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Rural and Regional Affairs and Transport References Committee
17/11/2015
Effect of market consolidation on the red-meat-marketing sector

HORNE, Mr Laurie Edward, Private capacity

HORNE, Mr Richard, Private capacity

[13:52]

ACTING CHAIR: Welcome.

Mr L Horne : My brother is a small farmer and an accountant. He has held his breath a few times in my buying and selling of livestock. I would be much more comfortable in a saleyard with 2½ thousand prime cattle than sitting here, I might add, but that is beside the point.

Senator WILLIAMS: You wait until we start grilling you; you'll be sorry!

ACTING CHAIR: Do you have anything to add as to the capacity in which you appear today?

Mr L Horne : I am a farmer from Molyullah, which is outside of Benalla. I have had three properties. I started small and gradually got bigger.

Mr R Horne : I have just retired. I spent the last 40 years as an accountant in private practice, initially in Wangaratta and more latterly in Wodonga. I have a small farming operation in the Indigo Valley, which runs into Barnawartha.

ACTING CHAIR: Thank you. We have received your submission, which we have numbered 12. Would you like to make any amendments or additions to your submission?

Mr L Horne : No.

Mr R Horne : No.

ACTING CHAIR: In that case, we will get to it and invite you to make an opening statement.

Mr L Horne : Thank you. I introduce myself as a livestock producer over my entire working life. I see myself as a member of a large proportion of smaller producers in Victoria and New South Wales whose livelihood is linked to their capacity to maximise returns from their property.

The catalyst for my involvement in this inquiry was the boycotting of the selling of prime cattle in the Northern Victoria Livestock Exchange saleyards in Barnawartha in only the second week of its operation by a large proportion of the buying fraternity. Wodonga was the hub of livestock marketing in the north-east of Victoria for many years. For reasons never understood by me, the shire closed Wodonga and a new facility was opened at Barnawartha. Buyers seized the opportunity to change the selling rules without consultation, consideration or care. I have long been a participant in the auction method of livestock transactions, both cattle and sheep, participating all my life in buying and selling.

The auction system is a very effective guide relating to the supply and demand for livestock and many other commodities. The success of the auction system in selling is competition. Competition is the lifeblood of all auctions. The resulting prices achieved at auction have become the benchmark value of livestock quoted by every sector of the industry. When working well the auction system is satisfying to all parties. It seems hard to believe, but I was involved in livestock buying when live weight selling was introduced in 1975. It certainly met with resistance early. However, when everyone started to realise that the accurate weight of the animals displayed gave you so much more information, it was accepted and supported. The introduction of the curfew added to the weight accuracy and this then met with complete approval. All of a sudden all interested potential buyers knew the weight of the cattle. What a great innovation.

I would like to quote from the history of the new market saleyards, where I operated years ago, from On The Fall of the Hammer: 'Undoubtedly the most significant change in the history of livestock marketing in Victoria was the introduction of live weight selling of cattle at Newmarket in 1975. The marketing concept whereby cattle were weighed and auctioned in cents per kilogram instead of dollars per head met with fierce resistance from sectors of the meat industry, drovers and agents in its early days. However, as the total industry recognised the benefits of objective measurement and buyers, vendors, agents and drovers gradually became educated and familiar with the live weight operation, the facility became a huge success. Consequently live weight selling expanded rapidly and was introduced at all regional selling centres in the state. Weighing of cattle and the resultant education of all involved in the industry has had a profound effect of stud masters breeding strategies, butchers' buying techniques and has encouraged sale by description, which is now practised by agents across eastern Australia.'

In all the deliberations regarding the introduction of live weight selling, the possibility of post-sale weighing was never contemplated. I have watched with dismay the quiet introduction of post-sale weighing over some years. The sale has been coordinated and introduced with assistance from a number of helpers. To my knowledge, none of them are producers.

