Monday, 10 September 2012
Wheat Export Marketing Amendment Bill 2012; Second Reading
In speaking on the Wheat Export Marketing Amendment Bill 2012 I would like to say that on behalf of the coalition I move:
That all words after "That" be omitted with a view to substituting the following words:
"the House declines to give this bill a second reading and:
(1) calls on the government to extend the operation of the Wheat Marketing Authority for not less than six months after the resumption of the 44th Parliament to enable the government of the day to modify Wheat Exports Australia or replace it with a another body, to better represent the needs of the wheat industry; and
(2) notes that the coalition commits to a consultation process that will commence immediately and provide stakeholders with a forum to outline what wheat industry issues need to be addressed."
I propose the second reading amendment to this bill as the government has once again abrogated its responsibilities in relation to the wheat industry—we should be used to that. The coalition, through the shadow cabinet and joint party, has resolved to move this amendment. The coalition has further resolved to oppose the bill if the amendment fails.
This bill demonstrates once again that the government has got no idea about how to develop and implement policy. The coalition has been forced to act, as this government has done a pathetic job of consulting with industry about this bill. The Productivity Commission investigated this issue very early on, after Wheat Exports Australia was formed, reporting on changes from the single desk before many of the issues had surfaced. Those in politics understand that policies are rarely perfected on the first attempt and that the sensible thing is to improve the arrangements to manage issues as they arise. But this government, instead of trying to understand the issues, has just looked for the first opportunity to wash its hands of the industry. To do this, the government set up a task force dominated by the large grain marketers who, naturally, would rather not have any oversight of their operations. Surprise, surprise, the task force concluded that the WEA should be abolished! The government has used the Productivity Commission review and the task force to justify its position.
The Wheat Export Marketing Amendment Bill proposes to abolish the Wheat Export Accreditation Scheme and the Wheat Export Charge on 30 September 2012 and wind up Wheat Exports Australia on 31 December 2012 so as to give it time to complete outstanding tasks such as its final annual report and the Report for Growers 2012-13. The requirement for providers of grain port terminal services to pass the access test as a condition for exporting bulk wheat was to be retained until 30 September 2014. However, this ignores the fact that the eyes of the ACCC on this issue, the WEA, would be gone and unable to provide information to the ACCC. The access test was to be abolished on the condition that a non-prescribed voluntary industry code of conduct covering access to grain export terminals was put in place. However, a number of issues have been consistently raised by individuals and groups from industry, including 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; the effectiveness of a voluntary code of conduct to manage supply chain issues; the reputation and integrity of Australian grain exports as a whole, including quality and the need to include containerised wheat exports; the record and success of the WEA accreditation system; and the consequences of complete dissolution of WEA.
The dissolution of WEA is a complex issue about which there are many views. We in the coalition have consulted heavily with industry and it is our firm view that the majority of the industry would like to retain the existing arrangements until the issues identified by industry have been addressed. This is complicated by the fact that Australian grain growers, grower representative groups, grain markets and bulk handlers do not have a unified position, there being differences in philosophy and approach both geographically and throughout the supply chain. However, the majority of the people that I have spoken to on this would agree that, while this is a very dynamic industry, there are issues which need attention. Currently 32 companies have been approved for export by WEA, all of which have operated effectively. Importantly for growers, none have gone broke and been unable to pay farmers, so WEA have done their job in making sure that only credible entities are given licences. Of those companies, 19 are actively exporting. While 18.5 million tonnes were exported last year, only seven companies exported more than one million tonnes. If we look deeper into the exports we see that the regions are mostly dominated by the established regional bulk handlers. In fact, 13 of the 16 ports are dominated by the exporter that owns the port. That would seem to suggest that there is still more that could be done to facilitate competition.
I will break it down by topic. There is a strong view within industry, both grower groups and non-bulk handling export marketers, on the importance of wheat stocks information as a mechanism to create maximum competition in determining pricing levels throughout the wheat export supply chain. Many from industry have expressed that there is an imbalance in the availability of information to different stakeholders in the wheat industry, resulting in dissatisfaction amongst grower groups, market and price discovery inefficiencies, and an inability for growers to make informed decisions on what crops to grow.
