AWB/CBH stalemate

29 Jan, 2003 10:00 PM

THE future of WA's grains industry has come to a head with the Australian Wheat Board and CBH promoting different pathways on how to bed down single desk marketing.

The AWB Ltd pathway embraces a 50-50 partnership with CBH but CBH has started talks with AWB's subsidiary AWB International (AWBI), promoting a "Blueprint for success in the West" proposal.

Now AWB chairman Brendan Stewart wants a meeting with CBH to resolve the issue "for the benefit of wheatgrowers".

"We're starting to get questions from growers as to what our preferred position is," Mr Stewart said.

"We're keen to talk with CBH to discuss their proposal and I'm happy to take all the time needed to see how we can come to a single position.

"I think the best way forward is some sort of partnership with CBH and we want to cement our relationship with them.

"But it doesn't mean the bad boys from the east taking over. On the contrary we were very much in favour of the CBH and Grain Pool merger.

"We want to keep assets with WA growers."

Mr Stewart sent all WA wheatgrowers a letter this week outlining the AWB's efforts to negotiate a partnership with CBH.

In it, he makes the point that in August last year, AWB Ltd lodged a formal proposal for a joint venture through a Memorandum of Understanding.

This included a timeframe for competing negotiations, culminating in grower meetings during February and March this year.

Mr Stewart said that on September 10 last year, the AWB was advised CBH was not prepared to consider it.

In the letter he wrote:

"Unfortunately CBH has broken off discussions for a partnership model, instead preferring to focus on a Service Agreement (sic) proposal, named "A blueprint for success in the West" to AWB (International) Limited that would essentially see AWB withdraw virtually all of its current presence in WA.

"AWB (International) Limited is considering the Service Agreement proposal and in this regard AWBI management met with CBH management on 15 January 2003 to better understand the CBH proposal. We are working through the many issues involved."

In the letter Mr Stewart also reiterated AWB Ltd did not wish to own storages in WA.

When questioned on the AWB's "investigations" of land in WA, he said it was in the context of "assessing commercial options".

"The AWB has not spent one cent in buying land in WA and while we have investigated sites it has been done as a fallback position," he said.

"But we don't want a fallback position; we want a single position.

"And as I have said in the letter we will not lose sight of the need to ensure ownership of WA storage and handling continues to remain in the hands of WA growers."

The CBH position, which has been presented to AWBI as a formal proposal, outlines a strategy for strengthening single desk and for added dollar benefits for WA growers through AWB pools.

Essentially it would see CBH deliver grower services and wheat supply chain management for AWBI in WA at no cost to the national wheat pool.

According to the proposal, the strategy would see an immediate estimated benefit of $12.38 million a year to pool participants in WA.

CBH estimates its proposal will conservatively generate about $40m a year in additional value to the WA grains industry.

CBH chairman Allan Watson said that while there would be additional costs inherent in the CBH proposal, these would be covered by improving efficiencies.

"Extra costs will be paid for by achieving better efficiencies from integration (with AWB)," he said. "We already have met with AWBI executives and our figures haven't been challenged and they've had our proposal since November.

"What we're saying is that our proposal is the first step towards a fully integrated approach.

"Let us control the movement of storage and handling and transport of grain to port.

"We'll prove we can do it and then maybe a share of our facilities by AWB would be more favorably accepted by WA growers down the track.

"But first let us create an environment where we can have meaningful discussions."

In CBH's "blueprint" proposal, it comments on wheat grower disenchantment with the AWB.

"The non-contestable pool service agreement between AWBI and AWB and the commercial objectives of the latter, are perceived by an increasing number of Australian wheat growers as a conflict of interest and lacking in transparency," the proposal said.

"This apparent lack of confidence in undermining support for AWB Ltd and orderly marketing and is the single biggest threat to both AWBI and ultimately the sustainability of the wheat single desk."

Ironically, in Mr Stewart's letter, the key principles he espouses for the AWB are practically identical to those of CBH, including "to preserve and enhance the value of the national wheat single desk and maximize net returns to growers".

With such an identical base on which to start discussions, WA wheat growers will expect a positive outcome from the meeting between the AWB and CBH, which is likely to be held later next month.



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