Joint Dissenting Report by Senators for the Coalition and the Australian
Greens
Key issues
1.1
In this joint dissenting report, Senators for the Coalition and the
Australian Greens (Dissenting Senators) express their objection, in the
strongest possible terms, to the recommendations in the majority report. The
recommendations made in the majority report fail to adequately consider and
address the valid concerns raised by grower groups and acknowledged as significant
by a wide range of other industry stakeholders.
1.2
Dissenting Senators wish to draw attention to the fact that, since the
removal of the single desk system under the Australian Wheat Board, transition
to a more deregulated market has been ably assisted through the support of
Wheat Exports Australia (WEA) and its accreditation system for suitable
exporters. The Wheat Export Marketing Amendment Bill 2012 (the bill) proposes
to unravel, if not reverse, the important gains achieved for the Australian
wheat industry under WEA's supervision and guidance.
1.3
Dissenting Senators are acutely aware, through evidence before the
committee as well as extensive direct consultation with grower groups and other
stakeholders, that a number of significant issues remain to be addressed before
further deregulation of the wheat export market should proceed.
1.4
The key issues requiring the immediate consideration and focussed
attention of all industry stakeholders include:
-
fair and equal access to wheat stocks information for all industry
participants;
-
management of the wheat export supply chain and port capacity
information;
-
port access issues including regional monopolisation of port
terminals by bulk-handling companies (BHCs);
-
the effectiveness of a voluntary code of conduct to manage supply
chain issues (noting that the agricultural sector does not have a precedent for
management of such issues through a voluntary code);
-
the reputation and integrity of Australian grain exports as a
whole, including the need to regulate containerised wheat exports; and
-
the record and success of WEA accreditation system, and the
consequences of complete dissolution of WEA.
1.5
Until these issues are addressed, it would be imprudent for the government
to proceed with full deregulation of the wheat export market. The risks of
further structural adjustment caused by full deregulation at this point
threaten to erode any gains achieved to date in competitive pricing and value
for growers. The following sections of this report discuss four primary areas
of concern.
Premature full deregulation
1.6
It was keenly observed throughout the committee's inquiry that grower
groups hold grave concerns over the future uncertainty of the premature full
deregulation of the wheat market. These concerns were widely expressed in
grower group submissions. For example, the Victorian Farmers Federation Grains
Group submitted:
... the current Bill being considered by Government not only
fails to address the existing flaws and inefficiencies in the industry, but
actually exacerbates them and may also have unintended consequences ... [i]t
will further erode market confidence; result in continued complaint from the
grower sector; erode Australia’s international export reputation; [it] fails to
address the need for public/industry good services; and exacerbates market
concerns around lack of transparency, port access, and competition.[1]
1.7
These concerns can be largely attributed to the fact that deregulatory
changes to the wheat industry are only three years old, and that there is a
continuing need for national oversight of the wheat export market. It was noted
in evidence that, by way of comparison, other more mature industries in
Australia, such as the banking and financial industries, are subject to
oversight by national regulatory bodies.[2]
1.8
The committee further noted that growers in Western Australia were
represented throughout this inquiry by both the Pastoralists and Graziers
Association of WA (Inc) as well as CBH Group – a BHC with ownership of port and
transport infrastructure and significant marketing assets – which is still
owned by grain producers. Dissenting Senators note that while CBH Group
supports the bill, the option to corporatise CBH Group has been discussed
recently and remains an option to the members of CBH Group.
1.9
Dissenting Senators agree with the evidence provided to the committee
that it is too early to consider further deregulation. A range of issues have
surfaced since deregulation commenced in 2008 and it is vital that these issues
be settled before the industry is required to adjust to further legislative
changes.
1.10
It should be noted that the function and operations of WEA, through a
challenging deregulatory period to date, is generally supported by industry
stakeholders. Moreover, the cost of sustaining WEA through the Wheat Exports
Charge (WEC), currently being $0.22 per tonne of exported wheat, was not
criticised by industry stakeholders as being expensive. Rather, one submission
called for raising the WEC to $0.30 per tonne, suggesting that it was a 'small
price to pay, as the charge is less than 1% of the pipeline margin of $35 per
tonne...'[3]
Dissenting Senators assert that, if industry – in particular, grower groups –
are willing to fund the continual operation of WEA, then it seems perverse for
the government to decide that WEA should cease to exist.
