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PRODUCTIVITY COMMISSION

DRAFT REPORT ON THE AUSTRALIAN PIGMEAT INDUSTRY

DR N. BYRON, Presiding Commissioner
MR G. EDWARDS

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON WEDNESDAY, 2 FEBRUARY 2005, AT 9.44 AM

Continued from  31/1/05 in Brisbane
DR BYRON:   Good morning, ladies and gentlemen, thank you very much for coming and welcome to the public hearings of the Productivity Commission's inquiry into the Australian pigmeat industry, following the release of our draft report, last December.  My name is Neil Byron, and I've been appointed the Presiding Commissioner for this inquiry, and assisting me today is my colleague Geoff Edwards, who is a distinguished agricultural economist who's been working for the commission on this particular inquiry.

	The inquiry started with a reference from the Australian Government Treasurer, which we received on 31 August last year and the commission is required to report on the competitive situation of and outlook for the Australian pigmeat industry, including both production and processing and secondly, whether government or industry measures are necessary to enhance the competitiveness of the industry and if so, what measures would be necessary and appropriate.

	I would like to put on record how grateful we are to the many organisations and individuals who have already participated in this inquiry.  We visited piggeries, abattoirs, met with industry associations in most States, even in the relatively short time available for this inquiry.

	The purpose of these hearings this week is to facilitate public scrutiny of the commission's work and get comment and feedback on the draft report.  We've already held hearings in Melbourne and Perth last week and Brisbane on Monday.  We'll be in Adelaide on Friday and again back in Melbourne for a special hearing with APL next Monday, 7 February.  We'll then be working towards completing a final report to go to the Australian Government by the due date, 18 March, having considered all the evidence presented at these hearings and in written submissions as well as whatever other relevant information we've been able to obtain.

	All the participants in the inquiry will automatically receive a copy of the final report once it's been released by the government, which is usually about - up to 25 parliamentary sitting days after we've handed it to the government.

	We always like to conduct the commission hearings in a pretty informal manner, but we do take a full transcript of the day's proceedings for the record and so for that reason, it is not helpful to have comments from the floor, but we make it a practice to always provide an opportunity for anybody who wants to come forward, at the end of the day, to say their piece and put something on the record; to come forward and do so, to make a brief presentation.  Participants in public hearings are no longer required to take an oath, but the Productivity Commission Act says that participants should be truthful in their remarks; that participants are perfectly welcome to comment on issues raised in other people's submissions, or other speakers here today.

	The transcript will be made available to participants for checking, to make sure that they haven't been misheard or misquoted and the verified transcript will be available from the commission's web site as soon as possible after the hearings, and also available for purchase with an order form that is available outside, today.  All the submissions that we received are also available on the web site, or hard copies by the order form.

	To comply with the Commonwealth occupation health and safety legislation, I am required to draw your attention to the fire exits.  The fire exits are located each end of the hallway as you walk out of this room.  The assembly points are located in Margaret Street, if you go left, or in the laneway if you exit to the right.  The toilets are just down towards the left for the ladies and the gents are opposite the lifts.  And that, I think, takes care of the housekeeping for the day except that if I can ask anybody in the audience to turn any mobile phones either off or on to silent mode.  I just remembered to do that myself.  I would like to really thank all of you to take the time to come here today.  I hope it will be a very useful, constructive and informative day for us, but I hope it's also useful for you.

First up this morning, I would like to welcome Mr Campbell.  If you would like to just come forward, Ted, and take a seat in front of any of the microphones. 

MR CAMPBELL:   I would like to be joined if I can.  I haven't filled in a form for my sister.  Just in case there are any tricky questions you guys come up with, she can answer it.

DR BYRON:   I hope the microphones caught that, but if you could just, when you are settled, sort out your papers and whatever, if you could each just introduce yourselves officially for the record and then if you'd like to summarise the main points you want to get across today, and then we can discuss that.  Thanks very much for coming.

MR CAMPBELL:   I'm Ted Campbell, managing director of B.E. Campbell.
B.E. Campbell processes in excess of between nine to 10 thousand pigs per week, which is getting close to half a million pigs per year, so I think we've got a very good insight into the industry and can sort of tell first-hand because we are competing directly with the imports which are affecting the place and also the effect on productivity and everything that those things are having on the industry. 

MS RILEY:   I'm Marie-Louise Riley and I basically look after the financial section of B.E. Campbell.

MR CAMPBELL:   I know that, Neil, you've received a copy of our notes.  It's a little bit hard because we summarise those fairly well, so if you don't mind, I just might work my way through those, if that's okay.  Really, what we've done is we've worked through your draft findings to try and come across and make some comments on, not all of those, but certainly the ones which we think are most pertinent.  I'll begin with draft finding number 2.1 - - -

DR BYRON:   We've already got this, and it's probably already up on the web site, and we've read it and thought about it, so there's not much point in reading it all into the transcript again.

MR CAMPBELL:   Okay.  In summarising that point then, we agree that significant structural change is taking place.  However, great uncertainty is now in the industry, and in our own case, our 10 year plan for expansion in abattoir has been shelved because of what's taking place in the industry today.  That's on point number 2.1 of the draft findings.  I'm just doing a summary of those now.

DR BYRON:   I'm going to ask you to elaborate on that later, but why don't you go through them first.

MR CAMPBELL:   By all means.  Draft finding number 3.1; we are concerned that the period of review is very limited.  We are also concerned that the feedback we are receiving from large specialised growers is that profitability is extremely low.  We also have concerns that Denmark may be dumping.  They are always within 
2 to 3 per cent of our prices and I think the other point in this 3.1 is that lower prices that the commission talks about in its draft report is a short term view.  If the industry goes here, we are very likely to see prices increase.  We also want to make the point that Denmark is heavily subsidised, and it's estimated at approximately 20 per cent.

	Draft finding 3.5:  I think they talk about feed costs which really, yes, we are in full agreement that something needs to be done about that and I think that's something which maybe government can help.  Because as feed is basically 60 per cent of the input costs, it's paramount if we are going to keep this industry going, surviving and competitive, that something is done about that point.  Draft finding number 5.2:  extremely disappointed by this and really think that it ignores the non-financial adjustment costs.  It's just looking at cheaper pork I suppose, for consumers.

	That's it in a summary.  At the conclusion, I would just like to go over a little bit now.  Can I go through the conclusion.  B.E. Campbell supports the broad economic objective to increase competition and encourage free trade.

	We agree that ultimately this leads to a higher economic growth and higher income per capita.  Structural change is involved in this process and we agree that this is necessary.  However, we also point out that other overseas countries are not always as outward looking in their approach to encouraging free trade.  This approach can have serious irreversible consequences.  Speaking as a processor, I can reflect on the state of our business.

	We are faced with great uncertainty.  If the present trend continues, the core part of our business, ie, supplying secondary processors, will be non-existent.  We have invested considerable capital into our plant which is highly specialised.  We can not jump in and out of processing pork.  If profitability continues to decline, or our supply of pigmeat diminishes due to growers exiting the industry, we will close down forever.  We advise caution.  While supporting a broad objective, we should be aware of the factors which prevent our industry from growing on the world market, and address these wherever possible.

	We do not advocate supporting an inefficient industry, but advocate assistance to enable our industry to continue the process of restructuring.  In particular, we would encourage attention being given to the following areas.  Firstly; urgent attention to the problems inherent in the monopoly statutory marketing powers and impact on feed costs.  The major input costs for pigmeat growers.  It seems strange to me that the government can be encouraging the pigmeat industry to be competitive, while on the other hand supporting a monopoly.  Secondly, we urge the government to investigate the apparent dumping of product on the Australian market.  This must be soon, or it may be too late.  It would be a tragedy to see this industry, which could compete on the world market, sacrificed unnecessarily.

	Finally, we urge that assistance be given to the industry in its efforts to re-structure and improve efficiency.  Further attention needs to be given to carcass quality.  The Danish industry is still ahead of us in this regard, and funding to assist the industry in this area would be of great assistance.  The situation as we see it is critical.  It is interesting to note that back in 1998 when the commission undertook an inquiry into safeguard measures for the pigmeat industry, imports were 4 per cent of the Australian production on carcass equivalent.  Today, Canada supplies 28 to 38 per cent of legs into the processing sector, and Denmark 32 to 33 per cent of middles.  I will point out again that in both these countries the level of support received by the pigmeat industry is far, far greater than the very low level of support provided in Australia.

	Throughout the report the viewpoint appears to me that everything is okay because the consumers are benefiting through lower prices.  I ask the question; what about the consumers who will no longer have a job.  We employ 250 people.  If the industry dies, so do the jobs.  What about the social cost?  The community of people having to relocate, perhaps move to the cities which are already bursting at the seams.  While the commission is taking this view, the European Union is about to restart wheat subsidies.  Our Prime Minister was justifiably angry, and spoke out very strongly about this recent development.  It's also interesting to note that in today's Financial Review it quotes that our treasurer is saying that our deficit is our biggest economic problem.  We trust the commission will make recommendations to support and encourage the pigmeat industry in its ongoing development.

DR BYRON:   Thank you very much for that, and for all the thought and work that has gone into preparing those notes.  You really did summarise it very well.

MR CAMPBELL:   I've got to thank my economic adviser for that.

DR BYRON:   I certainly appreciate - having been to your company's business, and I know that you've got a very ‑ ‑ ‑

MR CAMPBELL:   You can see first hand there's a lot of people employed.

DR BYRON:   long and highly respected position in this industry, so I am taking very seriously everything you say.  It seems to me that the general story that comes out, not only in your submission, but also New South Wales farmers and a number of the other hearings we've had is that the Australian pigmeat industry seems to be in a squeeze between the prices you get for the product and the cost you pay for the input.  You've got very little control over the prices that you're getting in the manufacturing market in Australia or in exports, and you see things like the grain marketing arrangements that actually unnecessarily increase the input costs.  Like many other sectors, there is a squeeze between your costs going up and your prices going down or staying stable.

MR CAMPBELL:   I think the important thing is that normally in a drought the situation would be this - that the inefficient growers would drop out, there would then be an increase in price for those guys who have hung in there through the hard times, they'd recoup a little bit of that.  But now with imports, what happens is that it just comes in, it's a cap on prices straightaway.  All the major processors realise what's going to happen, and say, "Well, let's book it up, fellows, we know the price is going to go."  At the moment, we've had a number of growers exit the industry, and they just say right, we've got to book it up - pigmeat is going to be expensive.  So you get none of that payback period.

DR BYRON:   When Australia was basically isolated by world markets because of our quarantine controls, anything like a drought that increased grain prices, increased pig prices, it would just flow all the way through to the retail market.  But now when the Australian prices start to grow up, there's a big farm down the road called the rest of the world, that is presumably not undergoing the same drought at the same time, and so you, as you say the manufacturers have a choice.  One of the manufacturers at the hearings in Brisbane, actually gave out the prices he had been quoted that same morning, and said to buy an Australian is $6.50 - $6.60, and I can get one from Canada for $4.50.  Why shouldn't I buy the Canadian one?  From his point of view you can understand, you can understand why he's trying to get his inputs at the lowest price he can.

MR CAMPBELL:   Of course.

DR BYRON:   If he buys the more expensive Australian product that his competitors don't, then he's not going to be in business very long either.  Is that ‑ ‑ ‑

MR CAMPBELL:   I think that's absolutely right.  Not only that, you're talking about a major processor.  What we've found, and I think we had it mentioned somewhere, that basically all the smaller processors now that try and compete against the big guys are all importing product.  So whereas the first few years of imports coming in, it was only the big guys, now it's everybody.  It's very difficult.  I think the important thing to note about all that is, that's fine if we're all on a level playing field, but we're not.  I'm sure that in Denmark their cost of production is more than ours.  They've got an additional 10 per cent in cost to get their product out here.  If you can explain to me how their cost of production is 10 per cent higher, they then have another 10 per cent of cost in getting it here, that's with transport, packaging, freezing, clearance rates, transport into the factory, how they can still manage to be within 2 or 3 per cent of our price.  It defies description.

DR BYRON:   This has again come up five or six times a day everywhere we've been, so we might as well talk about it right now.  We've been trying very hard to find, and identify exactly how much and where these subsidies are.  The US, there are huge subsidies in the US grain industry which obviously flow through to as cheap supply to the pig producers.  The Canadians have an income stabilisation scheme which seems to many people to be very generous.

MR CAMPBELL:   It's just a one-way street.

DR BYRON:   The big mystery is still Denmark, because the figures that we are getting from a number of different sources show that the prices that the Danish exporter receives when they sell to Australia are actually higher than the prices they receive when they sell in Denmark or the rest of the European Union.  You used the word "dumping" before.  Dumping technically means when you sell it on an export market for less than you sell it on a home market.

MR CAMPBELL:   Or another market.

DR BYRON:   Yes.  There is no evidence at all that we can find to justify the use of the "d" word.

MR CAMPBELL:   I think it's a little bit more tricky for you in Denmark's case, because what they basically do is they process it themselves.  So that could be just a transferral cost, because they own the smallgoods factories, don't they?

DR BYRON:   Danish Crown.

MR CAMPBELL:   Yes, Danish Crown.  So it's very hard for you.  They've even taken it to the extent now where they've extended that into the UK, so it will be very hard to pick up over there as well.

DR BYRON:   It will likely become one of the major distributors in the UK and Poland and other places, and they've got that US subsidiary, and all the rest of it.  So it is very difficult to track it down, but the figures that we put in the draft report, and that ABARE and various other people have looked at, we've all quoted the study by the OECD on the producer subsidy equivalents.  We've actually been involved in a very long and complicated series of emails and letters and things with OECD.  It now seems that there is fairly serious confusion in that - I'm not sure what page it's on, yes, page 48 of our draft report - there's a table there that's got Australia and Canada in it.  The estimate that was made by the OECD in Paris for the producer support for pigmeat in the European Union is 23.93 per cent and that sticks out like the proverbial, compared to the US, Canada and Australia.

	If you then look a bit more deeply into that, 20 out of that 23.9 is actually market support.  That's anything like tariffs and quotas that have the effect of jacking up the domestic price relative to the world price, and they've estimated that at 20 per cent.  What we find out is that only about 10 per cent of the quota is used each year and then we find that the EU internal price for pigmeat is actually lower than the world price.  So how can you say it's been jacked up by 20 per cent above the world.  The data just don't support that.  If you just ask yourself, if you were a Danish producer, why would you export outside the EU to a low-price market if the EU price was 20 per cent higher than the world price.

MR CAMPBELL:   From what I've been told within the industry - this is through traders and everything else and this is going back probably two or three years ago - the word was from Denmark that, no matter what happened to our price here, they would continue to make sure they shifted volume into Australia, because it kept the price higher into the UK, which is the main market for middles.  So that's the talk within the industry.  That's coming from people on the ground, on the telephone selling the meat.  That's consistent with what we've been told and what you said yourself, that the price committals from Denmark always seem to be within a few cents, which suggests that they're matching it.  The price that they sell middles to in Australia therefore probably has nothing to do with their actual average cost of production for a pig.  If they can sell the front and the back end somewhere else for a price ‑ ‑ ‑

MR CAMPBELL:   Which is often subsidised.  They'll get subsidies - I forget their terminology for it - but they will be paid money by the government to shift shoulder meat, which can be very hard to shift.  What they say, there is no help or subsidies in selling the middle part of the pig, but if you support the other part of the pig, it's obvious that you can sell another bit cheaper ‑ ‑ ‑

DR BYRON:   Yes, they've told us that there are no subsidies on the middles, but your point is right.  If they get an inflated price for the hair on the back of its neck, then they can afford to sell correspondingly lower.  All I'm trying to say today is that we've had three or four people doing nothing else for the last three months but trying to get to the bottom of the Danish subsidy story and we're still digging.  What we've found out so far is that it's nowhere near as simple as straightforward as everybody, including me, used to think.

MR CAMPBELL:   Neil, I'll agree with you.  It's very complex.  It's a tough one to crack and these guys are used to being scrutinised.  So we have to understand that but I suppose, without going into the detail - I question that this is about their cost of production.  There was a report, which was in The Hog Producers, which is the international paper which goes out.  We've spoken about costs of production, and Denmark's cost of production was about $2.27 or something like that.  That was quoted in an industry newspaper.  Ours I think we put down at about $1.95, so it's a 10 per cent difference.  So it doesn't make sense; how they can do it?  Sure, their transferral cost in Denmark may be cheaper than here or who knows how they do it, but that's just a book entry.

DR BYRON:   The new abattoir that the Danish Crown has built has a capacity of 4 million pigs a year, hasn't it?

MR CAMPBELL:   It has.

DR BYRON:   Substantially bigger than I think any of the Australian ones.

MR CAMPBELL:   Without a doubt.

DR BYRON:   Although there is one in America that does 112,000 a day.  I think it's close to 40 million a year,

MR CAMPBELL:   Yes, but it will get to a time when you can get so much economies of scale and then it starts to diminish, right?

DR BYRON:   Exactly, yes.

MR CAMPBELL:   It's all very well to say that even if you put no kill cost into the Australian pig, that's the equivalent of what it costs them to bring the meat over here.  So you can't really argue the point too much.

DR BYRON:   That's another thing that we've been looking at.  One of the things about this organisation, we do inquiries into everything, including international shipping.  In that inquiry we were told that something like a third of all the containers coming into Australia are empty containers being repositioned.  Australia's exports in refrigerated containers, something like 15 to 20 times the amount that we import in refrigerated containers.  So there's an awful lot of empty refrigerated containers that have to come back to Australia so they can be filled up again with beef or ‑ ‑ ‑

MR CAMPBELL:   Not out of Denmark.

DR BYRON:   Possibly.

MR CAMPBELL:   Not out of Denmark.  Listen, all I did is, before I did my figures, I went and spoke to a guy who is importing it and said, "Tell me about the costs in bringing stuff in here."  So he went through and he said, "If you're bringing something out, here's the cost and I'll put it into a per kilo basis.  Mate, I can't wear that one."  You don't get containers from Japan, send them over to Denmark, refrigerated containers, or from America, wherever our beef is going, and say, "Right, let's fill them up with pork and we'll bring them down here at a cheap rate."  It doesn't make sense.  I agree with you, that we have got a huge imbalance with obviously refrigerated containers, but that's the US market and also to the Japanese market.

DR BYRON:   You don't think that the refrigerated containers might move from, say, San Francisco to Vancouver to be filled up with Canadian pork, rather than come back empty?

MR CAMPBELL:   Maybe they could go over to Vancouver, I suppose.  You might get Canadian.  I was focusing more on out of Europe.

DR BYRON:   No, I'm just trying to look at everywhere in the trade.  The other interesting thing about those OECD estimates and trying to figure out where the subsidies are, they tried to work out what's the farmgate price and what's the world price and all the rest of it.  They've used a figure that I think equates to about 60 cents Australian as the cost for everything that happens to the pig between leaving the farmgate and getting to the wharf.  That includes all your killing and boning and logistics and all the reset of it.