On Tuesday last I watched 2½ thousand cattle sold to buoyant demand in Barnawartha. Buoyant demand is something I have witnessed on too few occasions in my many years of market attendance. With no details supplied, like place of origin or weight, I do wonder what role those white cards play. We can all count and determine sex. Everyone was asking, 'What do you think they weigh?' The way I see it, the scales only identify what the purchaser must pay. If we reverted back to pre-1975, to open auction, at least producers would go home knowing how much their cattle made.

My initial reaction to the boycott at Barnawartha by some of the usual buyers was astonishment. Then I became totally offended. I could not believe that some processors could treat producers with so little respect. I was told last Tuesday that the sale turned into a disaster. Can you imagine a year's product sold at a dramatic discount because of the buyers' wish to have their own way?

I have read with some interest the submission by Teys Australia Pty Ltd and acknowledge the contributions that companies such as this make to the ongoing survival of the rural sector, not to mention the employment they create. They have a great network of facilities across the eastern seaboard and I welcome and support the contribution that they make.

I ask: being the purchasers of 92 per cent of their stock direct from producers—direct, that is, to their works—how did they make the decision to withdraw their support, along with others, from the saleyards at Barnawartha, creating huge disappointment for many producers? What percentage of their eight per cent would they buy at Barnawartha? No-one I spoke to at the Barnawartha sale last week could find a kind word to say about Teys. This has been a public relations disaster.

Having bought and sold cattle my entire working life, both auction and live weight, I need to know what the motivation was for bullying producers to change their selling methods. The only plausible reason is to give themselves an advantage by lessening competition from opportunity buyers such as me. Less competition, less money. As a per kilogram sale in the saleyard is a benchmark for direct sales, the market price is quoted when trying to sell direct. So it impacts unfavourably on the seller.

I am extremely interested in the outcome of this inquiry. I believe the uniformity of the selling process to be of the highest priority, which would be easy to implement and would disadvantage no-one. Thank you.

ACTING CHAIR: Thank you, Mr Horne. In your evidence you said the move to live weight selling was initially resisted but subsequently accepted and seen as a great thing.

Mr L Horne : Yes.

ACTING CHAIR: Earlier today we heard from the Northern Victoria Livestock Exchange. They said, 'Yes, we know post-weight selling originally created some problems but currently most of the producers think it's a fine thing and they're adapting to the new system.' Would you agree with that or would you dispute it?

Mr L Horne : I totally disagree with it. I do not know which saleyard he is attending but it is not the same one as I do at Barnawartha.

ACTING CHAIR: I think he was actually representing Barnawartha.

Senator McKENZIE: He was representing the operators of Barnawartha.

Mr L Horne : He is not talking to the same people I am. I talk to producers. I do not identify much with the buyers. I talk to producers. Producers want to know what is going on. They pay the money. My father was an Irishman and he had a saying: 'He who pays the piper calls the tune.' This bloke paying the piper calls no tune here. Do not make any mistake about that.

ACTING CHAIR: You are not an orphan in putting that evidence before us. I will go in a moment to Senator McKenzie because I know she loves Barnawartha. It is in her electorate.

Senator McKENZIE: I do. I am going to be heading out there in a couple of days. I can't wait.

ACTING CHAIR: Thank you very much for your handwritten submission. I have not had the opportunity to say this for many years, but, Mr Horne, you have a lovely hand.

Mr L Horne : Thank you for saying that.

Senator McKENZIE: We won't dwell! I competed in the Molyullah gymkhana about 35 years ago. I don't get to say that very often.

Mr L Horne : If you go back next Easter Monday it will be bigger and better than ever.

Senator McKENZIE: Fantastic.

Mr L Horne : It has been going on for 105 years, so we are all—

Senator McKENZIE: It is a great gymkhana; get out there, everybody. I want to thank you very much for your unique perspective. It is really heartening for us to hear from somebody with your experience in, and concern and passion for, the industry. I really appreciate it. I have three quick questions. With respect to your views on collusion, you have worked in this industry. We hear time and time again, 'No direct evidence, Senator, of collusion.' We all know it happens. Mr Horne, in your experience, do you have any direct examples that you could put in Hansard for us of collusion at the saleyards?

