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                     PUBLIC MEETINGS


     THURSDAY, 1 MARCH 2007

     MR RALPH: Good morning, ladies and gentlemen and welcome to this
     meeting to discuss the wheat export marketing arrangements. Let me first of
     all introduce my colleagues: on the far left, Mike Carroll; next to him, Roger
     Corbett; on my right, Peter Corish; and at the other end, Russell Phillips, who
     is the head of the secretariat servicing the committee.

     You're all aware that the Government has announced that it is reviewing the
     arrangements for the marketing and sale of wheat overseas and it set up this
     committee to ascertain the views of growers. Obviously the large players and
     the various interests will be lobbying the Government in the lead-up to its
     announcement about what it intends to do, but our task was to go out and seek
     to find out what the views were in the areas where wheat is grown.

     We have completed the swing around the country, visiting 24 country towns,
     and also a meeting in Perth. This part of Victoria obviously is not quite as
     interested in wheat marketing because Bendigo was the smallest meeting we
     had, where there were only 60 there. We normally had somewhere between
     150 and 250, and Melbourne is about the same as Bendigo, by the looks of this.
     It may not even reach Bendigo's status. What I have been - - -

     MR CORBETT: He can only say that because he's a Melbourne man.

     1.3.07                               P-1
MR RALPH: What I have been stressing is that it's not our task to make any
recommendations about what should happen with the marketing of wheat. Our
task is to get out and find out what the growers' views are and then to feed that
into the Government as an input into its deliberations about what it will do
about the marketing of wheat overseas. We have to report by 30 March.

We have two mechanisms for obtaining that information. One is the public
meetings, of which this is the last, and the other is by way of written
submissions, and more than 1200 of those have been received and they have to
be analysed to see what the interests are.

In order to make the process as transparent as possible, all the meetings have
been recorded and they will be available for public examination at a later time.
The submissions also are on the public record. We have said that if we get any
that request anonymity, we will look at the reasons. If we think the reasons are
satisfactory, or reasonable, then we would extract as much as we could for the
public record, without disclosing the author. If we think there's not a good
enough reason, we would send them back and request them to consider putting
them on the public record.

The way we have conducted the meetings is to ask for people, when they enter,
to indicate whether they wish to speak. If you haven't indicated you wish to
speak, that won't preclude you from speaking, because the process we use is to
go through the list of people, it usually takes up to 50 per cent of the meeting
time, and then we ask anybody else who would like to speak to come to the

Today, because of the number of speakers, we will allow six minutes per
speaker, and the first one is Peter Small.

MR PETER SMALL: Chairman, Peter Small. I'm here today responding to a
letter from the Minister. However, I'm no longer a wheat grower as such. All
we do grow wheat from time to time, I'm much more a sheep and cattle these

I'm also here representing a generation who, with their fathers, created the
myth about the value of statutory marketing, cost of production formulas,
grower-controlled boards, single desks, and Government intervention in the

I myself in my younger days campaigned as a member of the VFF pastoral
executive for statutory marketing for red meats. Thank goodness we failed.
As a member of the Australian Wool Industry Conference, I was involved in
the introduction of a reserve price scheme for wool. We all know what an
unmitigated disaster that was, which has almost completely controlled,
destroyed, Australia's oldest and proudest industry.

Chairman, I know you have to report to Government about the views of

1.3.07                               P-2
growers in respect to the single desk. However, I plead with you and your
committee to weigh your report in favour of the minority, the minority who are
mainly from the younger generation, who favour complete deregulation.
Economic history, economic theory and economic practice tells us that they are
right and the majority, believing with almost religious fervour in the myths
created by my generation are wrong.

Wealth - whether it's a country's economy or an industry's economy,
deregulation stimulates, not depresses further, economic activity. Nothing is
more stimulatory to economy and industry than deregulation, and all the
economic history and all our own experience tells us that.

Finally, chairman, having said those few words, I would ask you to see if it's
possible if we couldn't seek funding from the private sector, not from the
Government, to set up at one of our universities a research fellowship so that
the real history of the wheat industry can be researched and told and the myths
that we all believe in are exploded. Thank you.

MR RALPH: Please hold the microphone, Peter. I forget to say that after
each speaker, the opportunity will be for members to the committee to ask any
questions before handing over to the next one.

MR CORBETT: I think Peter has made it very clear where he stands.

MR RALPH: Thank you very much. Lawrence Richmond.

MR LAWRENCE RICHMOND: Lawrence Richmond, from near Ballarat in
Victoria. I'm a wheat producer and very much in favour of a free enterprise
market. We live in a society that runs on private enterprise and yet, as a wheat
producer, we are forced to deliver our grain to a statutory marketing authority,

They have no idea on our costs of production, when we require payment, or
anything like that, and yet they think that they're doing the best job by us. We
can also do hedging and all that sort of stuff by ourselves, rather than them do
it for us. What I think we really need is a very transparent Australian grain
exchange that trades every day, to then have a very transparent price of grain
and all grains, not necessarily wheat, in Australia.

My basic principles are deregulation first. If that can't be achieved,
unfortunately the VFF model is probably the second. Third, or very last of all,
would be a Grain Licensing Authority, which would be complete turmoil in the
grain industry if that came in.

Buyer of last resort - I don't believe that the buyer of last resort has actually
been around since deregulation on the domestic wheat industry. Really, if you
look at the submission that the AWB have given to you, they say that they have
to accept all grades of wheat, and actually they don't because they have never

1.3.07                               P-3
accepted red wheat, for example, into a national pool. So you need to actually
look at some facts about a lot of people's submissions. Thank you.

MR RALPH: You mentioned that a registration system, in other words,
registering qualified buyers in terms of their financial capacity, et cetera, would
create chaos. Would you like to elaborate on that, because we have had a
number of proposals put to us that that is the way it should be done.

MR RICHMOND: How are you going to do it? Are you going to allocate
certain buyers a certain percentage of the crop? If you do that, how much is
20 per cent, is it 20 per cent of the anticipated production, 20 per cent of the
actual production? All those sorts of things. How they are going to hedge
effectively if they don't know how much grain they are going to get.

Who are going to be the chosen ones? Is it going to be your Graincorps, your
ABBs, all those sorts of things, or is it going to be your ADMs, Cargills? Who
is going to choose that? I think if we run a private enterprise company, we
should be able to sell our wheat to whoever we like anywhere in the world.

MR CORISH: Lawrence, one of the things we have heard all around the
country is a concern that a move towards deregulation, even partial
deregulation, will let a whole lot of players into the wheat industry, the export
wheat industry, that will potentially undermine, in the view of many, prices
received for Australian wheat. But also another concern that is very real to the
people that have expressed it is the issue of payment security and letting a
whole heap of unscrupulous, in their words, traders into the market. Would
you like to comment on that?

MR RICHMOND: Certainly. If there's an effective grain exchange set up,
part of the trading rules, I would suggest, would be that all grain is fully paid
for before title of transfer.

MR CORISH: So security through the exchange?

MR RICHMOND: That's correct.

MR CARROLL: Lawrence, both you and Peter are in favour of deregulation
and you specifically made reference to your ability to hedge your wheat and
manage your risk. We have heard many growers say that they don't have the
skills and they don't have the inclination to do that themselves.

MR RICHMOND: So what are they in business for?

MR CARROLL: They have said that they want a system, they want someone
that they can trust to just do the marketing for them, and to hand that
responsibility over.

MR RICHMOND: If they want to do that, let them do it because I'm sure that

1.3.07                                P-4
there will be regional pools and all that set up. But why impose it on me?

MR RALPH: Thank you very much, Lawrence. The next speaker is Ross

MR ROSS PEEL: Thank you, gentlemen, for the opportunity to say a few
words. I am at odds with our two previous speakers. The benefits to growers
from AWB International's commercial management of the wheat export single
desk, the prosperity and certainty of Australia's wheat industry is built upon the
sound foundation of our extremely successful wheat export single desk. As a
wheat grower over the past 40 years, I have appreciated the following benefits
that AWB have delivered.

The certainty that their wheat payment cheques will not bounce. That means a
lot. Our home trade market here in Victoria - some of the traders, we don't
even get the cheque, so you don't get paid.

Secondly, with AWB as the only marketer of Australian wheat on the export
market, wheat growers know that no other seller of Australian wheat can
discount the price, which would reduce our income. Most of the present
Australian wheat growers are well aware of the hardship an earlier generation
of Australian wheat growers suffered during the 1920s and 30s, when they
were exploited by grain traders.

This situation led to low prices to the growers, who were then unable to afford
the necessary annual replenishment of the soil nutrients removed by each crop.
Cropping methods degenerated into mining the soil. Then climatic conditions
played their part and a dust bowl situation quickly developed, leading to
financial destruction of many wheat growers and large areas of valuable topsoil
which was blown away.

Australia's wheat industry, at the end of the 1930s, was unsustainable.
Fortunately for our wheat industry, during the late 1930s, enough concerned
farm leaders and Federal MPs realised that such a devastated industry could not
continue. There had to be a better way to manage such an important industry.
These people persuaded our Federal Government to introduce the legislation
which created our present AWB.

Another important benefit has been the AWB's success in quality control of the
grain it markets on our behalf. AWB has established high standards, which
grain buyers appreciate, and they are prepared to pay premium prices for our
product. Some of our competitors on the worldwide market have not been so
successful in their quality control.

Our AWB's success in marketing a quality product could be jeopardised if any
decision was made to weaken its single desk control of wheat marketing. I
draw your attention to the unfortunate case of feed barley being sold as malt
barley to an overseas buyer by one of our new barley exporters from Victoria,

1.3.07                               P-5
as reported in our rural press four or five years ago. This situation came about
as a result of the Victorian Government deciding to allow new exporters to
compete with the Australian Barley Board.

Our AWB's success in managing a single desk to market our export wheat and
maximise the financial return to growers has been excellent. We should never
forget that our major competitors, the USA and the EU, both heavily subsidise
their wheat growers and/or their trading houses. Such actions corrupt and
distort a far from level playing field for international wheat trading.

I have a cutting here, a report from Washington dated 1 February this year,
which indicates that the American Congress, now controlled by the Democrat
Party, is unlikely to agree to any reduction in US farm subsidies.

MR RALPH: You have a minute to go.

MR PEEL: Australian growers cannot afford any weakening of the present
successful single desk marketing by the AWB.

I have another cutting here. The Indonesians welcomed cooperative bulk
handling with open arms and immediately started to screw CBH down in price.
The Indonesian Minister stated that, because it wasn't AWB and the single
desk, they expected to get the wheat $20 cheaper.

I also have another cutting from one of our private grain advisers, we subscribe
to a number of trading firms, but talking on barley. He said that the
deregulated export market here prevailing at the moment - I thank you for the

MR RALPH: Ross, you've declared your support for the single desk. We
have heard around the country people who support the single desk take one of
two positions. One is the status quo with AWB International, which actually
manages the pool, and markets the wheat remaining as a part of the corporate
structure, and we have heard many more argue for a separation of the single
desk management from the listed company, because of the conflicts they see
between having two different classes of shareholders. Where do you sit on that
side of the argument?

MR PEEL: As I recall, as wheat growers over the years, we all contributed
funds prior to the floating of AWB into I think it was called the Wheat Industry
Fund. As I understand it, all that money still is bound up with AWB. I think it
is in our interests to continue to be associated with AWB.

