Code exemption helps growers: Joyce

24 Sep, 2014 02:00 AM
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There are going to be negative consequences of this CBH exemption, there’s no doubt about that

CONTROVERSIAL negotiations to develop a mandatory code of conduct governing port access arrangements for bulk wheat exports have been finalised, but the news has generated mixed reaction amongst farming groups.

Federal Agriculture Minister Barnaby Joyce and Small Business Minister Bruce Billson made a formal announcement late last week ahead of the code’s September 30 implementation deadline.

As revealed by Fairfax Agricultural Media, the regulations will contain three key elements that have been hotly debated in recent weeks in light of Western Australia’s strong push for total deregulation of wheat exports.

The code will contain a three-year review rather than a five-year sunset clause; an exemption for co-operatives (namely WA’s dominant CBH), and growers having a “seat at the table” during dispute arbitration.

'A massive step forward'

NSW Farmers Grains Committee chair Dan Cooper saying the final code wasn’t perfect but was “a big improvement on what we had before”.

“It’s a massive step forward,” he said.

The news was welcomed by WAFarmers but the WA Pastoralists and Graziers Association criticised the sunset clause omission and CBH exemption.

PGA Western Grain Growers chairman John Snooke said the government “denied” stakeholders an opportunity to comment on the co-op exemption in a draft version of the regulations.

Mr Snooke said the code’s power structures had effectively been reversed, with CBH given an exemption in the WA market where one company exerted the most monopolistic control.

“It’s about the market distortion this creates,” he said, warning the exemption would reduce competition in WA where CBH dominates at four key ports in Kwinana, Geraldton, Albany, and Esperance. Port access is a key issue in WA as 95 per cent of the annual crop is exported.

“If you were going to have a code anywhere, it would be over the WA market and not the east coast which has more competition.

“There are going to be negative consequences of this CBH exemption, there’s no doubt about that.”

Checks and balances

In contrast, WAFarmers claimed to have helped boost farmgate returns by contributing to successful government lobbying to exempt grower co-operatives from port regulation.

WAFarmers Grains Council president Kim Simpson said his group would have preferred to see a repeal of the Wheat Exporting Act 2008.

But second preference was to have co-ops exempted from the code to reduce supply chain costs - “and we have been successful in achieving this”.

In a statement, CBH said it wasn’t exempt from the entire code but it appeared likely it would qualify for exemptions from certain parts of the code.

A spokesperson said that in effect would reduce the cost of regulation and put CBH on the same level of regulation as the multinational company it currently works alongside in WA.

“The Minister makes the determination but can also revoke the determination, so there are checks and balances in the code to ensure continued fair behaviour by all grain port operators,” the statement said.

“The Australian Competition and Consumer Commission (ACCC) may also exempt port operators from the Tier One requirements of the code which is an additional balance.”

Best result overall, says Joyce

Mr Joyce said the code would now provide certainty to Australia’s $6.8 billion wheat export industry.

“We had to line up both those on the east and those on the west and the ACCC (and) that took a bit of work, but we have got there,” he said.

“I think every person, except possibly one group, is pretty well satisfied with the result that has been delivered.”

Mr Joyce said the code was designed to protect against monopolistic behaviour at grain export ports causing increased supply chain costs, which would then be forced back onto growers.

“Of course this becomes a great detriment to getting a fair return back through the farmgate, so you’ve got to have a form of transparency to deal with this,” he said.

“Now, if the person is not in a monopolistic position and there’s a real market pressure there then I’ve got no real interest in being in that space. I want to be as light in that space as I can possibly be.

“(But) if you’re a co-operative and you’re supplied predominantly by your own growers than there’s an extremely good reason for you to be exempt, because any benefaction of that monopoly position goes back to the growers.

“If you’re not owned by the growers and you have a monopolistic position which gives you the capacity to exploit growers and send the profits back overseas then we do have a regulatory right.

“And it’s nothing more different than what they do in the telecommunications industry, what they do in the electricity industry with poles and wires – anywhere there’s crucial infrastructure and a monopolistic position the government has a regulatory role.

“I’ve never heard anyone (complain) about the government’s regulatory role in the telecommunications industry.”

Mr Billson said having the code in place by October 1 would trigger the automatic repeal of the current wheat export legislation.

“This is a significant step towards free and open competition in the wheat export industry, which is a longer-term goal to which we have committed," he said.

"Importantly, though, further reforms to the nature and extent of regulation of the sector will take place in a staged, methodical way, to ensure that all industry participants have the opportunity to have their voices heard and that changes are in the broader national interest.”

Just a 'political fix'?

Shadow Agriculture Minister Joel Fitzgibbon said the code was “a clever political fix but "bad policy”.

“In a classic 'Friday afternoon drop', the Abbott government has announced it will proceed with Labor’s Code of Conduct but will exempt the country’s biggest monopoly and stop the path to full deregulation,” he said.

“It’s a political fix designed to address the fight between the government’s east coast and west coast MPs and Senators.

“The losers will be the growers and Australia’s international competitiveness.