Mr L Horne : My response to that would be I have seen shameful collusion in my life—shameful collusion.

Senator WILLIAMS: Were you an auctioneer?

Mr L Horne : There is no collusion at the moment.

Senator WILLIAMS: Were you an auctioneer?

Mr L Horne : No. I have never been an auctioneer.

Senator WILLIAMS: Go on. I am sorry to interrupt.

Mr L Horne : I just buy and sell livestock.

Senator McKENZIE: You say 'shameful collusion' is what you have seen throughout your working life in this area. Could you outline some examples for us?

Mr L Horne : Yes. I have seen buyers one week go along and buy two buys, all killing the same type of livestock. One will go along and buy all the lighter weight cattle this week, and the next week it is his turn to buy all the heavier weight cattle. And the reverse is the case, of course. This is at times when farmers are selling because of the seasonal conditions or whatever, and there is not enough competition. This is why I am worried about this post-sale weighing. You must have competition. I am an opportunity buyer. I am reaching the end of the line now, but opportunity buyers play a big role because they do not owe anyone any money. I bid against whomever I like. It is important that these people are there. If they see something that is under value, they have the opportunity to buy.

Senator McKENZIE: But in terms of evidence of collusion, you have the lighter averaging out their losses over time?

Mr L Horne : I could not name names because I have not seen it for quite some time. But I have seen plenty of it. Anyone who says they have not seen collusion is not at the market.

Senator McKENZIE: That is interesting. There have been a couple here today who have had over three decades of experience in this industry—

Mr L Horne : Yes, I heard them say it.

Senator McKENZIE: saying that they have not seen any collusion.

Mr L Horne : In a buoyant situation, as it is at the moment, and on other occasions, you do not get collusion because everyone has to get their numbers. It is when it is on the downward spiral, or something like that, that you get collusion.

Senator McKENZIE: Do you have a view of commission buyers?

Mr L Horne : I do not have a negative view of them so much because at least they are operating in the marketplace. Even if they have four consumers to service, at least they are operating. Better one than no-one.

Senator McKENZIE: How do they deal with that inherent conflict of interest?

Mr L Horne : It would be interesting to know quite how they do. Quite often you see some of these people with big orders; they knock down to them and they will wait for 30 seconds before they decide which one of their bosses to give the cattle to.

Senator McKENZIE: Do you think there is a role for maybe some regulation around that, some transparency around it?

Mr L Horne : It has worried me. I have thought about it a lot since the introduction of this inquiry because we have to appreciate competition, and any competition is better than no competition.

Senator McKENZIE: I could not agree with you more.

Mr L Horne : So they are competing. Obviously, they are not competing on the same levels because they are eliminating the other chap from being there and competing against them. I am not quite comfortable with introducing regulations. Maybe there could be a limit of five or four orders, or something like that. But some of these guys would have eight orders.

Senator McKENZIE: In terms of the consolidation and its impact, not just in the processing sector but the impact on competition, do you think that, particularly, say, in our home state of Victoria, we have too many? You can send them to Echuca, you can go to Shep, you can go to Barnawartha, or Wangaratta.

Mr L Horne : Everyone likes to support their own area. I think that the opportunity to have bigger saleyards, as in Barnawartha, is good. But one has to be comfortable with selling them. I have cattle being sold in Shepparton today. I got them in at eight o'clock yesterday morning. Those cattle will not be weighed maybe until five o'clock tonight. There is an animal health problem there, I believe, among other things. And it has been later than five o'clock. I might be making a mistake; there might have been the first sale and they weighed at, say, 11 o'clock. So you do not know. I do not mind there being a certain number of saleyards, but if you fragment them too much you end up with no-one getting a decent price.

Senator McKENZIE: That was my point. Was it the buyers advisory group at Barnawartha that made the decision to change the—

Mr L Horne : I do not know. I was given the tip on a Friday night, I think, before the Tuesday that Teys was saying they were going to pull the pin on supporting Barnawartha unless they changed the selling technique. I do not think it was Teys' decision. It is the producers' decision. We pay the costs.

