GPSA concerns over Viterra port plan

09 Apr, 2015 01:00 AM
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The changes could lessen buyer competition for farmers’ grain

THE Australian Competition and Consumer Commission (ACCC) decision on whether to allow Viterra to create long-term agreements (LTAs) for shipping access at its six South Australian grain ports will displease at least one section of the industry.

On one hand, Viterra claims the LTAs will benefit the South Australian grains industry by providing certainty to export customers, end-use customers, growers and Viterra.

However, chairman of Grain Producers South Australia (GPSA), the State’s peak grains organisation, Garry Hansen, said his organisation preferred retention of the status quo, where there is an annual auction of capacity on a first come, first served basis.

“The current system is working well for growers,” he said.

Need for certainty: Viterra

Viterra’s general manager of operations, Tim Krause, said the decision to make the application to change the port arrangements came after discussions with stakeholders.

“Feedback from our export customers is that they want the certainty of longer-term contractual arrangements and the flexibility of commercial negotiations in preference to the current auction system,” he said.

He disputed Mr Hansen’s interpretation of the impact of LTAs on growers.

“LTAs will provide benefits to South Australian growers, providing greater ability for multiple exporters to plan longer-term export programs from South Australia and therefore be active buyers of South Australian grain.”

Critically, Mr Krause said the changes would allow more scope for front-end shipping over harvest and into the first half of the calendar year, when demand is highest for Australian grain.

But Mr Hansen said the changes could lessen buyer competition for farmers’ grain.

“It certainly may be the case for some of the larger buyers that these LTAs are a good idea, but from our viewpoint, we have concerns about the impact these deals will have on competition.”

Across the nation, farmers have been the beneficiary of short-term price spikes caused when grain exporters have to accumulate sufficient grain to put together a shipment to honour a shipping slot they have purchased.

Viterra has said smaller exporters will be looked after under its proposed new system, saying there is scope to lock in smaller amounts of capacity.

Mr Krause said a longer-term view would also allow the company to make better strategic decisions regarding its supply chain assets, which include all the SA grain ports and the vast majority of its upcountry grain receival network.

He said the end goal of more capacity was a win for all sectors of the industry.

“We are working towards increasing the annual shipping capacity for exporters to ten million tonnes,” he said.

“During March, Viterra executed 838,821 tonnes of grain exports, the second-highest month of export volume through Viterra’s ports on record, highlighting our focus on meeting peak shipping demand when it is required.”

Under Viterra’s plan, it would allow third-party exporters to apply for long-term access to its wheat port terminals.

Terms of between two to five years have been proposed.

There will be a mix of short- and long -term capacity allocated, to meet seasonal demand.

A minimum of 500,000 tonnes will be allocated in short-term capacity each quarter which will be available on a first come, first served basis.

The ACCC is seeking submissions on the impact the proposal is expected to have.

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FarmOnline
Gregor Heard

Gregor Heard

is the national grains writer for Fairfax Agricultural Media
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READER COMMENTS

Jock Munro
9/04/2015 5:23:06 AM

Seems as if GPASA are having some trouble with the mega merchants! This body and SAFF Grains were in favour of wheat deregulation - are the crows coming home to roost?!
competition
9/04/2015 8:40:04 AM

I can see gary Hansen's point of view but there does seem to be a need for a bit of both long term contracts plus short term auction processes. ensuring vibrant competition is still the highest priority . Jock's mega merchants will always try to improve their positions but equally the fringe must always be encouraged to participate in a fair and regulated sector of the industry.
Percy
9/04/2015 12:08:52 PM

Viterra storages look like someone owns them or has pride in them! Take a look at Graincorp storages in Dunolly and the neglect is obvious. Maybe we should have sold out when we had the chance. Or maybe Graincorp need a shake-up in the management.
Jock Munro
9/04/2015 6:54:29 PM

competition, the only real competition is growers competing against each other for a price. In the real world, merchants are in the business of sourcing the cheapest grain for end users. You are getting the idea though - the big and powerful are the real winners in this game. SAFF Grains and SAGPA must be disappointed that the mega merchants are not playing ball after all that they did for them. It will only get worse. It was a big call to expect that giving away grower control would be in producers' interest.
Geronimo
15/04/2015 11:35:24 AM

Where is the competition Mr Hanson refers to? Up-country buyers simply clip-the-ticket on the way through to the same handful of exporters.

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