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WHEAT EXPORT MARKETING CONSULTATION COMMITTEE,
FRIDAY, 16 FEBRUARY 2007
MR RALPH: Good morning, ladies and gentlemen. It's a bit like being in
church, where the front pews are very lonely.
My name is John Ralph and I'm chairman of the Wheat Export Marketing
Consultation Committee, and I would like to welcome you here this morning
on behalf of my colleagues and myself. The members of the committee: on
my far left, your right, is Mike Carroll; next to me is Roger Corbett; on my
right, Peter Corish; and from the secretariat, Andrew Wallace, at the far end of
You're all aware that the Government has said that it's going to be examining
the arrangements for the marketing and sale of wheat overseas, and they have
appointed us as a committee to visit towns in the wheat-growing areas to
ascertain the views of growers, the people who actually grow the wheat, so that
those views can be an input into their deliberations.
Obviously the large organisations, the representatives of farmers, the traders
and the various other industry players, will be seeking to get their own views in
front of Government and lobbying, et cetera. Our role is to get out and see if
we can find what the growers themselves think, so that that can be input into
the Government's consideration.
What I would like to stress is that we will not be making any recommendations
about what should happen in relation to the marketing of wheat in overseas
markets. That's not our role, and we are specifically charged under the terms
of reference to consult with the industry, particularly with growers, and then to
reflect the views of growers back to the Government. So our job is to report
what you and people like you in other towns think and that will be what we
will be seeking to do. Just to reiterate, we will not be making any
recommendations about how the marketing of wheat, the arrangements should
be changed or not.
These meetings are all on the public record. We want to have the process as
transparent as possible. Those records will be available to anybody who wants
to look at them. We have two sources of information. One is the public
meetings, the second is by way of submissions, and I would encourage as many
of you as possible to make a submission.
The submissions don't have to be a lengthy document, half a page or a page,
and they can be communicated by mail, by email or by fax, and we have some
little slips here that we will give you, those addresses and numbers, plus the
telephone number of the secretariat.
We have to have the submissions in by 23 February because we are required to
report to the Government by 30 March, at the latest. If, after the meeting, you
would like to have your view recorded, then you could send off a submission,
which, as I said, doesn't have to be lengthy at all, just to record your views.
The way we have been conducting these meetings is that we ask people when
they arrive if they would like to speak, so we get a register of those who wish
to speak. If you haven't registered to speak, that won't preclude you from
speaking. What we do is we give each person the same amount of time, so that
everybody has exactly the same chance, and when we have finished with those
who have registered, then I'll open up the meeting for others to express their
points of view.
If you have a mobile phone, it would be handy if you could switch it off so that
we don't have phones ringing in the middle of the presentations.
After you have spoken, if you would just retain the microphone until the
members of the committee have had the opportunity to ask questions. The first
person I have on this list then this morning is Jeff Pearson.
MR JEFF PEARSON: Thank you, Mr Chairman, and members of your
Consultative Committee. Prior to the Cole Inquiry, the single desk was safe
from review until 2010. The hysterics generated in the political arena reached
an all-time low when Kevin Rudd suggested that Australian wheat growers had
provided the funds for the ammunition being used against Australian troops in
In my opinion, the single desk and the AWB's recent indiscretions are being
linked, when in fact they are two separate issues. Single desk had its origins
back to a previous free trade marketing environment. Unfortunately, I'm old
enough to have witnessed it operating. Single desk emerged from a situation
where farmers collectively decided that they had had enough of getting ripped
off by grain traders. I do not believe that human nature or business ethics or
the trading environment has suddenly changed in 2007.
Single desk offers farmers a collective mechanism to market their grain
regardless of where they farm. Deregulation of trading to the domestic market
has already excluded farmers from this area the opportunity to benefit from the
limited Australian domestic market.
A requirement in the act for the licence holder to also be the buyer of last resort
compels that operator to source grain right across the wheat-growing areas of
Australia. In practice, it has allowed the industry to grow and driven the
licensee to find and develop new markets for Australian wheat. I believe that
the current expectation from opening up for new traders into the market is
flawed for that very reason.
