Port code co-op exemption upsets AGEA

12 Sep, 2014 07:15 AM
The proposed exemption creates uncertainty around future processes, in particular, in WA

THE Australian Grain Exporters Association (AGEA) has expressed “serious reservations” about the government’s proposed mandatory code of conduct for managing port access on bulk wheat exports.

With the September 30 deadline looming, Federal Agriculture Minister Barnaby Joyce told Fairfax Agricultural Media this week the code had been agreed, with Small Business Minister Bruce Bilson.

The regulations are expected to be signed off at the September 18 Federal Executive Council meeting to achieve the code’s implementation deadline of October 1.

Mr Joyce said the final code would contain three key elements: a three-year review rather than a five-year sunset clause; an exemption for co-operatives but only in their own market; and growers having “a seat at the table” to ensure their involvement in arbitration on any disputes.

However, the AGEA expressed concerns about the government’s lack of commitment to move to full market deregulation by excluding a five year sunset clause and giving CBH special treatment in Western Australia.

In a statement, AGEA said a draft code of conduct with a sunset clause, was “a tool to provide an orderly pathway to deregulation” of the national wheat export market.

But AGEA now has “serious reservations that recent proposals to remove the sunset clause and to exempt grower cooperatives will seriously disrupt such a pathway”.

AGEA executive officer Rosemary Richards said her group’s members don’t support a code that does not include a meaningful sunset clause.

Ms Richards said full deregulation was supported by industry but the code‘s proposal for a “co-operatives exemption... is likely create a rocky road for the foreseeable future”.

“The code includes a set of criteria for port terminal operators to apply for exemption,” she said.

“These are in line with competition principles and provide a consistent set of rules for all parties. The regulation of port access rests on competition principles, not on the ownership structures of the port operators.”

Ms Richards said those two elements of the code represented “a significant policy shift and one that the industry and community should have the opportunity to debate”.

She said historically the federal government had chosen not to exempt co-operatives from regulation, except in the areas of taxation. Nor has the government tended to impose regulation with the effect of treating one state, in this case Western Australia, differently from other States, she said.

“It would be unusual for the government to do so now, without full discussion and consensus,” she said.

“The transition mechanism provided by the draft code was important to provide the opportunity to develop appropriate mechanisms for allocation of capacity in a deregulated market.

“AGEA was confident that as the industry evolved from the Code to full deregulation that the industry would commit to a set of processes that support best practices in a deregulated market.

“However, the proposed exemption creates uncertainty around future processes, in particular, in WA – the only port operator that’s currently a co-operative is CBH.”

AGEA’s membership comprises powerful international grain exporters like Glencore, Cargill, Bunge, Viterra and Louis Dreyfus but WA co-operative CBH and east coast grains giant GrainCorp are not members.

GrainCorp manages an estimated 75 per cent of the east coast grain crop controlling the major port facilities, while grower-owned CBH is WA’s dominant player, with port assets at Albany, Esperance, Geraldton and Kwinana and 200 grain receival sites.

Both bulk handlers are facing emerging competition with Bunge establishing new grain export facilities at the Bunbury port in WA and the recently opened Newcastle Agri-Terminal in NSW comprising multiple owners, including CBH, to compete against GrainCorp.

Ms Richards said many of AGEA’s members had made significant investments in WA to support their export marketing activities.

She said these investments have been based on an expectation that they would have reasonable and fair access to shipping stem.

But she said the proposed policy or code placed uncertainty around future processes.

“The unintended effect of this policy may be to reduce competition for growers’ grain in WA as some exporters may not be sufficiently confident in their ability to execute grain exports and therefore participate in the market, thus leading to lower prices for growers,” she said.

“Ultimately, AGEA would like to see the industry move to a competitive market where regulation is not required for any port operator.

“These proposed amendments would not be supportive of the industry moving towards full deregulation under a smooth transition that delivers best outcomes for exporters and growers.”

AGEA’s members are active in grain accumulation, storage, handling, processing and marketing and have been long-term supporters of market deregulation, since forming in 1980, including lobbying heavily to remove the AWB monopoly on bulk wheat exports.

The port access code is seen as the final vestiges of the AWB single desk monopoly and must be implemented to remove the Wheat Export Marketing Act and the measures it implemented to assist with transition to a deregulated market six years ago.

However, east coast growers have argued the market is not yet mature enough to handle full deregulation, expressing concerns about limited competition.

In contrast, WA has supported full deregulation but concerns have also been raised about CBH’s market power and dominance.

The Act has a provision to either remove the current access arrangements for bulk wheat exports or for the legislation to be entirely scrapped - but only if a mandatory code of conduct for all grain export terminals is in place by October 1 this year.

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Jock Munro
12/09/2014 9:07:15 AM

There is one solution for Ms Richards mostly foreign merchant masters-they can go back to where they came from but of course they wont because they have almost complete control of Australia's wheat industry. Well done Minister Joyce for standing up for growers.
Philip Downie
12/09/2014 9:20:39 AM

I presume when Rosemary mentions industry she means AGEA members, who are not the "industry". They already control the "standards" for export.
17/09/2014 5:54:25 PM

There is an additional suggestion for AGEA Jock. They can put up capital to buy their access to the grain silo and terminal infrastructure, paid for by growers before they start to tell us all about their right of access. After all, they are mainly just speculators and middlemen just looking for a free ride. Who did they ever give a free ride to?


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