Desk consensus reached: now for the hard part

The state farmer groups which thrashed out a six-point plan for a demerged AWB International to hold the single desk should be congratulated for putting aside their differences and formulating a united stance.

The grains industry was sorely in need of some compromise for the greater good, and this is the most promising show of unity from within the industry yet.

However, having come to agreement, the hard work now starts in earnest.

The idea of a demerged AWB International holding the right of veto works well as a concept - but how is it going to work in practice?

Will AWB shareholders, both A and B-class, vote on letting go of AWB(I)?

Where is the capita to fund the new I going to come from?

What about staffing the fledgling organisation?

This is not intended to pour scorn on the plan, far from it, however the grower community needs to have solid answers to these and more questions before embarking on this path.

Again, congratulations to the farmer groups for finding a position suitable for all of them. You have now reached base camp - the slog to the summit is now on.

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READER COMMENTS

NSW farmer
18/05/2007 3:19:12 PM

The Australian wheat industry is at a severe disadvantage to its main export rivals from USA and Europe in that Australian growers get no financial support from Government for their grain, while USA and EC growers continue to get access to Government income supplements equivalent to up 50pc of total proceeds from grain production. USA growers also get access to a form of guaranteed minimum price scheme via their farm loan program. It is not honest to say that deregulation will increase growers returns via increased numbers of grain buyers. This is because increasing the number of traders is not a true increase in buyer numbers. It is just an increase in possible players. Only an increase in the number of wheat processors and/or consumers would provide an increase in buyer numbers and deregulation is unlikely to create this. As long as Australia remains an export surplus producer it is the volume of total world wheat produced coupled with total supply and demand at any point in time which determines prices. And then as long as USA and EC growers continue to receive subsidies to supplement their wheat sales proceeds, they can afford to discount their prices below Australian growers. So it is more honest to say that under deregulation (or any step away from the AWB Single Desk System) there would be an increase in the number of Australian wheat sellers competing down prices to make sales and clear farm wheat stocks. There is nothing stopping Australian wheat growers today under the Single Desk marketing arrangements from accessing all the futures and options markets they need to assist them in managing their future wheat income. Deregulation is not needed for such access.
Michael Hein
18/05/2007 6:50:10 PM

How irrational will this get? Wheat export must be left to commercial experts. The farmer organisations who support single desk politics seem to think that these experts are sitting in the respective party rooms. The politicians are deluding themselves to be such experts. The only rational way forward is to accredit multiple exporters who know how to market wheat on the global stage. Multiple exporters will be multiple buyers at the farm gate and this competition will create a vibrant and innovative market place which will be to the benefit of farmers and the whole industry. Those who don't want to see that have their heads firmly in the sand. Best regards
Grain Farmer
18/05/2007 7:49:14 PM

If Howard allows this demerged proposal of AWB to proceed, I can just see the headlines in the major national newspapers - "Howard Rewards AWB for Violating UN Sanctions". He will be the laughing stock of the international community and the resulting findings and costs from the Cole Inquiry will all be for absolutely nothing!! How on earth is AWB going to get 75% support from shareholders for this proposal - simple, it won't. Therefore, nothing will change. McGauran claims that this is a united stance. It is not - it is a front for AWB as claimed in emails leaked to the Australian Newspaper. The Wheatgrowers Association of WA is NOT a major lobby group as claimed, it is an isolated vocal minority at best. Perhaps the views of the SAFF, the Eastern Wheatgrowers, the PGA and the recently formed major lobby group, the WA Graingrowers Group headed by Doug Clarke, should be considered. McGauran would then realise that a united position does not exist! If I sound angry, I am. This debacle is costing wheatgrowers by the day and it must be resolved.
Julie
18/05/2007 9:50:33 PM

Let's look at how the farm lobby groups made their decision. The key group executive of WAFarmers worked most of the year on a licensing type proposal. Just before final approval, the president, past president (and key GCA delegate), the senior vice president and the vice president were warned that we were on an AWB hitlist. After the president was sacked, I was sacked unconstitutionally as senior vice president for simply warning farmers about the liabilities associated with pools (which has since been proven to be an underestimation of the problem). There was nothing short of a hostile takeover of the grains council of WAFarmers. What is being proposed, instead of controlled licensing system with an aim to maximise net returns to growers and address the problems of deregulation, is a demerger. AWBI and all its liabilities and responsibilities is to be sold to a grower-owned cooperative (at a cost of hundreds of millions of dollars to farmers). This entity then tenders the profit making single-seller services back to AWBL. It is easy to see why AWB want this proposal, but why on earth would farmers support this?
Single Rip-Off
19/05/2007 2:09:44 AM