Senator McKENZIE: The evidence this morning from Mr Edwards, who operates the livestock exchange up there, was that the only change that was made was to curfew time. You are smiling, Mr Horne.

Mr L Horne : I have always believed in a curfew. The introduction of a curfew was a very proper way of knowing that the cattle are in before a certain hour and then you weigh, knowing that you have this uniformity regarding the time they got there. I do not know about the curfew. I do not sell a lot of cattle in the prime sale because I do not have a lot of confidence in it. I would much sooner sell in stall markets; I have more confidence because the weight is up there. My steers are in there. The other day, there they were. They weighed 256  kilograms, for all to see. People can bid what they like. As producers, we are accepting our buyers calling the tune so that we are unaware of their weights. Yet as producers, when we sell them in the stall sale, their weights are displayed.

Senator McKENZIE: Do you think there is an argument for a standard set of technology in the 21st century so that, as they walk in to the sale ring, we get the weight?

Mr L Horne : Absolutely. Echuca does it—on-scale weighing. I understand Graham Osborne put a submission to this inquiry. He runs Pakenham and Leongatha. Both are sales at which I have sold cattle many times. The producers were unaware that it was going to change and become post-sale weighing. All of a sudden they wake up in the morning and their lives have changed. They go home and wait for an agent to ring them at 10 o'clock and say, 'Your cattle weighed 402.' You would say, 'I thought they would have weighed 450.' 'Oh, well, that's what they weighed, mate. Bad luck.'

Senator McKENZIE: There is no—

Mr L Horne : Recourse.

Senator McKENZIE: process in that to say, 'I don't want to sell them for that'?

Mr L Horne : That is the question. I have a couple of questions myself that I would like answered. I will read them out to you. When does the ownership legally change hands? In that story about the Newmarket saleyards, where I operated for some years, it was on the fall of the hammer, as it was called. That was when it legally changed hands. I notice that with the conditions of sale at Barnawartha they have put in the conditions of sale that it changes hands at the end, when they are weighed. That is a condition but I do not think it is a legal requirement.

I bought cattle one day and they were knocked down to me. The bloke was rising in $10 rises and I took him back to $2, which was the accepted price at that time. He said, 'No, I'm going to put them up again.' I stopped him when he got started. I said, 'You are now selling my cattle.' He said, 'Get yourself a lawyer.' They are the words he used. So I kept bidding again. They went from 240 I think to 290, and he had to knock them down to me again. I made my inquiries regarding the legalities of it; I was right and he was wrong. So he stood to have to pay his vendor that extra $50 per head because once the fall of the hammer came, they were legally my stock.

ACTING CHAIR: My memory may be faulty; perhaps the secretary can correct me. I think we had evidence from a processor whose view was that it was not until the weighing that the transaction was completed. If I recall correctly, he said he was surprised that few people ever stayed back and waited for them to be weighed because they could pull out at that time if they wished. It might mean hanging around quite unproductively for a long while—

Mr L Horne : That is what we need to know—if they have the right. Let us say you are hoping your cattle weigh 400 kilograms and you are working on $2.50 a kilogram, which you have been offered. You know your neighbour will give you a thousand dollars for them but they only weigh 390 kilograms. Can you veto the sale then? That is what we need to know.

ACTING CHAIR: The secretariat will have a look. If I am right, could we let them know? The secretariat are very good.

Mr L Horne : There are a lot of questions that need to be answered. We see these cattle coming to Barnawartha from Cameron Corner, Tibooburra—I do not know whether you have been there. It is a long way away. Those cattle travel a long way. They might leave on Sunday to be sold on Tuesday morning and then they are weighed that night. That is a long time; there is an animal welfare problem there, I believe.

Senator WILLIAMS: You would not have to spell them on the way?

Mr L Horne : I do not know whether they do or not, but chances are they would not—they would come straight through.