Australia's reputation for quality is no longer the competitive edge that it has
been. End-users have developed means to blend lesser quality wheat and there
are new suppliers from which to access greater quantities of wheat. Australian
farmers have had the capability until now, with their agronomic advances, to
keep ahead of the cross-price squeeze, but world wheat prices are governed by
the law of supply and demand. The experience of the 2005 harvest
demonstrated that fact.
The premiums that are offered by prospective marketers are for cherry-picked
markets. Proceeds from those markets under the single desk are equally
divided across all Australian wheat growers; the CBH activity in the most
recent harvest being a good example. The simple fact is that world wheat
markets pay what they have to pay. Grain traders are only interested in their
own bottom line, and the AWB will join them if the single desk goes. There
are wheat growers prepared to sell for less either for the reason that they sell
under a subsidised system or that they need a cash return, or perhaps their cost
of production is lower.
If the single desk is the single reason for the pain in the wheat industry, why is
it that our Canadian counterparts are trying to strengthen theirs or why is it that
our American counterparts are trying so hard to demolish ours? One thing is
certain: demise of the single desk will not suddenly reveal new markets, but
equally as certain is that it will disenfranchise communities of wheat growers
and introduce competition between farmers, an experience that will add a new
pressure for the sustainability of regional communities around Australia.
Farmers need to have an appreciation for the difference between marketing and
selling. One thing is absolute, and that is that a return to pre-single desk
trading is not the single answer to the wheat industry's problems at this
moment. Thank you.
MR RALPH: Thank you very much, Jeff. What I failed to say is we are going
to give everybody six minutes, but you didn't use the six minutes. At the five
minute mark, you'll get an indication.
We are finding quite strong support for the single desk, as we move around the
different towns, but what we are also finding is the differences in views as to
whether the current arrangement should stay or whether the activities of AWBI
should be separated from AWBL; in other words, in some cases the suggestion
is there should be a completely different organisation rather than AWBI, but to
have an organisation that's separate from the corporate listed company because
some people see a conflict.
Do you have a view on whether you would want to stay with the same
relationship between those two companies, or would you like to see the
MR PEARSON: I'm not prepared to be firm with an answer on that because I
don't completely understand the detail between that. I do believe that the AWB
structure in total has provided opportunity for the industry to develop, because
it knows market intelligence and so on and so on, and vested a lot of our
money, I guess, into developing those markets up.
Other than that, I'm not prepared to suggest that I'm strong on one thing or the
other. I think what I'm saying is the principle of the single desk has to survive
and I guess we have to be prepared to accept change. I noted when I got here
that not everybody is driving a Model T. Certainly we have to be prepared to
accept some change.
MR CORISH: Jeff, just following on from the chairman's question, a lot of
people have suggested to us that the situation pre-1999, where effectively the
single desk was held by a company controlled by growers, admittedly with
some Government involvement, wasn't involved in other activities, commercial
activities, and didn't have B class shareholders to provide a return for, a
dividend for, it was a better situation than where we are now.
I am just wondering whether you would share that view or whether, as the
chairman said, you think the status quo, where we are now, is a better
MR PEARSON: I believe that that change has certainly generated a lot of the
debate we are having now, because, as you say, dealing with a private company
rather than a cooperative. At the end of the day, I don't see that the debate we
are having now - I mean, we have had to move on from that because what we
are offered now is more of the same. I don't believe at the moment that we
have been offered a cooperative system again and I don't see how we would
achieve it under the current market conditions, bearing in mind that that
company prior to that time also had a significant control over the domestic
market as well.
I don't quite, in my own mind, understand how we can go back to where we
MR CORBETT: Jeff, this whole area of a single desk and what format, what
does a single desk mean, has really been the major debate across Australia.
Peter has referred to one of the issues.
There are a couple of other interesting issues, and one is people feel very
strongly about the escalation of the cost of maintaining the pool and there
being no transparency to what constitutes a lot of those costs in people's view.
The second aspect has been the unequal use of the pool and therefore the cost
of maintaining it.
