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

PAYG
19/06/2014 7:02:53 PM

GFA: - you say that I implied – “Using that point to put down the massive benefit of grower marketing power via the SD system is clearly erroneous.” – What I actually said in relation to AWB mate was this @ 14/06/2014 10:56:59 AM – “It was ‘government intervention’ that ultimately led to the demise of the ‘single desk’ in allowing AWB to publicly list on the ASX using $365 million in growers levies (tax)” – now go away and learn to read.
GFA
20/06/2014 12:04:32 PM

If you think you know everything PAYG, why are you continuing to make a fool of yourself?
Jock Munro
20/06/2014 12:20:43 PM

PAYG, growers still controlled the company AWB Ltd and it was as good a marketer as we are ever likely to see. Its constitution clearly stated that pool deliverers were to have their net returns maximised. Unfortunately many growers were influenced by the spin that the merchants promoted that AWB LTD was beholden to shareholders first. AWB LTD was dual class share company and was listed on the stock exchange. It was under extreme statutory scrutiny by the WEA(Wheat Export Authority). The mega merchants that, thanks to Labor and Liberals, run the industry now are under no such oversight.
PAYG
20/06/2014 4:19:46 PM

Jock - No argument with that from here, I know how it was all supposed to work particularly with the WIF controlling a fair bit of my (totally wasted) compulsory levy money, but that is not what GFA has been bangin’ on about – relevant facts and other crap. - My point is simple; that Governments intervened in the first instance with Ag industry regulatory structures and regulatory levies AND then with further intervention (with little knowledge of the consequences) in these same Ag ‘Structures’ brought these industries to their knees. Gov caused the market failure !!
Rational Ag Policy
20/06/2014 5:13:24 PM

Barry, I love rural Australia, and your opinions and those of your party are why I can never vote for you. The reason late sippers are so well off is they do what they are good at, unlike 70pc of Australian farmers. If 70pc of disconnected latte sippers got jobs they were no good at they could not afford lattes. Conclusion: encourage structural adjustment (i.e. not what you now advocate), get out of the way and give future generations of smart rural kids a chance in large good businesses with opportunities for progression. Also, write something interesting, you lot sound like a broken record.
GFA
23/06/2014 12:12:26 PM

You can fluff around reality and pick out details as much as you like PAYG, but you are in denial if you believe the Government killed the Single Desk by accident. They succumbed to pressure from the US Administration going as far back as the 1980s/90s to lead the way in deregulating world trade. So when they finally pulled the pin in 2007, they finally fell for the US 3 card trick, leaving US farmers totally protected with multi billion $ safety nets and subsidies, while Aussie farmers were divided, disorganized, and out in the cold. The rest were just steps along the way.
Dalby
23/06/2014 12:36:31 PM

PAYG, it is not clear whether you were ever a supporter of the Single Desk? On one hand you are saying that Government intervention killed the AWB. Where did you stand on the Government's Single Desk regulations prior to the WIF levy system, because that was also "Government Intervention"?
Dave
23/06/2014 2:02:04 PM

No more of a broken record than you and your multitude of screen names, thugboy.
PAYG
23/06/2014 6:41:51 PM

Dalby – yes I was a supporter of the single desk for the export of wheat before the WIF debacle. After however, I withdrew my support on the grounds that it seemed to me to be reprehensible to levy (tax) growers only for those funds to be used as market capital for a company to list on the ASX. Under the Government’s own ‘Levies Principals & Guidelines’ levies can only be engaged by industry only where there is an identified market failure. In my view misusing the levy by allowing the listing of AWB and the Govt’s removal of AWB’s borrowings guarantee was the end of the single desk.
PAYG
23/06/2014 6:57:29 PM

GFA – you say that I ‘believe’: - “……but you are in denial if you believe the Government killed the Single Desk by accident.” – Really ? - How would you know what I ‘Believe’ mate ? – If you really want to know, I strongly believe, and because the Govt intervened in this manner, that they (the Govt) did it ‘Purposefully’ otherwise they would not have allowed AWB to list on the Stock Exchange in the very first instance. You see, in the allowance of anything, it is usually done with forethought mate, which includes the conceptual misuse of levies.
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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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