Senator WILLIAMS: As a former truck driver, I have carted a fair few cattle and sheep, by the way—but not that distance. Mr Horne, I am getting confused. You said, in about the last sentence of your opening statement, 'We need consistency in selling of livestock'. I moved to northern New South Wales in 1979. Right through New South Wales and, I believe, a big part of Queensland the cattle are sold per kilo weight after the sale. I do not have anyone coming to my office in Inverell complaining about the selling system of the cattle. Yet you were saying down at Barnawartha you have gone from a pre-weighing situation to a post-weighing situation now. Isn't that consistent with what we have been doing for decades?

Mr L Horne : I always thought New South Wales was a backward area—

Senator WILLIAMS: We are also the No. 1 state now. We were No. 6 a few years ago; we are No. 1 now.

Mr L Horne : Mine was a flippant comment. There are much bigger producers in that area. Victoria is festooned with small producers.

Senator McKENZIE: Small producers; high-quality product.

Mr L Horne : Small producers need to know what they are getting. They can do their budgets—

Senator WILLIAMS: It is only a little state, isn't it?

Senator McKENZIE: Let's not have this argument.

Mr L Horne : I know there are a lot of vast areas, and big producers send a lot of cattle in, and they are comfortable with it. In my experience, all the people I know are not comfortable with it. It has never been introduced by the producers. They have always been a party to it, an acceptor of it, but it has never been introduced—

Senator WILLIAMS: Mr Horne, we are just a committee to make recommendations to government. What do you want us to recommend? That all auction cattle sales in Australia be pre-weighed?

Senator McKENZIE: Like Wagga.

Senator WILLIAMS: If you want that, we will have to go up to Inverell and Glen Innes and Tamworth and Gunnedah and Goondiwindi—you name it—and say: 'Rightio, you lot. Change your whole system. Change your curfew. You will start weighing them before you put them up for sale.' How are we going to recommend that? They will go off their tree—they have been happy with it for decades.

Mr L Horne : You asked me what I would do as an outcome. I would introduce it for Victoria and the Riverina.

Senator WILLIAMS: How does the federal government make one law for some part of Australia and not for the other?

Mr L Horne : I find that a bit hard to answer; I am not sure.

Senator WILLIAMS: Next thing you will want lower income tax for Victorians than for the rest of Australia.

Senator McKENZIE: Always!

Mr L Horne : Perhaps. I see us as producers being disadvantaged by this. I do not like being disadvantaged by something by other people.

Senator WILLIAMS: I can see your point. Last Tuesday my wife sold lambs. They were weighed before the sale: 62 kilos live weight. They sold well. Yet, a couple of hours before that, at the cattle sale, the cattle were weighed after the auction. So I can see your point, when the buyers know exactly what they weigh.

Mr L Horne : It certainly gives them information they can calculate on, doesn't it?

Senator WILLIAMS: When you pre-weigh them to auction them, do you pay per kilo or per head?

Mr L Horne : Per head.

Senator WILLIAMS: It is per head, whereas post-sale you buy per kilo mostly. The auctioneer might put some up per head, but normally when you are going through, especially in a fat sale, it is per kilo.

Mr L Horne : Per kilo, yes. As I see it, what we are hanging out for in Victoria is uniformity in selling methodology. We just do not have it. You go to one place and they are selling one way—it is all over the place.

Senator WILLIAMS: Victoria has been like that for a long time.

Mr L Horne : True.

Senator McKENZIE: You are not lying.

Mr L Horne : But it has been introduced without the approval of the producer, invariably. That happened at Barnawartha. The agents were consulted. How many producers were consulted? I wonder. Everyone forgets where their money comes from. The agent's livelihood depends on the producer—absolutely 100 per cent.

Senator WILLIAMS: Are Teys Cargill corporate bullies, in your opinion?

Mr L Horne : Absolutely. Why did they do that, unless they wanted to reduce competition? I am not operating as an opportunity buyer at this moment because they are too dear. I will again, but if you do not know the weight it gives you less confidence. I am not the only opportunity buyer in Victoria.

Senator WILLIAMS: They are too dear. If you wait for them to come back, they might even be dearer.