	We said, "Okay, where did you get that number from?" and they said, "There are five abattoirs in the north of France."  I said, "Are they typical of everything that happens in the whole of Europe?"  They said, "No, but they're sort of halfway between the Mediterranean south and the Scandinavian north and they're the only ones we have data for, so we use them."  What I'm trying to say is that that's an incredibly crude approximation, to take just a small number of abattoirs in one region of France and say this is typical of everything that happens in the whole 15 countries of the EU.

	You mentioned the Whole Hog figure of cost of production, at $2.20 a kilo or whatever.  We’ve found, I think, five different sets of very plausible and reliable estimates of cost to production, and they're all over the shop really, from $1.90 to $2.70 sort of thing.

MR CAMPBELL:   What was the cheapest one for Denmark?

DR BYRON:   They were for Denmark.

MR CAMPBELL:   So they went from 1.90 to 2.70.

DR BYRON:   Approximately.  I gave somebody the other day a report by the Irish Agriculture Department, looking at all the Danish production costs and everything else and trying to see why the Irish can't match it.  There's no shortage of estimates, but what we're finding is to say surely there's a range of production costs in any industry in any country.  It's not just one number.  Then the bigger problem, we're saying, is even if their production costs are X, how much does that tell you about the price they're going to get for any particular cut in any particular offshore market, because what they're trying to do all the time, like anybody else, is say, "How do we dissect this to get the maximum, to put each component into whichever market gives us the best total price?"  I understand that the Danes are recalculating that every hour, whether to leave the loins in or take them out and sell them separately.  So the price that they sell middles for in Australia, as I think we've agreed, may not have much at all to do with the average cost of production for the whole of Denmark or for the whole of Europe.  It doesn't actually tell us very much.

MR CAMPBELL:   But it certainly would be an indicator that there could be some dumping taking place.  If you agree that the price here is matching ours, you'd have to think that there are going to be times there where what they're doing is selling high to the UK, which I think is the majority of the time, and therefore just keeping the excess going into Australia at cheaper money.

DR BYRON:   The figures we've seen suggest that they look at Australia as a premium market, not quite as attractive as selling into Japan.  Again I understand from the Danish point of view they're worried about the Brazilians getting into Russia and they're saying, "What are we going to do with our product now that we've been squeezed out of there?"  So they're constantly looking around the world, saying, "Where is the best place for us to ship our product to and how do we get the best price for it?"  I would assume that they're trying to pitch the price of that product to be the best they can get and still be competitive with Australian production.

MS RILEY:   That's right too, but long term, if our industry goes, they're going to get a very good price in Australia, aren't they, because they won't have the competition.

DR BYRON:   That's one of the things that we have been looking at, the idea of predatory pricing, that they deliberacause it is all very short term.

DR BYRON:   There are a number of places in this where I think we are in heated agreement with each other.

MR CAMPBELL:   I think there is.

DR BYRON:   It's like trying to find weapons of mass destruction; you're pretty sure they're there somewhere, but you can't find them.

MS RILEY:   We're a bit afraid, too, that it might all just slip away while we're doing the searching for how they are doing it.  It's a bit drastic now, the way things are going - the way the imports are increasing.

MR CAMPBELL:   If your major growers, your most specialised ones, are really now contemplating getting out of the industry, if they've lost so much money, it is at the drastic stage.  I think you spoke about over half of the pigs in Australia were produced by three per cent of the growers and the balance was produced by the small, non‑specialists.  You'll end up with the small, non‑specialised guys because they don't really realise half the time they are losing money.  They've got these other lines of support financially.

DR BYRON:   Yes, or assuming family labour is free.

MR CAMPBELL:   That's exactly right.

DR BYRON:   It certainly is a worry when the most sophisticated - both in a technical sense and a financial sense - producers seem to be in trouble or having serious doubts.  I guess what you are saying is that you can't really have a long term future if you've got no short-term future.

MR CAMPBELL:   Exactly right, yes.

DR BYRON:   Thank you very much for the work and effort that's gone into all that and all I can say is that we will take it very seriously and think very hard about all the matters you have raised.

MR CAMPBELL:   Thanks, Neil.

DR BYRON:   Well, according to the program, we've only just started but it's time for morning tea.  Can we resume at 11.00 with the New South Wales Farmers Association.  We can take the opportunity for informal mixing.

____________________

DR BYRON:   Thank you very much, ladies and gentlemen.  If we can resume now with the New South Wales Farmers Association.  Gentlemen, when you're ready, if you could each introduce yourselves in your own voice, so that the transcribers will be able to recognise who's talking later on when we get to the discussion.  Thank you all very much for coming, and thank you very much for both the written submissions.

MR ROBERSON:   Thank you, commissioner.  Peter Roberson, chairman of New South Wales Pork.

MR WALKER:   Dugald Walker.

MR SHAW:   Kenton Shaw.

MR MOFFITT:   David Moffitt, senior policy manager.

MR ROBERSON:   Thank you, commissioner.  Dr Neil Byron and Geoff Edwards, fellow producers, and ladies and gentlemen.  New South Wales Pork represents close to 90 per cent of pork produced in New South Wales, and I'm very privileged to be given this opportunity to brief the commissioner.  Mr Chairman, there will be four of us presenting this morning; Dugald Walker, Kenton Shaw and David Moffitt.

	Firstly, I'll give an overview of our response to the draft Productivity Commission report.  Secondly, I'll give a report on how we found your draft report.  Our initial reaction is that the commission has deliberated very extensively on the long‑term strategies to improve competitiveness of the industry.  However, the commission has failed to make findings to assist the industry in the short to medium term.

	It is in our view that the short to medium term problems of the industry need to be addressed to make the long‑term strategies work.  We regard drought, labour shortage, feed grain prices, domestic resource cost, regulations, world trade organisation safeguards, anti‑dumping and countervailing legislation, production technology and capital investments as short to medium term issues that need to be addressed.  We will be addressing these and other issues during our presentation.

	Let me get back to the commission's findings.  Draft findings 2.1, 2.2:  the commission has reported the majority of producers are still non‑specialist producers, and that Australia has become increasingly integrated into the world pig market.  It appears the commission has not taken into the consideration the reasons why there are so many non‑specialist pig producers.  The major reason is that these producers had no option but to diversify their farming systems in order to manage their risks.  Due to the low profitability they did not have significant capital to pursue economies to scale.  We agree with the commission that the pigmeat market is global.  However, we would like to put to the commission that the domestic grain industry should also belong to the global market.  My colleague, Dugald Walker, will cover this issue.

	Competitiveness, findings 3.1 to 3.5:  3.1 we agree with, and confirm that New South Wales producers made a loss during 2002‑2003.  We agree with findings 3.2, but the commission has not indicated how the feed prices and the exchange rates could be addressed.  While we agree exchange rates are difficult to control, we suggest the drought affecting feed prices, and exchange rates affecting our pork exports, should be trigger events for government to introduce intervention programs providing temporary relief for imports.

	We agree with finding 3.3, that subsidies are being reduced by US and EU and other countries.  However, we would like to emphasise the reform for subsidies is very slow, and Australian pork competitiveness is not likely to improve in the medium term.  Meanwhile, Australian efficiencies are likely to suffer as we lose more of our domestic markets to heavily subsidised pork imports in the medium term.

	We agree with the commission's findings 3.4, that improved internal competitiveness is important to maintain long‑run competitiveness, and with foreign competitiveness.  The commission is indicating that this could be short lived in view of the unexpected movements in foreign exchange rates and feed prices.  It is for this reason we are proposing that there must be trigger mechanisms for government to implement intervention programs to provide relief to producers and other stakeholders in the supply chain.  We further submit that unless a trigger mechanism is put into place, producers will be very sensitive to the risk of negative returns on investment, and will be reluctant to invest in any technological advancement.  Kenton Shaw will further that detail.

	Government industry programs in Australia:  we agree with the commission's findings that there has been limited evaluation of government programs to assist the pork industry, to gauge whether there has been a net gain to the industry.  New South Wales Pork intends to take that issue up with the government.

	Potential impediments to improve performance and competitiveness:  New South Wales Pork fully endorses finding 5.1, that there is a role for government to ensure that overseas trade barriers faced by pork producers are reduced.  New South Wales Pork would like to highlight that the government is very selective in its support for fair trade in the domestic market by providing significant intervention for ethanol, sugar and the grain industries, and that exposes the pig industry to serious injury.  David Moffitt will cover that issue.

	New South Wales Pork is concerned with recommendation 5.2, whereby the commission highlights that assistance to overseas grain and pigmeat businesses, that would lead to lower world and Australian pigmeat prices, will benefit consumers, retailers and manufacturers.  I regret to say that New South Wales Pork cannot agree with this finding, as it will have far reaching consequences not only for the pork industry but all agricultural commodities.

	Our point of contention is that on one hand the commission is strongly highlighting the multi‑focal strategy as the basis for long‑term competitiveness in the pork, and on the other hand it says that although the local industry could be adversely affected by various forms of assistance to overseas pork industries, this is fine as long as the consumer, retailer and manufacturers can benefit from it.  We therefore find it very difficult to reconcile the commission's long‑term outlook for the pork industry, while ignoring the wellbeing of the key players in the supply chain.

	New South Wales Pork agrees with finding 5.3.  The drought impacts on domestic prices and reduces industries competitiveness, especially those industries dependent on local grains.  New South Wales Pork is concerned the commission has not sought it fit to make more substantial findings on the issue of grain and drought prices.

	New South Wales Pork only partially agrees with the finding 5.4.  Where regulatory impediments may have small effects on improved competitiveness, it nonetheless contributed significantly to the whole scheme of things in achieving greater competitiveness.  It is for this reason that we have included a section Domestic Resource Costs in our submission.

	Findings 6.1 to 6.4:  New South Wales Pork agrees with 6.1, endorses finding 6.2, while pursuing further with the government that one.  However, New South Wales Pork does not agree with recommendation 6.3, which talks about new restrictions on pigmeat imports into Australia.  The new import conditions, which cannot be regarded as new restrictions and, if anything, will increase the risk of post‑weaning multi‑wasting syndrome coming into Australia.  It is for this reason the new import conditions have been the subject of court action with APL.

	The pork industry conservatively estimates that a PMWS epidemic in Australia would result in a loss of a $250 million export market, and $188.9 million fall in gross domestic product.  It would also add 15 per cent to the cost of production, resulting in a 55.3 million loss in profitability, and subsequent job losses.  It is for this reason that the commission needs to reverse the finding in 6.3.

	New South Wales Pork is concerned that the commission's finding in 6.4 suggests that there does not appear to be a strong case for additional specialised adjustment assistance to the Australian pigmeat industry.  The pork producers are not looking for handouts, it is capable of competing with any other pig industry in the world provided competition takes place on a level playing field.

	Pork producers are aware that they are competing on uneven playing fields.  While the industry is not seeking equivalent subsidies, some drought related assistance - assistance with domestic resource costs such as increased depreciation, micro‑economic reforms, especially industrial relation reforms, fuel rebates et cetera - will make the pork industry more competitive.

	Farm productivity and profitability, the impact:  the pig industry cost of production on an average using wheat, $350 per tonne, was $2 a kilo live weight.  This represents an increase in the average pig cost of production of about 29.9 per cent between January 2001 and December 2002.  I have been made aware of cases where producers were losing up to $60 per pig in the middle of the drought.  In one particular instance a piggery of 450 sows got into trouble to a debt of $500,000, and the piggery has started making a profit recently, and has been able to reduce that back to $370,000.  Many small to medium sized piggeries up to 200 sows cannot sustain the losses, and have closed down.  In New South Wales we have lost close to 500,000 sows due to farm closures.  I believe that's more likely 10,000 sows.

	New South Wales Pork submits that a number of changes be made to the government drought assistance package for the intensive livestock.  Among other recommendations, we strongly feel a criteria for severe financial impact continue to be considered, as either a severe downturn in income or a severe increase in cost of production.  We feel this principle is fundamental for differences in production systems and management options between intensive and broadacre industries.

	I'd like to introduce our speakers.  Dugald Walker is a partner in Windridge Farms.  He has 4400 sows.  The company produces 140 tonnes of pork each week for the domestic and export markets.  The company also runs 3000 cattle and 2500 sheep, and grows approximately 850 hectares of crop each year.  They also have their own feed mill, processing 30,000 tonnes of feed annually.  The company has 67 staff, with an annual wage bill of 3 million.  Dugald will talk on Wheat Board monopoly and grain issues.

	After Dugald we will have Kenton Shaw.  He is the production manager for QAF based at Corowa.  QAF, as you are aware, is the largest piggery in Australia, with 55,000 breeding sows, and 930,000 pigs annually, manufacturing 45,000 tonnes of feed.  The company at any one time has half a million pigs on its sites.  Kenton will talk on adoption of production technology and scope for further adoption.

	The fourth speaker, ladies and gentlemen, is David Moffitt.  David is the senior policy manager, livestock, New South Wales Farmers Association.  David has assisted New South Wales Pork to put the second submission together, and is well versed in issuing all aspects of the pig industry.  Dugald Walker.

MR WALKER:   Thank you, commissioner; Dugald Walker.  The big picture of factors that prevent our success, our expansion and our survival are the Australian government's legislated distortion of Australian trade markets and the Australian government's inability to negotiate fair trade or even free trade agreements with other countries.

	If I could illustrate the absurdity of some of those WTO agreements that have been sanctioned at the end of the day by our government.  There was an agreement that allowed Japan the status of a developing nation in the early 1990s so that they could obviate all of the rules that were set down under the WTO agreements, because otherwise they wouldn't come into it.  Our government sanctioned a deal that allowed them third world country status to entice them into the WTO organisation, so those type of deals all the way through are the things that have put us out of business.

	Perhaps the most damaging single act for the Australian pig industry was the 1990 signing of a zero import tariff for pigmeat.  Now I think we're all aware of it.  Marginally less damaging to Australian pig farmers if the legislated distortion of the grain market.  We might rate - or I might rate that of about secondary importance to the distortions of trade that the government has put in or has allowed.

	I can happily compete against my Australian competitors.  I can't complain about that.  I don't know enough about the cost of production and things in Brazil to know whether I can compete against Brazilians.  I do know that I can compete against the producers of the EU.  I do know that, if there was fair and free trade, I myself could export to the EU if it were not for the marketplace distortion negotiated between their governments and ours.

	I know I have no chance of competing against Danish product if it has a 24 per cent subsidy that you accept as being the correct PSE for Denmark.  My belief is in fact the pig industry of Denmark's producer subsidy equivalent was 28 per cent and then they passed legislation that allowed another 14 per cent for aiding and abetting exports to other countries.  I know our Minister for Agriculture made a statement that he had spoken to the Danish ambassador about that subsidy, and that it wasn't going to apply to Australia.  But if this 14 per cent subsidy to enable the Danes to export pig bellies or pig heads or pig legs to Eastern bloc countries and the like, that gives them a very great leg‑up in exporting the middles that we get sent to Australia.

	I believe that with freight from North America, and without the Australian government's legislated distortion again of my costs, I could compete against the US and Canada, even if their levels of support are somewhat greater than ours.  I believe the report's figure of 8 per cent PSE for Canada is incorrect and that the figure for the troublesome part of Canada is in fact about 16 per cent.  The flogging I've got over the last two years has terminated our part‑complete building program, our renovations and the deployment of newer technology which we believe would have reduced our cost of production by about 10 cents a kilo, and of course that would have made us much more competitive against alternate suppliers.

	On page 37 of your report, you list that imported pigmeat rose 73 per cent in one year.  It would seem to me that any industry that had to suffer that increase of competition by fair or foul means or whatever would have to be taken to the cleaners by such a challenge.  Page 2 of your report, you take or make effort to point out that safeguard actions should not be applicable and wouldn't help us.  My belief is, when anybody has such a rapid 73 per cent increase in imported product, there are certainly grounds for safeguard actions and other assistance.

	To my subject, which is grain, it is the most significant point or cost‑of‑production item in all of our budgets in growing pigs in Australia, and when we talk of grain we really are normally talking wheat.  It's the major staple diet.  The government has unfortunately persisted with the worst parts of the old Wheat Stabilisation Act.  The Wheat Stabilisation Act allowed the acquisition of all wheat produced in Australia by one entity.  In return, that authority guaranteed the supply of wheat to Australia at a set price.  The Wheat Board is still the only entity allowed to export wheat but there are no longer any controls.  There is no longer any regulation of the price that they are allowed to charge.  So they have been given a monopoly.  A lot of us would accept that that serves no good purpose.

	The monopoly of export single desk allows the AWB to dominate stockholding.  In time of drought the Wheat Board has always used it position of monopoly to charge unreasonable prices and there is no independent body to prevent any abuse of the system.  The significant advantage allows the AWB to be the seller of last resort in time of drought.  They are the owner of last stocks.  Economists would seem to accept that the Wheat Board's position is iniquitous.  It has been opposed by the US, by other governments, and seen as inconsistent with Australian free trade policy.  The government has assisted other animal producers with various drought subsidies but not included any intensive animal producers in any of that assistance.

	Commissioner, your report clearly does not dispute the distortion in the grain market from the government's awarding of a single desk monopoly.  That monopoly allows market manipulation and clearly expresses a view of the benefit to grain growers from the increased price to consumers.  The report seems unequivocal in concluding that the subsidies paid to farmers in the EU and to a lesser extent the North Americans benefit their profitability and their ability to export pigmeat to Australia and to other countries.  The report hints at benefits to pig producers in the EU and in North American from subsidised grain production.  Commissioner, we would press you to accept that this is in fact correct.

	Commissioner, your report states increased or higher domestic prices of pork may not be in the best interest of Australian consumers or Australian pig farmers, but you do not seem to make the same assumption with the higher price of wheat; in fact, the opposite is recommended.  The cost of production is more relevant to intensive animal production than to animals that are produced extensively.  The intensive industries are essentially much more dynamic and they have much faster biodirectional cash flow.  Australia has natural comparative advantage against most or all of its international competitors.  Unfortunately most of Australia's intensive agricultural competitors are given advantage through international legislation and through subsidy.

	Up to 70 per cent of my cost of production may be grain costs, and I believe that runs right across the industry.  In the dry periods of 1996 and 1998 our cost structure went through the roof because the Wheat Board became the last remaining stockholder and put the boot in.  There is no transparency and the Wheat Board at that time made misleading statements about grain shortage which made it impossible to estimate the real level of available stocks.  In effect, the same occurred in 2002 with the Wheat Board charging monopoly prices for wheat and, unfortunately, importation of grain past the Eastern seaboard is difficult.  The grain that did come onto the Eastern seaboard in 2002 ultimately brought some relief and the Wheat Board dropped their prices quite considerably overnight.