Eastern farmers in the main are now supplying a lot of their crop to the
domestic market and maybe they like to pool in a boom crop, but in normal
times the market is almost getting to a point where they don't use or support the
pool and therefore they don't bear the costs, because the costs are finally borne,
dollars per tonne, into the pool. If there's not many tonnes in the pool, the cost
per tonne goes up, naturally.
Do you have any comments on these aspects?
MR PEARSON: I'll make a comment on the cost side of it because, AWB,
because of its position, has to publicly declare what its cost structure is and
what its costs are. But the international buyers, to my best understanding,
aren't compelled to provide that information. So there's an inequity in that
The other thing is that I believe particularly this year the difficulty has been
that even with the limited licences that were operated, obviously that restricted
AWB's ability to buy in that grain, or at least the opportunity to do it, so their
cost structure is probably pretty much out of whack right at the moment.
But what we, as growers, have got to have in mind is that we have to take that
cost structure over a longer period, operating period, and decide then whether
in fact we have benefited or been disadvantaged by it. The other thing in
regard to the eastern states' experience is in this area we have never
experienced that situation, we have never had the opportunity to access those
So it's very difficult for us to actually provide you with a direct comparison,
but it has been suggested to us that regardless of the experience of growers in
the eastern states, the single desk has put a base, a cost base or a price base, in
the Australian market and the domestic markets benefit from that.
So it's a bit of a chicken and egg situation as far as we are concerned, except
for the fact that I believe we are basically shut out of the domestic market.
MR CARROLL: Jeff, one suggestion we have heard is that the industry good
functions, the quality standards setting and maintenance, should be paid for by
a levy on all wheat growers including those in northern New South Wales, that
very rarely deliver into the pool, and you're bearing the cost here of all of those
things. Do you think moving to a levy-type system for covering those costs is
a sensible way to go?
MR PEARSON: It is, in my opinion, and I know I can be criticised in this
meeting because in fact I am involved with the Regional Development Board
and we're party to upgrading rail on Eyre Peninsula and we are currently
levying growers on Eyre Peninsula to contribute to that rail system. I know
there are a lot of growers that have got some misgivings about that. But at the
end of the day, I believe the levy system does provide some sort of opportunity
to level out that situation.
MR RALPH: Thank you very much, Jeff, for those views. The next speaker
we have is Paul Kaden.
MR PAUL KADEN: Thank you, Mr Chairman. Mine won't be as long
as Jeff's, so he's pretty much covered the areas that I had wanted to cover. The
most important thing is your voice piece to Government, where you take back
to them, "Look, this has been driven by politics. We, as growers" - how can I
put it? You've got AWB and you've got the single desk. The two issues are
separate, Jeff made that quite plain. In 2010, the single desk was to be
reviewed. But because of the Cole Inquiry, we have the two lumped together,
and it's being driven by politics.
Most growers you talk to in our area - and I come from Cowell, a very
marginal area up from here, export orientated - are scratching their heads
wondering how we got to this point, when there was 3000 other companies that
were breaking the oil for food program protocols. We had the Cole Inquiry,
which was looking at AWB's involvement in the Iraqi program, and now we
have a review of the single desk. Why? Why has the Government brought it
Is it because there is a load of back-benchers, Wilson Tuckey and others and
some in South Australia, who have this philosophical bent against single desk?
I would suggest to you that is what is driving it. However, we have this
review, so we have to get on with it.
I also say that this industry has been reviewed and reviewed and reviewed, and
still we have AWB that has somehow or other broken these protocols, broken
business ethics - it's happened under an organisation that's probably been
reviewed more so than any other statutory body in this country, and that was
So what have those reviews produced? I would suggest to you that the
Government arm that's meant to overlook the legislation, the Wheat Export
Authority, hasn't been doing its job. That was Government's responsibility -
and correct me if I'm wrong - to have an overarching view of how AWB
managed the single desk, and that didn't happen. So now we as growers are
going to be penalised because the Government got it wrong and the reviews got
it wrong. So that's my opening statement.
