Grains group puts issues to election candidates

Grains group puts issues to election candidates

Agribusiness
The Interflour joint venture facility in Vietnam has come under the microscope of the Western Australian Grains Group.

The Interflour joint venture facility in Vietnam has come under the microscope of the Western Australian Grains Group.

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Western Australian Grains Group (WAGG) has put forward a range of issues its members want the seven candidates contesting the CBH Group member director elections next month to consider.

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WESTERN Australian Grains Group (WAGG) has put forward a range of issues its members want the seven candidates contesting the CBH Group member director elections next month to consider.

"We (WAGG) don't advocate change for the sake of change, but there is no point in doing the same things and expecting a different result," said WAGG chairman and Pingrup grain grower Doug Smith this week.

Mr Smith said WAGG had put many of the broader issues to CBH director election candidates three years ago but it appeared nothing had changed.

"The core co-operative business of storage and handling to benefit grain growers continues to perform well, but the additional activities that CBH has become involved in are where the problems lie," he said.

"Unprofitable activities are not in the growers' interest because any loss by a CBH business unit potentially takes funds away from storage and handling or reduces rebates returned to growers - which are an overcharge in the first place."

Some of CBH's loss-making investments like its Interflour joint venture, were in effect WA grain growers "subsidising our competitors", Mr Smith said.

There were also issues of "fairness" in some of CBH's operations, including the marketing and trading division's performance - it sustained a net trading loss of $119.3 million last year - which impacted on the group's overall results when not all members participated in those loss-making business sections, he said.

Mr Smith said WAGG members wanted CBH to extricate itself from its Newcastle, New South Wales, port facility and Interflour investments to stop future losses.

"CBH is not using the (Newcastle port) facility and there is substantial ongoing maintenance costs, so there is no benefit to growers," he said.

"It is also time to cut Interflour loose, as CBH did with Bulk West Engineering and the lupin dehulling plant after losing millions of dollars.

"It will be 20 years before the market meets the capacity of the flour mills, we can't continue to prop the mills up for this time period.

"Basically, CBH's financial involvement in Interflour is WA grain growers subsidising our Black Sea grain growing competitors, because that's where Interflour buys its grain from, not from us."

The marketing and trading division should also be "cut loose" and "cross subsidisation" between the marketing and trading division and the storage and handling division should cease, Mr Smith said.

"I would prefer to see the marketing and trading division hived off as a separate co-operative," he said.

Mr Smith pointed out the division's latest loss was preceded by losses in 2015 and 2011.

On CBH's dealings with growers, WAGG believed there was also improvement needed.

"It should cease the arbitrage of farmers by putting two different qualities of grain in the same stack and farmers not being paid for what is sold," Mr Smith said.

For example, with Noodle One and Noodle Two, there could be up to $50 a tonne price difference but they both went on the same noodle wheat stack so it was not clear to growers whether the price they were paid was fair in relation to other noodle wheat prices paid, he said.

Mr Smith said CBH should disclose unsold grain stocks on March 31 to send "clearer market signals" before seeding and it should also switch to a commodity-based rebate system to send "clear transparent signals to growers".

Also, if CBH through its harvest finance and other grower financing programs was to "be in the business of lending money, do it fairly", he said.

"Interest rates to farmers in 2018 ranged from 3.95 per cent to 5.8pc and in 2019 from 3.45pc to 7.45pc.

"It should maintain fair and equitable treatment of all shareholders as per co-operative principles," he said.

Mr Smith said WAGG also wanted CBH to maintain voluntary grower use of its Paddock Planner system - he was part of a protest group which met with CBH chairman Wally Newman and chief executive officer Jimmy Wilson last July which successfully argued for the superseded LoadNet system to be turned back on as an alternative.

"Some growers are concerned about the amount of farm information CBH collects through Paddock Planner, in the long run that may be counter-productive for growers," he said.

"CBH already has a virtual monopoly in WA and through Paddock Planner will have early access to information about the next harvest that other grain buyers will not have access to.

"If you were another grain buyer, why would you bother entering the market in competition with CBH when it has all the cards?

"It (Paddock Planner if all growers are required to use it) could ultimately work against competition in the marketplace."

The final issue WAGG would like candidates to address is removing voting rights from CBH's independent directors.

"It's not just on the CBH board, but across boards generally," Mr Smith said.

"Boards appoint independent directors for their expertise and independent directors invariably vote the same way as the chairman because that's how they keep their positions.

"Removing their vote would return control to growers," he said.

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