	If I could give an example of the effect of the cost of grain, the prices of grain in 2002 went from about $180 to $350 a tonne.  If you had a 200-sow piggery and you got an increase in the price of grain of $170 a tonne over a one‑year period, the additional cost to the piggery would be about $169,000.  The difference to cost of production would be about $38.44 a pig, or 45 cents a kilo.  If you looked at it over a six‑month period, which is sometimes more likely with grain trading, then the cost would be about half that.  If it was half that, my calculation was that it still cost the pig industry of Australia $85,918,000 for the six‑month period in 2002 that the Wheat Board were able to abuse their position.

	In my company's case, the additional feed costs for the 2002 and 2003 years were very close to $3 million.  It could have been just above it, as it was likely to be just above as it was below.  I really found it extraordinarily difficult to survive with that increase in grain price, and we certainly had to stop all the things that we were doing that would have made us a better piggery.

	On page 27 and on page 33 of your report, you acknowledge that the Wheat Board's single desk "distorts grain markets and may reduce competitiveness and have the potential to raise domestic grain prices, especially during drought".  I don't think the word "may" is correct.  There is no doubt that happens.  On page 44, you show unequivocally the damage caused by grain monopolies.  In 1996‑97 and in 2002‑03, it is a monopoly because there ultimately would be shown to be adequate stocks of grain left at harvest in 2003.

	Your report states the high level of support for grain producers in North America and in Denmark.  Your report states that this leads to increased suppliers and cheaper price.  We would contend that this assists with cheaper production costs of pork in those countries.  They benefit from the subsidies that are paid to grain producers.  Commissioner, we believe there is a remedy for the monopoly held by grain, and it doesn't actually have to dispose of the single desk.

	If it could be legislated to provide grain to consumers at export parity price.  That price should be the export parity at port, which would give the Wheat Board an approximate margin of $30 or the ability to transport grain to delivery sites without disadvantage.  When we get to a drought situation, the Wheat Board invariably says you cannot get grain in one area, it must come from somewhere else, and again, we'd have to pay the additional freight charges.

	Of course, we never know whether they actually had to do that or not, because they are never forced to divulge their stockholdings or the locations of where they have grain.  We believe the AWB should not add any additional charges.  Mr Commissioner, if the Australian government persists in allowing subsidised and probably dumped pigmeat into Australia, there is very good reason for the government to assist or to compensate for the damage they have condoned.  If the Australian government has legislated distortion in the domestic grain market and this distortion is an impediment to consumers, then the disadvantage should be compensated.

DR BYRON:   Thank you.

MR SHAW:   Kenton Shaw.  Commissioners, I would like to provide some information as a follow‑up to a request by the commission, particularly on the recent adoption of production technologies and the scope for further adoption.  The declining and erratic nature of pig production enterprise returns, combined with the uncertainty of future returns, has resulted in farmers being unable and/or reluctant to invest in new technology and infrastructure that would continue the efficiency improvements that have occurred in the Australian pig industry over the last two decades.

	Pig farms are capital intensive businesses with associated high establishment and depreciation costs.  Added to this is the corrosive nature of the piggery environment, requiring high maintenance costs.  This was clearly understood by the Productivity Commission, and I quote, "Intensive piggeries are purpose built operations that cannot be used for other activities and substantial investment is involved."

	To just go through the technologies that are available for the pig industry, and in particular ones that have been, or can be, adopted - I've listed them in my submission attachment.  Artificial insemination in the pig industry is a major technology improvement.  There is a significant cost to that, to implement.  In QAF's case it was a $2.5 million investment to net a return of around 2.5 cents per kilo.  The ongoing costs of that AI program are about $1 per pig sold.  So it takes considerable input and capital to initiate those kind of programs.

	Genetics is a technology that is certainly a widely held view for improvement.  There tends to be a much slower process in Australia because we cannot import foreign genetics, so improvement occurs through internal genetic improvement programs.  Nutritional improvements are continuing.  Basically, continuous improvement throughout that area has occurred right across the world, and Australia is one of the leaders in that area as well.  That's through funding continual research across a large group of organisations and companies.

	Shed design and construction: this is an area that has certainly changed dramatically in the last 25 years, and you can evidence that by some of the visits I'm sure you did on piggeries.  An example would be tunnel ventilated grower/finisher sheds, which have now been adopted right across the world, particularly in places like Asia, which provide considerably improved performance of the progeny.  But for a thousand pig place shed you would be looking at a quarter of a million dollar investment, and in any large piggery that's very significant.

	Within that, there have been quite a few changes to farrowing pen designs and flooring structures over the last 25 to 30 years.  QAF, for example, has some facilities that are literally 30 years old in that area.  To upgrade those to new facilities inside the existing structure would cost $3000 a sow place, which can get up to 4.5 million for some of our farms.  The problem with that is you don't necessarily gain a significant cost advantage in that, but it is a necessary fact of production.

	Effluent handling systems: the requirements for those have certainly changed too in the last 25 years.  That doesn't provide a cost advantage to production.  It actually increases the cost to the business and most of that is done through environmental regulatory requirements, which change consistently.  Pig health technologies: the health status of the Australian pig industry is very good, but we still deal with certain diseases.
	
	The most common technology that producers use to improve health is a destock repopulation program.  They can reduce the cost of production anywhere from 5 to 11 cents a kilo, but you potentially lose 30 per cent of your income in one year to do it, and that's not including the actual cost of the clean up.  So it can be a very significant impact on the business in the short term.

	The commission in its findings has made some comments, 3.4 particularly, "Improvements in elements of competitiveness internal to a pigmeat business are important to maintain long run competitiveness with foreign competitors."  Basically, we agree with that finding, as Peter mentioned before.  You've also said that, "The internal factors aren't likely to offset the impact of factors such as large unexpected movements in exchange rates."  Certainly, we agree with that entirely.

	To demonstrate that, in the attachment you received from us you will see some figures from QAF's capital investment over the last five years, and some dramatic changes in that investment from significant amounts in 2001 down to virtually zero in the last couple of years.  Those investments are basically structured in what we term three types of investment.  We have a value adding investment, which is described as expansion of output and cost reduction, a value-maintaining expenditure, which is asset renewal and upgrade and compliance, which is basically regulatory requirements.

	Of those, some of those large investments incurred by QAF that were capital investments, up to 38 per cent in any particular year could just be compliance costs so there is a large amount of dollars which basically give you no cost reduction advantage but which are extremely necessary to maintain your business continuity.  Finding 3.5, the commission stated:

While increased specialisation and capital intensity have allowed some pig producers to achieve economies of size and higher returns, the consequences of large, unanticipated variations in the prices of outputs and inputs may be greater.

	I certainly agree with that.  Facilities are specialised in the pig industry and there is no option for alternative use and they have large asset values.  New regulations, particularly regarding environmental and animal welfare requirements, may require in the not too distant future, considerable investment with again, no increased return, and potentially increased cost of production in the case of welfare requirements.  Finding 6.3:

While new restrictions on pigmeat imports into Australia may provide short term benefits to producers, they would adversely affect Australian pigmeat consumers, retailers and manufacturers.  They would also discourage or delay ongoing restructure, and fail to target those in greatest need of assistance.

	We disagree with that as was mentioned before.  Basically the ability of pig farms in Australia to be able to survive and confidently reinvest in the infrastructure and new technologies, relies on the business' ability to achieve consistent profits and positive cash flows.  Restrictions on imports would build confidence, enable profits and allow producers to improve their competitiveness through lowering of cost of production.  Continuation of the current import strategy would continue the scenario of lack of investment described above.

	Basically, the high capital cost of the industry and the increasingly high compliance costs require consistent positive returns.  An industry without consistent profits and reinvestment ability will struggle to be competitive in the long term.  The adoption of new technology is critical to long-term competitiveness as recognised by the commission.  I quote:

Capital investment in the infrastructure used in the pig producing and pig processing industries can lead to improved productivity.

	As detailed previously, there is strong evidence that capital investment is not occurring in the Australian pig industry at the rate required to remain competitive in the long term and this is purely to do with the ability of a company to see the future and reinvest its current profits.  You can't reinvest negative returns.

	I believe that the Productivity Commission needs to perform further analysis to seek more information requiring - on the technology adoption, and this would obviously result in a delay in the final findings of this report.  Thank you.

MR MOFFITT:   Mr Commissioner, David Moffitt.  As Peter mentioned in his opening address, I'll be speaking about the distortion of the domestic pigmeat market caused by foreign subsidies.   As we would all recall, the PC inquiry from 1998 found that serious injury had been caused by imports.  Since this time, there have been significant changes to the structure of the domestic pigmeat industry in terms of both rationalisation and consolidation of the supply chain across both production and processing manufacturing.  We've seen a significant growth in exports over the same time.  Also, we've seen closer links been developed between all parts of the supply chain through both vertical and horizontal integration and we've seen significant quality improvements.

	However, at the same time, we've seen continuing increase in imports.  We've seen drought and an appreciating Australian dollar, which, the bottom line basically meaning that the advances that have been achieved over the last six years are unable to be sustained, due to the significant financial pressure which those three factors are exerting upon the industry.

	From our analysis of the draft report, the commission seem to have placed drought and the exchange rate as the primary causes for the industry's current situation and saw imports as more of a secondary issue.  We disagree with this and we believe that all three elements are very important.  The fact that imports are continuing to rise beyond the competitive capacity of Australian producers causes significant concern for the industry.

	In terms of international competitiveness, page 14 of our submission to the draft report, outlines a graph that shows producer support for agricultural sectors in Australia's major trading partners.  Basically looking there, and the conclusion is that in the OECD the level of support is around 34 per cent of gross farm receipts, which is more than five times the support received in Australia.  After the EU, we then go to the US at 22 per cent and Canada at 19 per cent.  So from those figures we can see that there is significant assistance provided to our trading competitors.

	Through some figures that we have sourced from Pig International, looking at both cost of production, production figures in terms of tonnages and also export volumes, we were able to make the following summary comments.  Both Canada, the US and Denmark are indeed high volume in production; large exports which are allowing surplus of their pigmeat to be placed in other parts of the world at a discounted price.

	The small Australian domestic market is unable to soak up this increased imports.  If you look at the moment we've got around 50 to 60 thousand tonne of imports coming in, bearing in mind that's pigmeat.  Now when you convert that across to carcass, you are actually there at about 120,000 tonne, so that's significant.  I guess the final point on that is that other industries have a traditional, have a cyclical period where there is a downturn and then the upswing.  If you look at industries such as beef, sheep and chicken, they are able to do that because basically imports aren't allowed of those products.  So when there is a shortage of supply, the domestic market pushes prices up and when the oversupply comes, prices move down.

	If you look at the pigmeat industry, however, and the report states this clearly, that we are having at the moment, a displacement of fresh pigmeat going back, sorry there was a displacement of domestic pigmeat that is destined for the manufacturing market, that is actually going back on to the domestic fresh market, which is in turn reducing producers' returns and indeed, industry profitability.  So that's a situation that is quite unique to the pork industry and I think it's something that - it's a point that's made in the report and I think it's a point that we certainly should not lose sight of.

	Again, when you look at the Australian pigmeat industry and compare that to some other industries in Australia, we are in a unique situation once again.  We have some industries that there are no imports of products allowed due to quarantine and other trade related issues.  We have some industries such as Dugald has mentioned, grain, which benefits from government regulation.  We have industries such as ethanol which is currently looking at a 38 cent per litre excise relief.  When you equate that across to dollar terms, that's looking at about $152 per tonne.  In other words, that gives the ethanol industry $152 a tonne head start on other competitors who are looking for their grains that they may be using.

	So looking at those industries, and then if you look at the pigmeat industry once again, we have a product that is coming into the country, so it's allowed to come in and it's been, obviously, as the report has mentioned, subsidies are allowed through those countries where it's originating from.  I guess the problems there are attributable, we see them as being attributable to two main factors.  First of all, as alluded to earlier, the zero ban on tariff rates from the 90s, and secondly the fact that some of the governments in those countries where the product is coming from, allow through their respective programs for, one way or another, the subsidy of product to occur.

	The draft report also highlights that there has been a reduction in decoupling of subsidies and that is ongoing whilst however, it is slow, once again, providing credibility to our argument of the existence and the ensuing damage of these subsidies.  Then in turn, it's providing further support for our claim of support for government assistance to try to level the playing field and equal the competition.  

	Government assistance:  there is comment in the report of government assistance to producers and exporters of pork into the country and the advantage gained from that.  There's just some points here that we'd like to challenge:  subsidies to Danish, Canadian and EU producers do play a big part in their competitive edge; I don't think anyone could argue that.

	Subsidies to input suppliers, such as North American grain farmers, once again, allow them to lower their commodity prices, and then that is passed on through lower prices of inputs into intensive animal production.  Page 48 of the report states that external government assistance to industries assist them at the expense of competitors - so that's clear - and page 63 of the report states that the existence and benefits of subsidies to EU producers is clearly beneficial to their trading terms.  

	Looking at the final part, whilst we recognise in the report and the commission - it states in the report that the inquiry has not been asked to look at safeguards, basically due to the terms of reference, and they could not undertake such a review without a formal request; page 28 of the executive summary does state that countervailing and anti‑dumping measures can be applied in certain situations.  The report also states that imports do result in some displacement of the fresh market, as I mentioned earlier, of local product that otherwise would be used for manufacturing.
	
	Therefore, New South Wales Pork is of the view that the government should not allow unfair and inequitable trading of pigmeat and other intensive animal industries.  If it chooses to reject accepted rational economic theory, it should assist the producers and assist those disadvantaged parties.  We believe that importation of pigmeat from countries that heavily subsidise production should see a response from our government of safeguard measures being put in place, based upon the points that I've mentioned earlier.  We therefore request that the Productivity Commission recommend an investigation into provisional safeguards under WTA rules.  Thank you.

MR ROBERSON:   Commissioner, can I just sum up.  I've got 10 points here I want to bring to your attention.  The first one:  that New South Wales Pork strongly recommends that findings 5.2, 6.3 and 6.4 be reviewed in view of the information that we supplied you.  Number 2; in order for the commission to satisfy the industry that its findings can be adopted with confidence, the commission must demonstrate through statistical analysis which of imports, exchange rate or feed costs significantly affects productivity within the industry.  Number 3, the commission to carry out cost-benefit analysis in regard to the impact on productivity of each measure proposed by the commission.

	Number 4, the commission come up with a finding that addresses the need for a system of grain supply to be put in place that will deliver grains to livestock producers at competitive world prices and give a fair return to grain producers.  Number 5, the commission come up with a substantial finding on domestic resource costs to improve competitiveness of the pork industry.  Number 6, that the commission come up with a substantial finding on drought assistance to include a criteria of severe financial impact, continue to be considered as either severe downturn in income or severe increase in cost of production.

	Number 7, the commission to make a finding that grounds potentially exists for a Productivity Commission investigation specifically into safeguards.  Number 8, that the commission make a finding that there is an urgent need for a review of the anti-dumping and countervailing legislation.  Number 9, that the commission make a substantial finding that there is a need for a trigger mechanism for government intervention on imports that addresses the cost of production as a result of the drought and/or reduced exports due to the appreciation of the Australian dollar.   Number 10, in the view of the substantial new information sought by the commission, New South Wales Pork is of the view that the commission will need more time to do a thorough report.

	New South Wales Pork will support the commission for more time.  Alternatively, we suggest that the commission does a research project to substantiate its findings.  Thank you very much, commissioners.

DR BYRON:   Thank you very much.  That's been extremely wide-ranging.  I think you covered every inch of the canvas, and it is a bit hard to know exactly where to start responding to all that.  There were a couple of things- points that I thought of interjecting as you went through, but I thought it was probably better to let you say all that first.  One of the arguments that comes across in your submission and a lot of the others is, and it seems to be that we are now at a watershed point in time, a pivotal moment where we either go one way and everything will get better, and continuous improvement and productivity, profitability, competitiveness, et cetera, and if we go the other way, then it's a long slow downhill spiral and the death of a thousand cuts, and all the rest of it, so that makes it fairly important to get it right.  If that is the case.

	As we were saying with Ted Campbell earlier, there are sonsurance mechanism there through that natural hedge.

MR SHAW:   It's a bit keen to say that everything else will stay constant.  One of the big drivers of world grain price seems to be the droughts that occur in grain producing regions and they have as much of an influence - or high production, whatever - across world prices as the exchange rate to us.

MR EDWARDS:   Well, of course, we know in reality that a lot of things typically change at once.  When the exchange rate goes up, all those other things may work to make your situation worse or they may work to make your situation better.  It's not all one way.

MR SHAW:   Yes, but it's not a risk management tool that we can employ.  It's still a luck of the gods type thing, isn't it?  We can't bank on it and we can't invest on it.

MR EDWARDS:  No, but it's something there.  That hedge is operating and you don't have to do anything in order to take advantage of it.  I don't want to make too much of this, but it seems to me if we are going to argue that an appreciating exchange rate in recent times has made the going tougher for the industry then we do need to accept that it has helped on the feed input side.

MR ROBERSON:   Yes, but I think the loss of our export markets then snowballs back onto our domestic market.

MR SHAW:   There's a big negative there on the sale price side.

MR EDWARDS:   I don't dispute that side.

MR ROBERSON:   I'm not an economist so I'm not going to try.

MR NAKHALA:   Commissioner, I was wondering if you could take comments from the floor.

DR BYRON:   No we can't, I'm sorry, but you will get an opportunity later.

MR EDWARDS:   Could I just go on?  There are many issues that you have raised but clearly the issue of assistance to the pig industry overseas is something that you and others in this hearing are very concerned about.  If we think about that, it seems to me there are a couple of quite separate questions.  Question one is, just what are the facts of overseas assistance to the pigmeat industry, and how is that impacting on Australia?  As my colleague has said, we have devoted a lot of time to trying to dig into that and find out what the reality is, and it's very difficult.  However, we do think that, on what we know at present, many have overstated the extent of assistance to the pig industry in those parts of the overseas industry that are especially important to the Australian situation.  So that's one question, the facts.

	A second quite different question is, what policy response by Australia is sensible or smart once we know the facts of the overseas assistance?  Of course, we all feel that the Europeans and the North Americans and the Japanese and others in Asia are generally very unneighbourly when it comes to their agricultural policies.  We probably all supported our government when it has criticised many different countries for the policies they use to assist their agriculture.

	So it's very unfair, but that doesn't necessarily mean it's good policy for Australia to respond to those overseas policies, that do damage our country, by introducing assistance for our own industry.  An expression that has been used here is that just as the overseas countries, if they took up a rational overall view rather than focusing on their producer groups, we'd see that they are shooting their countries in the foot by granting those policies.  So we shoot ourselves in the foot - taking a national view - if we respond by introducing offsetting or compensatory policies here.