“The policy will stifle competition, distort the market and will result in some parts of the country and some companies being regulated and others not.”

Mr Cooper said critical commentary the co-op exemption had failed to consider was the difference between market structures.

He said while WA’s grains market was dominated by a grower-owned co-op in CBH, the east coast market was controlled by companies that don’t return profits directly to growers.

Mr Cooper said WA had “the perfect market structure” where the co-op CBH gave growers ownership of the grains logistics supply chain.

“With a co-operative, the benefits of having that monopoly position in the market should flow through to the growers and if they’re not happy with anything that’s happening they can take it up with CBH directly and politics doesn’t need to get involved,” he said.

Disallowance still on the table

NSW Liberal Democratic Party Senator David Leyonhjelm is maintaining his threat to introduce a disallowance motion against the finalised mandatory port access code.

But the eleventh hour political manoeuvre appears unlikely to succeed with the Coalition and Greens expected to vote down such a motion if it’s introduced.

Senator Leyonhjelm flagged the disallowance in a strongly worded article published on FarmOnline last week.

The article took a heavy swipe at the code’s proposed inclusion of an exemption for CBH and threatened to introduce the disallowance motion when parliament returned this week.

“If any area of the wheat export market requires protection from monopoly practices it is WA,” he wrote.

“The regulation implementing the code will be a disallowable instrument.

“Perhaps the Senate won’t be as enthusiastic about agrarian socialism as the Minister.”

Disallowance motions can be moved up to 15 sitting days after regulations have been tabled in the Senate.

It’s understood government Senators would be unlikely to cross the floor and vote against an agreed regulation by voting with the disallowance motion, but WA Liberals may well express sympathetic views towards deregulation during debate.

WA Greens Senator and agriculture spokesperson Rachel Siewert said her party was unlikely support such a disallowance motion.

She said the mandatory code was one of the outcomes the Greens arrived at through the last round of wheat negotiations back in 2012.

“We don’t believe we’re in a position yet where we could do without the code,” she said in a statement.

Leyonhjelm looking for crossbench support

However, Senator Leyonhjelm said he was continuing talks on his disallowance motion and believed he may yet be able to persuade the Greens and Labor to vote for it.

The exemption, he said, was a variation on policy agreed to by the Greens and Labor which launched the code development process two years ago via amendments to legislation designed to repeal the Wheat export Marketing Act 2008.

“I don’t think this is a done deal by any means,” he said.

“Barnaby Joyce has been a Senator so he should be more aware of how the Senate works.

“I’ve spoken to Joel Fitzgibbon (Shadow Agriculture Minister) and he agrees an exemption for CBH, which has the most monopolistic power, is bizarre.

“And the justification given for the exemption - that CBH is a co-operative and therefore profits go to growers and not multinational grain traders - is not good enough.”

WA Liberal Senator Dean Smith said Senator Leyonhjelm’s article detailing CBH's exemption from the final code was “a refreshing independent perspective and reflection on the current debate”.

“The comments that Senator Leyonhjelm makes about CBH and the risks of engaging in monopolistic behaviour deserve closer attention,” he said.

Mr Fitzgibbon said if the disallowance came forward he would need to consider and then discuss it with his ALP colleagues.

However, he also stressed a successful disallowance would mean the “current weight of regulations” would remain.

“In my view that’s something that very few in the industry or the sector would consider a desirable outcome,” he said.

“(But) the government is really all over the place with deregulation and needs to very quickly build some confidence and certainty in the industry because no one seems to support the confused pathway the government has taken.”

FarmOnline
Colin Bettles

Colin Bettles

is the national political writer for Fairfax Agricultural Media
Date: Newest first | Oldest first

READER COMMENTS

seethelight
24/09/2014 1:24:06 PM

Barnaby Joyce has just granted CBH a license to run a quasi monopoly with advance dispensation from the Trade Practises Act for monopolistic behaviour and pricing.CBH should be well satisfied with the millions they have spent buying off politicians.This isn't going to end as well as some farmers think.
Jock Munro
24/09/2014 3:23:29 PM

So you would rather have the middlemen merchants gouging you seethelight!?
Interested Party
25/09/2014 2:04:33 PM

I have been doing a little research and reading over the last few days as promised. CBH's own State Act, The Bulk Handling Act 1967, states - "Subject to this Act and the regulations, the Company shall allow a person, on payment of the prescribed charges, the use of any bulk handling facilities and equipment controlled by it at ports in the State." In other words this legislation prohibits them from restricting access to all and sundry. An interesting fact for those discussing CBH's "free kick" under this new Code.
mark2
27/09/2014 8:50:45 AM

I really don't understand the problem for the westies. If 95% of your wheat is exported and through a coop owned by the people who grow the grain , how is it possible to achieve a more efficient arrangement than that? The Coop has a mandate to distribute the earnings to the members and also reinvest in its infrastructure. What makes people think that bringing in other players is going to change that equation to the benefit of growers? It hasn't really worked here in the east. Any reduction in handling has been swallowed by freight increases and on farm storage costs

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