The single desk in this area, where we are export orientated, is important on
many fronts, and I'm sure you have heard it over the meetings you have been
to, not the least to say the risk management side of it. We all know that AWB -
or most of us would know - now is currently preparing itself for next year's
harvest and marketing, by putting next year's pool into operation through its
risk management strategies of money, swaps, Chicago exchange, all those
various avenues it's got to start putting risk management in place for next year's
Are we as growers expected to be able to put that sort of process in place?
Some can, many won't be able to. It is time-consuming, it is demanding. The
only ones that I could see are going to win out of that, other than the odd few
that are really good at it and got a bent, is the market analysts, who all seem to
be wanting to go down the deregulation path. They're the ones who are going
to make a lot of money out of we all of a sudden wanting to acquire the
knowledge that the AWB has got at the moment.
I talk about AWB and the single desk as one. Since the Government has
decided that's how it is going to be, that's how I will make my comments.
The other really important task in my mind that the AWB plays is the
development of markets, and the single desk, the development of markets and
selling into those markets. Sure, the independent companies, such as Cargill,
Elders, ConAgra and others can do it, but we as growers have had in the past,
and I can't see why it should change, a very close working relationship with the
AWB, who has developed these markets, and they have clearly come back and
told us what the markets require, and that's how we set up our businesses to
provide for what those markets want.
Just to draw as an example: for a number of years I sat on the Wheat Quality
Advisory Committee, that has since been disbanded, but there's something else
in place that the breeders around the country, such as AGT, have in place.
There's a group of us who sat around there, farmers, end-users, breeders and
cereal chemists, and AWB, being the major marketer, would look at various
varieties the breeders had and say, "Yes, this will be good for that market, or
that market or this one just won't cut it, get rid of it," and we the breeders got
their signals of what the market required from those meetings. In fact the
breeders now lament that it's not as robust now as what it was then.
They went out and bred the varieties for the markets and then we grew them.
That takes a long time to happen, that sort of development. I would suggest to
you with many marketers, we will not get those market signals. It will be
Rafferty's Rules. We will grow wheat and then we will find out that the
markets don't want them, overnight, and we just can't change our direction that
quickly. We need long-term planning and stability in the industry, and that's
something that we have got out of the present system, but I am afraid that won't
happen if it changes.
Talking about the growers, price stability and an indication of where we are
going with price, is everything, for us to have confidence in investment in the
industry. Even now, even as rough as it is, we are given an indication of where
prices might be for next harvest, and that gives us then the ability, the security
of knowledge, what percentage of crop that we grow, whether it be more wheat
or more oilseeds. That is all important for growers, especially those of us in
these drier areas, for making our investment.
One last thing: there's a lot of grey-haireds around here and bald heads around
here, so they'll remember 92. Receiver of last resort, which is required of the
single desk, is all important. In 92, who could forget that downgraded crop we
had, weather-affected crop, which was just about impossible to market.
Through a bit of fortuitous trading on the New York Exchange, and I think the
guy was Tim Ryan, then working for AWB, that price that we got for that pool,
that product, was artificially high. I would suggest we would find that very
difficult to do as growers.
The last, closing statement, I make is that the legislation, single desk
legislation, requires whoever operates it to maximise returns to growers. I
would like to come back to just a couple of questions you asked Jeff, if that's
possible. That was about the cost of services of AWL to AWI. I have always
found it quite curious and open to question of how that happened. I believe
that the AWB had a computer model in place that would test robustness of the
services that were supplied to AWI.
I would have thought that that would have been better if it was open to tender,
so that we could really get an open look at the pricing. Look, I'll leave it at
MR CORISH: Paul, you've made some strong statements there in regard to
support for the single desk. You did make the comment earlier there that the
Government got it wrong by having a weak Wheat Export Authority and
effectively growers might be punished as a result of that. I would like to turn
that around a little bit and say hopefully the current situation that we find
ourselves in may be an opportunity to set the structure up for the future.
You also suggested that there's been inquiry after inquiry, review after review.
I think this is a very positive opportunity and hopefully, if there is going to be
change, it's positive change for the industry, and that's why these meetings and
the submissions are a crucial part of that process.
My question is: looking at the future, should we see a strengthened Wheat
Export Authority which does have some teeth, and should it go as far as having
the veto rather than AWB holding veto or AWBI holding the veto?