1.11
In fact, it would seem unwise and short-sighted to have invested the
physical, intellectual and network capital of the wheat industry in WEA, only
to have it dissolved despite its effectiveness. The WEA's role should continue,
and be modified, to ensure that the wheat industry is adequately supported.
1.12
Dissenting Senators further note that the majority report refers to Single
Vision Grains Australia (SVGA) – a prior government-sponsored initiative to
support increased information flow and efficiency throughout the wheat export
supply chain – as being unsuccessful because of lack of industry cooperation. It
is known that, historically, participants in the industry have encountered
difficulties in driving such initiatives amongst themselves and there has been
no new evidence presented to suggest that a voluntary code of conduct would
succeed where SVGA failed. Rather than being a reason to dissolve the WEA, the
SVGA highlights the need for intervention through a statutory body to resolve
the issues within the industry and continue to support the maturation of this
market.
Voluntary code of conduct
1.13
Dissenting Senators are not confident or convinced that industry issues
can be resolved through a voluntary code of conduct. While it is acknowledged
that measures are currently being taken through the Grain Trade Australia Code
Development Committee (GTA Code Development Committee) to establish a voluntary
code of conduct for port access, it remains uncertain whether consideration
will extend to access to wheat stocks information and other issues. Dissenting Senators note the
membership of the GTA Code Development Committee is heavily weighted in favour
of exporters and port owners by virtue of the composition of membership – two nominations
for grain producers and seven nominations for exporters, marketers and port
owners.[4]
1.14
It should be noted that the committee received evidence from witnesses which
was less than reassuring in relation to the future operation of a voluntary
code of conduct and whether the Australian Competition and Consumer Commission
(ACCC) would play an effective role. Mr Andrew Weidemann, President of the
Victorian Farmers Federation Grains Group commented that:
... expertise is essentially something that would be
required, and we do not see that as being fundamentally in the ACCC at the
moment. One of the other things that became very obvious in the meeting the
other day in regard to port access is the clarity around exactly what will
happen post-2014, because it would seem that, at the moment, if a voluntary
code—and I stress 'a voluntary code'—is established, what is the caveat
post-2014, for that bulk handler to remain a part of that? That seems to be
quite unclear at the moment as well.[5]
1.15
While ministerial approval of the voluntary code was referred to as a
'safeguard' in the majority's report, scant regard seems to have been paid to
the consequences of non-compliance with the 'voluntary' code. From the ACCC's
own evidence, referred to in the majority report, it was acknowledged that the
ACCC is highly unlikely to be a party to the voluntary code as a dispute
resolution body, let alone having regulatory and enforcement responsibilities
in relation to the code.[6]
1.16
Dissenting Senators believe that the best and most secure safeguard is
to not impose further deregulatory changes and uncertain accountability
mechanisms on industry. Instead, the industry should be allowed further time to
resolve issues through the existing and proven mechanisms, including continued oversight
by WEA.
1.17
If any code of conduct is to be developed, Dissenting Senators are of
the view that, in line with the committee's view in the Operational issues
in export grain networks report, the code should be mandatory.[7]
Access to information
1.18
There are real industry concerns that the dominant market positions
occupied by BHCs have allowed the trading arms of those BHCs to appear to have
preferential use of wheat stocks information that is not otherwise accessible
by other traders or grain growers. After deregulation of the wheat market, there
would be little to prevent BHCs using this information in an anti-competitive
manner to the commercial detriment of other exporters and grain growers.[8]
1.19
Through direct consultation with grower groups, Dissenting Senators have
been informed that some grower groups advocate for delaying the commencement of
the provisions in the bill by up to two years, to enable development of an
appropriate framework to ensure a competitive wheat export market for growers and other market participants.[9]
Similarly, other growers have emphasised the importance of ensuring that the
wheat industry is not left to operate without a statutory body to enforce a
minimum standard of behaviour and have indicated a strong preference to retain
WEA until such time as it can be reformed or replaced with another oversight
body.[10]
1.20
Dissenting Senators are of the view that open, transparent and timely
disclosure of information is essential for the wheat market to function
effectively. This view was shared by the Australian Securities Exchange
Limited.[11]
1.21
Dissenting Senators reject the assumption that access to wheat stocks
information and port capacity information will be fairly and equally made
available to all participants in the supply chain without national oversight
and enforceable consequences for non-compliance.
