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Sheepmeat body notes processor reaction to $150m MLA plan

by Terry Sim, 24 February 2017

Sheepmeat Council of Australia CEO Dr Kat Giles

AUSTRALIA’S leading sheep meat producer body is closely monitoring the rejection by processors of Meat & Livestock Australia’s initial plan to fast-track objective carcase measurement into abattoirs across the nation.

MLA’s Project 150 announced in November last year aimed to pursue a $150 million industry-wide installation of Objective Carcase Measurement technology to all AUS-MEAT accredited plants by 2020.

MLA managing director Richard Norton announced MLA would acquire a commercial loan on behalf of industry to finance the $150 million one-off cost of installing Dual Energy X-ray Absorptiometry (DEXA) technology in up to 90 AUS-MEAT abattoirs.

However, the Australian Meat Industry Council believes it has identified a number of conceptual, methodological and policy-related deficiencies in the MLA plan and has not supported Project 150 in its current form, and with the Australian Meat Processor Corporation today announced the appointment of professional services firm EY (formerly Ernst and Young) to undertake an independent review into the introduction of objective carcase measurement technology and its application in the red meat processing industry.

The Sheepmeat Council of Australia initially supported Project 150 proposal, believing it would enable scientific measurement of saleable meat yield and underpin future value-based marketing and productivity gains through processing automation, genetic improvement and data-based on-farm decision-making. The Cattle Council also supported the initiative.

SCA chief executive officer Dr Kat Giles said the council supported initiatives that supported the Sheepmeat Industry Strategic Plan, which included support for technology and feedback to producers from objective carcase measurement.

“However, we still need to look at the merits of the proposal, including how it will be funded, how it will be implemented etcetera, which we’re doing that at our board meeting next week.”

Dr Giles said the AMIC position on Project 50 would inform part of the sheepmeat council’s discussions next week “because we have got to work with the full supply chain.”

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Review will evaluate all aspects of Project 150

AMIC chairman Lachie Hart

AMIC and the AMPC said the proposed OCM technology review will provide analysis and recommendations on whether investment in DEXA technology is a prudent operational and commercial decision for processors. The review will evaluate all strategic, technical, financial, commercial, operational, governance, and implementation aspects of Project 150.

AMPC chairman Peter Noble said that AMPC had commissioned an independent review because it has a responsibility to its members to ensure that investments made on their behalf are thoroughly evaluated and deliver commercial benefits to the industry.

“Without adequate consultation, cost-benefit analysis or due diligence there can be no level of comfort in investing substantial industry funds in DEXA technology which is yet to be sufficiently proven.

“We take our obligation very seriously to provide members with a comprehensive fact-based approach to investment decisions to ensure their funds are spent in ways which will benefit them and the industry,’ he said.

Mr Noble said that AMPC has already invested and committed to invest $6.6m of processor levy funds in jointly-funded projects related to carcase measurement technologies, highlighting the processing sector’s support.

AMIC Chairman Lachie Hart said that a capital investment of this scale that is without appropriate governance, consultation and feasibility assessments could encumber an industry already facing unprecedented cost pressures related to regulation, utilities, livestock, and labour.

“Until our members can be confident that this technology will provide a more independent and accurate way to grade and price carcases, we risk undermining the integrity of the cattle pricing process,” Mr Hart said. “If we get it wrong, it would be a costly and backward step.”

“At this early stage of its development, it would not be prudent to unilaterally roll out DEXA technology across the whole of industry,” he said.

The independent review and the trials being undertaking by Teys Australia will better inform the industry as to the merits of the technology and provide the necessary confidence to make an investment decision, the processors said.

The independent review will be led by Andrew Metcalfe who has extensive experience in the sector and was the lead partner on a recent report called ‘Strategic Risks Facing the Red Meat Industry’.

The processor bodies said EY had identified a team with key skills, knowledge and resources to undertake the review, including an international expert familiar with DEXA technology and its application across multiple industries. The findings of the report are anticipated to be publicly available in April 2017.

Click here to view yesterday’s Beef Central report, outlining the processing sector’s rejection of the Project 150 proposal in its current form.

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