Free market free-fall

Farmers' futures are tied to the whims of the supply chain oligarchs that deregulation has spawned

THERE is a secret club that speak only in hushed tones within the hallowed walls of Federal Parliament.

Fearful of being ‘outed’ by our Coalition colleagues, we have considered creating a secret handshake, a secret password and a secret code of ethics.

I am speaking about those members of the Coalition that do not blindly salute the flag of the free markets.

We are certainly no strangers to this debate. The pros and cons of economic rationalism have been debated for several decades.

However, while in its ideal, it refers to the reduction of government intervention in the economy in favour of enabling ‘market forces’ to organise economic activity, the reality has seen the biggest players get bigger at the expense of the remaining supply chain.

While it may be uncomfortable territory across the political divide, it is a fundamental dispute that must be debated in the push for a strong agriculture sector that is positioned to capitalise on the burgeoning overseas opportunities.

In recent weeks, some commentators have argued that stances taken by The Nationals, especially in regards to selling state assets and collective models of ownership, is hypocritical and wrong footed.

But to suggest that market forces should simply be allowed to dictate the trajectory of rural industry and, with it, public policy, ultimately becomes a disservice to people across the agriculture sector.

More than a decade of deregulation across several agriculture sectors has not resulted in the monetary gains at the farm gate level that were promised.

Instead, it has emboldened many multinational corporations to stifle competition and, with it, any criticisms of their unbalanced and unprecedented market power.

It has enabled large, multinational corporate gorillas to break free of their zoo cages, tip over the pie van and climb up the flagpole. Rural representative groups, the Australian Competition and Consumer Commission, multiple Senate inquiries – there are many trying to clean up the aftermath from the gorillas' ongoing rampage, but no-one is ever going to convince them to get back in the cage.

Philosophically, a free market can only exist when there is freedom of choice, transparency of transaction and the existence of true forces of supply and demand. Proponents of free market policy in agriculture simply like to go to bed and not think about what is happening so that when they wake up in the morning, it is done.

The winner is the last man standing. Disregard that there was no transparency, no choice and no freedom.

Can anyone seriously claim that Queensland dairy farmers currently enjoy an open, transparent and most importantly, free market – one indeed with freedom of choice?

Dairy farmers wanting to provide their fresh product to the general marketplace realistically only have one choice – they can supply their milk to (mostly) foreign owned processors that will most likely place the cartons on the shelves of either Coles or Woolworths.

There is no transparency, there is no freedom of choice and there is certainly no tension of market demand.

If farmers challenge or protest the price they receive, the supermarkets can always just truck milk from the southern states into Queensland.

Currently Queensland Nationals are vocally opposing Wilmar Sugar’s proposal to remove itself – and 60 per cent of Australia’s sugar - from the century-old national marketing system. Due to deregulation, Wilmar can claim its participation with Queensland Sugar Limited (QSL) is only voluntary.

Wilmar does not need to concern itself with the impacts its decision will have on the family cane farms that do not supply its mills. Wilmar does not need to concern itself with the long term viability of the Australian sugar industry.

Of course, business should be encouraged to make its own decisions and profit should be both the focus and the reward for sound management. Government should always work to encouraging this situation.

But when the collective fortunes of any industry are so intrinsically linked as is the case with agriculture, businesses also have an ethical responsibility to ensure viability across the supply chain.

Our rural industries are facing the challenge of maintaining competitive advantage and driving productivity gains within rapidly expanding and changing global markets and operating conditions.

Australia’s future productivity and prosperity is closely tied to our ability to maintain our position as a world leader in the management and production of our sustainable resources, especially across the agriculture and mining sector.

The dual imperative of raising productivity and workforce participation is fundamentally changing the required skills and knowledge required for the agriculture industry.

If industry is to achieve these imperatives, workers will require new skills and deeper knowledge, including higher level technical and innovation skills.

This requires money - at a time of falling profits at the farm gate.

Australian farmers are price-takers. This means their futures are often tied to the whims of the supply chain oligarchs that deregulation has spawned.

The market does not always get the balance right. Responsible policy debate should recognise this and adapt accordingly.

If that means critics will accuse me of being an agrarian socialist, then I suppose it is a flag that I will proudly salute.

