The Australian Competition and Consumer Commission today issued a report examining the relationship between livestock prices and retail meat prices.

The report was issued following a request from the Minister for Agriculture, Fisheries and Forestry who was concerned about an apparent increase in the margin between prices being paid to farmers for livestock and retail prices for meat.

"The report found that short term movements in the margin between livestock and retail prices do not necessarily mean that market conditions are moving in ways that are out of the ordinary or caused by weaknesses in competition," Mr Samuel said.

"The supply of fresh meat involves a long and complex supply chain. The cost of livestock is only one component of the total cost incurred by supermarkets (and other retailers) in providing fresh meat to consumers and it represents a relatively small proportion of the final price of packaged meat.

"Increases in other production costs may counteract the effect of lower livestock prices. For example, high feed grain prices throughout 2006 appear to have had an impact throughout the red meat supply chain."

Mr Samuel said the use of direct supply agreements by major retailers also means that their buy prices are more stable than saleyard indicator prices.