MR ROBERSON:   I don't know the correct terms, but if you go to take one of these countries for dumping product into Australia, it takes us 18 months to get information to say that it's done, and as soon as we look like saying that it's being dumped here, they get wind of it, they cut it off, forget about sending it here for another six months, and then start again.  What we're saying is that we need treatment mechanisms in place so that we don't have to do all that 18 months' research and quantifying of it to stop them coming here and dumping product here.

DR BYRON:   So you're suggesting that for pigmeat we should adopt some sort of mechanism similar to what the ‑ ‑ ‑

MR ROBERSON:   I think any product, not just pigmeat.  The process should be a lot shorter than what it is, because it's just too long and drawn out to be able to be feasible to take people to the World Trade Organisation to stop it coming in.  I don't know the legalities of that.

DR BYRON:   It's just that Australia has a long tradition of being very critical of those sorts of things when it's done for Australian lamb in the US or Australian beef in Japan.  It might look a little inconsistent if we now started to do exactly the same thing that we've been abusing the Japanese for the last 20 years.

MR ROBERSON:   But if the product is being put in here at below their cost of production, surely it's being dumped?

DR BYRON:   You'd need to be able to prove that.

MR ROBERSON:   Yes.

MR WALKER:   Commissioner, there was - I haven't seen it, perhaps, for some short period - statistical studies of cost of production of pigmeats around the world.  But a few years ago there was certainly a lot of it, and the cost of production of pigmeat in Denmark was always about 25 per cent greater than ours.  I would ask you, how the hell can they get pigmeat into Australia, how can they export to us, if they don't get a leg‑up from somebody?
	
	You accept in your report that the other people that we're all talking about - the EU, the North Americans, the Wheat Board, the lot - do gain an advantage from the action of the governments in giving them particular advantage.  They benefit from it.  I think your report says that, really, without equivocation.

DR BYRON:   What we've also argued is that the cost of production doesn't tell you very much about what the price ought to be for a particular part of the pig in a particular market.  Even if you knew exactly what the cost of production for a particular enterprise in a particular country was, that doesn't say the price of a shoulder in Poland should be X and the price of a middle in Sydney should be Y and the price of a leg in Japan should be Z.

	Even if you did know exactly what their cost of production is, it doesn't tell you much about what the selling prices might be for different products in different markets, especially when every producer in every country is continuously scanning around and saying, "How do I maximise my income by getting the best price for all the different products I've got to offer?"  How much it cost, historically, to produce this pig doesn't actually tell you anything about where you put each part of it and in which market.

MR WALKER:   Commissioner, I think it's rather too long a straw for you to be pursuing an argument about the different costs of the spare parts of the pig.  I would have thought it would be an unending and an infallible study.  I don't think you could ever get to the end of it.  But we do know, your report admits that there is assistance.  All of the literature from around the world, whether it's official or journals or what have you, do show that people get unfair advantage for one reason or another.

	I would really ask you, do you think that there should be equity and fairness in trade, or should people who have been given an advantage by government, by other than natural means or natural skills, do you think they should be able to take out another industry in another country?

DR BYRON:   I think the short answer is that everybody is in favour of equity and they all have a different definition of what it actually means.  What you might think is perfectly fair for you, I can assure you, an American or a Canadian or a European might see it as an unfair advantage.  We, like everybody else, are very quick to point the finger at what everybody else is doing that's not reasonable.

	I know there are people in other countries who are just as vigorously pointing the finger at Australia and saying, "Yes, but that's not fair what you're doing."  I don't think there's anybody who is, in biblical terms, totally without sin.  It's not a very good line of argument to run with, and so what governments all over the world ought to be a little bit more realistic and say, "Let's work with the world as it is rather than the way we think it ought to be and try and go forward from there."

	You and I might agree that it's extremely unfortunate and iniquitous and everything else the way the common agricultural policy works, but the basic point is that it's not likely to change.  So are you going to live with it, or what?  As we've said in the report, the government should continue trying to improve access and to break down these government policies that bestow unfair inequitable advantage in certain industries in certain countries.  But that's not going to happen overnight either.

MR WALKER:   It would seem to me that there is no political will, really, in general to remove the inequity.  The unfortunate thing about the free trade negotiations as they have developed, and we've seen the really terrible lack of compromise or consensus, or any other damn thing, with people walking out of trade agreement rounds and the like, it would seem to me and I've in fact had it explained to me by the then John Anderson, Minister for Agriculture staff, the AFFA staff came and they said, "Well, look, you know the WTO stuff, it's not really about fairness and equity, it's really about, like you're sitting out here and because the big players didn't want equity and what have you, they said well, all we can do is we'll each give a bit."

	So the EU gave a bit perhaps, and the Americans perhaps gave a bit and when they got round to us, those guys who came out of the northern winter and they had all their ski gear and what have you on, we were in an Aussie summer and we didn't have any clothes to take off.  So at the end of the day, they took off a bit; we got pneumonia.

DR BYRON:   The other argument against that is that the continuance of the success of the Australian economy, which surprises many people in Europe is partly because of the trade liberalisation measures that Australia took without saying, "We won't do anything unless you do."  The liberalisation has actually been good for the Australian economy, and if the Europeans want to continue to have a very tightly regulated 19th century sort of economy, it will be at their cost.  But today is probably not the right place to discuss international trade politics.

	But the point that Geoff I think was trying to made before is whether or not we think certain agricultural policies are fair or unfair, or if somebody is sort of cheating, or the rules weren't written the right way, it doesn't necessarily get you very far in the sense of, what are you going to do after the next 12 months?  Which finally I think brings me back to the subject.  I said before if we can agree that the industry potentially has a terrific future ahead of it, and the question is, how do you get over the short term hump to make sure that we don't accidentally do something that's irreversible.

	The argument that I think you've been making in other state associations, a lot of producers and APL, talks about trade restrictions, you know, to have some sort of limitation on either the quantity or the price of imported pigmeat, to allow "breathing space", respite, time to adjust.  You probably noticed in the draft report, we've said, "Well, that might work, but there is also the possibility that if the pressure is of, people will no longer see the need to continue with this continuous improvement program."  When the squeeze is on, everybody is always looking for opportunities, financial, technical or whatever to be more competitive and I think the judgment call that the government is going to have to make, is, does the industry continue to improve once the pressure is off?

	You've probably read comments about the sugar industry, which I'm not going to mention any more, but there is no doubt that the industry has had - you know, there was the period in 98 when pig prices were low, grain prices were high, profitability was terrible.  There was a period in 95 which was another terrible period and there was another one before that, back in 92, 93.  The observation is that when  any industry is going through those really hard times, people are looking very hard at what can we do to become more competitive?

	The counter argument that has been put to us is that if the pressure is off, if the good times are here again, thank God we don't have to worry about all that adjustment any more, you know, we're right now.  So can I put the question to you, does everybody relax when the pressure is off?

MR WALKER:   No, commissioner, we don't.  I know that when we get to a good patch, I know when I'm really getting belted, I haven't got anywhere much to turn, I've just got to really hang on, how do I help?  And I know that when things get better, he's going to expand and I'm going to expand, and I've got to make sure that I've done it better than him because if I haven't - if he's done it best, next hard time he's going to gobble me up, I'm going to be out.  So I know that I've got to really make progress when things are going well.  I understand it implicitly.

DR BYRON:   That's, I think, a very important point there.

MR SHAW:   I agree completely.

DR BYRON:   Whether the progress occurs when the times are tough or the times are good and what you're saying is when times are tough you can't make the investments and you can only do that when prices are up and import costs are down.

MR SHAW:   That's been demonstrated.  But I agree that, I think the industry is moving to, this last 20 years of restructure which involves uncompetitive units shutting down, or less specialised units closing down.  We are maturing as an industry and to me, we're a fairly mature industry.  There are a lot of people like Dugald that do realise that and everyone who wants to be a pig farmer realises that you can't sit on your laurels any more and say it's going to get better and here we go, Christmas is coming, the price is going up.  It hasn't happened for 10 years and it won't happen again.

	So when the good times return and profits are made again, companies like us, basically any pig farm, will seek to reinvest, as fast as he can, to get ahead of the competition, whether it's the neighbours or overseas.  And I think that in our company it is the belief, one hundred per cent.  Particularly at this point, that we are still playing catch-up from the last five or seven years as QAF mentioned in their submission that only three of the last seven years have been acceptable margins, which puts you in a very poor position to be continuously competitive.  We just need the ability to reinvest.

MR EDWARDS:   I think it was you, Dugald, who referred to a particular property where that level had been brought down from, was it half a million, to 375? 

MR WALKER:   That's Peter's. 

MR ROBERSON:   Well, since October last year.

MR EDWARDS:   So I take it that's happened fairly recently.  Does that mean that you see a significant improvement in the situation over recent months?

MR ROBERSON:   It's been stabilised.  Pig prices have been fairly stable, but the grain prices have been at a better level than they have been for the last three years too, and I think that's basically where he's picking it up.  The industry as a whole is looking for a couple of years where they can make a profit so they can do those renovations that are necessary to keep them competitive.  Everyone has tightened their buckles so hard that they haven't done any repairs or anything to keep production to acceptable levels.

MR EDWARDS:   This morning, earlier, Ted Campbell said - I took it he was referring to a significant number of non specialist producers who don't know if their pig enterprise is profitable or not and can't separate the costs and revenues, presumably, from the various enterprises.  Do you think that that could be said of a significant group in the industry?

MR ROBERSON:   I know in my case I've been subsidising the pigs from the grain mainly, and from the sheep food crops.  

MR EDWARDS:   But you know you're doing that?

MR ROBERSON:   Yes, I know. 

MR EDWARDS:   I took it that you're saying that some people don't know and I'm wondering how significant a group that is? 

MR ROBERSON:   I don't think many of the pig producers would not know.  They would know that they are subsidising it but in my case, I'm only very small - I'm only a 40-sow unit - and I look for the pigs to cover my wages and they haven't been doing that in the last three years.

MR SHAW:   Could I just make a comment on the reduction in debt that Peter reported on a farm.  At the moment, you could look at the margin on a pig and you would say it's a profitable situation.  The problem that we're dealing with is the history of the negative returns that we're trying to catch up on and on those quick sums it would take at least twelve months for that farm to get back to square from it's previous position.  Which means in two years it's made not a dollar, basically, and its reinvestment potential is much lower as well.  I don't think there's any farm that's different to that scenario, that we will spend the next two years recovering from the position we are in.  Even though those years may be profitable, they will be just catch up for the money we haven't spent for two or three or four years.

DR BYRON:   But isn't that the sort of situation that applies in Australian agriculture generally?

MR SHAW:   Yes, except that the pig industry, I think, is quite unique in its input is 100 per cent consistent.  You can't change what you give a pig today or tomorrow; you've got to keep feeding it.  Its output is fairly consistent as well, in that when that pig reaches carcass weight, you haven't got time to play with it;  you can't say "I'm not going to sell it today" or tomorrow or next week or next month.  It has got to go out the door.  If those two things are in a negative situation, you can't change them.  Other industries, more extensive industries and beef cattle, you have options of carcass weight.  You have options of age of sale in your systems.  There are more possibilities than we have in our very fixed infrastructure.  That's the difference to me, compared to other cycles in other industries.

DR BYRON:   I'd like to continue on and we could go all day, but we probably do need to stop for a lunch break.  Can I thank all four of you very much for coming and for sharing your probably hundreds of years of cumulative experience between the four of you and for all the trouble that you've taken to make the submissions and the thought that's gone into it.   Did you want to say anything in closing, Peter?

MR ROBERSON:   I'd just like to thank you for allowing us to present to you today and hope it's been of some benefit to you.

DR BYRON:   It's certainly been educational for us, thank you.

MR ROBERSON:    I'd just like to reiterate number 10.  If you need more time to finalise your report properly, because it needs to be done properly.  The industry is looking for you to give us a look at ourselves from the outside in, as a guide as to where the industry should be going.  I'm a delegate to APL and I know the strategic plan is looking for you to tell us where we should be going in the long term.  It was a way of us seeking the best for our industry and I hope you can assist us in that regard.

DR BYRON:   I think from what I've seen of the strategic plan, the industry has already got a pretty good idea of where it's going and what it needs to do and is getting on with it.

MR ROBERSON:   But it can be fine tuned after your report.

DR BYRON:   Okay, our effort is to be as useful as possible.  Thank you very much for coming, gents.

MR ROBERSON:   Thank you.

DR BYRON:   We can resume at 1.30 with the Australian Meat Industry Council.  I know that's 15 minutes late.  Thank you, ladies and gentlemen.

(Luncheon adjournment)

DR BYRON:   The next presentation is from the Australian Meat Industry Council and Mr Cottrill.

MR COTTRILL:   Thanks, commissioner.  My name is Kevin Cottrill.  I'm the chief executive officer of the Australian Meat Industry Council.  The Australian Meat Industry Council is an employer body which represents the post-farmgate meat industry in Australia, and in particular we represent abattoirs, boning rooms and further processing including smallgoods manufacturers and retail butchers.

DR BYRON:   Thank you very much for the written submission.  I did find that very helpful.  You just want to take us through the key points.

MR COTTRILL:   Commissioner, our submission was quite brief, as probably most people are aware, and if I could just summarise it in a few words, the pork processing industry in total, from abattoir right through to retailing, is one which operates on minimal margins.  There's not a lot of money at any sector on the way through, and the margins tend to fluctuate in relation to the price of the raw material.  So if there's for any reason a low raw material price, the grower gets less, but it doesn't mean that anybody else in the chain gets any more because the pricing at each sector on the way through is adjusted so it tends to be a margins business.  The person who does ultimately probably benefit from the pork industry and the meat industry generally with fluctuations is the final consumer.

	One of the concerns that the members of the Australian Meat Industry Council have is the increasing level of imported product.  It's got to a point where it is no doubt having a very significant effect on not only the prices which growers can get, but it also influences pricing at each step of the chain on the way through.  If imported prices are lower and a processor is using those prices, he tends to build it in and reduce his sale price, his wholesale price, into the retailer who in turn tends to pass that on, for the most part, to consumers.

	There is probably no better example of it than with bacon middles.  If bacon middles tend to be cheap, because there is an overproduction in the processing industry, in the smallgoods industry, what tends to happen is that the price of bacon will come down.  I was in a store recently.  I won't name the store, but it was a chain store and it was selling bacon for $7.99 a kilo.  That quite obviously means that at the moment, that somebody is making a huge loss.  If the price of middles at the moment - and I'm not familiar, but Ted Campbell could tell you what they are - was 5.30 or $5.40 a kilo at the moment, to sell a product at $7.99 is an extremely low price.

	So one of the difficulties that everybody suffers with is this low margin and also the fluctuations in pricing.  There is a cycle of pricing in Australia, and my understanding is that that cycle is carefully monitored by those who are shipping product into Australia, so that the imported product price tends to move in sympathy with the Australian product price.  That price can fluctuate anything up to 50 per cent within a calendar year.  When it moves up or when it moves down, and how people anticipate it or how people try to offset it, can tend to add to the volatility of pricing in the industry.

	So there's a number of factors that our members are concerned about.  At the end of the day, the thought that a smallgoods manufacturer could probably operate completely on imported product is a fallacy, because there's a lot of products that you can't make from imported product.  In particular, you can't make any product that's got a bone end product on it, so there's no Christmas hams, for example.  You can't make a product which isn't cooked, so you can't make fresh sausages out of it.  So if you think about the importance of the pork industry and you think about the importance to the smallgoods industry in particular, the smallgoods industry survives or fails on the Australian fresh pork industry.

	So our concern in particular as members is to do with those factors, and obviously coming off the worst drought in a hundred years, a lot of people have suffered, particularly in the last couple of years, with very high grain prices, feed prices, and that's been well dealt with by the commission.  A number of smallgoods manufacturers have got to the point where they're probably not making very much money or they're not making money at all.  I think there has been some rationalising and there will be some further rationalising, I would guess in the not too distance future of smallgoods manufacturing because of these low margins and the inability to actually invest.

	So our concern was initially that, if imports were to stop overnight - and there was experience of this going back a few years when there was a health scare.  All of a sudden we couldn't get imported product.  It was put on hold for a while - there would need to be some adjustment time and there would need to be some adjustment factors to allow the industry to get itself back upright.  We're pleased that the commission is actually seeing that and taking that into account.

	Just finally, I would say that the conclusions in the draft report we do support as a general statement.  There might be a few minor issues in there which have been addressed by way of questions, but fundamentally we do support the outcomes of that draft report.

DR BYRON:   Thank you very much for that.  One of the things that I wanted to follow up with you, the impression that I got and your submission seems to confirm is that each of the manufacturers, the ham and bacon smallgood people, is under pressure to provide the best quality price service proposition to their customers that they can, and that to do that they need to buy their imports at the best price quality offering they can get.  What I'm trying to find out more about is the way the prices move, whether it's the price of imported Danish middles, tracking the price of Australian middles, or whether it's the other way around.  The price of Danish middles is X and then the Australian producer is told, "We can't pay you more than X because we can buy imports for that."  So can you just clarify a little bit who is leading and who is following, or is it a bit of both?

MR COTTRILL:   It's a bit of both.  I think the best way I could probably explain it is to say that, first of all, you've got a fluctuation in pig prices throughout the year which tends to respond to supply and demand.  Obviously, if there is a shortage of fresh pigmeat in Australia, then the price is going to be higher, and if there is a surplus of fresh pigmeat in Australia, the price generally is going to be lower to normal supply and demand situation.

	So some of the very highs and very lows that we've seen over the years have been caused by mistiming of supply or mistiming of demand.  I think what the imports did when they came in, imports initially were probably generally cheaper than Australia pigmeat was.  Those who got onto importing initially probably took an advantage because the import price was lower.  Those that weren't importing were therefore at a disadvantage in terms of the wholesale price particularly into major chain stores.

	So there was a lot of pressure.  I'm talking about the big 90s.  There was a lot of pressure at that time to actually go and import at a lower price and that, in turn, obviously took some of the pressure off the Australian market, because people were buying just what they needed - they were only buying middles or they were only buying boneless leg.  That obviously would then affect the price of fresh pigmeat in Australia.

	My understanding anyway is that the overseas suppliers have now become quite capable of watching our fluctuations and probably their price moves a lot more in sympathy with the Australian price.  If our prices are high, their prices are higher.  If our prices are low, they reduce their prices.

DR BYRON:   I said this morning, I sort of have the impression of people sitting somewhere overseas and continuously re‑evaluating which market is the best place to put each component of the pig, if you like, and whether to sell the shoulders here and the middles somewhere else, and all the rest of it.

MR COTTRILL:   I might be wrong, but I think it might work slightly differently, where perhaps certain people in Australia actually go overseas to seek raw material, and the price negotiations would be probably on the basis of their anticipation of what the prices will be in Australia.

DR BYRON:   One line of argument says that the price of the imported pigmeat determines the price for the Australian manufacturing pigmeat, which then determines the price that happens in the fresh meat market.  What you were saying just before was the reverse of that - an oversupply in the fresh meat market can affect the price of the manufacturing pigmeat.  Basically, it all depends.