MR KADEN: Yes, Peter. I believe so, as long as that Wheat Export
Authority is provided with the information, which is now AWB's
responsibility. So providing it's got the information, yes, I think it should have
the veto. Of course, a strengthened Wheat Export Authority will come at a
cost, and I dare say we the growers will have to pay it, and that will be another
cost to us.
However, I do believe there's opportunity for streamlining of costs, as I said,
between the services that AWL provides, so it may in the end be neutral.
MR CARROLL: Paul, you mentioned a couple of things, such as having an
organisation solely focused on maximising net pool returns and the importance
of contestability of the services that the single desk administrator procures.
They are, I think, some of the reasons why this inquiry has come about, and did
indeed lead to AWB proposing a demerger. We have heard other people say
that demerger didn't go far enough to ensure that's achieved.
What are your views on AWB's proposal and what we have also heard about a
desire to see even stronger separation of those two entities?
MR KADEN: Look, I don't think I'm in a position to comment on that yet. I
don't have the full information. You're saying the separation of I and L even
MR CARROLL: Yes.
MR KADEN: I'm no corporate lawyer and I don't know how that would work
as far as the company goes, but I think I probably indicated a bit earlier that
there is room for a more robust tendering for services between the two, and I
think by nature that would then mean that they are going to have to be further
apart. I don't know how the shareholders would view that, but I think was it
you who you said pre-99, before we were a privatised company, was it better
Look, it probably was but then there was still the tensions then. As I
remember, we were building up towards about 800 million, 700 to 800 million
in the WIF fund, and then we were getting Western Australia saying, "Hang
on, we're the biggest contributor to this fund, we want to have a bigger say."
Not a lot has changed. So we went to the shareholdings, but we still have the
same old problems.
We talk about Western Australia. PGA seems to be able to get a hell of a lot of
airplay for a very, very small organisation, after all, pastoralists and graziers,
with a few wheat growers. They've got very good PR abilities. So I wonder
who is speaking for Western Australia. I don't think it's PGA.
MR RALPH: Paul, you raised the question of the strengthened WEA and it
would involve a higher cost, and you've made the comment about separating
could be difficult because of the current rights of both bodies of shareholders,
and I think that's right. I would just comment that we are not expecting people
to tell us how these things should be done, because they will be very complex,
but rather to indicate the direction they would like to see it go, and then it's up
to the people who ultimately design what the arrangements are going to be to
do that job.
It would seem to me, it occurred as I have listened to you speak, that if there
was a complete separation so that AWBI or some other organisation, controlled
by the growers, working only for the marketing of the wheat overseas, it seems
to me there wouldn't need to be any Wheat Export Authority because the
Export Authority I think is there because of the potential conflicts between A
and B class shareholder interests in AWB.
If you had a body that was only working for the growers, I don't know why you
16.02.07 - 10 -
would need the Government to be there to have any say or any need for them to
provide any surveillance. What would be your reaction to that?
MR KADEN: The Government would demand that they be there in some
role, because for the single desk to work you must have that piece of
MR RALPH: Sorry, there would have to be legislation for the veto and the
single desk, but I can't quite see why the Government would need to have
another body, the Wheat Export Authority, if the people who were handling the
marketing were only working for the interests of growers and the board voted
only on by the growers. Why would you then need the Government to have
any activity to try and supervise that? There's only one body of interest.
As you say, there can be conflicts between the different states. But after all, if
it's controlled by the growers and the only activity it has is the marketing of
wheat and purchasing services, could purchase those from AWB or anybody
else on a contestable basis, why would you need the Government to have
another body overseeing that?
MR KADEN: That's an option, and we need to look at all options. I could
accept that, as long as we retained the single desk and all it stands for. Would
that body then be able to provide all those risk management and financial
management options - not options - activities that they have got now?
MR RALPH: I think it would have to be part of it, of course, but they could
purchase those in.
MR KADEN: Yes.
MR RALPH: I mean, I'm not proposing this, I'm just trying to flesh out and
get reactions and ideas, that's all.
