Additional Comments provided by Liberal Senators
Senator the Hon Bill Heffernan, Senator Julian McGauran, Senator Judith Adams,
Senator Mary Jo Fisher and Senator Mathias Cormann
Introduction
The
interests of Australia’s wheat growers have always been foremost in the minds of the
Liberal Party and Liberal Senators when considering wheat marketing
arrangements.
Liberal
Senators consider the Exposure Draft Wheat Export Marketing Bill 2008 and Wheat
Export Marketing (Repeal and Consequential Amendments) Bill 2008 should be
supported with amendments.
We
acknowledge there is considerable diversity of opinion amongst wheat growers
regarding preferred wheat marketing arrangements within Australia.
Liberal
Senators believe the fundamental failing of the Exposure Draft Wheat Export
Marketing Bill 2008 is the absence of objectives explaining the overarching
purpose of, and principles underpinning, the Bill. These objectives must
recognise wheat growers. Had such objectives been included in the original
Exposure Draft it is conceivable that considerable angst may have been
prevented, or at the very least lessened, amongst sections of the wheat growing
community.
Liberal
Senators also note that rejection of the Bills will simply see the Government
re-presenting the new marketing arrangements after 30 June 2008 to the new
Senate. Rejection of the Bills in the Senate will create uncertainty in the
wheat market to the detriment of wheat growers, grain merchants and financiers.
It was clear from the Committee hearings that all parties involved in the
industry believed it was critical to have certainty as to the marketing
arrangements for the coming harvests and beyond.
It can also
be concluded from discussions and meetings from all industry players, that
there is an acceptance and anticipation, albeit a reluctant one by some, that a
multi-licensing system in one form or another will be introduced. For example,
WA Farmers’, a strident supporter of the single desk stated in their submission
to the Senate Committee:
With the government moving in the opposite direction to
WAFarmers policy of orderly marketing, the organisation has adopted a pragmatic
view of where things currently stand. WAFarmers has therefore reviewed the
Exposure Draft Bills and is making this submission in the hope that before
proceeding further with their legislation the government addresses deficiencies
in their wheat marketing legislation.
That said, WAFarmers in accepting that changes are inevitable
has taken steps to assist our members with the transition to the new marketing
arrangements and has commenced negotiations with Australia’s leading
independent grains manager, Emerald to develop a specialist wheat pooling
product. This action reflects WAFarmers commitment to representing the
interests of Western Australian wheat growers under the new industry structure.[1]
It is
evident that there is now no going back to the single desk marketing system
under this Government.
If the new
arrangements were rejected in the Senate before 30 June 2008, wheat
growers would be left in an unsatisfactory and potentially detrimental position
as noted in paragraphs 2.8 to 2.11 of the Report. AWB further stated in their
evidence to the Senate Committee:
Senator McGAURAN— ...in this transitional period
your own company has made significant steps to prepare for the new competitive
world. If this new legislation were stopped in the Senate, would you be capable
of reverting to being the sole exporter, creating a pool?
Mr Hadler—I think the genie is out of the bottle; I do
not think we can put it back in.
Senator McGAURAN—You are not capable, or you do not want
to?
Mr Hadler—I think it is not commercially feasible for AWB
to go back to the old arrangements. Let us remember the default set of
conditions is a national pool—not a single desk—with bulk permits and
deregulated bags and containers. It would not be commercially feasible to
manage under those arrangements.
Mr Grebe—What you are reverting to, Senator, is the 2007
Wheat Marketing Amendment Bill, where the veto will transfer from the minister
to the regulator, but there have not been additional legislative measures
introduced that would spell out how the regulator would apply that veto, and
that is the missing part of the picture at the moment.[2]
In light of
this, the proposed Bills should be supported with amendments. Such amendments
to the Exposure Draft Wheat Export Marketing Bill 2008 and Wheat
Export Marketing (Repeal and Consequential Amendments) Bill 2008 are
necessary to ensure the legislation operates to produce optimal outcomes for
wheat growers.
Most of
these amendments are covered by the Report, though additional comments are
provided below.