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FarmOnline
Barry O'Sullivan

Barry O'Sullivan

is a Queensland-based Senator for the Liberal National Party
Date: Newest first | Oldest first

READER COMMENTS

GFA
17/06/2014 12:51:59 PM

PAYG, Since you are suggesting others are idiots, how is it that when faced with the relevant facts, you have not even laid a glove on them. Instead you present an incoherent rant. What is your problem?
PAYG
17/06/2014 1:33:14 PM

GFA - Perhaps you didn’t read this relevant bit from the article - “More than a decade of deregulation across several agriculture sectors has not resulted in the monetary gains at the farm gate level that were promised.” - The relevant fact mate is that government regulation (intervention) has created even less monetary gains than deregulation could ever have accomplished. You know, government regulation like tax eating quasi-statutory bodies mate. Those are the relevant facts that I pointed out -
Cattle Advocate
18/06/2014 7:01:10 AM

1 school of thought was that QLD&NSW had too many dairy farmers so $1/lt milk and 12c/lt T2 milk fixed that.3rd Gen QLD dairy farmer Ray Gresham ''We had been losing money and the price just dropped further. I'm just so glad we got out you cant hand down something that's losing money'' The Gov wants to know why Aus milk supply has stagnated while our international competitors are aggressively expanding,has the missing 100 QLD dairy farmers got anything to do with it? The debunk the myth $1/lt milk said processors can be squeezed but stop when $1B in equity has been lost.
Cattle Advocate
18/06/2014 7:18:40 AM

Then suddenly fresh milk from foreign processors was on the nose and banished into the contract wilderness for 10yrs after faithfully honoring the agreement to supply the cheapest milk in Aus,but where no other milk was avaliable, if you closed your eyes and thought of the mother country it was drinkable.Then 'Fresh Opportunities' report that keenly wanted to double WA Dairy for export to Asia got the sack. In under a month Hong Kong Customs caught 879 baby formula smugglers BF $41500/tn. EU drinks 70pc UHT regularly, France, Spain Portugal and Belgium 95pc, just think of the mother country.
GFA
18/06/2014 10:49:26 AM

PAYG, How much tax did the AWB eat then? Tell me that fact please, if you have any idea?
PAYG
18/06/2014 5:08:06 PM

GFA - $365 mil of grower’s levies siphoned into the ‘Wheat Industry Fund’ (WIF) that was then redirected as part of their market capital to list. What don't you read, I stated this before mate. For many growers, including me, that was the day that the single-desk crumbled.
Jock Munro
19/06/2014 6:10:51 AM

Well written Barry O'Sullivan. Deregulation means power to the big end of town with nil obligation to anyone except their shareholders or owners in the case of some mega merchant grain traders. See the NZ Dairy industry which has enshrined legislative and co op principles with Fonterra. They have 37% of world dairy and are going ahead at the same pace that we are falling behind.
GFA
19/06/2014 6:42:14 AM

PAYG, your use of the word tax was misleading. Tax is what we pay to the Govt to do what they will with. That levy was agreed to by growers as a contribution to their Single Desk system being maintained in the face of growing Govt attempts to kill off the SD, as I pointed out. Using that point to put down the massive benefit of grower marketing power via the SD system is clearly erroneous. We are now 25,000 tiny growers pitted against a handful of mega corporations and O/S Govts in a corrupt world grain market. Sheer destruction by 1000 cuts, as seen by halving grower numbers and going down down.
jack tancock
19/06/2014 6:49:41 AM

Jock Munro, what you say is ever so clearly being shown up every day in our economy via examples like the massive market power of two local mega corporations like Coles and Woolies, who trample all over growers and other suppliers. Yet somehow we have a handful of delusional grain growers, (or maybe some are really merchants?), who think they, as minuscule players, can dictate terms to multi national mega corporations and overseas governments who are really dictating the terms of the trade. If that was not true, why do the big guys like ADM always want to get bigger? Answer = market power.
PAYG
19/06/2014 6:42:55 PM

GFA – hee….heee you say: - “….your use of the word tax was misleading. Tax is what we pay to the Govt to do what they will with. That levy was agreed to by growers…….” – fair dinkum…..hee….hee…so exactly when is a ‘Levy’ not a ‘Tax’ ? Quick you had better rush and tell the Gov & High Court that one mate. Where do you think levies go mate ? – hint – they go to the Government via the ‘Levies Collection Unit’ into Consolidated Revenue and from there they are ‘Appropriated’ back out via an ‘Appropriation Bill’ for its designated purpose. Fair dinkum…..what planet are you on ?
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Bush mattersBush matters - LNP Senator Barry O'Sullivan tackles the issues facing Aussie primary producers and people across rural and regional Australia.

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