WA chicken meat Act to expire

Posted by Josette Dunn on 24th December 2010

The Chicken Meat Industry Act 1977 will expire at the end of the year, Agriculture and Food Minister Terry Redman announced today.

The decision follows a recent inquiry by the Economic Regulation Authority (ERA) which recommended the Act should not be continued. The Act requires that its effectiveness is reviewed every five years, and should only be continued if its continuation can be justified.

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The Act was introduced in 1977 as a transitional measure to improve the stability of a fledgling chicken meat industry undergoing rapid expansion.

In this industry in WA, the production and processing of chicken meat is dominated by two large chicken meat processors, who control most stages of the production process, apart from the growing of chickens, which is contracted out to individual farms (growers).

The Act establishes a forum intended to facilitate collective negotiation and determine an average fee for service to be paid to producers, to improve the balance of bargaining power between growers and processors.

In the absence of the Act, the market structure can be defined as a monopsony (few processors and many growers). This type of market will produce less chicken, at higher prices, than a competitive market with many processors and growers who are able to switch freely between processors.

Collective bargaining can improve the position for growers, as it allows them greater input into the terms and conditions of their contracts.

In other States, some groups of growers gain authorisation from the Australian Competition and Consumers Commission (ACCC) to be allowed to collectively bargain with their processor. It is likely that growers in Western Australia would be given authorisation by the ACCC for collective bargaining if they were to seek it.

Overall, the Authority considers that the price-setting functions of the Act, while favourable to growers, are detrimental to the industry as a whole.
“I consulted extensively with industry in considering the authority’s report,” Mr Redman said.

“The Act served its purpose well during the late 1970s and ‘80s, but it is now time to move forward.  The ERA inquiry found that chicken meat production in Western Australia has stagnated even though demand continues to grow.

“In recent years, the gap between production and demand has been met by interstate imports.  Strong demand for chicken meat presents a major opportunity and the State Government will assist the WA industry in taking advantage of those opportunities.”

The Department of Agriculture and Food is also planning an industry forum to outline its plans to support industry and clarify the role government can play to help producers remain profitable and take advantage of future opportunities.

“The department will continue to work with the sector to help the State’s chicken meat industry grow,” the Minister said.

“This includes examining the establishment of new hatchery, breeder and processing facilities and assisting growers with issues such as waste management and access to low-cost bedding materials.”