Objectives
Support is
provided for the inclusion of overarching objectives explaining the purpose of
the Bill as discussed in paragraphs 3.30 and 3.32 of the Report.[3] The proposed objectives recognise
that the Act provides wheat growers with choice, enhanced by competition,
transparency and security.
It is not
necessary for the role of the regulator to be outlined in the overarching
objectives. Instead this should be done in Part 5 Division 1 of the Act which provides
for the establishment of Wheat Exports Australia and its functions, powers and
liabilities.
Eligibility for Accreditation
It is not
merely ‘desirable’ that the accreditation scheme supports increased choice for
growers in marketing their wheat: it is fundamentally important. In light
of this it is imperative that as many participants enter the market as
possible. It is in the interests of the wheat grower that there are many buyers
for their product. The greater the competition for the wheat crop the
higher the farm gate prices.
Liberal
Senators strongly support and endorse the submission of the Hon Wilson Tuckey
MP which seeks to exempt wheat growers from the Act who wish to directly export
their own wheat to a third party.
This could
be achieved by an express provision under Part 2 Division 1 exempting an
individual wheat grower where:
- The individual wheat grower
provides a statutory declaration to the WEA stating that the wheat has been solely produced by
the individual wheat grower;
- The individual grower provides
supporting documentation to the WEA evidencing the contract for export sale by the
individual grower to a third party (with such information to be protected by
commercial-in-confidence provisions); and
- The individual grower complies
with all applicable Australian quarantine and quality requirements as
ordinarily apply to exported wheat.
Regardless
of whether they are incorporated or not, individual wheat growers should not
have to undergo the full accreditation process in order to directly sell their
own wheat to a third party.
Wheat
growers who possess the acumen to establish direct links with third parties
deserve to be encouraged in their entrepreneurial endeavours rather than
stifled by regulation and have their profits taken by middle men.
Minimum Standard Trading Terms
GCA called
for the adoption of minimum standard trading terms by the industry including
truth in pricing and minimum standard payment schedules.[4]
AWB also
supported standard industry contracts established through NACMA as outlined in
paragraph 2.43 of the Report.[5]
It is
important that these issues are addressed to ensure wheat growers are provided
with transparent, easy to understand information.
Industry
standards should be established and education about these standards should be
incorporated into the industry education package outlined under Recommendation
3 (paragraph 4.34) of the Report.
Pool Products
GCA also
called for all pool products to be classified as financial products under the
Financial Services Legislation to improve the position of wheat growers as
unsecured creditors.[6]
This matter
should be addressed through the Financial Services Reform Act 2001 or
some other appropriate mechanism that provides the necessary security to wheat
growers.
The Access Test
It is
essential that non-discriminatory access to bulk storage and handling
facilities is provided to all market participants. Non-discriminatory access
needs to apply to: ‘up country’ storage facilities; port storage facilities;
shipping stem; and, information.
There was
agreement from all non-bulk handling company potential market participants, in
some or all of the above areas, that such access is necessary for the optimal operation
of the proposed new wheat marketing system.[7]
AWB, supported in part or in whole by a number of other potential market
participants including Consolidated Grain Industries Pty Ltd, the Emerald
Group, Southern Quality Produce Cooperative Limited and AGEA, outlined a
specific approach to access in their submission.[8]
As
acknowledged in paragraph 3.145 of the Report, we also welcome attempts by bulk
handling companies to provide a solution to these issues.
However, we
consider that these issues must be dealt with by access undertakings through
the ACCC under
the powers provided for in Part IIIA of the Trade Practices Act 1974. The interests of wheat
growers must be protected and we consider the access provisions to be the
mechanism to achieve this outcome. The success or otherwise of the legislation
will largely pivot upon the access provisions.
If an
Industry Code is provided for in the final legislation, it must be an ACCC
mandatory industry code. In stating this we note the difficulties in
negotiating the Horticulture Code and further note that very few mandatory
codes are in operation.
We are also
concerned that the code could be “subject to acceptance by the WEA” and would
welcome clarification on this issue.