International reputation of
Australian wheat
1.22
The committee received wide-ranging evidence that the international
reputation of Australian wheat, in terms of its quality and consistency, is
being eroded without a national oversight body and would be further eroded by
the removal of WEA as demonstrated by the experience with containerised wheat
exports which are completely deregulated. Evidence presented to the committee
also referred to the role of national oversight bodies in competitor countries
such as the United States and Canada.[12]
1.23
During the hearing, a range of evidence opposed the dissolution of WEA
given its capacity and expertise to regulate the quality of Australian wheat.
The competitive forces in world wheat markets would effectively leave Australia
behind if prospective buyers are not convinced that the quality of Australian
wheat is assured to recognised international benchmarks. For example, one
submission stated that:
Australia’s major competitors have co-operation amongst trade
and government to ensure that quality standards are maintained ensuring
consistency of grade is a paramount requirement. The U.S via the Federal Grain
Inspection Service (FGIS) and U.S Wheat Associates have embraced the “world”
standard that was so rigorously practiced by AWB – AWB may be gone but its
adherence to quality and world’s best practice will not long be forgotten.[13]
1.24
It was further noted by the committee that some growers expressed concerns
that end user dissatisfaction with milling properties and other quality
problems may incur a market response in the form of price discounting, and that
this would negatively impact the reputation of Australia's wheat export market
as well as reducing returns to individual growers. For instance, Grain
Producers Australia noted in its submission that:
... there is anecdotal evidence that the varietal
classification system that is used to describe the milling functionality of
Australian wheat is also being undermined with cross grade blending becoming
prevalent...[a]s a result, cargos may comply on specification but fail to meet
the functional requirements of the end user.[14]
1.25
Dissenting Senators believe that the reputation of Australia's export
dependent wheat market is paramount, and the views of grower groups must not be
overlooked. Wheat ranks consistently in the top ten yearly Australian exports
by value, and to lose the confidence of international buyers of Australian
wheat would be disastrous for grain growers, the wider wheat export supply
chain and the national economy as a whole.
Conclusion
1.26
Dissenting Senators reject the conclusions of the majority report and are
strongly of the view that it is imperative for the outstanding issues outlined
in this dissenting report to be resolved before additional instability, through
dissolution of WEA and further deregulation of the wheat export market, is forced
on the Australian wheat industry. Rather, industry participants must be given
more opportunity to satisfactorily address these issues, so that the market is
at a mature and proper stage before it is required to assimilate further
deregulation.
1.27
Dissenting Senators note the strong support of grain growers and their
representative bodies for the issues raised in this dissenting report, and
their support for amendments to the bill as contained in the following
recommendations.
Recommendation 1
1.28
Dissenting Senators recommend that the code of conduct, agreed to by
industry participants, be mandatory and prescribed.
Recommendation 2
1.29
Dissenting Senators recommend that the bill be amended to allow for the
continued funding and existence of Wheat Exports Australia in order to:
(a)
provide national oversight for the wheat industry;
(b)
provide national oversight for all wheat exported from Australia;
(c)
ensure grain quality standards for wheat certifying its quality
as accurately as practical, including, but not limited to:
(i)
defining uniform and accepted descriptive terms to facilitate
trade;
(ii) offering users of such standards the best possible information
from which to determine end-product yield and quality;
(iii)
providing the framework necessary for markets to establish grain
quality improvement incentives;
(iv)
reflecting the economic value-based characteristics in the end
uses of grain;
(v)
accommodating scientific advances in testing and new knowledge
concerning factors related to, or highly correlated with, the end use
performance of grain;
(d)
have oversight of shipping slot allocations and auctions;
(e) have audit powers over major industry stakeholders;
(f)
publish timely and accurate grain stocks information; and
(g)
provide domestic and international advocacy for the Australian
wheat industry, including:
(i)
facilitating the creation and handover of these responsibilities
and funding arrangements to a suitably constituted, representative industry
body.
Recommendation 3
1.30
Dissenting Senators recommend that Recommendations 1 and 2 should be
implemented as soon as practicable with agreement from industry, but no later
than 30 September 2014. If these recommendations are not agreed to
and implemented, then the bill should be opposed.
Senator the Hon Bill Heffernan
Deputy Chair
Liberal Senator for New South Wales
Senator Fiona Nash Senator Sean
Edwards
Nationals Senator for New South Wales Liberal Senator for South
Australia
Senator Chris Back Senator
Rachel Siewert
Liberal Senator for Western Australia Australian Greens Senator for
Western
Australia
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