GRAIN marketers looking for port space for this year's harvest will revert back to a pure auction system after CBH withdrew its proposal for allocation of port capacity through Long Term Agreements (LTAs).
In a shock move this week, CBH said it had been through a process of review and had made the decision on a pragmatic basis given current regulation to provide certainty to exporters and growers.
It said despite 93 per cent of the market volume accepting capacity offered through the LTA process, feedback to the Australian Competition and Consumer Commission (ACCC) showed there was displeasure from some in the market over the new system because they believed they would not receive all of their requested LTA capacity.
CBH Operations general manager David Capper said CBH was disappointed that a process that had seen extensive consultation all year had been unable to deliver a workable solution at this point.
"We have had some mixed and confusing messages coming back and forth from the market, and everyone needs to manage their own position and best interests," Mr Capper said.
"In terms of the process, there were some that came into this very late, who hadn't shown any interest until later and probably didn't get all the background that everyone else had that had been pursuing this for some time.
"If demand outstrips supply in any slot (under the LTAs), then the slot would revert back to the auction, and that was the initial process we had set up.
"That's what we were talking to the ACCC about and communicating to all our customers.
"With the first round of submissions, demand massively outstripped supply and effectively all the slots would have gone back to auction.
"After a couple of rounds we were still in the same situation, it was going to be 100 per cent auction.
"When we went back to our customers, and said LTAs are not going to land; we have to go back to the full auction.
"We had strong feedback from the trade saying they wanted us to take some leadership and they wanted the LTAs and asked to tell them what to do to make it work; that's what we did.
"From that we had strong support, and had 93 per cent of the capacity booked and 11 out of 14 customers were happy with that.
"So we went back to the ACCC to change the submission to state the way the process works, to include this step, of CBH assisting the trade to make it work, and have been working to do that.
"While we have been doing that, the sentiments changed, each customer has decided that they did or didn't like the offering they have been given."
Mr Capper believed most would say they didn't like the process, but he thought it was the outcome of the process they didn't like.
"That's where we have ended up; not getting the support across the group," Mr Capper said.
"With demand outstripping supply as much as it did, we were never going to give anyone the allocation they really wanted.
"And so, they have made the decision they would rather go into a full auction, rather than the LTAs.
"I think that could be a bad call.
"This auction could be quite horrendous - but we will see how that plays out."
A shipping slot auction has now been scheduled for Wednesday, September 17.
Mr Capper said CBH also had to weigh up its options in terms of the time until harvest, the chance of success and admitted the odds were against them.
“We couldn't afford the time before the regulatory process to go through its full course, so we had to make the decision,” Mr Capper said.
"This was the best course, to make sure there was certainty for harvest."
In the short term, Mr Capper said the the decision shouldn't have a negative impact on growers, but warned that in the long term WA growers will see less competition, if the issue is not resolved.
In WAFarmers' submission to the ACCC it outlined its strong support for the LTAs saying "it supported the sustainability of WA grain growers and greater security of access through LTA agreements".
"It is in grower's best interests to have a fair and equitable system and WAFarmers believes that the proposed changes to the access undertaking by CBH can help deliver this to the benefit of the industry", the submission stated.
WAFarmers Grain Council president Kim Simpson said they still supported LTAs despite the retraction.
"I am sure they have their reasons for the retraction," Mr Simpson said.
But Pastoralists and Graziers Association (PGA) Western Graingrowers Committee chairman John Snooke believes somewhere in the process something went wrong.
Initially Mr Snooke said he was supportive of CBH's LTAs, but grew to be disappointed as they became over subscribed and allocations seemed to be given to CBH's favourites.
"That has caused some considerable complaint from the trade, and we have been surprised about the number of calls to us, by the traders complaining about the process.
"The news (of the withdrawal), is a good outcome, it really is an admission that the process was wrong.
"The trade was initially very happy with the process that was explained to them back in March.
"But as the allocation occurred the process was not transparent and it seems to have favoured four big players in the grain trade to the exclusion of the smaller players.
"We need a number of grain traders in WA and that is what has given us the basis premium and we need equal access."
Mr Capper said CBH believes there is still a want within the market for LTAs, to create consistency and the certainty going forward.
"The market is still telling us this is well and truly what they want, it may not be reflective in their submissions, but they are certainly telling us this is what they want," he said.
"They want LTAs, they want the consistency and the certainty going forward, so we will do another round of consultations to try determine how this will work.
"If we can make this process work in the future, it will give us, our customers and our exporters the certainty to build that capacity."