Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

I present the final report of the Select Committee on Agricultural and Related Industries on the pricing and supply arrangements in the Australian and global fertiliser market, together with the Hansard record of proceedings and documents presented to the committee.

Ordered that the report be printed.

I seek leave to move a motion in relation to the report.

Leave granted.

I move:

That the Senate take note of the report.

Australian farmers were put under great pressure in the last couple of years. Some of it was due to the global bull market in fertilizer chemicals and fuel oil but some of it, as this report will show, was due to market power in Australia, a global cartel in world rock phosphate and the incapacity of on-time information to help farmers to know what the global market was doing.

There was a dramatic rise in prices in 2007-08 with an over 100 per cent increase in prices. Obviously, the farming community expressed great concern. International and demand factors were used as the reason that fertilizer prices went up so much. I was pretty amazed to go to a fertilizer industry conference and hear them bragging about how they got away with several $100-a-tonne rises that were not really justified.

In Australia the industry is dominated by two major companies, including IPL—Incitec Pivot. The ACCC ticked off the merger of Incitec and Pivot; it was probably a mistake. They have a dominant market in eastern Australia, with over 70 per cent of the market at the wholesale level and 60 per cent at the distribution level. In Western Australia the other great player is CSBP, which has a market share of two-thirds of the market. IPL has 100 per cent of the manufacture, and yet they are not considered to be a monopoly. I would have thought that that obviously demonstrates a need for more competition in the market, and that is what this report says.

Obviously, the report makes several recommendations. I will not go through the recommendations here because before I sit down I will seek leave to continue my remarks at a later time. The committee recommended that the states adopt uniform description and labelling of fertilizers. For instance, we received evidence that, over the years, when the farmer picked up his MAP or DAP or whatever it is, he took for granted that what he had in his truck is what the label says. Some evidence we received was that that is not necessarily always the case. So we recommended that there be some independent sampling taken by the states. And we think the Commonwealth should do regular sampling. The states should adopt uniform labelling.

The Commonwealth should review the provisions of the Trade Practices Act relating to restrictive practice so as to more effectively regulate anti-competitive practices and prevent abuse of market power. The ACCC gave evidence to us that market power did not count unless someone was being done over in the process. We think that plenty of people have been done over.

ABARE should publish, we recommend, international price information on fertilizer products to provide farmers with access to accurate, timely and accessible international prices. If you read the rural press in July last year you would have seen that commentators were saying, ‘Get in and buy your fertilizers now, boys and girls,’ because the price might go from what it was then for MAP/DAP—$1,400 a tonne—to $2,000 a tonne. And yet on the Bloomberg sight in July there were indications—due to a number of factors, including a dramatic price drop in the FOB price of fertilizer on the Black Sea and freight rates—that prices would fall dramatically.

Some farmers were caught badly by forward ordering. They have lost trust in the suppliers. Obviously the new management of IPL have made a commitment, which is reflected in the report, to build a better relationship with their farmers, and it is badly needed. At the time that farmers were being told to lock in at $2,000 a tonne the Bloomberg site was showing a dramatic fall at the same time. So we need to get on-time information to farmers so that they can be given a reasonable chance of understanding what a fair price is. There was obviously the withholding of evidence on the rising price the year before, where fertiliser was withheld from the market as the market rose. Even though they could see fertiliser in the shed, farmers could not access it because the industry knew the price was going up. As the price was falling they tried the opposite trick of trying to get rid of the fertiliser in their inventory; it obviously hurt some of the big companies like Elders or HiFert that they had what they called ‘expensive’ fertiliser in their pipeline and they wanted to get rid of it. In the report it is also reflected that if Australian farmers pay the global price it should be reflected by the FOB prices in the various ports around the world, and that simply is not the case.

The report reflects on the operations in Nauru of a series of companies. We received evidence—I have to say it was from the new CEO, who gave very good evidence and displayed a different culture to the committee—that 15 to 20 per cent of IPL’s rock phosphate fertiliser comes from Nauru. We received evidence that was clearly misleading in that there was a $5 million facility extended by IPL to Nauru in return for getting the works up and going, and they cut that out by buying fertiliser back at $40 a tonne, which at the time was a pretty cheap price. The shipping records, which are now tabled with the report, show that well beyond the time at which they paid the $5 million back they were still selling fertiliser to Samsung, Getax and IPL at $40 a tonne when in fact at the time IPL took the last lot at $40 a tonne the global price was $367 a tonne. According to the tables presented to the committee, over the period of the time of the report the government of Nauru missed out on $155 million from not getting the global price. That is probably something to do with the internal workings of Nauru and their incapacity to have enough resources to compete against the global cartel of places like Morocco, which seem to be able to impose their power on the market. We received evidence that 85 per cent of the rock phosphate market of the world is controlled by five entities, so there is very much a global monopoly, much the same as the oil setup.

So, there it is. We have made some serious recommendations to assist not only farmers but also the industry by trying to reflect global prices and recommending more competition in the market. We received evidence of a mine starting up east of Tennant Creek. If we can get it up it will be just as big a resource as Mt Isa. It needs 200 kilometres of railway line to hook it up to the north-south railway line. We are hoping that that infrastructure can be built. We received evidence from a company in Western Australia that is going to start up a urea plant from gasification of coal. It will produce two million tonnes of urea. Sadly, because of the financing arrangements, Australia will not get a lot of that, and I think the issue that has to be answered by everyone in this place is: if sovereign nations come in and buy Australia’s sovereign resources and then lock Australia out of access to those resources, we have a serious problem. There are indications of that happening.

Finally, before I ask for time to continue my remarks I would like to thank the hard-working committee that put this report together, especially Peter Short. I should not name any more as he is the main participant in this. The hard-working secretary and all the other girls in the secretariat have to be very patient to put up with people like me. I cause them heart attacks every second day. I am grateful for their understanding and patience. I suppose they will all have a sigh of relief now that we have got this one done. I seek leave to continue my remarks later.

Leave granted; debate adjourned.