Industry backs status quo on port code

30 Jun, 2018 04:00 AM
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The CBH Group has hit back at calls that regulations under the Wheat Port Code – which is under review – should extend to upcountry receival sites and other grains.
The CBH Group has hit back at calls that regulations under the Wheat Port Code – which is under review – should extend to upcountry receival sites and other grains.

EXTENSIONS to the Wheat Port Code put forward in submissions by the Australian Competition and Consumer Commission (ACCC) would cost WA growers up to $18.5 million per year in extra regulatory costs if imposed, according to the CBH Group.

The Department of Agriculture and Water Resources (DAWR) is reviewing the Wheat Port Code this year and consultations on its interim report closed this week.

The code is being reviewed to establish the effect it has had on the industry since its inception in 2014, whether it is still necessary and if it can be improved.

The CBH Group is exempt from three of the six parts of the code at all four ports in WA due to its co-operative structure and its demonstration of sound governance.

Bunge is also exempt from these three parts of the code.

However, the ACCC - which regulates the code - put forward submissions in response to the DAWR interim report, seeking the requirements of the code be expanded to cover all grain and extended to up-country receival facilities.

CBH chief executive officer Jimmy Wilson has spoken out against these submissions and believes extending the code could cost WA growers an additional $10m-$18.5m in red tape each year.

This is made up of $1.5m per year on direct regulatory compliance costs, $8.5-$17m a year on indirect costs driven into the supply chain by additional regulation and the additional expense resulting from the regulatory chilling effect on investment into industry and the supply chain.

He said parties advocating for additional regulation did not provide any evidence of market failure, deficiencies in protections offered by general competition law, or the absence of commercial or industry solutions.

“Obviously as a grower-owned co-operative, our focus is to land WA’s grain in the international market at the lowest cost possible,” Mr Wilson said.

“We don’t feel that unnecessary additional regulation is applicable given that there’s no evidence of market failure and this will burden our growers with unnecessary additional costs and hinder the flexibility that is needed in our network to help it perform.”

The Pastoralists and Graziers Association of WA (PGA) backed CBH’s view and called for unnecessary regulation to be avoided.

PGA Western Grain Growers committee chairman Gary McGill said the advocacy group met with representatives from the ACCC on Monday to gain an insight into perceived advantages of an extension to upcountry receival sites and other grains, but did not see how it would benefit WA growers.

“What we’re concerned about is that not enough account has been taken of the WA circumstance versus the Eastern States circumstance, where we think the ACCC might be placing its emphasis,” Mr McGill said.

“We are an export-orientated State and there’s just one grain handler, while over east they have a multitude of destinations for grain export and their market is very significantly domestic.

“Our submission will be subject to our discussion with the ACCC, but we’re erring on the side of just not wanting any more regulation - regulation is always an impediment.”

Mr McGill said while CBH was a “monopoly” service provider with extensive power in WA, the PGA believed it had not abused its power.

He said the PGA had confidence that the co-operative would work in the best interests of WA’s growers without an extension of the code.

“The slight risk for us is that if we don’t have any more regulation whatsoever and if port codes are not extended upcountry, is if the mainstream operator undertakes bad practices,” Mr McGill said.

“We’re prepared to take that risk, we don’t think that CBH is inclined to really want to do that; if a monopoly service provider is acting improperly, that often means that somebody else can see an opportunity.”

WAFarmers has also thrown its support behind the co-operative and called for it to remain exempt from parts three to six of the code.

WAFarmers Grains Section president Duncan Young said while he had no issue with an extension of the code to include upcountry receival sites and other grains, WAFarmers believed the CBH Group and Bunge should not have to comply.

“WAFarmers is concerned that as an export dominant market, with a grower-owned supply chain, the cost of regulation will only increase the cost to growers, without improving the competitive environment in WA if the code extended to include up-country storage,” Mr Young said.

“Some of the effects include cost of compliance, unknown regulations, complications in system and an unknown impact on-farm.

“Unlike the Eastern States, the upcountry receival facilities in WA work well and we don’t believe WA needs to lumped into the problems South Australia and the Eastern States have.

“WAFarmers do understand and sympathise with SA and Eastern States’ problems, however the inclusion to the code is not warranted in WA.”

The final report will be presented to the federal government by DAWR in August.

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