CO2, so would that be a bit of a cyclical pattern there.

CHAIR: Do you eat baked beans?

Senator WILLIAMS: Rarely. My final question is: are you expecting our cattle numbers to fall?

Mr Norton : This year to about 26.2 million.

Senator WILLIAMS: How many of those are dairy cattle?

Mr Norton : I think Dairy Australia is here today. The impacts of the dairy industry and the dramatic falls in dairy are not attributable to what happened in the beef sector.

Senator WILLIAMS: What about the sheep numbers?

Mr Norton : There are 70 million sheep. Our flock is a ewe-based flock, so it is a principally now a female merino flock and it is starting to increase. The merino ewe is still the largest part of our flock but it is being joined to prime lamb production. It is stabilising and we are starting to see a slight increase in our ewe numbers.

Senator WILLIAMS: Do you take an interest in the number of shearers in Australia? I think we are currently at about 3,200 shearers.

Mr Norton : That is a question, I suspect, for AWI.

Senator WILLIAMS: Thank you, I will.

CHAIR: Are we done?

Senator STERLE: I want to ask Mr Quinlivan about the abattoir being built in Huizhou at the Hutchison Port facility, in terms of the live export trade. Who should I ask about that?

Mr Quinlivan : Our export group who are on, with the current schedule, later this evening. They will be well equipped to answer that question.

Senator STERLE: There are also some bio-security barriers in terms of that export of live cattle to Huizhou. Where should I direct those questions?

Mr Quinlivan : We will be able to deal without at the same time.

CHAIR: That does not include an expose of the facilitation fees that are required to get things done. Thank you, MLA. You can go home. I now call the Rural Industries Research and Development Corporation.