BILLS: Wheat Export Marketing Amendment Bill 2012
Mr McCORMACK (Riverina) (13:26): The Australian wheat industry is heavily exports focused, with as much as 70 per cent of wheat production each year being exported throughout the world. Australia, historically, has been one of the top five major wheat-exporting countries. Let me from the outset declare a passionate interest in wheat growing and the future viability and prosperity of the industry.
I grew up on wheat farms at Marrar until 1968 and then until 1986 at Brucedale between Wagga Wagga and Junee. My late father, Lance, grew wheat, and two of my brothers-in-law, Gary Brill and Ian Buchanan, are wheat growers at Wallacetown and The Gap respectively.
In 2010-11, Australia was the third largest wheat exporter, behind the United States of America and the European Union. On 4 June 2008, the transition to a deregulated wheat export market began with the abolition of the single-desk wheat-marketing arrangements, a dark day in the eyes of most growers to whom I have spoken. The Wheat Export Marketing Act 2008 established a system for regulating the export of bulk wheat such that exporters of bulk wheat had to be accredited under the Wheat Export Accreditation Scheme, which is administered by Wheat Exports Australia and primarily funded from the wheat export exchange. A total of 32 companies have been approved for export by Wheat Exports Australia, all of which have operated effectively. Nineteen of these are actively exporting.
In 2010-11, 18.5 million tonnes were exported; however, only seven companies exported more than one million tonnes. This wheat was exported to 52 countries for a value of $5.9 billion. Of the exported grain, 16.3 million tonnes were bulk and the remaining 12 per cent was in containers. These statistics highlight the regional monopolies which are operating in the grain market. Furthermore, of the 16 ports, 13 are dominated by the exporter who owns the port.
New South Wales Farmers, Grain Producers Australia, the Victorian Farmers Federation, AgForce, the South Australian Farmers Federation and Grain Producers South Australia all have concerns on the public record about the grain supply for bulk exports currently being dominated by three established bulk handlers, stifling a competitive environment which could benefit farmers. The infrastructure networks belonging to these bulk handlers allow a natural monopoly as they have the integrated receiver, up-country storage and the port terminal services. This undoubtedly provides an advantage in the wheat export market when they become grain-trading entities.
The bill before the House implements the government's response to the Productivity Commission's recommendations on wheat-exporting marketing arrangements. If passed, this bill will remove the Wheat Export Accreditation Scheme and wheat export charge on 30 September 2012, abolish Wheat Exports Australia on 31 December 2012, and continue the operation of the port access test, to be administered by the Australian Consumer and Competition Commission from 1 October 2012 until at least 30 September 2014. The access test will then be abolished on the condition that a non-prescribed, voluntary industry code of conduct covering access to grain export terminals is in place.
The coalition does not support this bill to abolish Wheat Exports Australia and believes consultation with industry is the best way to address the outstanding issues. Consultation with all of the industry is something that has been severely lacking in this, as with so many other Labor policies brought before this House in recent times. The government did not widely consult with farm organisations on this bill and relied on a task force predominantly made up of large grain trader representatives.
The coalition has consulted with a large number of farmer groups and grain marketers and is of the view the majority support the retention of Wheat Exports Australia, at least until unresolved issues are addressed. As a result of these discussions, the shadow minister for agriculture and food security has moved an amendment to the second reading, calling 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 another body to better represent the needs of the wheat industry.
Further, the coalition commits to a consultation process that will begin immediately and provide stakeholders with a forum to outline what wheat industry issues need to be addressed. The majority of growers have presented a position that calls for oversight of the market to ensure transparency and competition, which has not currently been achieved. Former National Farmers' Federation president Graham Blight has said there is 'no equity in the marketplace', and he is right, of course. The proposed abolition of all statutory oversight is premature and such a decision should be based on evidence of the effective and efficient operation of the export wheat supply chain.
