CBH should be 'back in the pack'

24 Jun, 2015 02:00 AM
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WA Pastoralists and Graziers Association grains committee chairman John Snooke.
Exempting CBH from certain aspects of the code is essentially giving them a licence
WA Pastoralists and Graziers Association grains committee chairman John Snooke.

THE grain logistics inquiry pledged to maintain a watching brief on the Bulk Wheat Port Access Code of Conduct, but Western Australian Pastoralists and Graziers Association (PGA) grains committee chairman John Snooke predicted it may not.

The Rural and Regional Affairs and Transport References Committee’s report cited Mr Snooke’s concerns about exempting CBH from the code, as expressed at the February public hearing, in Canberra.

“Exempting CBH from certain aspects of the code is essentially giving them a licence to do as they wish,” he said.

“It is rewarding CBH for being a co-operative rather than a corporate - because the Minister favours co-operatives.

“That means the bad behaviour that CBH has done, which has been identified and which the ACCC (Australian Competition and Consumer Commission) has tried to rectify, will continue. If previous history is any example, it will continue.

“If you give CBH a little bit of slack, it will take it. That is our concern. We have put CBH up on a pedestal.

“It is not back in the pack with the other bulk handlers where it should be.”

Co-ops 'fundamentally different'

Mr Snooke’s view was countered by CBH CEO Dr Andy Crane’s evidence to the inquiry.

“More than anything I believe very strongly that the committee, in considering the merits of the exemption of co-operative businesses and the disallowance motion, should remain really cognisant of just why the co-operative exemption was included in the first place,” he said.

“The co-operative and mutual business model is fundamentally different to a corporate model.

“Unlike Australian publicly-listed companies, those assorted foreign owned and controlled multinationals and even privately owned traders, CBH as a co-operative exists solely to create and return value to growers.

“We only have one beneficiary. We are not trying to make money out of one group to provide value to external shareholders.

“We do not exist to make that profit and return dividends to those faraway shareholders.”

The report also said CBH had rejected the characterisation made by some witnesses that it had acted in an anti-competitive manner, as described by the PGA.

“Indeed, the committee received evidence from other witnesses that CBH had not limited competitor access to its ports,” the report said.

“For example, Mr Christopher Aucote, general manager, Bunge Enterprises, told the committee that CBH had not prevented reasonable access.

“The ACCC declined to be drawn on whether the exemption for CBH was appropriate, observing that this was a policy question as to whether WA grain growers, most of whom are members of CBH, are best served by the co-operative or whether they would get a better price for their wheat if there was competition.

“The committee received mixed evidence about whether CBH was acting in an anti-competitive manner, and, for this reason, should not receive an exemption and instead should be treated like a corporation for the purposes of the code.

“On balance, it seems to the committee that the vast majority of grain growers in WA are satisfied that CBH is acting fairly in relation to port access.

“Mr Kim Simpson, Western Australian Farmers' Federation, explained to the committee that on the whole grain growers were satisfied with the access provided by CBH.”

A regulation story

The committee’s report also referred to its previous and relevant inquiries into national grain logistics issues, including one into the Wheat Export Marketing Amendment Bill 2012 - tabled in June 2012.

It also cited another report into operational issues in export grain networks, tabled in April 2012; one into the Foreign Investment Review Board’s (FIRB) national interest test, tabled in June 2013; and an interim report into ownership arrangements of grain handling in Australia, tabled in August 2013 followed by a final report in December 2013.

“The committee is pleased that its work in this area has brought evidence to the attention of the Senate and relevant ministers,” the report said.

The inquiry into Australian grain handling ownership arrangements was pivotal to the Abbott government’s controversial decision to reject the proposed $3.4 billion sale of GrainCorp to US multinational grains and food giant Archer Daniels Midland, shortly after coming into office.

In September last year, Agriculture Minister Barnaby Joyce released the Wheat Port Access Code, which contains a sunset date of October 1, 2024.

The regulation was tabled in the Senate on September 24 – but a disallowance motion to remove the co-op exemption was moved in February this year.

The Senate subsequently debated the disallowance motion on March 4 which was eventually unsuccessful and the co-op exemption remained in place.

The code is intended to ensure bulk wheat exporters have fair and transparent access to port terminal services and trigger automatic repeal of the Wheat Export Marketing Act 2008.

The code removed the requirement for vertically-integrated port terminal operators or wheat marketers to hold access undertakings with the ACCC, the report said.

“Approximately ten port terminal service providers are likely to be impacted by the code and it is estimated that each provider will save approximately $260,000 a year in regulatory costs - compared to costs incurred under the Wheat Export Marketing Act,” the report said.

The committee report said Glencore Grain and Viterra supported decreased regulation as it would enable the market to operate more efficiently and increase industry competitiveness.

NSW Farmers Federation submitted to the inquiry that the code would ensure “contestability in the export supply chain”.

The Victorian Farmers' Federation supported the code, noting that the grain bulk handling market in Australia was “dominated by three bulk handlers” and that monopolies existed in WA and SA where 80 per cent of grain is handled by Glencore-Viterra, which controls 100 per cent of the port throughput and 46pc of SA exports.

“Although there is more competition on the east coast, GrainCorp handles 75pc of the region’s grain, and operates seven of nine bulk grain ports - estimated to be 80-90pc of port throughput,” the report said.

“Emerald and Cargill also own significant receival networks in the eastern states.

“This evidence illustrates the important role that the code will perform in promoting fairness and competition in the industry.

“Mr Rod Sims, chairman of the ACCC, explained that 'some level of regulation is needed to make markets work'.”

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Colin Bettles

Colin Bettles

is the national political writer for Fairfax Agricultural Media
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READER COMMENTS

LC
24/06/2015 5:48:59 AM

Everyone should know and understand that John Snooke's PGA are a small minority in the Australian and West Australian grain Industry and that they are more often than not pushing a view in opposition the vast majority of wheat growers.
Jock Munro
24/06/2015 8:05:20 AM

John Snooke ought to come over to the Eastern States and see his beloved corporates at work as they gouge us from farmgate to the customer's plate. How any WA grower could criticise a world's best co op that delivers a highly efficient and cost effective service is beyond belief. Then again PGA was only ever a Liberal party front and we know how much they (the Liberals) care about farmers' net returns.
GFA
24/06/2015 5:48:33 PM

Yes Jock you are correct and they are the extreme right of the Liberal Party at that.
Luigi
25/06/2015 8:09:17 AM

Try farming over East mr snooke. wa and the cbh is the envy of all

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