Debate over wheat GMP

29 Apr, 2013 02:00 AM
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Calingiri wheat farmer and long-time grains industry lobbyist Gary McGill.
Calingiri wheat farmer and long-time grains industry lobbyist Gary McGill.

THE WEST Australian government has form on the board when it comes to backing a guaranteed minimum price (GMP) for wheat.

But Calingiri wheat farmer and long-time grains industry lobbyist Gary McGill says the whole truth behind the Lawrence government’s commitment to deliver a $150 a tonne GMP for struggling WA growers more than 20 years ago, hasn’t been accurately recorded and must be understood in light of current deliberations.

An industry crisis meeting in Merredin last week passed 12 motions to support struggling eastern Wheatbelt farmers, including demanding the federal government instigate a $300/t GMP on wheat, “or some other means to ensure sustainable profitability”.

The meeting attended by 900 farmers also urged the WA State government to effectively underwrite a scheme - to be implemented by May 1 - to safeguard against a substantial farming collapse in the region.

It’s estimated about $200 million dollars is needed to provide immediate funding for debt-ridden farmers who can’t afford to plant a crop this season.

According to a blog from Curtin University political analyst Professor David Black, the then WA Premier Carmen Lawrence faced similar pressures in March 1991 to back a $150/t GMP.

Protestors organised a truck blockade of several access roads to Perth and dumped wheat at an unmanned US tracking station as a protest against US government subsidies to their wheat farmers, he wrote in an online blog on the Lawrence government.

“The Premier, acting on a taskforce recommendation, set a guaranteed price of $150 a tonne,” he said.

“The decision was criticised by federal Labor and non-Labor politicians and several state Premiers but welcomed by the farming community.”

In April 2005, a WAFarmers grain conference motion called on the WA government to introduce a $220/t GMP for the 2005/06 wheat season but it was narrowly defeated.

The motion was presented by Newdegate farmer Bob Iffla on behalf of the Corrigin-Lake Grace zone, who also raised the $300/t GMP proposal at last week’s Merredin meeting.

In 2005, he attributed the farming crisis to an astronomical increase in fuel, fertiliser and finance costs, making the cost of wheat production at least $220/t.

Speaking for the motion at the time, he also referred to the Lawrence government’s $150/t GMP saying fertiliser sales were rekindled to farms immediately after the Premier’s decision.

Speaking to Fairfax Agricultural Media, Mr Iffla said his $300/t GMP proposal would help inject immediate confidence into the local industry again and stimulate much-needed bank lending.

He said the Lawrence government’s $150/t GMP pledge in 1991 helped inject confidence into the industry at a time when farmers were suffering from the exact same issues they’re now facing - strained economic viability from the compound effects of several poor seasons, combined with high input costs and low grain prices.

The Lawrence government also gained a lot of credibility with farmers and rural voters for making the commitment; many who didn’t traditionally vote Labor, he said.

Mr Iffla said in 1991, farmers needed to grow wheat at 0.6/t per hectare and sell for $150/t to cover their costs but they now need to harvest 1.2t to 1.3/t of wheat per hectare and sell for $300/t.

He said the Lawrence government didn’t have to pay out on the 1991 commitment because the wheat price went above $150/t after harvest.

But Mr McGill said the actual level of support provided by Ms Lawrence – herself a wheat farmer’s daughter – had suffered historical misunderstandings and subsequently been overstated.

He said the “catastrophic” collapse of the world wheat price in 1991 - to price levels equating those experienced during the great depression – resulted in the WA Rural Action Movement’s formation and subsequent protests of civil disobedience.

As the Pastoralists and Graziers Association’s grains committee chair at the time, he stood on the steps of Parliament House in Perth during the Movement’s biggest protest and heard exactly what Ms Lawrence said in backing the $150/t GMP.

He said he was also privy to some of the behind the scenes political machinations leading up to the announcement.

Then Agriculture Minister Ernie Bridge had conducted detailed market analysis as part of the government taskforce and calculated that the wheat price would exceed $150/t post-harvest, he said.

He said when Ms Lawrence committed to the guaranteed $150/t GMP, “she knew damn well that she’d never have to cough up the cash”.

Mr McGill said the taskforce then found out that the WA government was unable to deliver a GMP and only the federal government could establish such a mechanism.

The taskforce spent months seeking an alternative mechanism to deliver the GMP and eventually settled on subsidising a portion of the CBH FOB wheat price, to make up any shortfall to reach the $150/t GMP.

“By the time they eventually found a mechanism to deliver this quasi promise the wheat price was well over $150/t,” he said.

“It was an absolute nonsense proposition, just like this $300/t is now.

“The government damn knew that it was absolute nonsense too but after (Carmen Lawrence) made the announcement and said, ‘yes we’ll do it’ all the angry farmers packed up their protests signs and went home.”

Mr McGill said the 12 resolutions passed at the Merredin meeting were “complete nonsense, straight out of the Rural Action Movement’s play-book”.

He said rather than adopting “protectionism” to force taxpayers to subsidise wheat farmers, he said a self-help proposition being pushed by the PGA, was for CBH to be privatised to give growers access to “the golden egg”.

He estimated CBH could be valued at $4 billion to $6 billion and various equity distribution methods could see hundreds of thousands, even millions of dollars in equity paid out to individual growers.

Mr McGill said the WA government, Premier Colin Barnett and Agriculture Minister Ken Baston had been “formally advised” of PGA’s self-help proposition.

He said WA growers now had to consider that option, rather than the 12 options that were raised at the Merredin meeting.

PGA wasn’t invited to attend the meeting and propose its self-help solution around CBH equity “because they didn’t want to hear it”, he said.

Mr McGill said he didn’t agree with the current “bank bashing”, saying the banks had probably been lending money over the past five years when they shouldn’t have.

“The banks didn’t force these people to borrow money and probably should have said no five years ago to the same people who are screaming at them now,” he said.

“I’ve got no sympathy whatsoever, to what’s going on out there, especially if they don’t take the self-help option.”

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READER COMMENTS

torobrook
30/04/2013 6:34:42 AM, on Farm Weekly

If its too hot in the kitchen Bob, then get out. Your agrarian socialism just doesnt cut it any more.
Owen Hall Waitavalo Farms Narembeen
30/04/2013 8:20:30 AM, on Farm Weekly

As you know Gary, there is no such thing as a free lunch, the cash injection you speak of will come from somewhere, someone will pay. I suspect the principal contributors will be the farmers who remain in the industry and arguably those of the distant past..
fred
30/04/2013 9:52:05 PM, on Farm Weekly

We used to have a GMP but those who new better decided we didn't need it.
Deregul8
2/05/2013 6:43:01 AM, on Farm Weekly

Well there's your $300 folks! No need for a GMP. How many are actually committing tonnage to it?
x
2/05/2013 7:30:56 AM, on Farm Weekly

Yes I am committing ,BUT you cannot commit 100% of probible production without risk. Price near harvest may be a different story

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