Many growers feel there is a need for a statutory body to oversee the industry and for it operate in a similar way to the old Wheat Export Authority. This is certainly the feeling amongst growers in my electorate of Riverina, and Ian Munro of Rankins Springs, better known as Jock, has been the most vocal about wheat issues in my time in parliament. I appreciate his forthright stance and his ongoing passion for the industry. Mr Munro describes the current system as 'unfair and inequitable' and believes a statutory body could police the ports and ensure equitable access for traders, especially the smaller traders who struggle against the regional monopolies.
A code of conduct is not viewed by growers as having enough power to ensure all parties will abide by it and it will benefit only the traders, not the growers. Evidence also suggests the export wheat supply chain is not mature enough to self-regulate and there is no precedent for an industry code of conduct in the agricultural sector.
Mr Munro also voiced concerns about the imbalance of the availability of wheat stocks information. This is an important mechanism to determine pricing levels throughout the wheat export supply chain, and Mr Munro's concerns were shared by many submissions from growers and exporters made to the Senate inquiry into the Wheat Export Marketing Amendment Bill 2012. Lack of access to this information has led to dissatisfaction amongst grower groups, market and price discovery inefficiencies and an inability for growers to make informed decisions on what crops to grow.
The current accreditation system also needs improvement to ensure accreditation is based upon performance and not character. The scheme does not need to be and should not be inflexible but must ensure symmetry in the supply chain around stocks intelligence, which could be anti-competitive, and maintain the integrity of the Australian wheat varietal classification system, ensure contract terms and specification compliance and recognise the need for greater transparency and improved confidence in the integrity and quality of Australian wheat.
The farmers organisations that have banded together have called for amendments to the present regulations to ensure accreditation is not a bureaucratic threshold to a competitive market but rather a tool to create a market environment where everyone is on an equal playing field. There is also the need for a monitoring role for export cargoes, bulk and non-bulk, to provide assurances around the quality and varietal integrity of wheat exports.
New South Wales Farmers supports the creation of a scheme to protect and continue to build a premium for Australian grain through quality assurance systems for exported wheat. This view is shared amongst other growers who are concerned a few dodgy operators would have the potential to ruin Australia's reputation for providing quality wheat if the industry goes down this path. Currently, by utilising the wheat export charge as the primary funding source to provide ongoing effective oversight of the export wheat markets, there are adequate capacity and resources. In order for any structure to provide effective oversight it will need a charter that provides appropriate oversight for the new role and function.
New South Wales Farmers President Fiona Simson has voiced her concern about this bill. Her organisation believes the liberalised wheat export market has not yet delivered the purported market benefits to grain farmers in terms of competition for wheat and improved on-farm returns. New South Wales Farmers would also like to see a scheme that requires reporting of information on available stocks of wheat and the quality of uncommitted wheat warehoused by grain exporters. They believe this would also ensure fair terms of access to port terminal services and benchmark the market to build competition for farmers' grain.
This bill certainly has had vocal opposition towards it from the grain industry and has forced grain marketers to address the issues of port access, the voluntary code and other sectors of grain producer representation to try to get a cohesive arrangement working in the best interests of Australian grain. There have been positive signs and industry now needs to build on this with the WEA.
The coalition is committed to continuing discussions with the wheat industry to help create the best environment for it to be able, given good seasons, to prosper. Whilst the coalition is eager to partake in this process, yet again this situation underscores the inability of this Labor government to understand and resolve issues, especially in the agricultural sector. For Australia to continue to be a top quality wheat exporter it is essential that systems are in place to ensure the product being exported has the necessary quality assurance programs and all growers have the necessary access to wheat stocks information to make informed decisions about which crops to grow and what their returns will be.
The latest issue of the Grains Research and Development Corporation journal Ground Cover, for June-July, tells of our quality issues in Asia, the fact the USA is stealing a march on us and that our wheat is losing its relative value. Alexandra Roginski writes:
Australian grain traders need to improve the traceability and consistency of grain within shipments if Australian wheat is to meet the functional needs of end-users and maintain its hard-won foothold in South-East Asian markets.
