Thumbs up for GLA

25 Jan, 2005 10:00 PM
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THE benefits of the controversial Grain Licensing Authority (GLA) to WA outweigh the costs, according to an independent review into the authority by accountants RSM Bird Cameron.

The review, commissioned by Agriculture Minister Kim Chance last September, canvassed the opinions of industry representatives including Agriculture Department officials, the GLA board and management, Grain Pool, WAFarmers, PGA, Australian Grain Exporters Association, special export licence holders and graingrowers.

Mr Chance said the report supported the continuation of the GLA and suggested the grains industry had benefited from its operation.

The report analysed Grain Pool markets and concluded it had developed important and reliable markets.

"But there are few situations where it can be argued that they have any real market power in that restricting their supplies to the market will increase prices," the report said.

It said the significant advantages held by the Grain Pool suggested the future loss of market share would be small unless there was a significant body of disgruntled growers already seeking a new buyer, or a new trader was able to offer a significantly better service of prices than the Grain Pool.

"There does not appear to be such circumstances and hence the Grain Pool is unlikely to lose a large market share unless it fails to provide similar services to a new entrant," the report said.

In its submission to the review, the Grain Pool said it had lost about $8.5 million in foreign exchange opportunities for 2003-04 pool participants due to uncertainty in volumes of grain issued under special licences.

"And with the Australian dollar strengthening the 2003-04 pool, participants ended the year with a much worse exchange rate than had this additional uncertainty not been in the market," according to the Grain Pool's submission to the review.

But the report did not put a value on what it called this indirect cost in its analysis due to a number of factors including:

p The major determinant of the uncertainty of volumes is seasonal conditions and not GLA licensed sales

p The management of foreign exchange is a risk management issue

p In differing circumstances, foreign exchange rate movements may have resulted in a gain

p It had not been privy to the basis of calculation of this estimated cost.

The report authors were not convinced that the issuing of special licences had reduced prices available to the Grain Pool in key markets, other than price changes attributable to world market trends.

"It is our opinion that we have not been provided with any conclusive evidence of any significant damage inflicted by the Grain Pool by the issue of licences in 2003-04," the report said.

Mr Chance said with only one harvest year of operation, the statistics on the impact of the GLA were limited, making the task difficult for the consultants.

"They only reflect the seasonal production and grain market circumstances prevailing for 2003-04," Mr Chance said.

Stakeholders have until March 31 to comment on the report to the Agriculture Department's Rob Delane before changes to ministerial guidelines are recommended.

The review was commissioned to examine the issuing of special export licences and the effect they had on the main export licence holder's operation.

It identified and, where possible, quantified the benefits and costs to industry and WA associated with the operation of the GLA and the issuing of licences.

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