MR RALPH: Of course, many of the wheat growers sold their shares in
AWB Limited. The 24 largest shareholders are now institutions, including a
US superannuation fund and a sheik from the Middle East. So there are
different objectives, obviously, and that's why we have had so far a majority of
people supporting that position. So you would rather stay with the current

1.3.07                               P-6
status quo of AWB Limited controlling AWB International?

MR PEEL: I would because, as I mentioned, they have the bankroll there to
fund the operation. The institutional investors, they won't stay with AWB if it's
weakened in any way, and therefore what you would say growers WA funding
would be jeopardised.

MR CORBETT: Ross, you have clearly, I think, stated a type of unequivocal
support for AWB. We have heard some arguments, and you made the
comment, that they don't discount the Australian wheat. But we have heard
submissions that in fact they are the world's biggest discounter because in
actual fact they haven't bought the wheat, all the risk is carried by the wheat
farmer and all they have to do is sell it. So they, like no other seller in the
world, are able always to give the lowest price. What do you say about that?

MR PEEL: They may be villains in your eyes, but - - -

MR CORBETT: Excuse me, not in my eyes. I must make this point quite
clear: in asking you questions, I'm completely neutral.

MR PEEL: Good.

MR CORBETT: But we found it, through the 26 meetings we have had, of
great use to challenge people who put a particular point of view, it debates the
issue a little. So I'm putting to you not my view, I'm putting to you the views
that have been put to this committee on several occasions.

MR PEEL: I respect that. Could I put it this way: the AWB may have some
shortcomings, but the gang of 45 that lined up in December, with Minister
McGauran, all with their hands up wanting to export our wheat, just imagine
the level of the wheat market if all those 45 groups had been out there selling
wheat. The price wouldn't have been what the AWB could get, it would have
been perhaps half that level.

MR CORBETT: But the argument goes, the counter argument to that, is
imagine those 45 people at your farm gate bargaining to get your wheat, to buy
it from you in order to have the right to sell it.

MR PEEL: I don't think it works that way. They will be marketing on the
world market. Either the Indonesians, the Iraqis, they will roll out the red
carpet for the 45 and screw them down to such a level, then they will come
back here with their tail between their legs offering us a much lower figure.
That's how it works. I'd stick with the AWB; we know where we are.

MR RALPH: Thank you, Ross, thank you for those views. The next speaker
is Geoff Honey.

MR GEOFF HONEY: Morning, Mr Chairman, and thank you for the

1.3.07                               P-7
opportunity to speak. I'm the CEO of National Agricultural Commodities
Marketing Association. We are not a grower organisation as such, although the
major grain grower organisations are members of our association. I should say
that the submission that we have just tabled is also available for public viewing
on our web site.

NACMA was formed in 1991 and it was formed specifically to facilitate trade
across the Australian grains industry. To that end, NACMA develops, in
conjunction with various organisations, but certainly promulgates the grain
standards, trade rules, contracts, and there's a number of specialised contracts
used across the industry, and we also conduct a dispute resolution service.

The question then begs as to our interest in this particular round of meetings,
and that's very, very simple, in that the board was concerned that if there was
going to be any changes to the wheat marketing legislations, what those
changes could have on the current arrangements, and in particular are there
certain aspects that need to be addressed. We don't have a position as to
whether there should be or should not be any changes, but we are concerned
that commercial activity needs to continue as seamlessly as possible; and
currently within the Australian wheat industry trading domestically, that occurs
in a very efficient manner.

The document that I have tabled - and I'm not going to go through it obviously
in detail - there's a couple of major things that really need to be brought home.
One is that at least half Australia's production is currently being sold and
managed in a commercial manner outside of any vesting or statutory marketing
authorities, whether they be AWB or CBH, in the case of Western Australia
CBH. So we already have a system in place for that to occur.

What we have sort of gone through and identified is that if there were changes
to the current arrangements, there would need to be substantial encouragement
funding for FarmBis programs for growers, because, yes, there will be growers
who this new arrangements would be new to them, so I think there needs to be
assistance in that regard.

GRDC would also take on expanded roles and more enhanced roles, if you
like, particularly in the area of varietal classification, the national variety trials,
and also make sure that the end-user breeder collaboration, that particular line
of questioning is as seamless as possible.

From a NACMA perspective, obviously one of the things that would occur is
that at the moment the industry uses the AWB receival standards, which are
developed for the national pool receival, but they are also used by the domestic
market. NACMA would, through our standards committee, be in a position to
be able to, if there were changes, take on that particular role in developing
wheat standards - keeping in mind that the standards committee is across
industry, it's not just end-users, it's not just bulk handlers, it's representation
from right across the industry.

1.3.07                                  P-8
We would also look at our ongoing professional development program,
enhancing that, and looking at getting that into growers' hands. One of the
things that would need to be taken up, AWB has been very heavily involved as
an industry advocate. For instance, on the International Grain Trade Coalition,
NACMA has now taken that role on, to the point where actually I attended a
meeting in North America last week on that particular coalition.

The other thing that needs to be addressed is the ongoing promotion, generic
promotion, of Australian wheat in overseas markets. It is something that the
Canadians, through the Canadian International Grain Institute, do extremely
well and the US, through US Wheat Associates, working in conjunction with
Kansas State University, through their international grain program, do
extremely well, to the point where, for instance, the Iraqi Grains Board have
been through that particular institution and the courses are short courses. They
now doing similar sorts of things in one of our other prime markets, Egypt.

This particular activity is something that the industry as a whole needs to
address and get on top of. Why I say this is, currently it's within AWB. If
there were changes, you would not expect AWB to continue that particular
function, and that is an absolute critical function for the Australian wheat
industry going forward.

We have just put our hands up that we would be prepared to act in a secretariat
role in that particular capacity. However, if industry thought that there was a
more appropriate mechanism for that to occur, we will work in in that regard
and to the industry's needs.

When it comes down to the Wheat Export Authority we have got in there, the
Wheat Export Authority or a revamped regulator, we see that that particular
function is an ongoing function, particularly in the short term. Certainly from
the perspective of government-to-government functions, there will be times
when that is required.

There also needs to be a custodian. We would like to see the wheat standards
branded as Australian wheat standards. That's absolutely critical. Currently,
we have ASWAPH, et cetera. I think it's important that the "A" in the "ASW"
stands for Australian, and we would look at the industry regulator being the
custodian. NACMA is in a position to be able to develop those, but it's
important that somebody has the imprimatur to be able to put the Australian
coat of arms on the Australian wheat standards in the same way that USDA do
for the US crop.

That rounds it out, and thank you for the opportunity to speak.

MR RALPH: Thank you, Geoff.

MR CORBETT: Thanks, Geoff. Your presentation is really all to do with if

1.3.07                               P-9
there was deregulation.

MR HONEY: Correct.

MR CORBETT: So do I hear you really arguing, from the people that you
represent, that self-regulation is the way to go in this industry?

MR HONEY: I'm not arguing from any particular perspective - and just at the
back of that submission is a list of the members of the organisation - but if that
was to occur, we believe that we have the processes in place. Already half the
Australian crop domestically - certainly the domestic market on the east coast
is very, very strong, but currently whether it be export or domestic, half of it is
being done on a commercial basis using either NACMA trade rules, NACMA
contracts or the standards. Or in international situations, we've got the Grain
and Feed Trade Association based in London, and that organisation, probably
the vast bulk, over 90 per cent of all trade in grain worldwide, is done on
GAFTA contracts and that particular process is already in place as well. So the
commercial basis is there.

MR CORBETT: Geoff, then if I might frame my question slightly differently
to you, and I understand that you're representing a diverse base and you don't
wish to be put in a position, and I'm not trying to put you in that position.


MR CORBETT: But I am trying to get from you a view that I think could be
helpful to us in our considerations.

We have heard, of course, as everyone knows and I think it's common
knowledge, a very diverse set of views from the AWB is all good and it
shouldn't change, right through to the presentations we have heard this morning
about deregulation, and a fair few people in the middle who say they want a
single desk of one type or another.

The question really arises: if so many people want this or that, what about
self-regulation? In other words, if people want to market their wheat in a
particular type of way, they will do it. I might also say that NACMA is held,
I think, generally in enormous respect across the nation; there have been
favourable comments made on a number of occasions.

Is self-regulation, in your view, a possibility in this industry?

MR HONEY: The tools are there to - irrespective of what the grain is,
whether it be wheat, sorghum, barley, triticali, whatever it may be, there's the
tools and the mechanisms for that to occur, for the contracts to be written, for
the standards to be recognised that are written into those contracts, and if there
is a dispute, for the dispute resolution process to work.

1.3.07                                 P-10
MR CORBETT: And do you think the suggestion of an Australian market, an
Australian trading desk, to buy and sell grain options and grain rights, is a

MR HONEY: You already have that through the Australian Securities
Exchange in terms of options, whether it be futures or options, or you can do
that, or organisations can do that, through the American futures exchanges.

I think what you're getting more is specifically for the physical market, and
I have seen a proposal for something similar to that. But the bottom line is half
that grain that is produced in Australia already is going through - it's not a
formal exchange as such - but it's going through whether it be from grower to a
trader from trader to trader, it's all operating within a market and that market is
based on NACMA standards, trade rules and contract dispute resolution.

MR CORBETT: Thank you.

MR RALPH: Would what you're suggesting require any change to the
financing arrangements for NACMA?

MR HONEY: I'm sorry, sir?

MR RALPH: Would what you're suggesting require any changes in the
funding of NACMA?

MR HONEY: Certainly NACMA was established for, as I say, the standards,
trade rule contracts, dispute resolution and to that it's a very, very - I should say
it's a voluntary organisation, it's self-funding, there's no Government
involvement or grants, et cetera, in any shape or form. Everything is quite
transparent in that regard.

If we were to take on - for instance, we are now getting more involved in
advocacy on particular issues that are of paramount interest to our members,
and I talk particularly in terms of the International Grain Trade Coalition. That
is an organisation that's looking at particularly biosecurity issues. Although we
are not in a country that has GM commercially available, this is a coalition that
is working to ensure that there is trade that can occur within that particular
framework. So we need to be part of that particular process.

In terms of NACMA, yes, there's no question that where we were three years
ago, where we are now, we have probably taken on another 50 per cent
additional work responsibilities, et cetera, and that will have to be taken into
consideration, and it's one of the considerations for the board at present in
terms of funding going forward. But once again, we are looking at that coming
from industry.

We are not going to be putting our hand up to Government and saying - if this
needs to occur, it needs to come from industry. So I make that in terms of

1.3.07                                 P-11
NACMA going forward operationally. The one that will require Government
involvement, there's no question about this whatsoever, is if AWB was to stop
funding an international wheat program, that does need Government assistance,
there's absolutely no question.

The involvement of the Canadian Government, the involvement of the US
Government through their USDA, through their various programs that they
have in funding that particular program is critical to the success of those
programs. We're not just talking a million dollars, we are talking in terms of
20, $30 million per year for those programs.

MR CARROLL: Geoff, you're arguing a case for industry self-regulation.
My understanding is that grain trading was excluded from the Financial
Services Reform Act. Do you think that's a positive, or should that be revisited
as well?