She added this was the finding of a GRDC funded study by the Centre for Grain Food Innovation in Perth. While Asia is a fast-growing market for wheat and flours derived from Australian wheat, its bakery sector is not satisfied with the traditional bulk commodity approach to Australian exports. This is another reason why the retention of Wheat Exports Australia is important until a proven structure or arrangement is put in place to address the issues that have arisen since deregulation. Professor of Food and Agribusiness Marketing at Curtin University, Peter Batt, who conducted the research with Associate Professor Fay Rola-Rubzen, says Australia still treats wheat as a commodity to be sold en masse. Instead, he argues, there needs to be an urgent shift in focus to maximising value through product differentiation for the range of end-uses in South-East Asia. Tellingly, Professor Batt says that many of those in the industry bemoaned the lack of Australian technical support and people to talk to in the absence of a single selling desk.
Import statistics show that it is a matter of value. In an increasingly competitive South-East Asian market, Australia is a dominant wheat supplier. But Professor Batt says that that volume does not automatically equate to higher prices per tonne. The most recent import statistics per country reveal the position of Australian wheat. Australia was the biggest exporter of wheat to Indonesia and Singapore in 2010, Malaysia in 2008 and Vietnam in 2009. Thai statistics for 2010 show Australian wheat coming second to the US. Where available, statistics on wheat flour by country show Australia as 12th on the list of exporters to Singapore and ninth on the Thai list. In Indonesia's wheat and wheat flour market in 2010 Australian wheat accounted for about 60 per cent of imports, but realised only 58 per cent of the value. This two per cent gap equated to about US$34 million in lost income to Australian growers. By comparison, Canada supplied 13.6 per cent of the wheat but took home 14.9 per cent of the payments. The US provided 11 per cent of the wheat and took home 11.63 per cent of the earnings. In the Thai market in 2010 Australian wheat was priced at US$272 per tonne, compared to US$297.50 per tonne for US wheat and US$282 per tonne for Canadian wheat. Between 2009 and 2010 Australian wheat decreased in price by about $13 per tonne, while US wheat increased by about $4.60 per tonne. Again, this highlights the need to remain steady on this valuable export industry, to get things right, to put in place measures to maximise our potential and to help and protect growers, who have been through more than enough angst in recent times.
National Farmers' Federation President Jock Laurie, on his recent return from Indonesia, said grain importers there raised concerns about the quality of our exports, saying the final delivered product is failing to match the standards of what had been promised in the original contracts. The Indonesian concerns follow the demise of the single desk. Mr Laurie was part of an Australian delegation including the federal trade and agriculture ministers that visited Indonesia in July for important talks on market issues and opportunities. According to Wheat Exports Australia, Indonesia has been Australia's biggest export market over the past seven years, buying an average of almost 2.5 million tonnes per year.
Many growers will steer away from pools and rely on spot cash prices at harvest, which will further weaken the harvest price if this bill goes through. The WEA was able to demonstrate how beneficial it could be to the industry by conducting research into an important aspect of grains marketing, and reporting to industry and government. That is how it should be. If Labor really cared about the Australian wheat industry, instead of shutting down the WEA it would give the authority powers to benchmark the performance of accredited exporters and bulk and container shipments and to publish export information.
Not only is Labor intending to shut down the accreditation process but the bill redirects possibly up to $2 million of paid, unused levy money to the minister to control in a vague, unspecified fund that will almost certainly be used to pay for other government functions in a cost-shifting exercise. You cannot trust Labor with money. How many times have we seen this in recent years? If the WEA is to be shut down, and that is far from settled, grain growers should be the ones deciding where unused levy funds are spent.
This is another example of Labor's contempt for agriculture. Labor has cut $2 billion from the agriculture department in the past four years, and the scrapping of the WEA is just another step in the process of getting rid of the agriculture department. I commend to members an article written by the New South Wales Farmers' Association grains committee chair, Mark Hoskinson, from Kikoira, in The Land, headed 'Bill breaches government promise,' and seek leave to table the opinion piece. (Time expired)