MR COTTRILL:   It's a very complex equation.  But if I could suggest to you that at certain times of the year - and this was one of them in January and early February - there was generally a shortage of middles, again going back to prior import base.  In a lot of cases you would be slaughtering the pigs to get the middles and putting the shoulder and the leg to one side.  I think it's important to always remember that we're dealing with the total carcass here.

	It's often been said if we grow pigs with five legs, then we'd be a lot better off than we are at the moment.  Once people start to selectively buy cuts, then it obviously affects the total pig price.  There was a lot of that, people buying middles in anticipation of either price or, perhaps, shortages.

DR BYRON:   You made the point earlier that the smallgoods industry can't operate solely on imports.

MR COTTRILL:   True.

DR BYRON:   That if there was going to be any restriction on the supply of imports, that it would need to be phased in to give the manufacturing people time to adjust.  I was wondering - and I briefly mentioned it this morning - if there was, for whatever reason, let's say a tariff of x cents a kilo went on imported pigmeat, you would expect that the price of the Australian produced product would move up by about the same amount, and that would be passed on to the manufacturers.

	So the price of ham, bacon and smallgoods would go up by the corresponding amount.  What I was wondering is, would that then make it much more attractive to somebody sitting in Canada to say, "Forget about sending frozen meat uncooked to be made into hams in Australia, let's just send them the hams."  In which case, the Australian manufacturers, rather than having competition in the raw material market, would then be facing competition in the finished product market.  Is that all fantasy, or is there any possibility that something like that might happen?

MR COTTRILL:   I think it's one of the concerns of the industry.  I think that if finished product was to come in in substantial quantities, given the current production oversupply capabilities of the smallgoods manufacturers, they would presumably be then fighting for a smaller market, and generally that's happened on price - quality to a certain degree, but on price.  The impact of that would then go right back through the industry, less volume through boning rooms, less volume through slaughter operations, less demand for pigmeat.

DR BYRON:   It seems to me that if APL, for example, is arguing for some sort of control or tariff on imported frozen uncooked meat, the first round effect would be that the Australian pigmeat producers would then have a much greater chunk of the manufacturing market.  If that meant higher prices, and that meant influx of processed meat instead of raw meat, then Australians might end up supplying a much smaller Australian manufacturing industry.

MR COTTRILL:   That's true.  I think there's another side of this too, that there is a limit to what you can get for a ham or a bacon product before you get leakage into alternative products.  It is, after all, only a food product.  We have seen in the industry resistance when retail prices got to a particular level.  Ham sales in particular started to stall, and there's been a concern for a long while in the industry about that.  Already, there is a ceiling before things like chicken meat start to become really competitive against what we're doing.

DR BYRON:   We looked at the prices that the Danes get when they sell middles, and we looked at the prices they get when they sell middle bacon, and there doesn’t seem to be an awfully big difference between them.  That just made me think, maybe if the bacon price started to go up too high in Australia, assuming shelf life and all those sorts of things ‑ ‑ ‑

MR COTTRILL:   Sure.  

DR BYRON:   Geoff, did you have a question?

MR EDWARDS:   Some people have expressed dissatisfaction with the main system for measuring pigs.  Is it called P2?

MR COTTRILL:   P2 reading.

MR EDWARDS:   Do you see that as a concern?

MR COTTRILL:   It's a bit out of my area.  Ted Campbell could answer you a lot better on that particular question.  People have tried to come up with alternatives several times and the P2 reading has been the one that's generally been accepted by the industry.  In terms of its reliability, though, my understanding is that the genetics of the pig can obviously be different, and therefore the reading may give you a good reading, say, at the middle stage; but that doesn't necessarily mean that the legs are of the same general fat quality or coverage.  I know APL as part of their industry plan to look again at that particular way of paying for pigs, and again, the industry will look at it.

MR EDWARDS:   But it's not clear to you that there is a major disadvantage in providing feedback to growers on desirable characteristics of pigs because of that measurement approach?

MR COTTRILL:   I haven't seen it as a major problem, I'll put it that way.  Some growers, they obviously would like to get, perhaps, better feedback, and I think that's an issue again between their particular abattoir and themselves.  It's not confined only to pigmeat.  There's also the requirement in the red meat industry for better feedback of information to help growers produce a better product.  

MR EDWARDS:   Just following on from your comment about the movement out of pigmeat into other meats if the price goes to a certain level, do you see competition from other meats?  I don't know, perhaps fish competes to some extent.  Do you see that as a major issue in achieving APL's planned increase in consumption of pork?

MR COTTRILL:   Based on the experience they've had with the top end of the pig price in Australia, then yes, I do see it as an issue.  I think it's something that people need to be aware of, that there is a market there for hams or salamis or whatever those products are, but there is also competition, particularly when you look at the product and volumes of product that get sold through the delicatessen side of the business.  It's not quite so much through the dairy cabinet side of the business, where you're talking, say, packet bacons or packet hams or that type of thing.  It's very noticeable when you get into the delicatessen, where you're dealing with the bulk product.

	About 65, 75 per cent of the sales of the average smallgoods company is through that delicatessen side.  So the lady is going up to the counter and she's looking at the price of the ham compared with the prawns over on the side here or she's looking at the chicken over on the other side, and she's got $50 in her hand.  She's going to make a decision about what she's going to buy and we have seen buyer resistance at the higher end.

DR BYRON:   Can I just ask about exports.  Does Australia export very much in the way of ham/bacon smallgoods?

MR COTTRILL:   Very, very small.  Yes, it's a very small part of the business and it's a business opportunity, I think, going forward to try and export more of our finished product.

DR BYRON:   Given that we've been exporting pigmeat carcasses, specific cuts, to Singapore and Japan and so on, do you have any idea what the reasons are why the Singapore supermarkets or delicatessens aren't selling Australia ham or bacon or smallgoods?

MR COTTRILL:   Some of the stores do.  Hong Kong is also a market.  It's probably as much to do with the fact that most of the Australian smallgoods companies are focusing on the Australian market and not the export market and tend to operate through agents.  As I say, there's some quite good business there for some organisations, in particular products.  It's usually in a package type, one of the dairy cabinet type products.  I'm thinking particularly of shaved meat and that type of product.

DR BYRON:   We met with one smallgoods manufacturer who had an opportunity to sell those sorts of products in Singapore but said that the costs of getting the export inspection was basically the same whether he was going to send 100 tonnes or 100 kilos, and that for relatively small orders that he needed to start off, he just couldn't get started.  So he just told the people in Singapore that he couldn't supply them.

MR COTTRILL:   We're dealing with another area here, which is the cost of running an export compliant factory, which is an additional burden for what is called a domestic factory.  To export product, it has to be produced to a particular protocol and that covers from pre-slaughter right through to the day that it actually goes onto the ship with all the documentation.  It comes under AQIS control and fundamentally the animal has to be slaughtered under AQIS supervision and then there has to be control over that meat until it goes right through into the end product.  So if an organisation is running a business where export is a minor part of that business's total output - say 10 per cent -what tends to happen is that it goes through in runs.

	When you do the export run you have to have AQIS supervision generally on site.  There are other alternative supervisions that you can become qualified in and supervise yourself, under certain circumstances, but generally you have to have an AQIS vet on the site while you're actually doing that particular run and that comes at an additional cost.  So, yes, I would agree that to get establish into an export market, where it's a very small percentage of your business, as opposed to the people in the red meat industry who are slaughtering and packaging for the export market all the time, it becomes a much lesser cost.  But to start up, to get into the export industry, is quite different.

DR BYRON:   Thanks.  You mentioned earlier about the continuing rationalisation of the Australian smallgoods industry.  I was just wondering if you might be able to do, perhaps later, a one-page letter of an email or something just to give us a bit more background on that, because it just occurred to me, when you mentioned that, that we haven't actually seen much in the way of statistics or evidence in terms of those changes that have been occurring in the manufacturing industry.  I guess anecdotally I can think of a couple of things that have closed down and so on, but if you could possibly send us any information at all that you have on that, we would appreciate it because it's a bit of a gap at the moment.

MR COTTRILL:   Sure.

DR BYRON:   I don't have any other questions.  Anything you'd like to say by way of conclusion?

MR COTTRILL:   I think one of the things that I'd like to put on the record is the difficulty of obtaining skilled labour in the industry in particular, and the shortage of skilled labour.  To a number of people, one of the biggest problems they face going forward is an ageing population and the difficulty in replacing skilled staff.  Probably if there is an area where we could get some relief as an industry, it would be to assist us in training and development of staff.

	We've got the courses.  We know what needs to be done, but in a lot of cases there is no financial support anywhere to try and fill this.  I realise this is a much bigger problem than just our industry, but it's certainly starting to affect our industry very significantly, not so much in the smallgoods area but in other areas of our industry people are actually bringing labour in from overseas to try and fill the gaps.  So I tab Wrong decisions on import protocols have been made in the past, especially in other countries.  So the New Zealand authorities, when they did their pigmeat risk analysis many years ago, made a wrong decision and assumed that the risk was negligible and apparently have imported it in fresh pigmeat.  It has now spread into the pig industry there.  Foot and mouth disease in Britain came in because of a flawed quarantine policy or protocol, where meat was allowed to come into the country provided it was heat treated before swill feeding occurred.  When this didn't occur, it resulted in an F and MD outbreak.

	So we're just trying to emphasise that there are quarantine risks and that they could be taken into account by the commission in its report.   For example, if the quarantine controls on pigmeat were inadequate, they would damage competitiveness and this is just, I guess, the essential key point that is missing from the report.  Maybe it’s because it's just too obvious a statement.  But the report does acknowledge the problems of market access, subsidies and all those sorts of things and we think that being explicit in pointing out the maintenance of a high quality quarantine system is fundamental to industry competitiveness is an important point.

MR EDWARDS:   But, Rory, your colleague has just told us we have not refrained from making obvious statements.

MR ARTHUR:   In this case, I didn't see the obvious statement.  Part of the high quality quarantine system would be the development of protocols and operations that area defect free in quality assurance terms.  Biosecurity Australia and AQIS are responsible for these.  The difficulty is that final decisions on import protocols are ultimately a bit subjective.  They try to be objective as much as possible, but ultimately somebody makes a subjective decision and this can lead to disagreement and conflict between stakeholders and BA.  So since BA is ultimately responsible for the quality of its decisions, we submit that it is important that it has a system in place to demonstrate that it's making the best possible decisions or defect-free decisions.

	We believe the commission has a role in advising BA on the adverse economic impacts of wrong quarantine decisions and we would ask that the report make some analysis of this issue.  BA has enormous resources at its disposal which we cannot duplicate in the States, to assure that the quarantine decisions that they make are valid.  We simply cannot do more than what we do already to review BA's decisions and proposals.  Therefore there is a certain element, when BA is reviewing its decisions, of Caesar judging Caesar.

	As a result of criticism over the pigmeat risk analysis, including from the New South Wales government, Biosecurity Australia has admittedly changed some of its systems by creating the prescribed agency, removing it from the trade portfolios or interests, creating an eminent scientist group to have a further level of overviewing decisions.  We're concerned that these sorts of responses, while they may well be very useful, may not be part of a fundamental systems approach.  We submit that the commission could consider that the pig industry competitiveness would be enhanced by BA introducing quality management systems and risk management systems to its decisions on protocols that can be thoroughly and independently reviewed, both internal, through internal audit, and externally.

	I've already mentioned that protocols are only sometimes best judgments and there are examples of best judgments being wrong, like the New Zealand decisions on PMWS.  So we need to keep in mind that sometimes decisions can be wrong and we think the report should comment on that.  Just as a little example, the current protocols for pigmeat sometimes require post-entry cooking.  These are underpinned by approved compliance programs administered by AQIS, not BA but AQIS.  The commission needs to satisfy itself that these post-import conditions cannot be faulted; in other words, that the compliance arrangements that apply after the product enters Australia can't be faulted.

	The fact that these compliance programs are implemented by another agency, namely AQIS, means that BA effectively shields itself from responsibility if something goes wrong.  So there needs to be a mechanism, we believe, by which BA can take ultimately responsibility for its decisions, by requiring it to do the follow‑up auditing of AQIS in administering the rules.

	So in summary, we're just saying that quarantine decisions sometimes are wrong.  Quarantine systems can fail.  They impact on the competitiveness and its imperative that BA have the total quality management systems and risk management systems in place that can be defended in order that the best decisions are made.

DR BYRON:   I might as well respond to that one while we are going through it.  I decided that we had more than enough work to do in this inquiry in five months without making it an inquiry into the quarantine procedures.  In principle, I completely agree with you about the importance of having the protocols and the reviews and the statutory independence and all the rest of it and that the quarantine is based on the best scientific evidence.  I didn't see that as part of the commission's expertise or where we could add great value of dabbling in the science of this.  

	We probably could do work on the economic impacts of wrong decisions.  I lead a team a couple of years ago that looked at economic consequences of hypothetical breakouts of foot and mouth in Australia and that was a pretty frightening experience.  I think, when we did discuss this with BA and with AQIS, they said that it's important that the quarantine decisions are based on science and it's important for procedural transparency internationally that the quarantine is based on science, not on apprehensions of economic impacts, positive or negative.  I understand the certain reticence in AQIS and by Biosecurity Australia to, in their view, cloud up the scientific waters with economic considerations.  It's not to say it can't be done.  We'll think about it some more.

MR ARTHUR:   It's a difficult area.  By the way, can I just say that I agree with BA.  We must separate science from economics, there's no doubt about that.  The principles, the SPS agreement must be applied because we are talking about whether or not AQIS and BA have the systems in place to make sure that their decisions on science are really good.

DR BYRON:   They communicated quite a lot to us along the lines that they now have procedures in place to ensure very rigorous peer review and assessment and being as objective as possible.  As you say, nothing is infallible.  I don't know whether it should be the commission or whether the National Audit Office should be looking at the rigour of their protocols and accountability measures.

MR ARTHUR:    I don't think we need to do that.  I think a simple desk audit of their document procedures, of their quality system, would satisfy the commission.   But, yes, it appears obvious from looking at this documentation that the management systems and the risk management systems - we're only talking about quality assurance systems at AQIS and BA of course.  Demand of some of their stake holders, such as a company exporting pigmeat, well.

DR BYRON:   Well, you'd expect them to know all about risk management.

MR EDWARDS:   Can I just make the observation that it's not always so easy to decide when a mistake has been made in quarantine policy.  You've referred to a couple of dramatic cases where something very nasty got into a country, but a 
policy can also be mistaken which is excessively zealous in reducing the risks of letting something nasty get in.  In other words, you could have a mistaken or costly policy which keeps the nasty things out, but you've incurred excessive costs in the form of foregoing the benefits from consumption of the barred products within your country, perhaps for many decades.

MR ARTHUR:   I agree.  It makes it a bit more difficult to get them right, doesn't it?  More important to get them right.  Neil?

DR BYRON:   Thank you.

MR BURFITT:   Just briefly on animal welfare, just a few points here.  As you pretty well know, in animal welfare world wide, there's mounting public opposition to the use of closed confinement systems in a range of intensive animal industries.  So much so, that in March last year, the Australian government began a process to review the model code of practice for the welfare of pigs.  It is anticipated in the current year, 2005, that the revised code will be presented to the Primary Industries Ministerial Council.  If the code becomes stricter, the pig industry can anticipate increased costs of infrastructure and, to a degree, staff training to cope with any proposed changes to sow stall use in the code - something, I'm sure, they're not looking forward to but it could become a reality.

	I think, then, it's quite important to recognise and for the inquiry to recognise that on a trading basis, it's equally important to recognise that at this time the majority of imported produce would not comply with what may become new welfare standards for Australia.  That's based upon the fact that in North America there are no national plans at this stage to regulate the use of dry sow stalls, but rather they intend to continue operating on a voluntary basis.  What that in effect could do - or would do - would provide those countries with a cost advantage as compared to Australian producers, who in time may need to comply.

	The consideration here, of course, is that on a level playing field welfare standards should match Australia's or, at the very least, if imported product comes in then consumers need to know what percentage of imported products' content was produced at welfare standards below those required by Australian producers.  So, that's a knowledge area.  Of course, the other one is that an inquiry would need to be carried out to ascertain in those countries that we are importing from, if support is provided from government sources to allow them to reach a model code of practice.  That's the two areas there.

	That's just some background.  What I'd like to then draw out from that is a summary and the first of three points in the summary is that, it goes without saying, animal welfare standards and a drive towards constantly ramping up model codes of practice impact on industry competitiveness through the cost structures involved.  The second point is that there needs to be transparency in relation to the actual costs of animal welfare standards - that's across all trading partners - and also a knowledge of what standards exist in what countries.  Finally, further issues involved here are whether or not overseas government offset any costs associated with animal welfare provisions through assistance measures and, again, the consistency of animal welfare regulation across competitor countries.

DR BYRON:   That is very interesting.  I think the point that may be made a bit too subtly or between the lines, but welfare codes like environmental standards, etc, obviously do have compliance costs and there are major differences around the world.  Some of the pig welfare regulations that I've seen that I think apply to Germany from 2012 strike me as pretty radical, shall we say, compared to anything that's been envisaged in this country.  Like, every pig has to be patted by hand for so many seconds every minute - it basically turns them into pets rather than livestock.  The point of compliance costs is one that we will be making.

	Will you be suggesting that there needs to be some sort of mandatory certification and labelling for imported products, rather like there's labelling for organic or GM free, that there should be little logo of a happy pig or something on compliant product?

MR DAVENPORT:   Maybe if I could comment.  I don't think we're being prescriptive at this stage.  I think as you've recognised, it's an interesting issue that we've got different standards overseas that import might be coming in under and yet here society has made the call that they want something else, a higher standard.  I think all we are saying is, again, to the commission  This is a fairly interesting issue, that we might be importing stuff that is below our own welfare standard.  If you can't force a country to do what we do, we're asking the question -  should we be looking at things like informing consumers here in some way of just what the situation is.

DR BYRON:   I guess to a certain extent, the new "home grown" label would indirectly satisfy that anyway, that anything that's home grown has met Australian welfare standards, but you couldn't be sure that anything that was from imported raw material would do that.

MR BURFITT:   That's by inference, Neil, but yes, I was going to actually then refer to home grown as the case in point.  That's a consideration.

DR BYRON:   I think we're finding a number of examples, as we go through this inquiry of where we have occasionally, quite unintentionally, if not shot ourselves in the foot, at least tied one hand behind the back in terms of international competitiveness - I'm mixing all my cliches.  It's quite clear from- what we've seen is the international competitiveness of firms in the Australian industry is fairly close to borderline.  Some are a bit above, and some are a bit below.  That also means that relatively small changes, in terms of additional costs, or lower prices actually become quite critical when it's close to the borderline.

MR DAVENPORT:   And most often it will be if we've got competitive industries, won't it?

