Ditching compulsory beef levies: Beware the free rider

Ditching compulsory beef levies: Beware the free rider

Beef
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Are mandatory levies still serving red meat or should they go?

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ONE of the more prominent figures in the red meat industry has set a cat among the pigeons by raising the issue of whether compulsory levies are still serving beef and sheep meat producers well.

It's been met by warnings to tread carefully.

Red Meat Advisory Council chair Don Mackay, a man who has spent five decades in the beef industry starting with the agency game and then heading up AACo and Rangers Valley before moving into agripoltics, said much of the discontented noise doing the rounds in the industry at the moment was a direct result of mandatory levies.

Adamant he was not advocating either position, Mr Mackay said the question had to be asked whether paying levies formed an essential part of a better red meat future.

There was clear evidence of great things being achieved with levies in the past, and there were some who believed the levy should be increased, but discussion needed to happen around whether the industry's players wanted to be paying levies come 2030, he said.

To paint the picture, there are 16 levies paid by the red meat sector to five key recipients.

In 2018-2019 that totalled $132 million, with government co-investment adding an additional $80 million.

"In the scheme of an industry turning over $65 billion dollars in the same period this is a relatively small amount of money," Mr Mackay said.

"The scale of levies paid ranges considerably. No one can tell you what exactly because as an industry we don't know who pays the levies.

"One can assume that the smallest levy payer is a hobby farmer paying a single $5 transaction levy. And from experience I can tell you the largest levy payers in corporate agribusiness can pay in excess of $1.5m in combined streams.

"Businesses rightly want input and ownership over these investments and businesses of any size who are not directly engaged in this often do not see the value of paying these levies."

Other industries which do not have a mandatory levy or industry service provider manage innovation and marketing in-house, Mr Mackay pointed out.

As a result, their political and advocacy organisations are highly prized, resourced and respected, he said.

Proceed with caution

Red meat industry stalwart David Palmer, former Meat & Livestock Australia chief and Cattle Council of Australia executive director, urged caution.

TREAD CAREFULLY: Former Meat & Livestock Australia chief and Cattle Council of Australia executive director David Palmer.

TREAD CAREFULLY: Former Meat & Livestock Australia chief and Cattle Council of Australia executive director David Palmer.

Mr Palmer oversaw the establishment of the transaction levy in the early 1990s.

It was originally set at $6.50 a head and replaced a slaughter levy, which had in its time reached a high of $16/head but was $13 at the time the switch was made.

The aim was to spread the levy over as many transactions as possible - research at the time indicated cattle were transacted 1.5 times during their life, which of course has since increased.

Mr Palmer explained the slaughter levy had built up over 20 years on the back of marketing as Australia gained better access to global markets, increased research in line with government dollar-for-dollar funding and the need to eradicate diseases.

A sizeable chunk had also been payable for an organochlorine carcase testing regime, to manage it out of the market and for product retrieval.

"To my knowledge, debate on whether compulsory levies should exist has never been had - it was always about the quantum not the application," Mr Palmer said.

"I suspect one reason for the discussion today is that the need for generic marketing is probably behind us now.

"The days we had to introduce Australian beef to other parts of the world are gone - that's been achieved.

"The private brand holder should ideally bear the responsibility of product promotion from here."

R&D was a different argument, he said.

"One of the greatest features of our government/industry relationship is cost sharing of R&D and our industry should take all measures to preserve and protect that," Mr Palmer said.

"For no other reason, I'd maintain levies to provide an R&D portfolio."

Free rider

Mr Palmer said anything that was voluntary could only encourage a free rider outcome and that had to be avoided at all costs.

"The system will hemorrhage fatally if that notion starts to develop. It will undermine the integrity of the whole program and it will be inoperative in no time," he said.

He also maintained advocacy was a very important component of a multimillion dollar industry like beef.

"I would have a dedicated component of levies to fund an advocacy role - that would of course mean a complete restructure of the industry," he said.

"A future levy structure might entail product integrity and the provenance story to a greater extent.

"It's an evolutionary process - traditional marketing a thing of the past, to be replaced by the provenance story."

SEE ALSO: Red meat reform plan tweaks levy control

Slaughter cattle prices on the rise

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The story Ditching compulsory beef levies: Beware the free rider first appeared on Farm Online.

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