Mr L Horne : I think they will. I can see no reason why they will not retain this extreme price.

Senator WILLIAMS: It is looking pretty good, isn't it?

Senator McKENZIE: In your submission you said that the move to post-sale weighing will encourage a lot of producers into more direct sales. We see that has been an increasing trend over time in this industry. What is the disadvantage of direct sales, if I am happy with the price I am being paid?

Mr L Horne : There is no great disadvantage. You have the advantage because you do not have the cost, but there are some disadvantages. One is that you pay the transport. Secondly, if you get a rejected beast, that is your loss. If you get a dark cutter or something like that, that is your loss. You put them in the market, they take them, and that is at their risk. So it is not all upside. There are some downside possibilities. You pay the transport. I sold sheep over the hooks the other day. I rang them and they said $370. I sent up a mob of sheep. I rang them in 10 days. Sheep had gone back a bit. They said, 'We're on $270 for the next low.' I said, 'Jesus, they didn't drop 25 or 30 per cent!' 'Oh, it's tightened up a bit.' I rang them before I left on Monday, and they were back up to $340. This is the problem. People have to sell. By not competing in the market they are getting the price down so they can pay $270, instead of $370 the week before.

Senator McKENZIE: So your argument is that that decreases the competition at the saleyard, and therefore the price?

Mr L Horne : That is the line that everyone buys—that the butchers buy their cattle at. It is the margin.

Senator WILLIAMS: It gets the price down. The auction sale is the price-setter, isn't it?

Mr L Horne : Yes. They do not have to have a car on the road for the buyer and they do not have to give him wages, so it is in their interest as well. It suits me, if I have a run of cows to go in, to take the price. But you have to ring up first and find out.

Senator McKENZIE: Is it transparent enough?

Mr L Horne : I believe so, yes. I do not have a problem with its transparency.

Senator WILLIAMS: What has your brother got to say? He has been very quiet.

Mr R Horne : It is difficult sending cattle in over the hooks at times because it is nigh on impossible to meet the parameters. If you take bruising as an example, you can mollycoddle your cattle to the point where they are out of your control but you then get a report that they were bruised. So the producer is paying for that decrease in sales value as a result of that. Over the last five years or so I have been to most Tuesday sales, firstly in Wodonga and then in Barnawartha, and a lot of the store sales as well. I think there are real difficulties at Barnawartha, and it is too late. I do not think they can be fixed. They are physical design issues. It probably is a really good place for livestock, but I do not think it is a good place for people at all. All the workers there are complaining about it. It is a very difficult place to work. I suspect that in 10 to 30 years time there will be a lot of claims coming out of Barnawartha.

Senator WILLIAMS: Why is it difficult to work there?

Mr R Horne : The roof is very low,; it is incredibly noisy; it is very hot in the hot weather. It only started in February this year, but the reports I have been getting all through the year—they are starting to come back now with the approach of warmer weather—are that it can be stifling in there at night time. The soft floor is a woodchip base—mulch-woodchip; mostly woodchip, I think. It has a lot of dust content in it. It rises.

Senator WILLIAMS: Can't they water the yards?

Mr L Horne : Oh, yes.

Mr R Horne : There is still a lot of complaint about it. At prime sales there are far fewer buyers than there are at store sales. At store sales where there are a lot of buyers, it is extremely difficult to get down the line. As the auctioneers move down the sale line, it is extremely difficult for the buyers to move from point A down the line to point B. One day I was so infuriated I went home, got a measuring tape, went round to the old sow yards, measured the width of the walkway, went back to Barnawartha and measured that—they are 18 inches narrower. It does not sound much, but there are people actually fighting their way through the crowd to try to get to buy. It is impossible.

ACTING CHAIR: We may have just drifted away from the terms of reference.

Senator WILLIAMS: They are probably better off to sell their livestock at Inverell or Dubbo or somewhere.

ACTING CHAIR: Brothers Horne, I think we are done. Thank you for your contribution.

Mr L Horne : Thank you