Australia needs a new 2007 and beyond marketing system for wheat not an old 1939 war time food supply measure called Single Desk. Wheat exporters in WA & SA, the major suppliers to the National Pool, are paying the price for the Eastern States growers who have a bob each way. They have the availability of selling for cash to domestic markets. They do not pay the costs to the AWB national pool and this suits them to have a backstop if they have unsaleable grain. If I am forced by the Government to sell my wheat to the AWB monopoly this year I will withhold my wheat again as the cost of such a foolish proposal is unbelievable. I do not want my hard-earned money wasted by AWB excessive costs and ongoing legal fees. Why do all other Austalians have freedom in everything they do in business except wheatgrowers. Even the workers have the right to choose to belong to a union or not. This system is faulty, so deregulate it and let us have some competition on the costs and competition on the market price. If there is so much support for AWB, let those growers who would die in the ditch for them do just that and give the others the freedom to make their own decisions. John Howard has a big problem and he cannot reward corruption. His party stands for choice so how about giving us some.
Grain Farmer
19/05/2007 6:31:31 PM

As a passionate young farmer excited by the prospects of a very real agricultural boom emerging, particularly in grains, I am appalled by the government's dithering on this issue. I am highly cynical for the reasoning behind this given the speed with which the labor market was deregulated. Over-regulation got us here and continued over-regulation will serve to make the situation worse. I have no confidence the Federal Government will deregulate the wheat industry and as such I am planting as little wheat as I possibly can until deregulation occurs. The ethanol boom in the US is underwriting values in other deregulated grains and so I am increasing acres planted to lupins, malt barley and even sandalwood. Any crop to avoid the illogical industry that is the Australian wheat industry. I have always been a Liberal voter. Well John, you've lost this vote ...
Ceres
21/05/2007 9:38:45 PM

I thought the WTO had earmarked 2013 as the time by which all state based trading organisations such as AWB had to be competing in an open market. I was also of the understanding the WTO agreement is behind the recent changes to the CWB (Canadian Wheat Board). With this in mind, can someone please enlighten me as to why the grower groups, with the exception of SAFF, seem happy to consider demerging AWBI from AWBL? Can someone also enlighten me as to how much such an exercise will cost and whether such investment is prudent given there are only 5 harvests before 2013?

You are right about the WTO, but only up to a point.

In Hong Kong in December 2005 WTO members agreed that all trade distorting export subsidies would be abolished by 2013.

That agreement is contingent upon the Doha Round being completed, and there is still much the main players are yet to resolve - it may not even come to fruition.

Even so, elements in Europe and the US have been pushing that this 2013 agreement be interpreted in a way to include export assistance in the form of 'state trading enterprises' (STEs).

The agreement in Hong Kong allowed scope for further negotiation on the issue of STEs.

The main target of this campaign has been the Canadian Wheat Board, which has encouraged Canada's decision to dismantle the CWB.

Also in the spotlight has been AWB's single desk, and Fonterra in New Zealand's dairy industry.

However, as neither of those companies are government owned, there is less pressure in the WTO for reform.

It was widely viewed at the time that these two companies were included in the EU's push primarily as a negotiating position to counter calls for it to cut its subsidies and tariffs.

But any voluntary change to the single desk system by the Federal Government could equally be used as a bargaining chip at the WTO to extract more concessions from the EU and US.

Posted by moderator: Michael Thomson on 21/05/2007 11:54:05 PM
NSW Grower
21/05/2007 11:59:56 PM

Deregulating the market will not increase the supply of grain from Australia. Supply and demand positions for Australian origin wheat will not vary but us growers will get competitive pressures chasing our grain. The end result will be a more efficient marketing and logistics chain along the way. The lazy and inefficient marketing by AWB and monopolistic profits AWB have ripped off us growers will over time be returned back to us with greater competition through a deregulated market. AWB's massive conflict of interest is glaringly obvious on their inept marketing of the 2005 pool. Instead of cashing in on the massive prices available and selling the lot over the past 12 months, they have carried over stock to the 2006 marketing program at much reduced prices. The fact they gain increased profits from the interest rate spread on their massive harvest loan book is a massive conflict of interest costing us who delivered into the '05 pool dearly.
Grain Farmer
22/05/2007 12:27:54 AM

Just browsing these comments I don't see 80% support for retention of Single Desk. Obviously it's a misnomer. Makes you wonder just who is compiling the figures! Margaret.
Grain Farmer
22/05/2007 6:43:59 AM

How thick is Judy Moylan? Wheatgrowers are not only suffering due to the drought, they are suffering because of the diminished pool prices which they received in the last two seasons because of AWBs mismanagement, coupled with spiralling fertilizer prices. Does she not realise that the price which growers receive from containers and bags is governed by the EPR which is set by AWB. We exported in containers because we could not get a bulk export license - thanks to Mr McGauran - and we received $70 a tonne less for our grain. Judy Moylan you need to go away and do some homework because on this issue you are wrong! Wilson Tuckey, bring on your Private Members' Bill. Margaret, WA grower
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