MR HONEY: Okay, we need to be a little bit careful there. The Financial
Services Reform Act, we have under that the financial services licensing
arrangements for people who are offering derivative products and certainly our
members who offer derivative products, that's products that involve futures,
they have to be licensed. We have a corporate governance committee that
looks specifically at that particular topic and we have a very, very good
working relationship with ASIC on this particular issue.

The other thing that comes into mind here is pools, grain pools. Now, AWB
have an exemption for the operation of their pools and also I believe a number
of other major grain trading organisations also have exemptions with ASIC for
their particular pools. That is something that will be ongoing and I think it's
sort of from an ASIC perspective, whether they really need to revisit or sort of
look at that particular arrangement.

Currently domestic contracts that are just in Aussie dollars cash price don't
come under the Financial Services Reform Act and don't require licensing.

MR RALPH: Thank you very much, Geoff. The next is Leo Delahunty.

MR LEO DELAHUNTY: Thanks, gentlemen. Leo Delahunty, grain farmer
at Murtoa, and I should declare former director of Graincorp and Grain
Growers Association as well.

I just wanted to make a few comments in relation to this, and I appreciate the
opportunity. I'm coming fundamentally from the view that the current
arrangements cannot continue to exist. There has been nothing said about the
inquiry of the last 12 months and people say it had nothing to do with this
current review that you gentlemen are undertaking. However, the issues of the
Cole Inquiry were not just about a bunch of senior executives who might have
got a few things wrong, it was really about the structure, about the system that
we were working under that allowed this to happen.

1.3.07                               P-12
I want to talk about a couple of proposals that have been floated around in the
press in relation to alternatives. AWB are talking about a demerger, and while
we haven't seen the actual proposals, the talk seems to be about separating the
board of management of AWBI from AWBL. But it doesn't seem to be talking
about a contractual separation, and consequently there's issues around that, in
my mind, about the cost of the services that are provided.

The other issue about the demerger proposal, as I understand it, it will require a
75 per cent vote in favour by A class shareholders, and the question I've got in
relation to that is: what happens, should that vote fail? Where does that leave
wheat marketing going forward?

The second comment I would like to make is in relation to the VFF model, and
my friends here and I have had conversations about this in the past. While
I understand where they are coming from and there's lots of good points about
what they are talking about, I actually think it's relatively impractical, and the
real concern I've got with it is - and it's the theme of what I would like to
present to you people - that there are no cost management pressures applied
under that model, as there currently is under the current model.

If I could just take a moment and talk about on the input side, from the farmers'
side, an organisation Pivot, the fertiliser company, right through to about five
or six years ago, but more particularly until about 15 years ago, it was regarded
very much as a regional monopoly, it was a farmer co-op, a public unlisted
company. Acting in the interests of farmers, it tried to stop the importation of
high-analysis fertilisers. Acting on the interests of farmers, currently my
understanding is that something like 70 per cent, 65 or 70 per cent, of the total
sales now in Pivot, or now the IPL, is related to high-analysis fertilisers.

I question this issue about representing people and doing it from a historical
point of view. I think the real issue I wanted to bring up in relation to Pivot
was for six years I was on that board and in 2000, it had a cost base of about
$230 million to $240 million. In the space of 12 months, based on absolute
financial pressure and the need to address the competition that naturally
farmers were looking for, it took $70 million out of that cost base in 12 months
and still supplied the same quantity of fertiliser to the farming community.

In the space of two years, I would argue that the great majority of that
$70 million ended up in the farmers' pockets, through competition. So the
issue is there was a cost pressure applied on that company, after many years of
a regional monopoly of not having a cost price pressure on it.

Growers are concerned about the national pool or the fact that we won't have a
national pool if there was a change in the current arrangements. The reality is,
in my mind, and there was a question asked earlier about farmers not being
able to market their own grain, and the fundamental answer, in my view, is that
we as farmers have all got skills in one area but not in all areas, and so be it if

1.3.07                                P-13
people haven't got the skills in marketing grain.

However, there's nothing stopping them from continuing to put their grain in a
pool run by a national company, whether it be AWB or whether it be with
another company, and I believe they will continue to do that. I think in the
end, my point I'm really saying is that there are no cost management pressures
currently under the system we've got; that the best option going forward is a
regulated system with an independent regulator that can make judgment on
submissions made to it by various players who may want to participate in an
export market. But fundamentally we would see that there would only be a
few companies that would be the major exporter, as is basically the case in the
non-wheat grains.

So I actually believe that the Grain Growers Association model - as I say, I was
a former director of it - that talks about an independent regulator where the
power of veto sits with that independent regulator is something worth looking
at. Thank you for your time.

MR RALPH: Thank you, Leo.

MR CARROLL: Leo, you talked about there still being pools around, even if
there was a step towards further deregulation. One of the concerns there would
be the ability of those pool operators to put an effective hedging program and
forward sales program in place, if they didn't know with some degree of
certainty what share of the grain production they were going to get. That leads
to the question of how important is hedging and currency management in
taking the risk out of the pool returns.

MR DELAHUNTY: Mike, clearly hedging and price risk management is
something that needs to be done in any sort of pooling arrangement.

There's two answers to that question. One is that I don't know exactly what
AWB are doing, but evidence suggests that the price that is obtained by a
farmer in relation to the national pool is very, very strongly correlated to the
price of the Chicago March Futures Exchange, that is, the March after the
harvest is delivered. So I guess there's a question about the way that
organisation goes through its pricing anyway.

But the other part of that is to say that, in the non-competitive grains, for
example canola, the companies that are exporting go through exactly those
same processes, that is, they price hedge, they currency hedge, and they don't
have a guaranteed supply. They manage it. I have seen some very, very good
operators in the grain trade that I believe would manage it quite well.

MR CORBETT: Leo, you're suggesting, I take it - I'm not putting words into
your mouth, I just want to be sure that I understand - you're saying that the
single desk should continue with maybe some more licences issued and the
regulator should be beefed up, it could for example be WEA, but the right of

1.3.07                                P-14
veto and the right of issuing licences should be controlled by some other body
other than AWBL or I or any mixture thereof. Is that what we hear?

MR DELAHUNTY: Yes, that's fundamentally what I'm saying. I guess what
I am really arguing strongly about is that under the current Act, company B, the
holder of the single desk, that's granted by the Government, but that company
has an association with a publicly listed company. What I'm saying is that I
don't care whether it's AWB, Graincorp, ABB or any other company that might
have commercial interests. The problem that I've got is when the veto sits with
the company that has an attachment to a commercially-operated organisation,
then there is nothing but a cultural challenge in that organisation.

MR CORISH: Leo, in any regulated marketing system, single desk system, as
it's so commonly referred to and often incorrectly, I think, referred to - that's
become very clear to me in the last few weeks - the power of veto is extremely
important and you're suggesting that one way forward is for the single desk to
be placed with an independent authority, Wheat Export Authority or similar,
with a power of veto resting in that body.

For that to work, how strict should the regulation be around that veto and,
importantly, how transparent should those arrangements be around that veto?

MR DELAHUNTY: We need transparency, we need absolute transparency.
You're asking me stuff about detail. I have to say, Peter, it's not always one of
my strongest points, is detail.

MR CORISH: Nor mine.

MR DELAHUNTY: However, the farming community firstly needs
confidence, and so I believe we have to have a licensing arrangement. The
issue about how that's managed really will take a little bit of time to work
through. There are some models around, the South Australians have just come
up with one themselves. I guess I'm really saying there are credible companies
here that operate in this country. I really get disappointed by the emotional
rhetoric of bagging traders. They're people like you and I who have got their
own business pressures.

All I am saying is I think there's a few companies out there, give them a
licence. We have to be careful that we're not saying, "Listen, every single
week we, as a grain trader, have to present to this authority about a proposal
they might have." We have to be a bit careful it doesn't get that tight, but we
still need to regulated arrangement where there is quite clearly benefits shown.
I don't know whether that quite answers it, Peter.

MR RALPH: I want to take you back to your comments on the VFF system.
Under their proposal, they are wanting a complete merger, in other words, the
soft merger as it is often described that you referred to. You mentioned cost
pressures. Of course, if there was a complete separation or if there was another

1.3.07                               P-15
body, as proposed by the VFF, the cost pressures between the farm gate and the
ship would be taken care of because of contestability.

Are you worried about the cost pressures within the marketing organisation
itself in terms of the costs in selling the product? Is that what you're concerned
about that?

MR DELAHUNTY: I think fundamentally it is. What these gentlemen have
put together has a lot of credibility about it, but the problem I've got is that it's
going to be based on a cost plus arrangement: this is how much we need, so
this is how much we are going to pay as growers. I don't know how you quite
get the innovation and how you quite get the discipline around that marketing
regime in that sense. So that's fundamentally it.

MR RALPH: Let me take you to the registration of buyers. If you're going to
have registered buyers, why should it be on the basis of buyers having to sort
of get a position in a limited field rather than any buyer who can meet the
fiduciary requirements and adherence to standards, et cetera, having a licence
to operate in the market and that's it? Why not that?

MR DELAHUNTY: Again, a good question. I think the issue is giving the
grains industry the confidence that everything hasn't been tossed out at once.
The consequence clearly is that there's going to be an issue of picking winners
in relation to this.

MR RALPH: Thank you very much for those views, Leo. The next speaker
is Justin Brennan.

MR JUSTIN BRENNAN: Thank you. I would first like to start with a quote
before I read my submission. It's a quote attributed to Rupert Murdoch, who
says, or is reputed to have said, "Monopolies are a terrible thing, unless of
course you happen to own one."

I am a farmer in the southern Mallee region of Victoria and my farm produces
wheat, malt, feed barley and legumes. I am in favour of total and immediate
deregulation of Australia's export wheat marketing system. The GCA and its
state-based affiliates have historically opposed all attempts to open up grain
market to go competition. In contrast, farmers have always embraced greater
choice in marketing.

In the three wheat harvests from 2003 to 2005 inclusive, AWB pools only
accounted for 35 per cent of Graincorp receivals. In the 2006-2007 harvest,
most wheat grown in Victoria, New South Wales and Queensland was sold for
a substantial premium over AWB pool prices on the domestic market.
Growers in WA have a tiny domestic market in their state. However, WA
growers warehoused the overwhelming percentage of their state's wheat
harvest. This was an effective plebiscite of WA growers' views on the single

1.3.07                                 P-16
These growers want a choice on the export market. It is my view that growers
all over Australia crave choice in their marketing options. There were an
enough applications put in for Mr McGauran to buy all that wheat, I believe.
Both the farmers and exporters have every right to be appalled by the limited
permits issued by Mr McGauran.

In my view, the AWB has an arrogant and dictatorial attitude in its dealing
with farmers. Approximately 10 years ago, I was growing chick peas on my
farm. I was intending to deliver these chick peas to a Graincorp site. As
harvest commenced, all buyers pooled their prices from the site. I made
inquiries to buyers from ABB, Cargill, et cetera. They informed me that a
trader for one of the Japanese trading houses had speculatively purchased
thousand of tonnes of field peas and chick peas that had been warehoused from
the previous harvest. When his bosses discovered this unauthorised deal, he
was fired. This overhanging stock caused the legume price to fall.