DR BYRON:   Yes.  I'm just wondering how far you think we should take this.  Is it simply a question of warning the Prime Ministerial Council that these measures, which may be very politically popular with people who live in the leafy suburbs, may have the unintentional effect of hampering the international competitiveness of an important industry.

MR BURFITT:   I think there's that obvious issue, Neil, just the impact on competitiveness, so that's one side of the coin.  But I think on the other, say for example, the Australian government has agreed that we will not consume pork that doesn't meet certain standards, does that throw some responsibility on the Commonwealth government in the process of approving imports, that obviously, as I say, force product in - perhaps they could.  In the absence of that, wouldn't the Commonwealth government feel a responsibility to at least inform consumers that some of this stuff you're eating from a poor animal welfare background?

DR BYRON:   Yes that's possible.  I'm not sure whether the WTO rules about like product that prohibit discrimination on the basis of process would do that.  I've worked a lot with the Marine Stewardship Council, the International Forestry Stewardship Council and all these other certification things, at what's ecologically friendly and sustainable, and  "green ticks" and "pink ticks" and social justice issues, and fair tea and coffee from Sri Lanka, et cetera.

	It is very hard to governments to restrict trade in products on the basis of how and by whom - the process by which they are produced, if the products are physically similar, but if consumers choose to decide, well we're not going to buy product X from that country because we don't like the way they grew it, or we think it was ecologically sound or animal welfare compliant, then consumers are quite free to exercise their preferences.

MR BURFITT:   I think it's the situation where the government, through legislation, has mandated.  So, the government on behalf of society has put a stake in the ground here, in terms of domestic production.  As you say, and the point you're making, that probably governments can't restrict trade on the basis of this issue perhaps.  Nevertheless, given that it's put the stake in the ground - and it's not a voluntary thing, it's a piece of legislation -it may be worth while the commission thinking about then, in the presence of imports that don't meet these standards, is there or isn't there some sort of responsibility to inform consumers, because consumers could be quite unintentional consumers of this obviously, but government on behalf of consumers - presumably consumers support this welfare standard - have in fact said that that's what they want.  In the absence of good information, they could well be consuming stuff that doesn't meet their own - and the government on behalf of consumers has deemed is required - they could well be consuming unintentionally product that hasn't met a domestic standard.  I don't know, it is an interesting issue.

DR BYRON:   Doesn't that suggest a certain amount of caution about where you put the stake in the ground, and to make sure it's right.

MR ..........:   Well, that's one issue.  Absolutely.

DR BYRON:   We were given a paper in Perth last week that argues that the proposed changes to  dry sow stalls may not necessarily enhance animal welfare at all, and may even be perverse.  So before we rush into any new regulation, it always pays to be sure that it will actually achieve what it is alleged to achieve, and then figure what the consequences are.

MR BURFITT:   Having addressed that issue, and I totally agree with you, there still remains the subsequent issues about imports, and are we as government going to just allow consumers unintentionally to consume product that they wouldn't otherwise be allowed to consume domestically?

DR BYRON:   Are we going to restrict the use of GM soy in feeding pigs in Australia, although Canadian pigmeat is probably - if it's been fed on soy at all, it's been fed on GM soy.  It's the same issue, and I can imagine a packet of bacon that's got about 37 different labels on it certifying that it's organic, and it's GM free, and it's made by a trade union member, and it's animal welfare friendly, and ecologically sustainable and so on.  The empirical question is, how much do consumers care about this?  Which labels do they read and pay most attention to, or do they go back to buying on price?  Sorry, I shouldn't be flippant.  It is an important issue, and I take your point, thank you.

MR EDWARDS:   Scott, I've benefited in the past from reading some of your well‑reasoned analysis on agricultural adjustment issues.  I expect you would agree that the great bulk of adjustment in agriculture - take the last two or three or five, 10 decades, whatever time span you like - has occurred autonomously as individuals make changes in response to all the factors, economic factors and other factors that are relevant to them.

	Although we have had rural adjustment programs of various sorts since at least the early 1970s, and some before then, most of the changes that have been made have been made without drawing on those adjustment measures.  The pigmeat industry, as we know, has gone through huge adjustment in the last 30 or 40 or 20 years, and as far as I'm aware no-one has argued that the adjustment in the pig industry has been other than mainly in response, again, to individuals making those changes that seem better for them.

	So given this, and given all the difficulties with which you're very familiar, in devising adjustment measures that will facilitate progress in a particular industry without generating significant efficiency costs or equity problems.  Do you see a significant role for adjustment measures in the pigmeat industry now?

MR DAVENPORT:   Thanks, Geoff.  The quick answer is yes.  I think the issue of adjustment - and I think there wouldn't be anyone here that doesn't agree that we all adjust every day - so the autonomous adjustment that's happening out there, whether it be pig producers or whoever, is substantial.  That's how change primarily happens, and that's how it efficiently happens, in many cases.

	Nevertheless, the role of government‑type arguments in this area - and again, whether it's the pig industry, drought policy, whatever - the sort of public policy framework, if you like, that to my mind seems appropriate is that - to start with certainly, what governments first want to see is that autonomous adjustment and that happening to the extent that can happen and it's efficient for that to happen and producers have the wherewithal to do that.

	You can look at this from a residual point of view, to the extent that adjustment is deemed not to be efficient, then you would conceptually see government playing a role.  So the first point, I think, in any discussion of adjustment is to, as you're alluding to, acknowledge the fundamental role of individuals first; and then, if we still seem to have adjustment pressures, then government can come into play and have a role.

	The other concept here that's relevant is that, in maximising the adjustment of individuals, making sure that's efficient.  They need good information.  I think I alluded to this in my presentation, and a simple way to look at it, for example, is information, provision of information, then the skills producers have to use information, and then you might move on to some more significant direct forms of government assistance if that's deemed necessary.

	The relevant framework is one where, when you do have significant adjustment pressures, while many producers will be in a position to undertake autonomous adjustment and so forth, it can't be denied that adjustment will be made more efficient if they have good information.  That's good information, whether it be about on farm production technologies and options, off‑farm options, and so forth.

	We've really, and in combination with the Commonwealth government, in fact, I think you'll find now the debate has moved on where people are pretty happy with the fact that governments can be very helpful in this area of information and then training‑type programs.  As I say, that could relate to technical aspects of businesses, technologies etcetera, environmental practices.  It could simply relate to the business side of things and certainly we all know the stresses that industries can be under, and individuals can be under, in trying to make rational decisions.

	So adjustment can be helped in that training, that business planning area.  There are plenty of precedents for that in other instances, drought policy for example.  So then you move on from information training to, is there a case for direct financial assistance, and I guess we've got some recent precedents from the dairy industry and so forth, and one can critique that.

MR EDWARDS:   If that's the case, that's presumably a case on some sort of equity grounds, rather than on economic grounds.

MR DAVENPORT:   That's right.  You've got to look at what the criteria are that you're endeavouring to justify that on.  You can have forms of financial assistance too where perhaps you're not trying to replace financial markets in that process, and you might simply be trying to give some sort of incentive for producers to head in a particular direction.

MR EDWARDS:   Of course.  If I can just chip in there on dairy, one significant difference between the dairy situation and pork is that the adjustment package for dairy was given up on the deregulation of the industry, so the producers lost some price support.  We don't have that situation in pork.  

MR DAVENPORT:   No, that's right, and I didn't say we did.  I simply said that there is a reasonable public policy framework that you can cast over an adjustment program.  There's a public policy framework that enables you, I think, to be able to justify certain forms of assistance to industries that are undergoing adjustment pressure, and I think that's where - the point I was making earlier, in your chapter 4.  If you go through there, really all that's been done is to list these things, and I think ‑ ‑ ‑

DR BYRON:   You'd be surprised how difficult that was.

MR DAVENPORT:   Yes, but there's not yet been made an attempt, I guess, Geoff, in the line that you and I are discussing, to ask even on a first principles basis, are these programs likely to be hitting the sorts of adjustment pressures that this industry is facing.

MR EDWARDS:   I think we are familiar with the sort of public policy framework that you're talking about.  Given your understanding of the particulars of the pigmeat industry, it would be interesting to us if you could point to any particular area of adjustment measures - you've highlighted the information one.  Is there anything else that you think, in the circumstances of the pig industry, is a particularly likely candidate?

MR DAVENPORT:   No, Geoff, probably not.  I'd prefer to sit down and go through them in some sort of analytical way rather than off the cuff here, to be honest.

DR BYRON:   That's fair.

MR DAVENPORT:   There are a number of them, and I was quite astounded when I did look through them myself.  I'm not trying to get out of it, but I think it requires a little bit of a sit down and a look through those to see exactly what they're doing.  I can talk in generalities about types of programs, but there may well be some there that are teasing out other issues that I'm not aware of.

MR EDWARDS:   An answer to that question in a week or two weeks' time would still be very useful.

DR BYRON:   We will certainly be going through it, and I accept that all we've got down there is an incomplete catalogue of the ones that we've been able to find in about the first couple of weeks.  We'll be trying to much more systematically look at them.  The reason we're asked to look at all the existing Commonwealth and state and industry programs is to make sure that we don't recommend things that have already been tried and failed.

	Hopefully, our recommendation will be informed by what seems to be relevant and working.  The one last question I was going to ask is, would you agree that rural adjustment assistance up until now has been mainly designed around family farms and the adverse social consequences of mum, dad and the kids being forced off the property; and if so, the change to - particularly in the pigmeat industry - a much more corporate structure, where the consequences of a closure are not so much mum, dad and the boys losing the farm, but 20 people losing their jobs.

	Does that make it a conceptually different issue, because if the concern is about people becoming employed, then the - we don't have a CES any more but there are Job Search programs for people who lose their job and need to find another one.  That seems to me to be a bit different from the more traditional approach to our concerns about rural adjustment.

MR DAVENPORT:   I don't know that I'd agree, Neil, with your first point, that it's just been about some sort of concept of family farms.  Tim could comment on some of the more recent programs, but I think clearly there has been a focus as well on efficiency, what I was talking about previously, trying to get producers making better decisions.  I would have thought that you would argue that it's certainly been in that area.

	From the family farm perspective, I think the more relevant issue there is the welfare issue.  If you look at areas like drought policy, for example, now it's probably true to say that in the last five years or so there has been a much stronger recognition of welfare, the safety net of welfare that Australia sets for everybody; whether the farm sector warrants that type of treatment, whether it's appropriate, and certainly now the Commonwealth government is giving, largely - I think I would be correct in, largely, welfare support through its current EC arrangements, for example.

	Efficiency has certainly been a target, and still is, with some of those Pork Biz type programs, I think, that others are more familiar than I with.  I would have thought they're very much focused on efficiency of the business and welfare, and so I think you can still look at these issues where larger corporates and then large numbers of people being unemployed.  I think you've got to stick to the efficiency and welfare arguments for role of government.

	Efficiency:  you'd like to think that those individuals theoretically would be re‑employed.  I guess there's efficiency arguments there that you're trying to move from one state to another and I guess when governments make certain changes there's an onus on them perhaps to facilitate that process.  Then back on the welfare front, similarly - say, the pork industry - if there's large numbers of people being affected by some of these things, at the end of the day it doesn't really matter from a welfare argument what the cause is, but governments generally deem that they're obviously going to help people that are thought might go over that threshold.

DR BYRON:   Geoff, you're almost out of time.

MR EDWARDS:   Scott, could I just take you back to your statement that fundamental efficiency arguments should have led us to be far more critical of overseas subsidies.  This one has come up in a number of hearings and you might have been here earlier when there was some discussion ‑ ‑ ‑

MR DAVENPORT:   No, I wasn't.

MR EDWARDS:   - - - of it today.  To be sure, the Australia government has a record of trying to persuade foreign countries to adopt agricultural policies that are more internationally civilised, shall we say, but if we're going to take your words "fundamental efficiency arguments" seriously, I suggest that the Australia government has reason to give the pork industry a rather lower priority in its messages to overseas governments than to the wheat industry or the beef industry or the dairy industry, and the reason for that is that if foreign countries do nasty things to our farmers through their agricultural policies, sure, they hurt our wheat growers and they hurt our pig growers, but the difference is that the benefits to the Australia consumers of wheat - because overseas policies push wheat prices down - is small compared with the costs to our wheatgrowers.

	But if overseas governments push pigmeat prices down, then the benefits to our consumers are likely to exceed the costs to our pig producers using the sort of analysis with which you're very familiar.  So in other words, while we clearly lose net nationally from foreign policies that reduce prices for our export products, we can expect to gain nationally weighting consumer effects and producer effects when those foreign policies impact on our import‑competing industries like pigmeat.  So I think there is some reason why our government should be focussing more on persuading foreign governments to make their wheat and dairy policies more level playing field style than for the pig industry.

MR DAVENPORT:   It's an interesting argument, isn't it, but I'd have thought pig producers here would be arms in the air about that sort of view.  I mean, are you actually arguing that simply because the benefits outweigh the costs in relation to pig subsidisation that we're going to make pig producers in this country wear it?

MR EDWARDS:   Scott, I was taking up your words "fundamental efficiency arguments" which I take to mean we weight consumer gains and producer losses equally.

MR DAVENPORT:   Certainly I was focussing on the production efficiency issues there, and perhaps it was the wrong terminology, but I think it results in a fairly bizarre and debatable position that we're going to just ignore - I think your statement, despite what I've said - the fact is I think your statement is fairly odd.  I think it's interpreted as you're saying, "Let's make certain people wear the pain for the benefit of others without any compensation."  I don't know why pig producers aren't up in arms in this room is that's what you're saying.

MR EDWARDS:   No, I'm simply saying that if we take an overall view in assessing the effects of foreign policies, then - if the wheat industry and the pig industry were of equal size, which of course they're not, and the fact that the wheat industry is much bigger than the pig industry is another reason why the government should, arguably, place more emphasis on that; but if the two were of equal size, then the reality that the consumer gains are more significant for the pig industry than for the wheat industry does provide a basis for the government to look at the two rather differently.

MR DAVENPORT:   Look, I can hear the point you're making.  Perhaps if you went to the big growers association and tried to tell them that, they might have a different view.

DR BYRON:   But, as you know, the role of the commission is to take an economy‑wide point of view.  If we're doing an inquiry into the steel industry, we don't ask what would the steel producers like.  It's a question of what's in the best overall aggregate interests of the entire country.

	In the draft report we were not suggesting for a moment that, because there may be a consumer benefit, therefore all foreign subsidies should be overlooked and forgotten, and excused or rationalised.  We were simply observing the fact that as a result of that there are certainly costs that we can recognise, but there may also be winners.  We were not commenting on the relative magnitude or merits of the winners or losers at that stage, but simply pointing out, but don't forget there may be a consumer benefit here.  I think we've already gone over time and have kept you gentlemen longer than we promised.  Is there anything that you'd like to say by way of conclusion?

MR DAVENPORT:   No, just very appreciative, then, of the opportunity to come here and, yes.

DR BYRON:   I always look forward to constructive criticism and helpful suggestions, so thank you very much.

MR DAVENPORT:   Thank you.

DR BYRON:   Mr O'Leary, PIC?  If you'd just like to make yourself comfortable at any of the microphones.  Thanks for coming.  If you could just introduce yourself and your organisation, for the benefit of the transcript.  Thank you very much for the written submissions.  We appreciate both of them.

MR O'LEARY:   Thank you.  Good afternoon everyone.  My name is Paul O'Leary.  I'm the chief executive officer of PIC Australia, and that organisation's core business, or core objective is the scientific genetic improvement of pigs.  It's a privately‑owned company.  It's origins date back to the late 1950s in the south of England when a group of pig producers got together in a pub and decided they wanted to focus more on scientific principles of breed improvement and not show‑ring criteria where they judged animals subjectively rather than objectively.

	PIC came to Australia through Dalgety.  Dalgety owned PIC.  They bought it from the pig producers in 1970, and they looked at a property in the south of New South Wales - in southern New South Wales - Grong Grong station, which Dalgety owned, and they thought it would be a good place to start pig breeding.  Genes were established there from the indigenous pig population of Australia and from there they imported genes from Canada, Ireland, I think some came via New Zealand through the late 70s and the early 80s, and then the last importation we had into our operation was 1986, which was genetically improved boars from England.  I digress a little bit but I just want to give you a little bit of background on PIC.

DR BYRON:   That's helpful.

MR O'LEARY:   PIC has been through three or four owners.  Dalgety sold it to Elders IXL.  Elders IXL then sold it to Adelaide Steamship Company, and now it's in the hands of private investors, and they themselves are pork producers.  I have worked for PIC for coming up 17 years.  I am a Kiwi by birth, and I was invited to come to Australia and work here and bought a one‑way ticket in 1997.

	I would like to just present some comment and observation on the report of the commission.  My overwhelming impression is that it is seeking a lot more information than it actually is providing and I go to the list of questions that are asked on page 35, I think it is.  I would like to offer the commission any assistance it needs to seek that further information, because it appears from reading the report that it is a statement of fact in a lot of areas, and that as a result, you could interpret it as being quite naive in some areas, and then as a result of that, then form quite the wrong view of what was intended in the report.

	For the sake of the record I would like to read the first three pages of my submission, so that I can get it into the record, and I have some information here which is benchmarking costs of production and feed efficiencies from other countries where PIC operations.  A statement of fact is that the larger percentage of Australian pig production is in fewer hands, with the largest 3 per cent of farms managing over half the breeding stock.  The trend will continue as the industry adjusts to competitive pressures from other meats and imported product.

	The request as made by PIC, that whilst this adjustment takes place investors in the industry are permitted to exit or consolidate, a safeguard action whereby it allows this process to occur is warranted.  We feel this is the social responsibility of a government.  People look to government for protection of sovereignty and social welfare.  Current investors in the industry quote to me - and this is straight from one of our major shareholders who is involved in vertical integration in the industry:

	During our recent negotiations with our supply chain partners, we continually get barraged with the prices they could buy imported pork for.  The threat was not even what they bought for, but what they could possibly buy for.  This puts a ceiling on our price.  This is with our own supply chain partners.  We buy Australian grain, we employ Australian people, we pay Australian wages, we pay Australian prices for goods and services, and then we pay Australian taxes.

	The question they ask is, "What does the Australian government receive out of bringing in a product that Australia can supply itself competitively when our grain prices are at world parity?"  So to put some things into context, I went to PIC and they have operations in 33 countries around the world.  They employ 13 geneticists in animal science and pig production and one of those geneticists every two years does a sample of costs of production, pig prices and costs per kilogram of pig gain, to benchmark against each other.

	I would like the commission not to focus on the absolutes of those numbers, the relativities of where Australia sits in relation to other countries, and there are 23 countries on the graph on page 2.  This was done before we had our drought, so it is trying to represent pig production in a time when it wasn't an abnormal season,  The key to me is not production costs in US dollars or hog price in US dollars, but rather what our feed cost per kilogram of live weight gain is, because that is our major production costs.  If you look at Australia, Australia is competitive with the major pork producing countries in the world.

