Grain deregulation doesn't pay

15 Jul, 2015 02:00 AM
Industry players clearly need to do a better job defining the benefits they offer growers

TWO thirds of grain growers say their returns are no better - or are worse - than they were before the export wheat industry was deregulated seven years ago.

A national survey of grain-only and livestock and grain producers, typically harvesting 1000 tonnes to 3000t annually, has also found the jury was still out on whether today's extra buyer competition had been a helpful development for busy croppers.

"There's more competition for farmers to sell to, but most responses about the deregulated grain market environment tend to lean more towards the negative," said survey co-ordinator with specialist agricultural market research business KG2, Robert Woods.

Concerns about more marketing risks and "more paperwork and confusing selling options" were among the key factors causing unease among farmers.

The KG2 research found only 27 per cent of growers believed their total grain returns were better than they had been when the wheat export single desk existed, while 49pc said they were the same and 17pc believed the deregulated marketplace had cut their earnings.

Unsure about market's impact

Sydney-based Mr Woods said 7pc of respondents were unsure about the current market's real impact on returns, partly because the number of marketers and marketing choices had increased significantly, making selling options more confusing.

He said grain growers felt more people were playing in the marketing space as "middlemen", potentially taking "a piece of the pie which previously came back to the farm".

About 13pc of respondents also highlighted concerns about the current grain marketing environment being more risky, prompted in part by occasional reports of marketing companies going broke or being particularly slow to pay for grain purchases.

Some insolvencies in the past few years have had significant flow-on consequences across the trade, leaving other smaller grain merchants without income and also facing bankruptcy.

Yet despite southern Australia bearing the brunt of several notable grain company failures last year - including South Australian-based Sapphire Grain which traded in four states, and Victoria's Convector Grain and One World Grain - the survey found farmers in Victoria were less inclined to be concerned about the risks in today's grain industry.

Mr Woods said KG2's survey of 450 growers stripping more than 500t annually was prompted by similar research last year focused on the rapid increase in on-farm storages, which reflected growers' desire to have more control over their grain selling options.

Marketing options clouded

However, that research also found while growers could be more selective about when and how they sold after harvest, it was not always easy to work out the best marketing option.

This probably explained why farmers were increasingly likely to feel the need "outsource" today's marketing decisions to brokers or other specialists.

"After rigorously fine-tuning and recording their crop chemical and fertiliser and other agronomy needs, they run out of time and energy to adequately deal with the complicated market options available," he said.

The findings on post-deregulation returns attracted similar responses Australia-wide, regardless of a farmer's harvest volumes or enterprise, although SA producers were more uniform in their belief that grain earnings had generally not changed greatly.

"In many respects there were some surprises for the grain trade - industry players clearly need to do a better job defining the benefits they offer growers," Mr Woods said.

He said 60pc of farmer respondents agreed there was more competition to buy their grain, but 11pc of them felt their returns were less, and 15pc believed "more middlemen in the market are reducing my returns".

Almost 10pc were confused by today's selling procedures and options and 5pc resented the extra paperwork associated with trying to market grain for a fair return.

As something of an indicator of a preference for straightforward marketing options, the most popular sale decision tended to be cash on delivery, or cash payments for sales made after grain had been temporarily stored at harvest.

However, respondents highlighted up to 13 different marketing strategy options for their wheat, barley, canola, sorghum and pulse crops, with NSW having the most choices and buyers.

Mr Woods said 31pc of farmers made selling decisions at least six months before harvest, while 19pc of decisions were made on a week to week basis and 10pc on a monthly basis.

About 10pc of growers were not sure about, or not committed to, any specific selling timeline.

Andrew Marshall

Andrew Marshall

is the national agribusiness writer for Fairfax Agricultural Media
Date: Newest first | Oldest first


15/07/2015 4:51:42 AM

Well, well, well here is the independent proof, that most farmers are now worse off on grain income without the Single Desk. And most believe it is because there are too many middlemen taking a slice of the growers incomes. Many of us knew that anyway while the handful of free traders and trade biased commentators tried to pull the wool over our eyes.
Mark Hoskinson
15/07/2015 6:52:26 AM

The loss of the Golden rewards, the dramatic increase in freight rates and the loss of the Industry good functions alone has cost us a hell of a lot of money. Combine that with the foreign millers complaining about the quality they are receiving after the traders have blended it will cost us even more in the long run. Typical of Government intervention into market systems they have no idea about and used Australian wheat growers as Political toys. The only option for East coast growers is to form a sister Coop to CBH as in the West Growers have survived Deregulation because of CBH.
Jock Munro
15/07/2015 6:59:53 AM

And grain deregulation or the transfer of marketing control to merchants (most them foreign) was never going to pay. This is a good article and long overdue. However, there needs to be mention of the negative affect that deregulation has had on the quality and relative vale of our grain.
15/07/2015 7:26:09 AM

Jock you need stop posting your dribble. Quite frankly it's just embarrassing for you.
15/07/2015 7:26:12 AM

Didn't take long for the flat earthers to emerge this morning. Ho Hum.
15/07/2015 7:34:30 AM

Well blind Freddy knew it was not going to work. The list goes right back to Chicago ? No point in recriminations . It will take time to fix the ill feelings. A good leader will draw ALL the growers together and direct their efforts to a more equitable system. The smart Alex grain buyers need to be kept well out of the way with their false promises.
15/07/2015 8:05:34 AM

To all the growers reading this; If you were to compare domestic up country prices with FOB prices then you would find that this spread has narrowed since the removal of the single desk. This is a direct result of increased competition and increased infrastructure spending. The single desk didn't ever had any influence on the international grain price (CBOT) and reintroducing a single desk will not change this scenario. The single desk did promote inefficiencies in the cost of the domestic supply chain, and it did smooth out some peaks and troughs in farmgate prices.
Jock Munro
15/07/2015 8:24:52 AM

Merchant, Then why are overseas millers telling us that our grain has lost quality and is worth less? Why are we moving out of premium markets? Why are grower's costs increasing? This new scenario is nothing more than a merchant's picnic and you have undone sixty years of premium marketing in six years.
15/07/2015 8:54:13 AM

@GFA: you need to read things more carefully. Only 17% are worse off, 49% the same, and 27% better off. So, significantly more gainers than losers. There is no reform where everyone gains.
Miss J
15/07/2015 9:11:07 AM

The results being reported: - 27pc growers thing their total grain returns are BETTER and only 17pc worse - there is only 7pc of growers unsure about the real impact on returns. - only 13pc concerned about current grain marketing environment - so that must mean that 87% aren't (or don't have an opinion). - 60pc! said there was MORE competition for their grain only 11pc less
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