I telephoned the AWB legume buyer and related what all these buyers had told
me. He said he wasn't prepared to discuss any market-related issues with
farmers. He was the one buyer not prepared to talk with me. All the other
buyers were open and helpful.

I harvested the chick peas and waited some months for the market to recover. I
rang all buyers who had given me honest and frank advice. I did not offer
these chick peas to AWB because of the attitude of the trader. I subsequently
sold the chick peas for what I considered to be a reasonable price.

Two or three years later, I met the acting state manager of AWB. I related the
story to him. Much to my surprise, he said the trader had done the right thing.
I was astonished.
The AWB staff and the AWB culture does not have an understanding of how to
deal with farmers. Their arrogance is unbelievable. This is the legacy of being
a monopoly.

During the 2005 wheat harvest, we were stopped by heavy rain. Moisture
levels in the wheat rose to 15 per cent plus. The wheat was ASW quality,
except for the rain. We were worried that follow-up rain would see wheat
downgraded to GP or feed wheat. A buyer from a competitor of AWB rang
and said he wished to buy our wheat at $135 per tonne ex-paddock. We told
him we could not sell our wheat due to high moisture. He guaranteed all end
users would be told it was wet wheat, and they were prepared to accept
delivery as they were short of supplies. This was a great deal. We spent the
next three days harvesting the wheat that could not be delivered to the handling
system, as its moisture was above 12.5 per cent.

Sale price of the wheat ex-paddock was $135 a tonne plus GST. As of
23 February 2007, the ASW 2005 pool SER at port in Victoria was $172. Less
freight handling and storage back to the Graincorp Berriwillock depot, it was

1.3.07                              P-17
$60.39. The net return at the Berriwillock Graincorp depot is an ESR of
$111.61. I saved $6 freight from carting it into Berriwillock. The net return
after that, if I took it to the pool, was $105.11. At $135 a tonne in the paddock,
I'm $29.89 per tonne better off in the cash market than the pool price.

AWB buyers would not be innovative enough to organise a deal like this. I
also do not believe they would be at all prepared to hand out a specific contract
like this contract.

Approximately 20 to 25 per cent of Australian workers are members of unions.
Approximately 20 to 25 per cent of Australian farmers are financial members
of GCA affiliates. Those who like the single desk join these organisations;
those who do not like the desk generally do not join.
Therefore, the GCA affiliates pretty much always push the single desk view.

I have received several unsolicited letters and faxes from AWB detailing the
so-called advantages of the single desk. No doubt AWB will put this back to
AWBI to have farmers pay for what they would claim as some form of market

The proposed demerger of AWB Limited and AWBI will not work. It needs a
majority of A class shareholders in each state and a majority of B class
commercial shareholders. I do not believe that either group of shareholders
will vote for this demerger. It is in effect a Clayton's demerger, the demerger
you're having when you're not having a demerger. After this fails, the AWB
will announce that they have done their best and they should keep on doing
business in the manner we're used to. They have behaved so badly, they must
be punished, in my view.

Farmers have more than capable of selling their own grain to any buyer of their
own choosing. Nearly every farmer in the country has sold domestic wheat,
feed and malt barley or seeds and legumes to independent traders. AWB had
not been frank and upfront with the ASX, Volker, farmers, politicians, the Cole
Inquiry and the Australian public.

MR RALPH: Thank you, Justin.

MR CORBETT: Justin, some of the people with a different point of view
would say, "That's all right, but what about when we get that 30 million tonnes
of wheat, a cracker harvest, what's going to happen then?" The Western
Australian farmers would say to you, "That's okay, but the domestic market
almost equals, give or take a little, the wheat production on the eastern
seaboard, but what about we fellows over here where we export most of our
wheat, and there's a great fear of having a crop and not being able to sell it?"

MR BRENNAN: First of all, with the Western Australian growers, as I said,
mostly we warehouse on my farm, just about everything except oilseeds and
malt barley, which are sold instantly. For the Western Australian farmers,

1.3.07                               P-18
they've got no domestic market effectively. In northern Victoria, I've got a
huge one, there's feedlots, stock feeders, dairy farms, all the rest of it. But in
WA, they've got a pool effectively that is the market and they looked at it and
said, 75 per cent or whatever said, who were spoken for by owners said, "This
pool that the AWB runs is too expensive. We need a choice, because the
charges of running the pool are costing our operations." So they warehoused.

They are not going to get an instant number of feedlots or dairy farmers. What
they were looking for was a range of exporters and they had a lot of permits
and refused most of them, effectively. There was probably enough permits to
take care of that warehouse wheat for all the permits, if they were issued. All
those guys have to price their permits above the pool returns in the domestic
market, but for those guys they were quoting substantial premiums, some of
them above the estimated pool returns in WA.

If you get companies like Graincorp, Elders, CBH, they have the balance
sheets and Oz Bulk ABB, some are listed on the stock market, some aren't, but
everyone expects they will pay. Elders deals with farmers every day of the
week for livestock, wool, and they are always paying on bills. But people want
the choice and the only thing that will drive down to a low cost structure in the
pools is competition as to who buys the wheat.

If we get a 30 million tonne, it's a cracker crop and gee we're all looking
forward to it, we all hope it happens this year and next year as well, but the
AWB will be confronted with the same problems. If you look at it, those
permits were actually issued, the Government said, "We will allow permits in
early January," I think it was. They came up with millions of tonnes of
permits, when none of the export traders or the international companies that
had any forewarning of planning, they were still able to source sales

If you give them a time frame, I think you will be surprised at how many years
ahead of the harvest, how much they could forward sell. They have the ability
to hedge it on Chicago and do the futures, and make the sales. Cargill has an
excellent reputation with farmers. It's buying oilseeds all over the country, and
I think - Peter Corish can tell me this - they have a cotton-buying arm as well.
Before we had any deregulation, you dealt with these guys who had two trucks
and were always slow, "Don't you worry, mate, I'll pay you," and some didn't.

But if you deal with big companies - and the AWB can go broke, I mean all of
them can - but if you deal with big companies, occasionally the computer goes
wrong and they do have mismatches in payments, all of them, but you know
you'll get the money with AWB, all the big players, it's not an issue. But if it is
30 million tonne, then the AWB will have trouble selling it, too, everyone will.
There will be a lot of grain, it would be wonderful.

MR CARROLL: Justin, we have heard many submissions that the current
wheat marketing arrangements provide a buyer of last resort and that's really

1.3.07                                P-19
important. That seems to be at odds with what you, and even Lawrence before
you, have said.

MR BRENNAN: The buyer of last resort, and I have had this discussion with
Wilson Tuckey - actually if you read the whole Act, the expression doesn't
appear in the Act. Everyone thinks we will keep the pools open forever, but
they do have a history of sometimes closing pools and opening a number
2 pool - as Lawrence said, the red wheat, which I'm not familiar with.

With downgraded wheat, the buyer of last resort, but at what price, because
historically the AWB worked well when it was a board, its problems started
when it became a company. Once you get downgraded, they have never been
strong on feed, GP wheat, they have sort of penalised you heavily. When we
got a deregulated domestic market, I could always sell GP at ASW prices now
in a domestic market, no problem.

It's a sort of an emotional thing. Do you believe in this? People say yes, but
it's at what price, the buyer of last resort. The wool market, even when it was
terrible 10 or 12 years ago and collapsed, if you wanted to sell, you could find
a price, terrible as it was, but the price was there. But I do think it's like that
with the pool. The price is there but at stages it could be very bad. It won't be
there's a world market out there accessing, it is just driving the costs out of the
business, that I would like to see.

The problem is if the AWB has the veto, no change will happen basically.
There's an innate conflict in the design of the legislation that says the AWB
gets to do all exports and vetoes others. If you don't take that away from them,
I think Volker and Cole and this will have achieved nothing. If it stays like
that, for millions of dollars it's been a lawyers' picnic at Cole, and it just has
proved we will get no change in the wheat marketing, the same thing will
happen. If you leave it with them, in another five years, corporate memories
die, people settle down, people get less agitated, and the same problem will
occur. They have signed up to a very incentive-based scheme, AWB
International did, with AWB Limited, which is not to the wellbeing of growers.

As far as I'm concerned, that service agreement should be available to every
wheat grower in Australia, but they won't put it out there because they know
growers, all of them, even growers who support the board, will be unhappy
with some of the things in it, break fees, cost structures, everything.

MR RALPH: Thank you very much, Justin. The next speaker is John

MR JOHN HAMILTON: Thank you, gentlemen, for the opportunity. John
Hamilton, I'm a grain grower from Inverleigh, about 100 kilometres west of
here. I'm probably a typical wheat grower. I'm 52 years old, run a family
farm, for all intents and purposes I'm probably about as close to average as you
can get.

1.3.07                                P-20
The point I would like to make is that even for my age and whatever, and
probably most of the innovative wheat growers are a lot younger than me, but
from a marketing point of view, I'm attached to one of these, right, and
certainly by 8 o'clock in the morning, I know what Chicago is traded at, I know
what the Australian dollar is trading at, and certainly at harvest time probably
by 9 o'clock in the morning, there will be three or four traders with grain prices
on the phone. So we are fully informed.

I'm sure when the single desk came into existence, it was critical and a great
thing for the Australian wheat industry. But it really is irrelevant now.
Growers are informed, they know what they're doing. The progressive
growers, the growers that are going to be there in five or 10 years' time, are
running highly technical operations, they're probably half accountants
themselves and all this sort of thing. I mean, that's where the whole industry is
going and there is absolutely no need for this grandfathering of a single desk to
be around us.

Even to the point of view to get or keep younger growers interested in
advancing this industry, they need to have the freedom to be able to work on
their product. A lot of growers and farm managers don't spend their life
driving tractors now, they spend half their time sitting in the office or that sort
of thing.

The other thing is the growers that maybe aren't comfortable marketing their
own grain, I'm sure the AWB will still be there, they will still be able to deliver
a hundred per cent of their wheat to the AWB, if they want to, and they will
actually have more choices because they will have other companies running
pools and that sort of thing.

As Justin mentioned, in Western Australia the growers there this year, when
there was just a sniff of there being other players in the field, all of a sudden
70 or 80 per cent of the wheat was warehoused, just in case somebody else can
get involved in marketing it. There is a real need out there for other marketers.

Australia, from a world sense point of view, produces about 1 per cent of the
wheat in the world. I think in an average year we produce something like
12 per cent of the wheat that is traded in the world. We are only a small player.
The single desk - and I keep saying AWB and I shouldn't - the single desk in
Australia is still only a small player. The best it can do is reflect Chicago
wheat futures and that sort of thing. It can't make a price itself; it can only
really reflect the price that's out there.

It's just wrong to say that the single desk gives Australian wheat growers
power. It doesn't really. The opportunities are probably there with other major
world grain traders that actually have more world markets to access for us to
trade with.

1.3.07                                P-21
I think I brushed over the single desk doesn't allow growers who excel at
managing their operations and their marketing, it doesn't allow them really to
excel at what they do best. We have to be the only industry in Australia that
doesn't try and reward people who are innovative and really on top of what
their game is, and I just don't understand why the wheat industry has to be
singled out.

Certainly in Victoria, from a grain-growing point of view, wheat, I don't think,
would be 50 per cent of what we growers grow. We grow barley, we grow
peas, we grow canola. For some odd reason, we are quite capable of marketing
our canola and our barley and all this sort of thing, but we are not capable of
marketing our wheat, and I just don't understand that.