	Just as an aside there, I've recently been given some information on labour, sow‑to-worker ratios in a similar number of countries, ranging from China through to Denmark.  So I'd like to present that to the commission when I leave today.

DR BYRON:   Thank you.

MR O'LEARY:   The Australia pork industry cannot compete with subsidised imports and the Productivity Commission has admitted that pig producers do not receive significant direct subsidies, although pig producers in the European Union, Canada and the United States have benefited from reforms in the feed grain sector.  This submission refutes the allegation that safeguard action would blunt incentive for producers and processors to adjust to the market environment.

	Australia requires a level of imports to supplement and support consumption of pork.  Whatever that level is, we ask for some breathing space to adjust any increase in consumption by product development and differentiation.  The global market will force adjustment upon the pork industry.  We cannot operate in a vacuum and divorce our economy from global supply and price influences.  There is more than significant economic pressure on the local pork producers to continue to stay focused.  It seems a naive statement in the draft finding that, "Farms need to be well managed and located, targeting markets in which they have competitive advantage."

	The progressive Australian pork investor benchmarks their output and costs of production with national and international pork producers.  If there is significant distortion, then the investor either adjusts, improves or eventually is forced to exit as the required return on funds employed deteriorate below acceptable levels.  So what I'm saying is let the market forces rule, but we need a little bit of time before 20 shiploads of containers of pigmeat come flooding into this country and distort our industry.

	I was involved in a business prior to joining PIC, which was in bacon, ham and smallgoods processing.  The major issue that he'd had was not the quantity of supply but the variation in supply.  So they had funds employed in their factories and their staff and their facilities, and they wanted a fixed number of live animals to be slaughtered through that plant every day that they worked.

	For the benefit of the commission, I would like to share some facts on what variation you see in a live animal as it grows from birth to slaughter.  If you put a standard deviation over the back fat of a group of pigs which are grown normally under normal conditions, with good health status and good management and good nutrition, good housing and welfare, there would be between 24 and 28 per cent variation in the back fat of that animal or that group of animals.  The basis of payment for pig production in this country currently is based on P2 and we have to reach market grids where we're allowed anywhere between 5 and 10 per cent variation to achieve top price.

	So normal variation in that group of pigs is 29 per cent.  We have to halve it by either management or stock practices to achieve the right price.  In terms of variational weigh female:  get as many of them as you can produce and then get them out of the system as fast as you can grow them.  So growth rate, growth rate, growth rate.  That's why they go for these very fast‑growing genotypes.  They don't have any very strict penalties for high back fats or variation in back fat, whereas we here - just last week I think we had 20 per cent of our animals not achieve top payment system because they were outside the back fat and weight group.  And, you know, we thought we knew what we were doing, we've been in the industry for years and years and years.  It was just that particular batch of pigs because of the time of year that it was in, they happened to fall outside the system, which is fine if you can handle that variation.  But if it's your actual sole determinant of livelihood, then you will not achieve top revenue per kilogram.  

DR BYRON:   Thank you very much for that.  It's been extremely helpful, and thank you very much for taking the time, for both the submission and to come here today. 

MR O'LEARY:   Thank you.  

DR BYRON:   It will take us some more time to digest it all, I think, but thanks.

DR BYRON:   Malcolm Bartholomaeus.  Thanks for coming.

MR BARTHOLOMAEUS:   Thank you.

DR BYRON:   Thanks for the two papers that Geoff and I have both read.  If you'd like to, normal procedure, introduce yourself, summarise the main points you want to make today, and then we can briefly talk about it.

MR BARTHOLOMAEUS:   Thank you.  Malcolm Bartholomaeus from Callum Downs Commodity News.  I'm based in South Australia and I was unable to attend on Friday in Adelaide, so I've taken the opportunity to appear here today.  Our business provides market information analysis intelligence and advice for grain growers.  We also commentate on the grain industry and industry issues.  Our client base is primarily growers, the major grain marketers around Australia, a few international, and some large end users, including in the pork industry.

	Why I ended up here was that I'd prepared some papers.  One paper was for an ABARE regional outlook conference, where I made some comments about how the single desk arrangements for grain are working.  The second one was a submission I put together for some growers who were lobbying politicians in South Australia about the single desk on barley marketing and trying to encourage the people involved in that process that there was an opportunity for entrenched political positions to be changed, and that's because of the amalgamation of ABB and AusBulk that occurred last year.

	They were written from the perspective of the grain industry, but there were obviously some issues that were of interest to end users, and I was invited to submit those papers formally as submissions.  I would like to take the opportunity today to twist it around a little to make it a bit more relevant to this actual inquiry.

DR BYRON:   Thank you.

MR BARTHOLOMAEUS:   I'd like to make a couple of comments, first, on New South Wales Department of Primary Industry when they were having a go at you about saying that single desk needs a regular review and, "Ho hum, don't we know that?"  Yes, we do, but I'm not sure that we are having these regular reviews, and I would encourage you to keep comments like that in your report.  We may have a system for wheat, but I'm not sure what it is for barley in South Australia.  I see the single desk on barley in South Australia as becoming quite pivotal on the input side of industries like the pigmeat industry, as we move forward from here.

	The reviews there tend to be ad hoc.  They tend to be funded by ABB, who are the managers of the single desk.  The agenda tends to be driven by the safe grain section.  From the grain growers' perspective, they are also supported and paid by ABB in some areas.  They tend to look at the wrong things.  They don't estimate all the costs associated with single desk marketing systems, and they try and estimate the benefits only to growers and then try and close it off pretty rapidly before other industries wake up to what might be going on.

	It's my firm view that we're going to have a head‑on collision between the proponents of the single desk system of marketing barley in particular, with the pigment, the poultry, the dairy, the beef feedlot industries.  We're probably coming fairly close to that day, but I think the political environment in which the single desk in South Australia currently sits is trying to delay that day as long as possible, and potentially at some cost to industries like the pigmeat industry.

	In the last presentation, it was stated that the feed cost per kilogram of live weight grain stood up pretty well in Australia against the rest of the world.  It would be interesting to know how much impact the grain price or the grain quality has on that relationship, or whether it is in fact the efficiency of conversion of the Australian gene pool on that particular one.

	Now to what I really wanted to say.  My interest is in the way the price signals for feed grains are being distorted, for both grain growers and end users, as a result of the current grain marketing system across south‑east Australia, and that's really Victoria and South Australia, with flow‑on effects into New South Wales.  In Victoria, the barley market was deregulated, and so anyone can now export out of Victoria.  The problem is they do not always produce an exportable tonnage of feed barley.

	In some years, every tonne of barley exported out through Victoria has to be replaced by grain dragged in from South Australia and New South Wales just for the domestic end use.  The impacts of that, I believe, tend to be higher prices for feed barley in Victoria, particularly later in the year after the main exports from traders have been shipped; and prices have to be attractive enough to purchase the grain in South Australia initially, and then transport it through to Victoria so that the landed cost into Victoria can be above normal export parity levels.

	Barley prices for the domestic market in eastern South Australia, Victoria, southern New South Wales, I believe, would be lower over time, less volatile year to year, and more stable within a 12‑month period, if we didn't have this particular anomaly.  It's not a problem every year.  It's more likely to emerge in those years when the grain traders see an opportunity to make forward sales into the international market early in the year.

	They post attractive prices to growers, growers take up those forward contracts and the commitment is made to export out of Victoria before we even know if we have an exportable surplus.  If we then end up at the end of the year and there isn't really an exportable surplus, that grain still goes out and it has to be replaced coming in from outside.

	More and more on the ABARE projections of feed grain production and feed grain use in Australia, that's going to come from South Australia, which is where we had the problem.  I think if the traders were able to export out of South Australia rather than being restricted to Victoria, you would find that very little grain would in fact be exported from Victoria.  It would come from South Australia where the exportable surplus is.  You would get less distortion in price signals and less variability, and I would see that as being a benefit for end users and the pigmeat industry.

	An allied issue is what happens in droughts, and we have the 1994 and the 2002 droughts to refer to.  Particularly in the 2002 drought, it was my view that there was never a shortage of grain in eastern Australia.  Anecdotal evidence, you could drive past heaps of the stuff out in country New South Wales and country Victoria, and yet we were being told that there was no grain available and production was certainly going to fall short of normal domestic consumption for a 12‑month period.

	That drove grain prices up.  Growers had forward sold grain and realised they weren't going to produce, so growers entered the buying side of the equation, bidding up prices in competition with end users trying to accumulate physical stocks.  It got to the point where the prices were way in excess of export parity, and the bluff was called by a couple of people who organised importations of relatively cheap, but good quality, feed wheat out of the UK.

	My understanding is that the amount of grain that actually came in was relatively small, but it was enough to burst the bubble, and my suspicion is that some of these stocks that AWB and ABB had said weren't available suddenly became available and we saw a price collapse in the grain market.  The end users got caught, not wanting to take a chance based on previous experience back in, say, 94.

	I think they over accumulated grain at the top of the market during the harvest period.  Growers, also working on what happened in the 94 drought, realised that they could hold grain back on farm and out turn it during the year to the end users.  So they held stocks on farm and the prices on some of that grain dropped by $100 a tonne.  No-one really won out of that.

	My point would be that our current grain marketing arrangements and the market power of ABB and AWB, and the unpredictability of how they are going to operate in any one season, can leave both grain growers and end users adversely affected.  We're trying to double guess not just the market and supply and demand, but also the actions of two very large players.

	Moving to domestic barley pricing, more specifically in South Australia but remembering that has a flow‑on effect into the Victorian market and vice versa, I guess, the merger of ABB and AusBulk - we've lost a competitor in grain trading.  We've created an organisation with something close to a monopoly, or they certainly have extreme market power, in both grain trading and grain storage.

	It's becoming quite apparent, and I guess more focused this year than in previous years, that as soon as grain is purchased by ABB and delivered to an ABB storage site, the cost of that grain to an end user rises dramatically.  It can $25 to $30 a tonne overnight.  That is, of course, to cover the grain handling and storage costs, which are in fact set by ABB themselves.  It's to cover carry costs, interest, and so on, and also to cover a profit margin, which ABB also decide what they need as their profit margin.

	I think it's quite telling that if you look at the annual reports or the annual statements from ABB over the last few years, they attribute a lot of their corporate profits to grain trade and not to managing the single desk, and none more so obvious than in the drought year where they obviously took quite substantial margins.  Because they've got, basically, a monopoly, most growers in South Australia will tend to deliver their barley to the ABB pool for export or sell it for cash to ABB, because there isn't really anyone else operating.

	Once ABB have control of the bulk of the harvest, there is no mechanism for international barley prices to be reflected back to domestic end users if international prices then fall.  So basically, after harvest, end users have to pay either the international price, export parity, plus costs, when international prices are on the rise; but when international prices fall, those lower international prices are not passed on because, simply, the owners of the grain - primarily ABB - will simply set the price at what they paid for it during harvest, plus storage costs, plus interest, plus their normal profit margin.

	It's a continual frustration to many people, that when the international price goes up the end users pay, when the international price goes down there doesn't seem to be much of a price fall for end users.  If end users could purchase pooled barley from an open tender system, as is the case with wheat, it may be possible for end users to buy grain at export parity all year, if the prices being charged by the ABB pool were more transparent, independently audited, and available to everyone and not just the ABB trading division primarily.  So there are some issues of just how the single desk is managed, and the model that we seem to have with wheat seems to be a little more reasonable.

	ABB also use their market power in terms of swapping stocks between their cash buying arm and their export pool.  Whenever they buy barley for cash they make the claim that none of that barley is actually exported.  So they go buying barley on Eyre Peninsula, where there is no domestic demand, and you scratch your head and say, "Well, where's this barley going to go?"  What they simply do is for every tonne of grain bought on Eyre Peninsula or lower York Peninsula they would swap that with the pool, and out turn it at the Adelaide division.  So they buy it relatively cheaply from growers outside of the domestic market, swap it with stocks in the pool, and out turn it where the domestic market is, and sell it for much higher prices.

	At the margin that's going to tend to distort grain prices.  They do have to compete to buy that grain for cash on Eyre Peninsula, for example, so the cash market tends to trade a little higher than it should.  They don't then have to compete as vigorously where the domestic market end users are located, so for the producer the grain prices tend to be a little lower than they probably should be.  At the margins we get a misallocation of resources.  But what's really a little bemusing is that these cheaper grain prices that we tend to see paid to growers, where the domestic market really is, doesn't necessarily translate into cheaper prices for the end users, particularly once we get past the harvest period.

	There's a couple of things that could be done within the single desk framework to remove some of these distortions, and one might be to legislate against stock swaps, by quarantining all deliveries made to the pool for export.  That would force the domestic market to compete against the pool for barley to be used domestically.  That may in fact raise the price of barley during the harvest period.  But I think it actually may open the door for more traders to participate in that market, although barley prices to growers may go up we may find that the trading margins fall, and it may not impact negatively on the end users.

	Granting third party access to an ABB pool would also assist.  Some traders would be willing to buy for the domestic market if they knew they could offload surpluses to the export market.  At the moment they can't, and it gets quite difficult for them.  We should see increased competition, which would help both growers and end users if there were more traders involved.

	I think it is interesting to look at the differences between wheat and barley.  Wheat does have third party access to its pools, which is a pressure relief valve for the domestic market.  Barley does not.  Allied to this is the limitations to stock swaps with barley in South Australia, which tend to be limited to ABB's internal operations.  We don't seem to have the same apparent problems with wheat, although I'm sure AWB do transfer stocks between their trading division and themselves.  But it doesn't seem to be as quite a closed shop.

	Wheat from the pool can be purchased in open tender, where we have price transparency.  That is not the case with barley.  Pricing for wheat is more transparent than for barley simply because of the nature of the global markets.  I mean, we can calculate the value of wheat on a daily basis from offshore data.  That's not possible with barley, which makes it even more important that we get some transparency into the operations of the ABB trading and pooling operations.

	Just what impact would competition have on the barley trading in south‑eastern Australia?  I think some observations from the recent harvest, initially in South Australia, the estimated export pool returns were set at extremely low levels.  Growers were going to be paid around about $110 net.  Some growers worked out that the underlying inherent energy value of barley was worth $150 a tonne just pouring it out on the ground in paddocks and putting it through fat lambs or prime lambs.  So the recommendation was made to growers to be very wary about marketing any feed barley at those sorts of prices.

	When it became apparent that there may be shortages of feed grain or feed barley in Victoria the price started to rise, and ABB established regional pools in eastern South Australia to reflect those higher prices, and the demand into Victoria, which is a fair thing to do.  Cash prices then started to lift.  But when competition emerged from some traders who were bidding to buy some feed barley in South Australia to export via containers, which is apparently permissible, the price suddenly ratcheted up, and overnight ABB were able to match those much higher prices.  Without that competition they certainly weren't able to.

	ABB lifted their pool estimates for feed barley supposedly because of domestic demand, even though it was apparent there was far more feed, barley and other feed grains, than could be absorbed by the domestic market in South Australia.  But they only lifted their estimates on the export pool, not on their domestic pool, even though they said the price gains were coming from the domestic market.  It starts to make their explanations look a little suspect, and their ability to move things as soon as they get a bit of competition makes us a bit suspicious as well.

	The centre of the universe in South Australia this last harvest was a little town called Pinnaroo.  That was where the highest feed barley prices in south‑eastern Australia were during the harvest period.  One would expect to find a thriving pigmeat, dairy, poultry, beef feedlot industry all nestled around Pinnaroo.  There may be a few operators but it is certainly not the centre of the universe.  What happens at Pinnaroo is that you get a culmination of all of the competing factors in grain storage and handling as well as in trading.  In storage and handling, for example, there are three operators within about four or five kilometres of each other, with the border in the middle, and you get the traders operating in a free market in Victoria against the regulated market in South Australia, and it tends to generate a little bit of competition.

	As soon as the competitors dropped out of the market in last December in South Australia cash prices fell back to be at a discount to pool estimates, which I'm sure has upset a few of the end users who had to compete for higher priced barley just a week earlier.  The top in price was $21 a tonne overnight at Pinnaroo.  Cash prices at Port Lincoln, which is on Eyre Peninsula, moved to equal pool estimates during harvest.  But when pools were revised up, because of the so‑called the domestic influences, those cash prices and did follow, and ended up being left behind by $10 a tonne.

	By mid January, just a few weeks after harvest, all cash prices across South Australia had pulled back to below pool estimates.  It's highly unlikely that the price falls have been reflected in prices ABB are asking end users to pay.  My suspicion would be that ABB now control a large percentage of the South Australian feed barley crop, and that they will then dictate prices to end users through the rest of this year regardless of where international prices signals take us.

	Some ways forward that could benefit both growers and end users could be the idea of quarantining pool deliveries for expert only.  It would certainly need to be an escape mechanism where some appeal could be made to the minister to release stocks in the case of shortages in droughts.  Allowing third party access to ABB pools would increase the competitiveness, and increase the number of traders willing to operate.  More controversial, certainly within South Australia, would be the introduction of a GLA for barley exports from South Australia, again, to allow traders to move from the Victorian market over to the South Australian market for their operations, and to improve or increase the number of traders operating both buying from growers and selling to end users.

	If the industry continues that way - and they very rigorously fight against any changes at all the marketing arrangements in Australia - I do not think it would be unreasonable for the pigmeat industry, for example, to seek for full deregulation of the barley market to improve competition in the provision of a core ingredient in the operation which is obviously feed.

	With the domestic demand for feed grains set to grow rapidly in eastern Australia, I believe that it's important that the marketing arrangements for wheat and barley be continually fine tuned to remain compatible with economic efficiency, and that means continual reviewing of single desk marketing operations.

DR BYRON:   Right.  Thank you very much for all of that, Malcolm.  It emphasises that there's a lot of people around, like you, who know far more about the intricacies of this than we've been able to get on top of in a couple of months.  But thank you very much for sharing that with us.  In fact, somebody this morning, I think it was Dugald Walker, mentioned that there seems to be - I don't want to put words into his mouth, but I thought that he was saying that there needs to be some sort of regulatory check on the monopoly powers of the holders of a single desk particularly in times of drought, but I can't immediately think of who that might be, or exactly how that might be done.  There used to be checks before the single desk thing were privatised, but those sorts of checks and balances have gone now, haven't they?

MR BARTHOLOMAEUS:   I think in the 2002 drought it was obvious that there were stocks of grain being held back for export, and AWB and ABB both used the argument that they needed to retain those stocks to export to their long‑term customers to retain market share, and it was going to be obvious that that grain was going to be delivered to those customers for less than what the domestic market would have yielded.  So I think that actually comes up against the legislated requirement of the holders of the single desk to maximise returns to growers.