In the Senate inquiry on this bill representatives from the Australian Stock Exchange stated that it would be desirable to provide wheat stock information to develop market certainty. As the Senate report states:
Grain grower groups strongly advocated for greater availability and transparency of information on wheat stocks. The broad sentiment reflected in a number of submissions highlighted a concern that wheat stocks information does not adequately flow through the wheat export supply chain, reducing the financial return obtainable by grain producers.
For example, GPA submitted that:
The system is crippled by a lack of information and accurate description of the crop as it is harvested and delivered into the central storage systems. The bulk handlings companies (BHCs) effectively operate regional monopolies and restrict and control the intelligence around up country stocks quantity and quality. This lack of transparency severely impacts the ability of producers and traders to make informed decisions in delivery and compete in the aggregation of cargoes
The broad sentiment reflected in a number of submissions highlighted are concerned that wheat stocks information does not adequately flow through the wheat export supply chain, reducing the financial return obtainable by grain producers.
GPA submitted that:
The system is crippled by a lack of information and accurate description of the crop as it is harvested and delivered into the central storage systems. The bulk handlings companies (BHCs) effectively operate regional monopolies and restrict and control the intelligence around up country stocks quantity and quality. This lack of transparency severely impacts the ability of producers and traders to make informed decisions in delivery and compete in the aggregation of cargoes.
… … …
GrainGrowers also supported the push for greater information availability and transparency, adding that recent overseas research has found that effective dissemination of market information reduces the fluctuation and variability of prices and quantities of within markets.
… … …
Broadly, exporters agreed with the need for greater availability of wheat stocks information. In its submission to the committee, AGEA commented that, while deregulation has delivered positive outcomes for competition in the industry, further efficiency gains could be achieved through removing barriers to industry performance:
Transparency and access to information is important to ensuring that markets operate efficiently. Access to information regarding the available (i.e. unsold) volume of grain type by port zone and information on grain quality by type by storage location will facilitate more efficient assembly of cargos to meet customer requirements and aggregate information relating to grower‐owned stocks will significantly enhance competition for growers’ unsold grain. Currently this information is only accessible to integrated companies with port terminal operations, thus restricting access by other exporters.
The problem is that some grain is bought by the handlers when it is delivered but an increasing amount is held in warehouses, in which case the handler does not own it; he only holds it on behalf of the grower. But the government has ignored the industry's concerns. It has ignored the basic principles of competition in the same way it has refused to tackle the issue of things like supermarket power.
I guess these are complicated issues and we would not expect this government to understand the issues, be able to consult and listen, and implement policy that actually delivers the requirements. The government have been disastrous in implementing agricultural policy. Whether it is live exports or the Murray-Darling Basin Plan, they have made a meal of it. But the coalition is committed to consulting with the whole industry and actually listening to them and working with them to come up with a solution.
There are varied views on this. If the amendment is successful and we have the opportunity, I seriously encourage all, whether they be the big handlers or growers who have a particular point of view, to not leave it to chance but to have their say on it because currently only a very narrow say has been listened to.
Port access has been identified as another issue that needs to be addressed. Making sure that smaller companies are not discriminated against and have fair access to the ports will help encourage new players and give existing exporters no disadvantage to the bulk handlers that operate the ports.
Grain quality is an important issue that most of the industry believes warrants the attention of the government and should be resolved before we consider abolishing the current arrangements. There is a major concern in the industry that a few operators could ruin our reputation to provide quality wheat on the world market and that buyers will go to the USA and Canada for the premium grades, as their quality is assured through established quality assurance programs controlled by government. This is especially the case for container exports, which have grown to 12 per cent. That is a figure that has taken most of the industry by surprise; it was nowhere near that figure in 2008.
