An independent study, commissioned by AMPC, has concluded there is “no justification” to implement draconian regulation to balance competition in the $18bn beef processing industry.
Dr Selwyn Heilbron, the report’s author, said there was no evidence of an imbalance in power on the buying side of the beef industry and suggested “significant competition exists” for livestock from processors and buyers. Making consolidation more difficult would have no monetary benefit, he claimed.
The report comes amid intense scrutiny in the red meat industry as the Australian Competition and Consumer Commission (ACCC) carries out a major probe into competition, efficiency and pricing. The independent research carried by Heilbron forms part of the wide-ranging ACCC study.
Adding $6.5bn to household income
No ‘anti-competitive’ conduct
Livestock producers in Australia have complained that prices passed down to them by meat processors have been unfair . Heilbron, though, argued this was a result of increased competition in the global market and could not be helped. The international market has driven up the price processors can afford to pay livestock producers as exports account for 75% of Australia’s beef output, the report claimed.
“Concentration in a market does not equate to anti-competitive conduct,” Heilbron said. “Moreover, beef processing in Australia is far less concentrated than in the United States, our major competitor. Where competition in the industry concerned is strong, there is no justification for using competition policy to hinder economic forces and limit the potential gains in efficiency and competitiveness of the industry as a whole.”
‘Missing the point’
Heilbron suggested innovation in the beef processing industry could be key to countering what he called the “economic challenges” of a competitive meat sector. Regulatory costs, he added, remained a “challenge” to international competitiveness.
AMPC chairman Peter Noble said industry calls for greater regulation were “missing the point”. He echoed Heilbron’s comments and defended the price processors pay for livestock claimed these prices were still “well above international competitors”.
He added: “Meat processing is risky and profitability across the supply chain is highly variable. Processors have been leading the way with innovation in order to counter economic pressures and enhance processing technologies, while at the same time driving increased demand for high quality Australian beef internationally.”