	I think the single desk operators would have argued we are maximising the long‑term returns to growers by looking after our long‑term customers and market share as opposed to maximising returns to growers in the short term, and in the middle of the drought the growers were actually focusing on short‑term things.  If there was a mechanism to test whether in fact they had made the right choice, then that may provide the trigger for someone independent who could say the value that you are getting from your long‑term market isn't actually outweighing the cost for foregoing returns to growers in the short term, then that may provide a trigger mechanism to get policy changed.

DR BYRON:   My understanding is that AWB and ABB would say that it was commercially confidential how much was in storage and how much of that was already committed to long‑term contracts, and that may well be true.  Given that they do have a monopoly by legislation, where is the quid pro quo to protect the interest of domestic end users such as the livestock feeding industries, and what might be a mechanism to operationalise that quid pro quo?

MR BARTHOLOMAEUS:   I think that the job of the single desks is quite laudable.  It's to extract premiums and to market as efficiently as possible and as effectively as possible for the benefits of growers to market our grain into the international market, but where that gives them market power to have adverse effects or flow‑on effects back into the domestic grain markets, both from the growers' perspective and the end users' perspective, then I think we need to put restrictions on how they can operate their single desks.

	So I canvass ideas like, well, let's quarantine deliveries that are made to a pool because a grower has made a choice, he wants that to be exported, someone who sells for cash is targeting a domestic market, or if we restrict their ability to have stock swaps, or if we open them up to everyone so that you can actually let the market operate and sort out some of these problems within the domestic market without actually affecting their key role in the international market.

DR BYRON:   So the issue of third party access apparently works in wheat without too much difficulty.  What arguments have been used for not having a similar procedure when it comes to barley?

MR BARTHOLOMAEUS:   My understanding is that they know how much barley is there because they own the storage system, so they actually have one up on most of us because since the amalgamation it's very hard to get supply and stock issues, so they know how much is there.  Their argument would be, "We don't know how much of that is going to be delivered to our pool, or when it's going to arrive, so therefore we cannot organise our international marketing program."

	My argument would be we produce , let's say, two million tonnes of feed barley in South Australia, 500,000 tonnes is needed for domestic use, there is always going to be 1.5 million tonnes exported; just get over the fact that you might not know exactly when it's going to be delivered to you.  If you are looking after growers, open a pool for growers during harvest, and then close it, and that may well be a pool which has the best return, and people who choose to hold beyond that do so at their own risk to try and encourage people to make the decision early.  In fact, AWB do that.  They have guaranteed access dates, and as soon as those dates roll around the pool is closed for everyone.

	They are well publicised.  AWB chooses whether they will exercise their right or not.  This year they did, and the new pools are some $15 a tonne lower, but they have encouraged people to slot in.  I just say the world changes, the requirements of the end users in the domestic market change.  You just have to work out new systems, new ways of operating to cope if we change the rules on you for the benefit of other people.

DR BYRON:   That's what I found so interesting in your papers is that the implication that not only the grain‑using industries such as pig production may have been detrimentally affected by the way it operates, but also even some of the growers are not necessarily pocketing the difference.  There are just straight losses both ways.  Geoff?

MR EDWARDS:   On the quarantining idea, isn't it a general rule that quarantining by reducing the flexibility of the business increases its costs?

MR BARTHOLOMAEUS:   Increases its costs?  I'm not sure ‑ ‑ ‑

MR EDWARDS:   Whenever you reduce the flexibility of an organisation or a household you impose costs of one form or another upon it.

MR BARTHOLOMAEUS:   Okay.  Let's accept that there are some costs, but are they greater than the benefits that might ensue to other parts of the industry?  I think they would be things that we would need to test before we went wholesale down that pathway.

MR EDWARDS:   But that does lead us to question whether playing around at the edge, which is what quarantining ought involve, is really the best way to go.  Should we not perhaps be thinking of deregulation within South Australia?  Have we got into this problem really because a little bit of deregulation is not such a wonderful thing?  Is that really the cause of the problem?

MR BARTHOLOMAEUS:   It could be, but if you're floundering around trying to find ways forward without actually fully deregulating or partially deregulating via a GLA, then maybe quarantining, maybe third party access, maybe open tenders for pooled barley are things that can happen which currently don't happen which may yield improvements for everyone without having to go to the full step of deregulation.  If there's too much opposition to any changes, or on investigation those changes don't appear to generate worthwhile benefits, then maybe you can stand up and say, "We have looked at all the alternatives, we can't find any way forward other than some form of deregulation," but I would test the alternatives before we went down a full deregulation pathway.

MR EDWARDS:   But in the case of the Victorian barley being exported and state demanders having to be satisfied by importing from South Australia later on, is there anything to stop people in Victoria making an attractive offer so that they can acquire that Victorian barley that is at present exported?

MR BARTHOLOMAEUS:   It would depend on whether the people who have made the commitment to export can turn that barley back into the domestic market and source that barley from elsewhere to meet their export commitments.  They may be able to source it from offshore, or they may be able to argue in Western Australia with the GLA there, they may be able to argue to get some grain from there for export, but at the moment they cannot turn that barley back into Victoria that they've committed to export, and then source it out of South Australia, which would be a reasonably logical place to go.

	If the price gets bid up high enough in Victoria that they may be able to wash out their contract into the export market, that's not a problem, but it would tend to become a - and it's just built into the pricing of the barley to get the contract washed out and turned around into the domestic market.

MR EDWARDS:   But isn't it an implication of what you were saying that, at present, the Victorians are not offering as much for that early barley as overseas people are offering for it?  So it's appropriate on economic grounds that that Victorian barley is actually shipped overseas.

MR BARTHOLOMAEUS:   Yes, maybe it's an issue, and I take on board some of the comments that were being made about how operators in the pigmeat industry might operate in terms of securing supply of their grain; maybe they should be reasonably active in those forward markets as well in competition with grain that's going to be exported.

	But if at the end of the day - and they may well do that, and they may well secure on forward contracts quite reasonable tonnages of grain, which may in fact end up being quite good and lucrative transactions in terms of where grain prices ultimately go over their production cycle, but if there is still some grain which is being purchased for export and is exported, when there wasn't really an exportable surplus in Victoria, at some stage that grain has to be replaced from somewhere else at some additional cost, which is at least the transport cost of shifting it into Victoria to replace grain that should never have been shipped out.

MR EDWARDS:   I find those words "grain that should never have been shipped out" a bit difficult to accept if we take an economic approach.  There's no reason why an organisation in Victoria should give preference to meeting the demands of Victorian buyers if overseas buyers are willing to pay more.  Is there?

MR BARTHOLOMAEUS:   I think if you actually deregulated the South Australian market, you would not see the grain flows in the same direction.  I actually tried to float this idea at last year's NACMA Agriculture Australia conference in their grain forum, so we had 10 or 11 eminent grain industry and marketing people, including Graincorp and ABB and GRDC and so on, and I was getting nowhere with the argument.  So I said, "That's fine.  We'll keep our single desk in South Australian.  We're quite happy to - if it's going to generate all this extra money for South Australia that maybe shouldn't be there."

	Afterwards Tom Keene from Graincorp came up to me and he said, "You are spot on."  He said, "The regulation of the South Australian barley market is incompatible with the deregulated Victorian market.  It will have to go."  He said, "We see it with canola.  We're the single desk in canola in New South Wales, with a deregulated market everywhere else in Australia, sees canola moving in strange directions which would never happen in an economically efficient model of free trade," and he could see the argument that the same thing was happening with barley.

	It will become more and more of an issue as the demand for feed barley grows in eastern Australia and ABARE models are saying more and more will have to move from South Australian into the north‑eastern part of Victoria, for example.  So it's going to become more and more sensible that anyone who is exporting should really be - the economic signals to them should be to export it from where the exportable surpluses are, which will be more and more southern Yorke Peninsula and Eyre Peninsula in South Australia, not eastern South Australian, southern New South Wales or Victoria.

MR EDWARDS:   Going back to the earlier discussion of people not knowing how much grain was held and how much was committed to being exported, and Neil's comment about that information being commercial‑in‑confidence, I find myself wondering just what information can be held very close on commercial‑in‑confidence grounds and what should be disclosed.  Is there anything we can learn from perhaps the US or elsewhere about public provision of stocks in private hands?

MR BARTHOLOMAEUS:   I think there probably is.  Because it's effectively a - well, it is a free market in the US and grain is held by a lot of traders and a lot of growers at any point in time, that there is a whole industry built up from the USDA through to private forecasters who spend a lot of time and resources on estimating stock levels, forecasting production, estimating what actual production has been, and that information is published through the news wires whenever some of these private companies make announcements, and the USDA do it every month and it's freely available to everyone.

	We do not have the same industry here in Australia because there hasn't been a need because the grain supplies and stocks and so on have been held:  wheat by AWB, barley by ABB.  As we have deregulated the domestic market, there are people out there who need that information, right down to growers who need to know how much has been produced, how much is in storage, whatever.  But that information is not getting out because it's still held by ABB, AWB, and while they are probably so dominant in the marketplace, there's no room for a private industry to set up and take off that would be commercially viable to replicate what happens in the US.

	You can certainly understand the arguments that ABB and AWB put forward in terms of not wanting to release stock information, in terms of their international marketing programs but that doesn’t actually help end users and growers in Australia who are trying to participate in a domestic market with a lot less information than their major competitors in the same marketplace who are - I mean, if I'm trying to sell barley and my competitor is ABB, they've got the information; I don't.

MR EDWARDS:   Neil, thanks.

DR BYRON:   Not the paper on ABB, but the one on AWB, you talk a bit about the range of pool finance tools that are available.  I'm just wondering if you could elaborate a bit more on how long they've been available, how well used they are, the impediments to their use, whether it's catching on, because I'm not sure how many people are familiar with these more innovative variations.

MR BARTHOLOMAEUS:   When AWB corporatised, they had to change their pooling arrangements whereby growers used to deliver wheat to the pool, AWB would sell it, and they would pay growers advances.  They would pay in advance up front and the interest cost on that advance would be a pooled cost and so the growers didn't see it.

	Effectively, AWB shifted to a system where they tried to make it look exactly the same but they lent the money to the individual grower, not to the AWB pool.  So the grower delivers to the pool, they can choose to take an 80 per cent advance which is a loan to them, and they actually get charged the interest.  That was quite a major change because a grower could deliver to the pool and elect not to take a loan and therefore elect not to have to pay that interest cost.

	There have been numerous changes and product innovations on that basic product.  Interestingly enough, they came into the marketplace from competitors like AusBulk and Graincorp and ABB and National Australia Bank offering lines of credit against wheat that had been delivered to the AWB pool.  It was in response to that competition that AWB have developed their own suite of products.  Without the competition, they wouldn't have done it.  So we see that a lack of competition and the provision of marketing services that comes from single desks just stifles innovation and stifles the delivery of products that are needed.

	In terms of actual forward pricing products, it's quite fascinating with wheat whereby AWB still persist in quoting daily forward prices which are 10 to 20 dollars a tonne under the daily Chicago Board of Trade wheat price.  That's fine; they can do that.  Their actual pool returns on average come out $10 above the Chicago Board of Trade expiry at the end of December, so anyone benchmarking against the December contract for their forward selling, if they make a fixed‑price forward sale, they are often taking a king hit of $30 a tonne upfront as a discount.

	AWB can do that.  They actually set the price of wheat in Australia, and then the end users can come in behind that, so in terms of wheat - where it is transparent - we can see that end users participating in the forward market can actually buy wheat for less than its true worth in that forward market.  That opportunity tends to disappear by the time we get to harvest, then in the post‑harvest market, if AWB are controlling a lot of wheat, then they can actually dictate the price and start pushing it up for the end user.

	But interestingly, growers can circumvent that now with products like bank swaps being offered by National Australia Bank and Commonwealth Bank, where they can lock in the international price base, but not the discount.  So we are now getting to a stage where growers are being encouraged and educated to never forward sell to anyone using a fixed price forward contract.  The way the end users can overcome that problem is by taking the opposite side of the same transactions, I guess, and trying to lock in the basis with someone early in the season.  There are some risks that end users are facing on their pricing, which is the international price base as well as the price relative to the international price that they're going to be asked to pay by traders.

	My suspicion would be that there are a number of end users, and potentially at the smaller end of the spectrum, who are not availing themselves of that range of products.  I think growers are starting to avail themselves of that range of products.  End users will find it more and more difficult to buy forward, therefore more and more difficult to protect themselves against an international price move.  They may have to start doing the same as growers but on the other side of the market.  I think we are yet to see that emerge.

DR BYRON:   That about does me.  Thank you very much for coming.  Is there any concluding remark or anything else you'd like to say?

MR BARTHOLOMAEUS:   I would make one comment on the single desk arrangements in South Australia, just on wheat and barley.  In the early 1990s, there were a round of grower meetings that were sponsored and run by the Grain Exporters Association.  So it was the traders pushing for change to single desk arrangements.  I think they got some minor changes, maybe third party access to wheat pools was an outcome, I'm not sure.

	We are now going through another round of pressure on the single desks, and particularly on barley in South Australia.  Interestingly, it is now coming from growers, not necessarily from the traders although they are taking a keen interest.  It is being pursued by some growers, not all.  So we've actually got growers against growers, which is an interesting development.  I would reinforce my point that I think in the not too distant future we will actually have pigmeat producers up against grain producers, which will provide an interesting dilemma for grower organisations that have got both sides of the argument as members.

MR EDWARDS:   Presumably, the other intensive livestock industries will be siding with the pig people?

MR BARTHOLOMAEUS:   Absolutely, yes.  They won't be orphans.

DR BYRON:   Thank you very much, Malcolm.  

DR BYRON:   I said this morning in my opening comments that anybody in the audience who wanted to come forward and put something on the record would have an opportunity at the end of the day, or anybody who wants to come back because they've just remembered something that they forgot to say this morning.

MS LITTLEJOHN:   My name is Jane Littlejohn, I'm with New South Wales Farmers Association.  Kenton Shaw, who presented earlier, picked up on a point of Geoff's which inferred that maybe the long‑term sustainability of the Australian pork industry as we know it is in question.  He wrote this down for me to read out and he paraphrases a question that you might ask of growers, is the Australian pig industry robust and competitive in the long term?

	His answer is yes, of course it is, but restructure, which involves the closing down of uncompetitive operations, and investing in new technology has to continue but requires consistent positive returns.  He says, "We can survive economic shocks in low magnitude but not perpetual losses or consistently low returns."  He says, "We will continue to reinvest and drive the cost of production down at every opportunity to remain competitive, and that's what our aim is and that's why we were here."  So he wanted to make that point.

	The other three points which some of us discussed over lunch were, I suppose, just retoday, is Denmark continually is held us as some paragon of pork production.  I'm on a training course at the moment with 17 people from 11 different countries, and of those countries that are importing pigmeat, all of them are very dismissive of the quality of the Danish product.  So Denmark is a very good example of how to market pigmeat, and how to present an image of marketing pigmeat.  They obviously have tailored to the Australian market and have a very good rapport and price mechanism for its product that it sells here, or exports here.  But I can demonstrate to the commission countries that import Danish product that does not meet the same quality criteria as what is currently perceived to be in Australia.

	The other point in a completely different direction, is our animal health status is sacrosanct to our cost of production and if we get it wrong, we have no way to go back.  If we get disease in this country, that is it.  It's 15 cents, it's 20 cents, it's 25 cents on our cost of production for ever and ever.  Our industry feels very, very strongly about that.  It is the core of why and how we can produce pigmeat and if we destroy that animal health status, we will be uncompetitive.  We currently have regimes of imports that were referred to by Dugald.  You cannot quantify the risk; it's unquantifiable.  That's the point I'd just like to make.

DR BYRON:   I'll try to leave the health and quarantine issues to the Supreme Court or the Federal Court, or whoever it is at the moment; they don't need me to buy into that one.  But just on the quality of the Danish meat.  We asked small goods manufacturers in Perth, Brisbane and Sydney about what they think of the Danish product, and they said, "Well, most of the other imported material we buy because it's cheaper, but the Danish middles we buy even when it's more expensive because we see it as better quality."  Maybe it's a perception thing.  I'm not sure.

MR O'LEARY:   I'm not discrediting the Danish quality.  All I'm saying is that they are very good at marketing pigmeat and they have chosen Australia as a very good market for a specific range or specification of middle. 

DR BYRON:   They sell us what we seem to want? 

MR O'LEARY:   That's all I'm saying.  They're no different to us, we can do the same thing, but everyone seems to hold Denmark in some sort of, I think unrealistic level.

DR BYRON:   My continuing question is how do they do it, because when you look at the biological husbandry of performance on the farms, the size of the farms is actually smaller on average than Australia.  The only thing that really sticks out is the scale of the processing and the logistics of the supply and sale.

MR WALKER:   Commissioner, could I attempt to answer or give my understanding of why they are so successful.  Firstly, they have a large industry.  I think Denmark's pigmeat exports were very close to the tonnes of beef that we export.  In Denmark they have a cooperative society, their meatworks are centralised, close together, what have you, but it's only a very small country.

	I think their ability to send the right bits of meat to the right place are actually made by their ability to sort out the meat for the market, and they're much better able to do that than we are.  When I went to Denmark, I walked around the processing works and what have you, and it was all very good.  But the movement of meat was really terribly well defined.  The big fatty hams that Ted doesn't want and Paul wishes he hadn't bred were going off to be parma hams in Spain.  The big industry gave them the ability to send little bits where they were wanted.

DR BYRON:   So that's a materials handling thing, and - - -

MR O'LEARY:   It's a total pork chain process, I think.  It's the producer, it's the cooperativeness, it's the sorting in the abattoir, it's the assessment quality systems they use to assess that carcass or that product, and then post that process, where it goes and in what market.  They've obviously done a very, very good job at making a name for themselves in Australia.

DR BYRON:   Thank you.  I can now adjourn the hearings and we'll resume in Adelaide on Friday morning.  Thank you very much, ladies and gentlemen.

AT 4.35 PM THE INQUIRY WAS ADJOURNED UNTIL
FRIDAY, 4 FEBRUARY 2005

INDEX

		Page

B.E. CAMPBELL:
TED CAMPBELL
MARIE-LOUISE RILEY		256-271

NEW SOUTH WALES FARMERS ASSOCIATION:
PETER ROBERSON
DUGALD WALKER
KENTON SHAW
DAVID MOFFITT		272-299
272-299

AUSTRALIAN MEAT INDUSTRY COUNCIL:
KEVIN COTTRILL		300-309

NEW SOUTH WALES DEPARTMENT OF PRIMARY INDUSTRIES:
SCOTT DAVENPORT
RORY ARTHUR
TIM BURFITT		309-325

PIC AUSTRALIA:
PAUL O'LEARY		326-334

CALLUM DOWNS COMMODITY NEWS:
MALCOLM BARTHOLOMAEUS		335-349

NEW SOUTH WALES FARMERS ASSOCIATION:
JANE LITTLEJOHN		350-350

B.E. CAMPBELL:
TED CAMPBELL		351-352