News

Lamb producer claims lack of transparency and collusion

Terry Sim, May 27, 2015

Australia’s Senate inquiry into red meat market consolidation in the processing sector has heard its first claims of lack of transparency and alleged collusion levelled at the sheep processing and trading sector.

A lamb producer, Hermit Hill Pastoral Pty Ltd, has claimed that it is commonplace for processors to collude together in saleyards to drop prices being offered for lambs.

“The stock agents themselves then collude together to hold back stock from the processors, then pushing the prices up,” the submission said.

“The general impression from selling our second lot of lambs, when deciding who to sell to, as to who had the better price, is that the processors are playing games with farmers/stock agents.”

The company’s submission to the Rural and Regional Affairs and Transport References Committee is one of eight made to the inquiry into the effect of market consolidation on the red meat processing sector, (see here).

It was made under the inquiry’s terms of reference pertaining to:

– the potential for misuse of market power through buyer collusion and the resultant impact on producer returns;

– the impact of the red-meat processor consolidation on market competition, creation of regional monopolies and returns to farm gate, and;

– the existing selling structures and processes at saleyards, particularly pre- and post-sale weighing, as well as direct sales and online auctions, and whether they remain relevant.

Company unable to obtain detailed carcase data

The family farming business, Hermit Hill Pastoral Pty Ltd, said it had only been operating a few years and is in the capital building phase of the enterprise.

“Being farmers in our late thirties-early forties, we represent a growing cohort of younger farmers intent on running a viable business for lifestyle and creating value for our family.

“We bought our first ewes and lambs just over a year ago and have recently sold our first lambs – 550 of them.”

The pastoral company said it was surprised at the behaviour of the buyers during the sale process, being unable to obtain a detailed analysis of individual carcase weights to investigate a “discrepancy” in expected dressed weights.

“We were informed that the processor did not respond to those requests and we could not obtain this information.

“The kill sheet only shows a number of beasts in a weight range,” the submission said.

“This lack of transparency over final kill weights for lambs makes it impossible to reconcile records kept on-farm, and the resultant lamb final dressed weight.

“The processor would have this detailed information to enable running an efficient business, but the farmer can’t obtain this beast by beast information,” the submission said.

“After talking to the stock agent it is commonplace for the processors to collude together to drop prices being offered for lambs.

“The stock agents themselves then collude together to hold back stock from the processors, then pushing the prices up.”

Competition impacted by buying behaviour

The company said its general impression “from selling our second lot of lambs, when deciding who to sell to, as to who had the better price, is that the processors are playing games with farmers-stock agents.”

The company submitted that saleyards are a relevant market mechanism and keep a floor in the market, but that various processors had been observed at the Bendigo saleyards “nodding to each other, allowing each other to buy various lots of lambs.”

“This indicates collusion between processors in controlling the saleyard market…”.

Source: Senate Standing Committee on Rural and Regional Affairs and Transport.

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