I have been growing grain for 34 years and we just market our canola and our
barley and it's no big deal. You just do it, you deal with the Louis Dreyfusses,
Elders, the other world grain traders. There's just no reason why you
necessarily have to deal with a locally-based or domestic-based company. I
mean that's exactly where I sit anyway. We can do it ourselves.

There is certainly growers that would have difficulty adjusting and it's not
something that you can turn around and say, "Okay, tomorrow's a deregulated
market." It would have to be a case of say in two years' time, Australia will be
a deregulated market. In that interim period, there would need to be like grain
companies licensed to export grain and an improvement in growers' knowledge
of marketing so they can perhaps cope better with their grain marketing.
Thank you.

MR CORBETT: John, what interim arrangements would you feel would be
appropriate to put into place, if the Government were to go down the path
you're advocating?

MR HAMILTON: Certainly the power of veto needs to go with an
independent body such as the WEA, and I would suggest that other companies
would be licensed to market export grain out of Australia. Maybe it's on a
percentage of the crop basis or maybe it's just on a specific tonnage, I'm not
sure, but the decision needs to be made and a timeline put in and this is the way
it is going to happen, and everybody, growers, marketers and Government,
everybody knows where they stand.

MR CORISH: John, you made your case very clearly. I would suggest to you
that right around Australia there's a lot of other 52-year-olds - it's a good age,
52, by the way - a lot of other 52-year-olds are staunchly supportive of the
single desk and are pretty concerned about changes and how it may impact on

This is a pretty broad question: do you see a growing number of people in your
area, your age group, moving towards support for deregulation?

1.3.07                               P-22
MR HAMILTON: Yes, very, very much, and it's happened in a very short
time. I mean, forget the Cole Inquiry. To me, that's not relevant to the
discussion of deregulation.

Certainly in my area, and I am a representative for Grain Growers Association,
so I do get around and talk to a lot of different people, only over the last five
years there's been significant changes. It's about five years ago when the
barley market was deregulated in Victoria and we got the same story from the
holder of the single desk of barley, that the world was going to fall in and the
whole thing was going to collapse. I don't know the percentages that ABB
grain get out of Victoria, but I know it is significantly less than 50 per cent and
they probably get something in the 10 to 15 per cent of my grain, barley.
There's just been enormous changes in a short time.

MR RALPH: Thank you very much, John. The next speaker is Alan Winney.

MR ALAN WINNEY: Thank you, Mr Chairman. My name is Alan Winney,
I'm the chairman of the Emerald Group. For context purposes, for the
committee, Emerald, a major part of its business is running independent grain
pools, wheat, barley, canola, in all states of Australia. We received 5 per cent
of the Western Australian wheat crop this year, making us number 3 in
Western Australia, after AWB and CBH.

We're strongly linked to co-operatives, United Farmers in Western Australia
with 3500 members, Southern Quality Produce in Victoria are two examples of
that. The pools that we run have certainly for the last three years, and this year
as well, returned in excess of benchmark, which for wheat is the AWB pool.

Our view is that it's time to change the marketing structure. The current
structure cannot stay in place because of a range of reasons that have come
through the Cole Inquiry and just corporate governance-type issues that have
been emerging over the last three to five years. I believe the current structure
is actually reducing grower returns and the issues of transparency,
accountability, contestability, particularly for services, have been around for a
number of years and haven't been addressed through the current structure.

I refer the committee to the Kronos report, which came out in 2003, which
talked about all these issues and remain unaddressed, particularly unaddressed
by people like GCA. Just for reference, Kronos is the corporate advisory
subsidiary of Emerald, and I guess we've been involved in this debate for a
number of years.

What we do want to emphasise is the single desk, the export monopoly and the
AWB aren't the same thing, and what we really have today is a buying
monopoly rather than a selling monopoly. We are in favour of actually
retaining a single desk, but not retaining it with the AWB.

We believe there is a need for a transition model through until 2010. There is

1.3.07                                P-23
an NCP review scheduled for 2010, we see that as a natural point to review the
structure, and make the decision at that point as to whether we should move to
full deregulation or whether a transition-type arrangement should stay in place.

The reason we say a transition model now rather than deregulation now is that,
in our view, a cliff-face change is not something that growers are able to cope
with and the industry is not able to cope with in an overnight change,
1 July-type change, so we would prefer to see a transition where there are
multiple exporters allowed during a transition period.

The other comments I would like to make mainly would focus on how that
transition might work, and our contribution in terms of our submission that's
already gone to the inquiry last week is really to talk about some of the
practical issues on a transition and can the industry cope with that, and our
view is yes, it can.

I believe that the transition model should be completely independent of the
AWB. The exemption AWB holds should be removed, the veto is not
necessarily for anyone to have if there is a single body holding an export
licence or export control, and the privileges that come to the AWB through
service provision should be contestable.

We would vest a single desk in the Wheat Export Authority, which is the
current holder of the single desk anyway, but it is not the current structure of
the Wheat Export Authority. The Wheat Export Authority today is completely
toothless, it's restricted in what it can do, it doesn't have the skills to be able to
provide the role that it needs to provide.

We would suggest a group of approved exporters be allowed. How many that
is, I don't know. But set criteria, financial capability, experience, proven
ability to export and the like, people that meet the criteria, are able to achieve a
licence. That may be 10, it may be 15 people, but it must be wide enough to at
least create competition at farm gate and create a competitive arrangement to
buy farmers' grain.

I suggest that selective permits to the three sisters - Graincorp, ABB and CBH -
is, in our view, a disaster as a future structure. It would in fact reduce grower
choice and grower returns.

The grain storage and handling system are essential infrastructure paid for by
growers. The debate that has gone on about is it a public swimming or a
private swimming pool - the bulk handling companies, in our view, view it as a
private swimming pool that they own, that they are currently allowing people
to come in and swim; and in a restructured environment where the natural
monopolies have control of exports, they would turn it back into a private
swimming pool and no-one else would be allowed to use the infrastructure.
I think that's a serious threat, a serious risk, that the Government and the
ACCC need to consider as part of any change.

1.3.07                                 P-24
There are too many models around probably in terms of what the industry
should look like in the future, and I think it's time for the industry to find some
way to sit down and come towards a common model, and that might be a
combination of a range of models that are out there. The transition model that
we favour is one with strong self-regulation: NACMA looking after issues
such as trade rules, contracts, standards, dispute resolution; Aquis looking after
quality verification, phytosanitary and the like; GRDC doing research; a body,
perhaps called Australian Wheat Associates, doing the promotion, along
similar lines to the US Wheat Associates; oversight by ACCC, make all parties
accountable to the Trade Practices Act, which is not the current situation; ASIC
and Australian Financial Services Licences I think will flow through to the
grain industry, and I think that's an important part of a transition; full
deregulation of bags and containers immediately as part of a transition; greater
contestability of services to the export arrangements, storage and handling
transport and the 75 or so services provided by the AWBL today.

In determining these views, we have actually polled growers that deliver to
AWB pools and we have included the results of those polls in our submission,
which I think are on your web site. The key point from that is 72 per cent of
growers we polled are in favour of multiple exporters.

To conclude, we have got the model we have today because growers were, in
their own right alone, allowed to determine what the AWB should look like.
We don't think that's an appropriate mechanism to determine the future of the
industry, it's too important, and it should be growers and the remainder of the
industry that determine where we go from here. Thank you, Mr Chairman.

MR CORISH: Alan, you talk about a transition period to 2010, with final
decisions made then. The licensing authority that you see controlling export
licences up until that period can be Wheat Export Authority or a strengthened
version, or necessarily strengthened version of it. Who should sit on that

We have heard a lot of calls around the country for grower control and growers
must be in charge of their own destiny, and it's the basis of the VFF model that
has been put forward. Would you like to comment on that?

MR WINNEY: I think it needs to be a wide selection of skills. I think a
grower board alone doesn't work. I sit on some grower boards today.


MR WINNEY: Growers have got an important subset of the skills that are
required to run agricultural organisations, but they haven't got all of them. So I
think you certainly need people with industry expertise, people that have had
an involvement in the past, and there's always accusations of conflict of
interest, but people like John Lawrenson, who I'm setting next to back here,

1.3.07                                P-25
former chief executive of the AWB, there's no reason why John couldn't sit on
that committee.

MR CORISH: Thank you. The second question, or second comment that
I will ask you to make a comment on: you suggested that the industry needs a
common model to go forward post-the 2010 review. I have seen a lot of
attempts from the grains industry, from the wheat industry, to come up with a
common model over the last few years, and right now the Grains Council of
Australia has got five members, five different positions being put forward to
us. That is public information.

How do you see the industry coming up with a common model that might
work, or might be able to agree on something that could work, past 2010?

MR WINNEY: I think perhaps John Howard needs to say to the industry,
"Unless you can come up with a common model by 30 April," then he'll give
you one.

MR CORISH: Thank you.

MR CARROLL: Alan, you're suggesting in transition a single desk with
multiple sellers and you mentioned in excess of 10 sellers getting licences.
Would you see any restrictions on the grade or regions into which they can
trade or would they be competing with each other in the same markets and, if
so, we have heard a lot of people say we need collective selling power, we
don't want to see Australian wheat competing with Australian wheat - it's just
ringing my ears, "I don't Australian wheat competing with Australian wheat."
It's a very popular view. How do you address that?

MR WINNEY: I think it's a fallacy, and I say that as former head of trading at
the AWB and formerly running Louis Dreyfuss in Australia. I don't think that's
how the market works, and I think it is a situation that can be resolved via a
permit structure. I think there is a premium that is achieved in some markets
for Australian wheat, but it's not a net premium. The current cost of extracting
that premium is more than the cost of delivering those premium, so it's a net
loss for growers.

More than one seller competing in a market is how virtually every other grain
works today, and I don't think there are excessive premiums that are out there
that are going to be lost through that process.

MR CARROLL: Just on the other point I raised about the licensing, is that
going to be limited to regions or grades that are competing with each other?

MR WINNEY: I think the Wheat Export Authority should determine that.
The way the GLA process works in Western Australia, for example, it is by
country and I think people do make application for probably specific countries,
but there may be multiple licences granted for the same country.

1.3.07                              P-26
MR CARROLL: Can I ask you to clarify another thing for me. We have
heard some people say that most of our wheat is sold to single desk buyers and
then we have heard other people say that that might have been the case but it's
rapidly disappearing. Can you just help educate me a little bit on that.

MR WINNEY: I think they are reading the 1970s version of the book, but that
is not necessarily the way it works today. There are not that many single desk
buyers out there.

MR RALPH: Thank you very much, Alan. The next speaker is Chris Killock.

MR CHRIS KILLOCK: Good morning, Panel. I just felt compelled to come
here this morning, having attended a regional meeting that you had in
New South Wales, mainly because of some of things that have eventuated
throughout the course of your consultation process, one being AWB putting
forward its public submission on all growers' computer screens over the week.