As the Senate report states:
A number of submissions also referred to the United States Federal Grain Inspection Service and the Canadian Grain Commission as examples of national grain regulatory bodies that should be emulated in Australia, and without which the Australian wheat industry would be at a competitive disadvantage internationally. For example, a submission from a consulting company 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.
4.74 Other submitters agreed with this view, stating that the role of WEA does not need to be as expansive as the United States or Canadian bodies, but that it should include activities such as random audits of grain to ensure that contract specifications are met.
WEA's position on this issue was examined during the Senate inquiry hearing when Mr Woods stated:
One of the things that WEA made public last December in our report for growers was that one of the board members and I were in South-East Asia visiting mills and, very clearly, they were concerned that Australian wheat was not performing and they believed that it was because of lack of varietal integrity, probably because of blending.
There is not a problem with blending; that is fine; it has always been done—
it always will be done—
But it is when blending occurs across varietal grades that there is an issue. So there needs to be perhaps something along those lines to fix that problem. Again, it is not up to WEA. All we have done is identify the situation as one of a few things that the industry need to be discussing. A lot of people were asking for views which we cannot give, but in our submission we made it very, very clear that in Canada and the US they do have ways of looking at this.
So there is another issue that can be resolved, but the Gillard government does not care to discuss this with the industry as a whole.
On the issue of a voluntary code of conduct, while many of the grain handlers and exporters in the industry believe that most outstanding issues can be resolved by a voluntary code of conduct, producer groups are concerned that voluntary codes of conduct do not work.
During the inquiry of the Senate Rural Affairs and Transport Legislation Committee into this bill, it was acknowledged that there was no precedent for an industry code of conduct for the agricultural sector. The following exchange occurred between the committee and representatives from GrainCorp:
Senator EDWARDS: So you are not working on any kind of a model of a voluntary code of conduct that has been successful in the past, whether it has been involved in the horticulture industry or any other grower industry where you are looking to rely on a voluntary code of conduct … Point me to a model that is successful in this country and which fulfils the charter in which it has been established.
Mr Trigg: The advice that we were provided with, at one of the draft code development committee meetings, from the ACCC was that there were many examples of industry codes of practice. I think there is a general insurance code of practice, for instance. There are a number of them that they—
have referred to as part of their advice to that code development committee.
Senator EDWARDS: Let us talk about the ag—
sector, shall we, because we are not talking about the finance industry here; we are talking about commodities and production … Still no successful voluntary code of conduct in the agriculture sector that you can think of off the top of your head?
Mr Hart: No, not that we are aware of.
Evidence provided by the New South Wales Farmers Association supported this view:
Unfortunately our industry is not very good at voluntary code[s] of conduct and there are no shining lights of voluntary codes of conduct in our industry.
So the issues are clear, as clear as is the government's inability but, more to the point, their unwillingness to deal
with these issues. Oversight does not need to be onerous. In fact, the coalition will be looking for the simplest and least-cost approach to address these issues. For example, a simple solution may be that, with a new lighter touch
accreditation, a condition of export is that you are signed up to the voluntary code and you adhere to it. This
would give the code of conduct the power to ensure compliance. Of course, the coalition is committed to discussing with industry the best ways to deal with their—and I stress 'their', not the government's—outstanding issues.
Growers have emphasised the importance of ensuring that the wheat industry is not left to operate without a body to enforce a minimum standard of behaviour and have indicated a strong preference to retain the WEA until such time as it can be reformed or replaced with another body that better addresses the needs of industry—that is, quality assurance, port access for all exporters and transparency of stock information, so all grain exporters can bid for growers' grain with confidence. And, finally, should the role of a code of conduct be voluntary or mandatory? The proposed abolition of the current arrangements through the Wheat Export Marketing Amendment Bill 2012 is, in the circumstances, premature, and such a decision should be based on evidence of effective and efficient operation of the export wheat supply chain.
Once again, in the event that we have the opportunity to have a debate, I would encourage the industry—whatever side of the debate they are on—to be involved in it when it happens in the future. I respectfully ask the House to support my amendment in the best interests of the wheat industry.