Industry not ready to deregulate - yet

How long is it going to take an appropriate level of competition to establish on the east coast?

THE move towards deregulation of our ports sees the markets of east and west in awkwardly countering positions, but is the east coast really winning out at the expense of the west as suggested by some?

Western Australia, dominated by CBH, could use a deregulated environment to grow new competition to gain a market toehold.

The restrictions placed on port facility owners in the port access code will be most beneficial for the eastern State growers.

Any competition that tries to get a toehold in WA is going to have to offer low port access fees to be competitive with CBH given not only its dominance of the WA market, but its mechanism of returns to shareholders via cheaper fees.

Senator David Leyonjhelm made a valid point in his column "Co-opting the shareholders" that growers were locked in as CBH shareholders through the way the co-operative recycled profits towards allowing lower handling and storage costs to growers.

But he doesn't consider the longer term sustainability from the growers' perspective.

The allowance of a grower representative voice at the table during arbitration will help reduce increased costs flowing back to the farmgate in the eastern States in the face of a lack of competition for establishments such as GrainCorp, which controls about 70 per cent of the east coast market.

This, in theory, will allow more competition to move into the east coast market - including CBH if it wishes to expand - which would be good for east coast growers.

Since the removal of AWB, pressure has existed to move to a fully deregulated market.

The catch on the east coast is more competition is needed to ensure growers don't cop the brunt of unfairly high access fees.

CBH, through its shareholder structure can reduce this burden on growers, even if the deal lacks flexibility in allowing growers to cash in their shares.

The unknown factor, however - which NSW Farmers grains committee chairman Dan Cooper has raised - is how long is it going to take an appropriate level of competition to establish on the east coast?

A three-year review has been recommended, but it could be longer before the Australian market is mature enough to allow full deregulation, which is why the review is a safer option than the originally suggested sunset clause.

It costs farmers enough to produce a quality product, let alone have to pay more than their overseas competitors to get it to market, especially when a lot of the profits would head overseas to foreign shareholders.

The code is now the best of two difficult options.

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TheLand
Andrew Norris

Andrew Norris

is the editor of The Land
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READER COMMENTS

Deregul8
27/09/2014 6:24:30 AM

Andrew you flippantly state CBH benefits shareholders through 'its mechanism of returns to shareholders via cheaper fees.' Many shareholders would argue the existance of record CBH profits is proof 'cheaper fees' are still extremely expensive by global export standards. Increasingly shareholders are becoming concerned their fees are being used to speculate in infrastructure plays outside of WA and non core to the job of storage and handling in WA, whilst essential WA infrastructure crumbles (eg rail).
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