Firstly, I should say that I am Chris Killock, from the Eastern Wheat Growers,
and I am also a grain grower from Yarrawonga in Victoria, and I've grown
wheat, or grains, in New South Wales and Victoria. From press releases that
I have seen and comments by yourself, Mr Ralph, a lot of the argument that is
being put forward by grain growers in support of the export monopoly are the
same arguments that we had when we moved to a contestable market in other
grains, like barley in Victoria, barley in New South Wales, domestic wheat

A lot of those arguments from growers are centred around fear of change and
lack of information and in some cases farm bodies are not prepared to come
forward with innovative new approaches to best suit the future requirements of
grain growers. The profile of the individual grain grower now is a lot different
to what it was four or five years ago even. We've got a lot of money invested
in our businesses these days, and we should have the right, I believe, to choose
to sell our wheat to the highest bidder.

The one-size-fits-all marketing pool, like we currently have, is denying those
growers that basic right that most other businesses in this country take for
granted. So that's about all I want to say there.

Then I wanted to move on to AWB's submission that I believe was sent into the
Panel. I suppose it didn't really surprise me, because that type of submission is
what AWB has put forward over many, many years; but it did surprise me in
the sense that the new managing director had stated in the press only months
earlier that this matter is a matter between the industry and growers and the
Government. Any moves by AWB to participate in this debate would be seen
as extremely self-serving.

I thought you beauty, someone has come into AWB and said, "We've got a

1.3.07                               P-27
vested interest in here, we've acknowledged that, we're going to sit back and
we'll operate under whatever system the Government comes forward with." So
I was a little bit surprised to see in their submission a survey from a group,
I think IPSOS, where they have chosen to survey what they call two groups - I
forget how they worded it, but it was something like the major clients of AWB
and more general clients of AWB.

I would suggest to you that that survey, whilst it does show a fairly significant
percentage move against support of the status quo, it was always going to show
support for AWB's marketing structures and single desk because you would
expect those people that are using AWB to come forward and support it.
Otherwise, it would be illogical. Surely, they're not delivering their wheat to
AWB to become a major customer and then say, "We don't support the

So I thought that's okay. Then in the executive summary, they state that it's a
joint submission from AWB Limited and AWBI. I thought both companies
had different charters. Whilst it doesn't surprise me they have got a joint
position, because I think that goes to the very core of the transparency issue, it
did surprise me in the current environment that they would make a submission
on behalf of both AWB Limited and AWBI.

As I said before, they have also used its global report that was much
discredited, where they claim there's 12,500 growers that are reliant on the
single desk and if it was taken away, they would all be a lot worse off. I think
that flies in the face of what every marketing consultant around Australia is
basically advising growers at the moment, that the national pool over the last
five years has performed extremely poorly by any benchmark.

How AWB can get a consultant to come up and say that 12,500 growers will be
worse off when every major consultant is telling us that that pool performance
is extremely bad, I find really hard to believe. I think if anything, those
growers would be a lot better off if the market was deregulated because they
would have move choice, they would be able to select who they sell their
wheat to, most likely the highest bidder, although maybe not everyone. So
that's about all I had better say.

MR RALPH: Thank you, Chris. I think we've got your views logged from the
previous meeting.

That's the last of the people who put their names down, so now it's up to
anybody else who would like to speak. If you would raise your hand, the
microphone will be brought to you. Because it's on the public record, would
you please state your name.

MR SANDY MACONOCHIE: Thank you, Mr Chairman. My name is Sandy
Maconochie. I'm sorry, I was a little bit late to get here to put my name down
to speak earlier. I'm a cattle producer, I'm a current board member and past

1.3.07                                P-28
president of the Australian Lotfeeders Association. Me personally, and as an
industry, we have obviously an intense interest in this issue.

When I hear all these submissions or presentations, whatever, going round in
circles all the time we read in the press, I understand where everybody is
coming from and it seems a popular vote today is probably favouring against
the single desk. The point I would like to make is my industry, and me
personally, is a customer of the grain industry. I haven't really heard anybody
speak about customers. I have heard talk about various ways of marketing and
selling, et cetera, but I haven't heard anyone talk about the actual customer.

Fortunately, in the industry I'm in, which is the beef cattle industry, we're not
regulated of course and I'm very pleased we're not because it would stifle my
business, purely because we focus very much on a customer. Our business, I'm
a beef cattle producer, we also run lotfeeding enterprises and value added
product through to restaurants, supermarkets, hotels, butcher shops, et cetera.
That's from a personal viewpoint, obviously as well from an industry

I just sort of keep coming back to this single desk issue in regard to export
particularly, and over half of our product we produce is exported. We have
customers, of course, over in Japan, Korea, United States, et cetera, and our
major competitors who we compete with, of course, and grain is very much a
major issue for us because we are as an industry, coupled with the other
intensity of livestock industries, the largest customer the Australian grain
industry has, largest single customer the Australian grain industry has.

We consume sort of upwards of 10 million tonnes a year, and projected in the
next 20 years, if our growth is not stifled, and it is somewhat stifled now,
purely by issues like single desk, we would be consuming around 25 million
tonnes of grain a year within 20 years. As I say, if it is unstifled. Even if it is
stifled a little bit, we may still go about another 30-40 per cent above where we
are now, which is probably at about 13-14 million tonnes, something like that.

I say that in a sense because again I see the whole single desk issue is really
more around the hole in the ground, everything is directed towards export,
every train sort of heads to a port. We've got the hole in the ground, we
produce the raw material, we ship it overseas. We talk about obtaining the
highest price. Again, I haven't heard anyone talk about the customer.
Essentially, it's what's the best return for growers. I for one just can't believe
how any grower could possibly be better off with a regulated system of any

Sure, a self-regulated certainly is somewhere towards it, but we don't have it in
our industry and I don't know any other industry in Australia that has. As far
as I'm concerned, there's only two communists left in this country: one is the
AWB and the other is the AFL. My team's on the bottom of the ladder.

1.3.07                                 P-29
So I think essentially that's pretty much the issue I am coming from. You've
got a submission from our organisation and Australian Pork Limited as well,
we have jointly done a submission to you guys, and pretty much mirroring
those sorts of issues.

In closing, if I could just make one remark: because of this distortion factor,
we at the moment, all of us, are going through a pretty severe sort of drought
situation and if any of those of you, and I know one or two you on the table
that are, are cattle producers, you would be aware where your cattle are
marketing at this moment or they're selling for at this moment, and I can assure
you that but for this drought, your cattle price would be about 30 or 40 cents
per kilo higher than where they are now, and the reason that is is the likes of
me have pushed it down because while we obviously focus very much on the
customer, various reasons why our grain prices rise, of course, a lot of it is
brought about by natural market forces and others is brought about by

Right now, in droughts, we very much see that distortion because we are seeing
grain prices in extreme. Grain farmers will say, "That's wonderful for us," and
that's fine, that's okay. Essentially we are under a lot of pressure in a sense
because otherwise we are able to pass on down to the cattle producer. So while
grain price is set by world markets and world standards and Chicago, et cetera,
cattle prices aren't and of course it's a deregulated market as well, so we are
able to push down cattle prices to pay for the higher cost of grain.

Someone says to me in this environment, "You're a lotfeeder. Geez, life must
be pretty tough paying 300 bucks a tonne for grain," and we are probably
having our best year we have ever had, but essentially because we're able to
pass it on down to the cattle producer, because they are the ones paying for it.
I'm a cattle producer as well, so that part of me pays for it as well.

I think where this distortion factors comes into play is because we see
ourselves having to pay extreme prices in times of shortages, and that is supply
and demand, I understand that, but the distortions come into play as well.
We're lucky as a cattle industry that our major - can I just finish this point - our
major competitor, United States, have, unfortunately for them, had a BSE case
a few years ago and we have a lot of that export market to ourselves.

If we didn't have that, if they didn't have that, and we were in this situation
now, we would see US corn, et cetera, corn-produced beef over there - this
happened in the mid-90s. We lost all our market share pretty much to Japan,
and we have gradually won it all back. Now we have it to ourselves.
If we didn't have that right now, by jingo, I tell you what, this Single Vision,
that's the other part of the Grains Council, but this single desk would really
decimate this cattle industry and we wouldn't be using 10 million tonnes, we
would be probably half of that and this grain industry would be very quickly
losing its largest customer. Thank you.

1.3.07                                P-30
MR RALPH: Sandy, why do you see the single desk stifling your industry
when the local industry is deregulated? Do you think the single desk is
actually pushing up prices overseas and therefore attracting export wheat?

MR MACONOCHIE: What we see is certainly the local market is
deregulated, yes, of course, and we participate in the local market. But where
the distortions come into play is again what I was just trying to say in closing a
moment ago: 60 per cent of our product we produce and export it, so therefore
we are up against our competitors. Obviously Canada, United States are the
main ones and down the track it will be South America.

Where that comes into play is that if we get some distortions along the way,
brought about by prices that rise above - I could use the term import parity -
when there's plenty of grain around and that 30 million tonne crop, we all like
to see any time, because everybody likes to see prosperity, but essentially that's
pretty much export parity, so that's pricings on export parity, when it comes to
that. We can live forever as an industry if we hover between export and import

We are not allowed to import grain anyway. If we were a chicken producer or
a chicken feeder here in Melbourne or Newcastle somewhere, we can. But we
are not, we're beef cattle feedlots and we're no different to the pork industry or
the dairy industry. We're not allowed to take it upcountry, unless it is
denatured or treated in some way. So essentially what happens there is we see
this spike in grain, but that's not necessarily going back to the pockets of grain
growers; we see this spike well beyond the import parity and obviously well
beyond export parity, of course.

So once that occurs, we would find, like the mid-90s, early in the last drought
we had in 2002, the Americans had a drought as well, the El Nino event hit
them as well, so they had spiked grain prices as a result of that at the same
time. So we were able to survive. This time around, we are surviving because
they've got BSE, so they're not a competitor at the moment. The grain price
right now, if we didn't have that BSE case, we would see these distortions

MR RALPH: I don't quite understand. If the single desk was eliminated, how
would that affect the price in Australia for the deregulated domestic market?

MR MACONOCHIE: The grain would be in the hands of many more other
people, and I would see the grain industry very similar to ourselves in a
deregulated system of competition, and I would see the grain industry - they
are not alone in this lack of customer mentality, most farming industries are.
But they would certainly become a lot more customer focused than they
certainly are now because they are stifled now and they are not allowed to.

I know you'll keep coming at me on this distortion from the single desk, but it's
purely because a lot of the grain is sanctioned and it goes to - the whole

1.3.07                                P-31
mentality, is hole in the ground, going to export, and there's a lot of grain that
leaves and goes overseas at various levels. It's not always at the highest price.

MR RALPH: That's not the story we have had coming down the east coast of
Australia because most of the product, particularly in a year like this, has gone
on to the domestic market and not into exports. I don't understand, if the single
desk was eliminated, why that would affect the domestic market - unless you're
arguing that the single desk puts up the export price and therefore puts up the
domestic price.

MR MACONOCHIE: I think I'm probably not explaining it as well as you'll
see in our submission, but it very much does affect us in terms of droughts
more particularly than in terms when grain is abundant.

MR RALPH: I think you would have the same problem with drought anyway.

MR MACONOCHIE: Certainly. We certainly have the same problem with
drought, but it's a lot more transparent and we get to know the stocks, we
would have secondary markets in place, which we don't have right now, and
we would have this - I know we had a lot of discussion with the Government
back in 2002 and we are very much trying to get this transparency thing of
saying what stocks are actually out there.