In light of
these difficulties with mandatory ACCC Industry Codes we reiterate that access
undertakings should
be the manner
in which these issues are dealt with under Part IIIA of the Trade Practices
Act 1974.
We reinforce that
shipping stem and provision of information must be included in the principles
contained in the legislation.
Information
Consolidated
Grain Industries Pty Ltd reiterated the importance, amongst other issues, of
the provision of timely information about grain stocks. They stated:
...in a deregulated market public access to timely information
about grain stocks at each upcountry and port silo is imperative. Indeed
the USDA goes further than this and demands that exporters notify major
international sales within 48 hours of the contracts being written. All
this information is publicly available immediately in the United States.
The grain handling companies have this information and can make it available
instantaneously from their data bases via email to the Wheat Export Commission
for publication on a daily basis.
Why is this important?
- because without timely statistics the crop can be seriously
oversold;
- huge logistical problems at export terminals can result; and
- coordination of export sales via the market mechanism will be
frustrated.
This again plays into the hands of the bulk grain exporters who
do have access to this information whereas the private trade does not.
This affords the grain handling companies’ monopoly advantages which will
distort the deregulated grain market and ensures that access is not fair and open.[9]
The ASX supports
the provision of such information stating:
...ASX would support any measures that the Commonwealth Government
may consider as deregulation approaches to improve the quality of data that
will help inform industry stakeholders and participants in the futures market.
...
The continued growth and development of a liquid domestic
futures market is, in part, dependent on the existence of a robust,
independent, accurate and timely data reporting regime for crop estimates and
stocks on hand. Supplying data by port zone is important as ASX grain
futures contracts are based on certain port zones. Independent and timely
supply of data would ensure that all market participants have equal access to
information to enable efficient pricing and assist in maintaining market
integrity.[10]
AWB also supports the provision of
daily reporting.[11]
Along with
daily reporting, weekly and monthly reporting should be collected and
disseminated by the ABS and/or ABARE as follows:
- To ensure that market participants
can properly price their product and/or services and growers can access this
information;
- Information should be gathered
from sources including growers, exporters & end-users;
- Should identify forecast crop
tonnage, actual crop tonnage, tonnage available for sale, and tonnage exported.
Division 3 – External Audits
Clarification
regarding the external auditing as requested by WEA needs to
be provided to industry. The AGEA provided the following recommendation:
That any audit requests under S 27 of the draft Bill that are in
addition to the routine company auditing undertaken by companies as part of the
general company regulation obligations, be paid for by the WEA.[12]
Wheat Export Marketing (Repeal and Consequential
Amendments) Bill 2008
This Bill appears to
propose that the WEA will not be subject to Freedom of Information (FOI)
legislation. If this is the case the Bill must be amended so that the
WEA is subject
to the FOI legislation and enquiries.
Industry Representation
All major
Australian agricultural commodities, such as wool, meat, livestock, dairy and
wine are represented by a peak body underpinned by industry and government
funding. A number of submissions called for the establishment of a peak
body to undertake a range of industry good functions.[13]
A wheat
body could potentially be based upon the Australian Wine and Brandy Corporation
model which on behalf of the entire grape industry, including growers and
traders, oversees:
- Export regulation and
compliance
- Domestic and international wine promotion
- Wine sector information and analysis
- Maintaining the integrity of Australia's wine labels and
winemaking practices
- Defining the boundaries of Australia's wine producing areas; and
- Assisting with negotiations with other countries to reduce trade
barriers.[14]
We consider
the government should consult with industry to determine the need for and
appropriateness of an overarching body for the wheat industry.
Review of Legislation
We
wholeheartedly support a review of the legislation in 2010, with the report of
the review to be tabled before Parliament by the Minister. These
requirements must be enshrined in the legislation. The review should be
conducted by the Productivity Commission and must be an independent economic
review, with an analysis based on the costs and benefits of the system as
called for by PGA WA.[15]
Senator the Hon Bill Heffernan
Senator for New
South Wales
Senator Julian McGauran
Senator for Victoria
Senator Judith Adams
Senator for Western Australia
Senator Mathias Cormann
Senator for Western Australia
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