Wheatgrowers need to grow up

THE suggestion that wheat producers are either too innocent, inept or dumb to sell their own wheat without Big Brother supervision, while those selling wool, beef, oilseeds, barley or cotton can sell their produce unsupervised, would offend most of them.

Yet that is what people who claim to represent their interests are suggesting. The federal government’s plan to abolish Wheat Exports Australia (WEA) from 1 October this year has been criticised by grower organisations and the Opposition, who claim it is premature. By implication, they are suggesting that wheatgrowers are still in short pants and need time to grow up more before being allowed to play in the big yard.

The government’s plan is based on the 2010 inquiry by the Productivity Commission, which recommended the Wheat Export Accreditation Scheme be abandoned and wheat exports deregulated, with WEA and the Wheat Export Charge abolished.

The plan will allow wheatgrowers the freedom to sell their wheat to anybody they like and exporters requiring no approval to operate. By 30 September 2014 special regulation of port access for wheat exports will also be removed, bringing it under general competition law supplemented by a code of conduct to promote transparency.

Grain Producers Australia, a producer group, claims in a letter to federal politicians: “There is no evidence that the export wheat supply chain is currently mature enough to self regulate."

It argues WEA should be retained, funded by the Wheat Export Charge, with a new charter to oversee an accreditation scheme based on “performance rather than character”.

In fact its concerns relate more to perceived threats to varietal integrity and quality than exporting per se. It proposes WEA take on a new role of monitoring and ensuring compliance with quality and varietal standards, along with filling perceived gaps in market information.

Its arguments do not withstand scrutiny. Markets are superbly capable of dealing with quality and integrity issues. A farmer who produces high quality wheat will obviously prefer a buyer who recognises and pays for that quality. That buyer clearly has an incentive to preserve the quality through to the end customer. So long as pricing reflects the value that customers are willing to pay, nothing more is needed. If current buyers are not reflecting that, plenty of others will.

The implication that there is a ‘Brand Australia’ requiring some kind of common marketing reflects a longing for a return to the single desk. There is no Brand USA or Brand Kazakhstan either, just diverse buyers and sellers who voluntarily come together in the global marketplace.

As for the supposed lack of market information, it is true that growers face slightly more price uncertainty than when they were forced to sell wheat via a pool operated by AWB. However, they have not suddenly been left in an information vacuum. There are many other information sources available, and pools are still available for those who want to participate.

Moreover, no case has been made to justify a special tax on wheatgrowers or why WEA should be the repository of such information, if it is indeed useful. There is certainly no precedent with other commodities – Meat and Livestock Australia and Australian Wool Innovation, for example, manage to gather and publish a great deal of market information without the need for a separate levy.

Grain Producers is attempting to carve out a role that will give it an advantage over its rival, GrainGrowers. Both are competing to be recognised as the primary representative of grain farmers. There is no harm in that, but promoting an additional tax on wheat growers to fund an unnecessary bureaucracy is hardly the ideal way of going about it.

If there are deficiencies in the wheat market that are not being addressed by normal activities and market signals, Grain Producers should be arguing for a share of existing levies to be redirected towards addressing them. If it is sufficiently convincing, the money will be found.

But it should stop enlisting Opposition politicians to support its campaign against GrainGrowers. At the very least, it makes them both look as if they think grain producers are still in short pants.

David Leyonhjelm is an agribusiness consultant with Baron Strategic Services. He may be contacted at reclaimfreedom@gmail.com

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Agribuzz with David LeyonhjelmCommentary, news and analysis with agribusiness consultant David Leyonhjelm. Email David at reclaimfreedom@gmail.com

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