We, as an industry, actually set up the AWB through one of our major
members of the association and they failed it miserably, and it was really more
brought about - if I just touch on that example. At the very time, the AWB
were aggressively targeting a market in Egypt for 50,000 tonnes of wheat. We,
through one of our members, applied to the AWB for 50,000 tonnes of wheat at
the same time. All we found was that they lost that market anyway in Egypt,
but the price difference was $80 a tonne, apples for apples, all things
considered the same.

The price they were targetting in Egypt was $80 a tonne beneath what they
quoted us and they wouldn't give it as 50,000 tonnes, they said, "You can have
it in 5000 tonne increments, 5000 this week, 5000 next month, 5000 the month
after," et cetera, at $80 a tonne in excess of what they were aggressively
marketing that same product, and they lost it anyway, the French beat them.

So that's the areas I see where distortions can happen, because they are the
owners of that wheat. They had the wheat, they had the stocks. Particularly in
drought, when products are short, that's when we get these distortions.

MR RALPH: Thank you, Sandy. Who would like to be next?

MR RON STOREY: Good morning, gentlemen, thanks for the opportunity to
speak. My name is Ron Storey. I speak as an individual this morning, but in
the interests of wheat farmers. I'm from a wheat farm and my brothers are still
wheat farmers, so I had that orientation. In the grain industry, it's a small one

1.3.07                                P-32
and it's important that we make our declarations, so I do that as well.

I run a consulting business now, a small business called Australian Crop
Forecasters, and we supply some of the major people in the grain industry, and
I provide consulting services as well to a number of the sectors. I'm chairman
of a plant breeding company, trying to breed better wheat varieties. Perhaps
most importantly and perhaps most notoriously, I'm a former AWB executive -
not one of latter years, but for a long time, and I left AWB in the year 2000.

The importance about that is that for a period of about a decade, I'm proud to
say that I had the opportunity to effectively manage the single desk over that
period of time, and it's with that background that I make a couple of comments,
and I hope can contribute to the discussion.

We know that farmers are saying to you, at least 70 per cent of them, it would
appear, that they want a single desk. It appears to me the difficulty is we are
not sure what question they are answering. The reason I say that is because
I think the single desk has become one of those things that is many things to
many people and it has a lot of elective services added to it these days,
compared to what our friend earlier referred to as the 1939 version.

So my contribution today is not to argue for regulation or deregulation, but to
argue for clarity. I think that if this committee can make a real contribution to
strip down this single desk to its core function and differentiate that from the
elective services, which have been added to it over the years, and particularly
by the current single desk management regime, then growers will be better off
and they will understand that it is the core function of price discrimination that
originally formed the reason for a single desk and probably remains today a
valid reason, if indeed there are price premiums or price differences in the
world market that can be extracted.

So it's that differentiation between a single desk system and a sole exporter
system that I would suggest is worthwhile pursuing because that would perhaps
lead us to the heart of this issue of the fear of the undercutting that farmers are
expressing to you. They are desperately concerned that they will start
competing with each other and drop the price of their product in some markets,
which they believe pay them a premium, which leads me on to the second and
probably my last point.

If we are going doing down that track, it is also important to determine, or
attempt to determine, what the size of this prize is. If there are premiums, then
please let's get the clarity around where they are and what size they are, so the
farmers know what they are fighting over. Is it really big, or is it relatively
small in comparison, perhaps, to the cost gains, and they know that they have
been overcharged under the current system, that might be available to them.
Thanks for the opportunity.

MR RALPH: Thank you, Ron.

1.3.07                                P-33
MR CARROLL: Ron, could I just ask you a question.

MR STOREY: I thought I had been dismissed, like I was in the year 2000.

MR CARROLL: Ron, we've seen some of the studies that have tried to
quantify what the size of the premium is and we have heard a lot of people talk
about those studies and this premium, and a lot of people, I have to admit, talk
about figures and quote them in the wrong context and mistakenly. We have
also heard people talk about the size of the prize in terms of contestability of
the costs and services of managing the single desk.

Are you able to sort of give us your views on which one is the greater prize and
their quantum?

MR RON STOREY: If you know the answer to that, you know which is
better for growers, and I guess that's what the argument is about. I'll answer it
this way, Mike, by saying that the definition of premium is one that's misused.
In my own experience, and maybe the world has changed since, I'm not sure,
so I put that caveat on it - in my own experience, with one or two very distinct
exceptions in the world, customers do not pay more for our grain than what
they pay for competitors'.

What happens is we get the opportunity to perhaps keep some of the freight
advantage that we have in delivering to some markets. By and large, flour
millers around the world are looking for the best deal. They look at what you
can provide versus Canadian or US or Kazak wheat or whatever it might be on
a landed cost basis at their mill, yep, they'll buy Aussie wheat every day, if it's
the same price, because it's good stuff and it's drier and cleaner, et cetera. But
paying more is a misnomer. Japan is an exception to that.

That's the first thing, is to understand what we are talking about. How big is
that? Look, people can do their estimates, but if you sold half the Aussie wheat
crop at a freight advantage of $5 a tonne on a good day, you're getting some
idea of the size of the revenue gain perhaps, half the exports there. People
have done the sums previously and more qualified than I on the cost side.

MR CORISH: Ron, if it's a freight advantage, surely that is sustained outside
a single desk marketing arrangement. And just another question: what are the
characteristics of markets where you can, through collective selling, extract a
premium? Is it the markets where there's a single desk buyer?

MR STOREY: No, I don't believe it's related to what type of buyer it might
be. I think as far as the freight advantage is concerned, I would probably
disagree with you. I think that the freight advantage would be eroded. If there
are five or six of us standing there with the same wheat to a customer and it is a
freight advantage, and we all know where the freight advantages are, and the
whole Aussie crop cannot fit into that one market, we are more likely to erode

1.3.07                                P-34
that. We won't erode the whole lot, but I think some of it would be eroded.
That is my own view.

But against that, you've got to weigh up the advantages, and I think one of the
Achilles heels - and I'm perhaps disappointed but proud to say I have always
said one of the Achilles heels of a single desk is innovation, and I think that
you need to be very, very sensitive to the fact that other people have got other
ideas about how your product might be used.

MR CORBETT: Ron, I'm really pleased that you had the will and, I might
say, the courage to stand up and express your views because I think it's a very
significant part of the input of what we have heard to hear from someone who
actually operated the single desk

Could you give us, from your experience, and I realise there would be a bit of
estimation and a little bit of guesstimate here, but the strong argument for
deregulation is that you will get more buyers at the farm gate who will have
bought at a fixed price, or some other arrangement, but let's assume - sold.
They will have bought from the farmer at a fixed price. Then they will have a
great profit motivation to get the highest price in the market.

So it gets down fundamentally to these two type of models: one, many buyers
fighting to sell in the world market and make a profit, so they have an upward
motivation, against a single desk that hasn't got a fixed commitment to pay a
purchase price and therefore has got a great flexibility and it can always be a
buyer because it can always afford to be a dollar under their opposition.

Could you try to give us a picture of what you think the market might be in
deregulation, because I think you've already said the single buyer doesn't get a
premium, so how might that market look in practice, do you think?

MR STOREY: Perhaps I will just clarify that. You said that I said a single
buyer - I think your words - a single buyer doesn't get a premium. I think a
single seller does get a premium in certain circumstances, and it depends how
you define premium.

Under deregulation, this is something that I have wrestled with for 20 years,
and probably still do, and will. I think the reality is once you have a number of
buyers and sellers in the market, then because of the range of risk alternatives
that they have, risk pricing alternatives, they all take different positions in the
market, and I think your example of saying you've bought at a fixed price from
a farmer is really only a part of the equation. The reality is that these trading
companies are taking risk positions all the time in multiple grains and on both
sides of the market, be it buying and selling, and trading off between market
and barley and sorghum and those sorts of options.

So I can't give you a straight answer as to say under deregulation, they will
compete the price down or not. I think what I can say is that certainly at times,

1.3.07                                P-35
and we have seen it here in Australia in the last five to 10 years, when parties
have operated in the domestic market and they have to stand at the farm gate
and compete, because they have already sold perhaps to an export market, they
have had to stand there and compete with each other and farmers have been
very, very much the beneficiary of that.

The flipside I think perhaps is the 30 million tonne crop, which again is one
that people seem to be concerned about, and I will perhaps add my comments
to what has probably already been said, this buyer of last resort issue. I guess
I have been there in terms of trying to put a price on a very, very large volume
of grain that, on the day, you can't see a home for it.

I think that what happens is you become a receiver of last resort, not a buyer,
because you don't buy it, you leave the risk all with the farmers. You give
them a price estimate of what you think it might be worth and that's what
happens from there on. I would think that that will continue under a regulated
or deregulated market. Plenty of people in fact like buying in pools because
the risk stays with the growers.

MR RALPH: Thank you very much for those views, Ron. Who would like to
be next?

MR ALEC OSBORNE: Good morning. Alec Osborne, commercial manager
with Louis Dreyfuss in Australia. Louis Dreyfuss has been a long-time
supporter of deregulation of all of the grain markets in Australia. While we
have provided a submission from Louis Dreyfuss directly to the committee, we
have also put together with the Australian Grain Exporters Association a larger
submission called Marketing Australian Wheat.

Louis Dreyfuss fully endorses and supports the contents of that submission,
which calls for a registration of exporters, many exporters able to operate from
Australia and export Australian wheat overseas, and the separation of the
industry good or essential service functions from the commercial players in the
industry, but making those services accessible to all of the commercial
participants in the industry.

I would like to speak more to the Louis Dreyfuss submission that we have
made. Essentially, the views that we have expressed in there are that today in
Australia we dictate to growers to whom they should sell their wheat, we
dictate to the customers overseas from whom they should buy their wheat, and
we operate under a Wheat Marketing Act that disenfranchises all of the market
participants who are not participants in the national pool, and I say that because
the Wheat Export Authority, in making its decisions about any export
applications must have regard to the participants in the national pool and the
Wheat Marketing Act does not countenance at all the activity of the domestic
market in any effective way.

I would put to you a very simple proposition, that we let the growers decide to

1.3.07                               P-36
whom they wish to sell their wheat, we let the overseas customers decide from
whom they wish to buy their wheat, and quite frankly we stop messing around
with expensive reviews and submission-gatherings and things like that where
we engage in trench warfare that does not promote the Australian industry to
our customers and to our markets.

Fifty-two is a good age. Sometimes being near to 40 and having already
messed around in the politics of the wheat industry for the last seven or eight
years, you start to feel pretty old.

I guess I'm also a member of the gang of 45 that we heard about earlier.
There's many companies operating in the world market trading wheat. Many
of those companies are represented in Australia in a small way. More of them
would like to invest in Australia, if they had the opportunity. Those companies
are already selling wheat from many, many origins around the world to
customers. So if they have the red carpet rolled out to them or if they bid down
the price of wheat in the world market, then that's already occurring.

Quite frankly, I don't believe that's what sets the price of wheat in the world
market. It is the supply and demand of wheat, the amount of wheat that is
produced relative to the amount of wheat that is consumed, and allowing for
the value of being able to store grain until its usage is required. There are
certainly within the world supply and demand for wheat important regional
supply and demand considerations, and that is the influence of an Australian
crop, be it a 10 million crop or being it a 30 million tonne crop, and I frankly
can't understand why we are so worried about this 30 million tonne crop.

The fact is that there is a price for wheat in the world market today and
tomorrow and next month and you can follow the curve through time probably
out to two or three years in front, and there are plenty of exchanges and
financial institutions willing to put a value on the price of wheat forward. If
Australia has a 30 million tonne crop and if that can't be moved to the export
market in a short amount of time, that grain is quite simply money in the bank.

You finance the opportunity cost of holding that grain, so you have your
interest rate cost in your carry charge, you have your storage charges, and you
can put a very effective floor in the market relative to the future value of that
wheat, and that will be your buyer of last resort along with the probably
20 million tonnes of on-farm storage that already exists in Australia, and those
stores close the minute that growers are not satisfied with the prices.

Some of the earlier speakers have indicated how they market their grain.
I have every belief that growers will build more on-farm storage if they get
more marketing options. Currently the only way for them to get their grain to
market is to put it into the pool, so there's no value to those farmers in having
on-farm storage.

As I have done at a couple of other meetings, just to talk about one of the

1.3.07                                P-37
issues that has been raised, the power of veto and what it really is. The power
of veto is in effect ensuring the disenfranchisement of all other participants in
the industry. If I could liken it to Corish Farms, lamb producers, being able to
veto the sale of lambs from other participants in the market, unless they're
poddy lambs, and then having someone run around to verify that the mothers of
those lambs had died in birth.

MR RALPH: Thank you, Alec. I think we've got your views previously, and
I think Peter would like to have that power.

MR CORISH: Please. Bring it on!

MR ERIC SHADY: Thank you, gentlemen. Eric Shady is my name. I'm a
grain grower north of Geelong, also a Victorian Farmers Federation Grains
Councillor, so I enthusiastically support the VFF model as it sits at the
moment, and for most of the reasons brought up to today.

I was curious that, apart from perhaps Ron Storey before, didn't really talk
about logistics, he talked about freight advantages and things. I'm thinking to
myself if we have got up to 45, from say 10 to 45 marketers in this country,
and we have a reasonably big harvest, I could just imagine the logistical
problems that the Graincorps or even the smaller say private storers would
have if they there associated with a number of marketers. How do you then
manage that stockpile?

I think particularly with Pacific National, our rail company, I know they don't
like mixed loads. They have trouble with it, they would charge enormous
costs. We would have problems, therefore, with probably extra trucks on the
road because clearly rail is the way to go, but rail can probably only really cart
huge amounts of grain at one time and not so much mixed loads. If they do,
they would be charging, I'm sure, a premium for that.

So I think logistics in all of this plays a very, very major role, just moving that
extra grain - I'm talking about pool grain - into the port system, and I think it
perhaps hasn't been touched on as much today as it could have been, so
I thought I would just mention it. I think it's very important to the growers that
our handling and transport costs are high enough now, I could just see them
climbing even further. So thank you.

MR RALPH: Thank you, Eric.

MR CORISH: Eric, has the VFF done any work on the amount of on-farm
storage that's currently available in Victoria - I assume you haven't done any on
a national basis - and also what percentage of last year's wheat crop might have
been warehoused and what percentage is warehoused on a regular basis?

MR SHADY: I would have to seek support from the president, but I suspect
not. There are some figures banded about, I guess, by some of the marketers, I

1.3.07                                P-38
guess word of mouth would give us a bit of an example. Certainly there's been
an enormous amount of warehousing as of 05-06 that is carried through. I
wouldn't have thought there would be too much this year, but there would be
certainly amounts still out there on farm and in some of the small storages.

MR CORISH: And in a normal year, if you ever see a normal year again?

MR SHADY: That's a good point. I would say that warehousing is becoming
more of an option these days. So in some ways, that does decrease the risk a
little bit of logistics becoming a problem, although that grain certainly still has
a future and in lots of cases, even though it has been warehoused and bought by
traders, can finish up in the pool anyway. So it will still have that same
function to get to port.

MR CORISH: But without the pressure, perhaps, the time pressure?

MR SHADY: Yes, I'm sure it would, and that would be at the behest, I
suppose, of the grower himself, depending on when he wants his money and
when he wants to sell it, because the harvest is handled over a 12- or 18-month
period anyway. I mean, trains and trucks can only do so much.

MR RALPH: Is there any anybody else would like to speak?

MR JUSTIN BRENNAN: Justin Brennan again. This is on a slightly
different thing. Yesterday I went to the Baillieu Library at Melbourne
University and got a copy of a book called A Shared Harvest, which was
published about 15 or 16 years ago and it's sort of the official sanctioned
history of the AWB. We have always been told about the huge support for
pools and the single desk when it first came in. There's just a few interesting
things in it I thought I should quote. It's talking about:

      Originally in Queensland a compulsory pool under the control of
      the State Wheat Board was created and operated continuously
      between the wars. The voluntary pool soon languished, with
      Western Australia being a notable exception.

In Victoria, it says:

      There was a ballot organised by the Hogan Labor Government in
      May 1928 to determine whether a compulsory pool would be
      introduced. In the end, the proposal was narrowly defeated, with
      52 per cent voting against it. Farmers in the Goulburn Valley,
      which I will concede is a tiny wheat growing area in Victoria now,
      and the Wimmera voted strongly for maintaining the existing
      system. Mallee farmers, however, showed the extent of their
      enthusiasm for agrarian radicalism by recording large majorities
      in favour of compulsory pooling.

1.3.07                                P-39
My father was dead a decade ago, but he always said that in the Mallee, it was
overwhelming support, he understood, but in other areas it was different. It
further goes on and says:

      In New South Wales, the Farmers and Settlors Association
      executive advised its members to vote no when the pool was put up
      in 1926. The pool took place in February 1927. Of those growers
      issued with ballot papers, only 42 per cent voted and of these,
      55 per cent voted in line with the executive's directive. The
      Farmers and Settlors Association showed renewed enthusiasm in
      1927. In 1928, it called another ballot. Again, however, the
      September ballot saw 55 per cent of growers voting against the
      proposal. A year later, another ballot was conducted.

Keep on going until you get the result you want, I think:

      This time the position was reversed. Some 60 per cent of growers
      voted in favour of compulsory pooling, with support strongest in
      the Riverina. A pool was not formed, however, because the
      Marketing of Primary Products Act 1926 provided that a pool
      required a 66 per cent majority.

It further goes on:

      In September 1930, another ballot was held in New South Wales.
      Some 63 per cent of voters supported compulsory pooling again, an
      insufficient percentage for the pool to be introduced in 1931. With
      the ALP, Jack Lang, back in power, yet another ballot was
      organised and again the proposal was defeated, with only
      42 per cent of voters voting yes in support of compulsory pooling.

      Likewise in Victoria, a ballot on compulsory pooling conducted in
      1930 under the Hogan Labor Government resulted in 56 per cent
      of growers voting yes, which failed because they needed
      60 per cent majority. Only two-thirds of growers voted. Moreover,
      the overall yes vote disguised the fact that in the Wimmera and
      northern districts, a large majority, 57 per cent in the former and
      63 in the latter, voted against the proposal. Only in the Mallee was
      there support.

      It was the same story in South Australia. Until 1930, support for
      the Australian Wheatgrowers Association was limited, almost
      entirely struggling farmers living on the fringe of the wheat belt
      and the Murray Mallee and the west coast.

MR RALPH: Justin, I don't think this is helping to sort of discuss what we
want to do in the future.

1.3.07                               P-40
MR BRENNAN: No. The only point I note, I didn't put it in my first
submission, it was just the fact that we are always told the support has always
been overwhelming, and in the official history of the Wheat Board, it doesn't
appear to be the case. It's just a point that needs to be made.

We have always been told still the support is overwhelming, but I don't think it
was - it was pretty marginal on votes there and I just think often the agro
politicians say it's still overwhelming. It is just my general view it wasn't then
and it certainly isn't now.

MR RALPH: Thank you, Justin. Is there anybody else like to speak?

UNIDENTIFIED SPEAKER: Can I ask a question?


UNIDENTIFIED SPEAKER: Chairman, I would like to ask a question of
your committee. The questions coming from your committee today have been
very much asking various speakers about what model, which model, how we
do this bit and put this bit together or that bit. That seems to be your dilemma,
is how you actually pick all these threads up of all the different things that
people have been saying and how you actually put it into something that will

My question is, chairman: surely with the background of your committee, the
obvious answer is let the market work and surely our industry, or the wheat
industry, needs regulation by government as any industry does. But other than
that degree of regulation that is required by all industries, why not let the
market decide which is the best way?

MR RALPH: I can give a very clear answer. The terms of reference require
us to go round and find out what the growers think, specifically not to make
recommendations about what we think should happen, which is what you're
encouraging us to do. Our task is simply to find out what we can find to put
the growers' voice, if you like, into the Government, because the Government
is going to be the one that is going to deliberate on what the position should be
post-30 June or maybe earlier, and our task is simply the professional one of
finding out.

The reason for the questioning, I think, as Roger indicated, is just to tease out
because what we have actually found is that the initial position that somebody
puts to us, upon questioning, turns out to be slightly different from what it
sounded like the first time.

MR CORBETT: And, chairman, it's a lot more interesting to do it with
teasing, isn't it.

MR IAN HASTINGS: Thank you, gentlemen. I have spoken before, Ian

1.3.07                                P-41
Hastings. I just felt to sum up the VFF's position, which has been discussed by
your people here today and of course by a number of others as well, and again
point out to you that the position that we have come to as the VFF has been
done through a very, very democratic process and we do have almost
unanimous, and I know there are a number of our members in the room who
have expressed different points of view - g'day, Lawrence - but we have taken
our model out to the public arena on a number of occasions and it has been
very, very strongly supported by our members, and I just really wanted to make
that final point.

MR RALPH: Thank you, Ian. If there are no other speakers, I would like to
thank you all for coming. This is the final public meeting that we are having.
So from this afternoon onwards, we are going to be starting on deciding what
we have heard at the meetings and what we have got in the written

What I can say is the meeting here today has been quite different from any
other. The balance of views is unique, in our experience, compared with any
other. It might be something to do with the capital cities, because Perth was a
bit closer this way, but Perth's views were about evenly divided between those
who wanted some form of independent single desk and those who wanted

Geraldton was a bit different, in that while you still had the support for the
single desk, there was quite a lot of support for a licensing system, generally
with accreditation of the buyers.

I have said on previous occasions that in some respects our task is very simple,
that's to represent what viewers say. On the other hand, it's rather complex
because the range of views among growers is quite disparate.

We wouldn't be able to make any headway in our task if people like you hadn't
come to all these various meetings, and it would have been a rather futile
exercise, so I do appreciate people taking time out to come here today, and to
also thank you for something we have noted everywhere we have been, and
that is that people, irrespective of the views they hold, have been prepared to
allow others to speak uninterrupted and allow them to make their statements,
which I think is very helpful to us and always reflects well on the audiences
that we have.

Normally at this stage I have pleaded for written submissions, but we have
passed the closing date, so I don't need to do that today. Thank you very much
for coming along and for your participation this morning.


1.3.07                               P-42

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