MR KADEN: It's an interesting idea and really we need to look at those
options and work through them. I would have thought that you would still
need to have somebody checking on the activities of that organisation. They
have this piece of legislation that is quite valuable, over time it could be - just
because you have growers in control, there's no guarantee that it's going to be
managed 100 per cent. You would have to have, I would have thought,
somebody to keep an eye on the activities of it.
MR RALPH: And probably the industry good activities, making sure quality
and standards were being maintained. Thank you very much, Paul. Karen
16.02.07 - 11 -
MS KAREN BURROWS: Firstly, I would like to know: has a decision
already been made by the PM and are these forums just paying lip-service to
growers? I have heard concerns from other state representatives.
I do not think the single desk is meant to be on trial here, as surveys have
continually shown majority support for it. I firmly believe the inquiry into
AWB's role in the oil for food inquiry was instigated by the US farm lobby,
envious of our single desk marketing arrangement, as demonstrated by a recent
Harvard study. Why is it that over 2200 companies were implicated - even the
US Secretary General, Coffey Annan's son was involved - yet only one
company has been investigated? I'm wondering how Tigris has escaped so
While I do not condone AWB's action, it was common practice in dealing with
Iraq. Did we as growers suffer? No, we took the payments maximised on our
behalf. AWB has $1.2 billion in capital, a massive amount of leverage for
growers. Despite the Cole Inquiry, the company is in a sound position. As no
further export licences have been issued by the Minister, it's time the power of
veto was returned to AWB.
I don't believe there is a conflict between growers and shareholders in current
single desk structures because a lot of growers are also shareholders, and the
AWB constitution clearly states, as Paul has said, that they are responsible for
maximising net national pool returns to growers.
Do other companies have this charter, or is theirs to maximise returns to
shareholders? Therein lies the difference. I am in possession of a Indonesian
newspaper paper article saying Indonesia is confirmed to receive half a million
tonnes for its Bogasari mill, from an Australian farmer cooperative, at a
$US20 per tonne reduced price, a discount to our growers already. So this is
what we are going to face.
The AWB is locked out of Iraq. However, they have many, many other
markets. It is only political anyway. Why do you think the US went to war in
Iraq? Could it be the oil and wheat trade? Marketing the AWB single desk, as
before the current permit arrangement, they have 24 specialists people
managing the pool and the expertise, or an independent grower-controlled
national body to hold the single desk, but my preference is for AWB to still
National pool arrangements to stay. A fragmented system is not the way to go.
Collective bargaining power via a single desk is the best way, and I think it's
the best option, as growers have become so time-poor through having to cope
with the pressures of running the farm, complying with Government and
industry regulations, and we're unpaid Government workers, collecting their
16.02.07 - 12 -
GST and even doing our own fuel rebate and things like that. It's very
A lot aren't skilled in marketing, so the pool is a safe alternative. Ability to sell
to more than one exporter. There are so many marketing options out there for
those skilled in marketing, cash basis, swaps, et cetera. If those growers who
use these options don't want the pool, that's fine, but it's impossible be to
achieve the highest price for these products without a lot of risk, as
2006 clearly showed.
The markets are becoming more volatile and complex, so the single desk
system is still needed. Things I consider in marketing is the ability to sell all of
our wheat at reasonable prices, no matter what quality or grade, with a charter
to maximise return to growers and have a buyer of last resort. Stability of
prices, not a huge amount for part and little for the rest. Collective market
power on international markets. Premium payment for good quality wheat,
with quality assurance. Risk management of currency and commodity
exposures being shared. Being a price-maker through crop shaping activities,
not a price-taker. Past performance and reputation of the company and
More than one company to sell wheat overseas. What's the point of Australian
wheat competing against Australian wheat? The power of veto ensures this
doesn't happen. Current payment processes are sufficient and varied. The
current industry good functions by AWB are sufficient, including trade
advocacy, in national and international regulatory frameworks, and promotion
of the key advantages and customer value propositions of Australian wheat
against overseas competitors.
Container trade is not huge, but I feel it needs the same quality assurance as
bulk wheat, so as not to threaten our high standard for markets. A lucrative
premium bulk market was lost in Vietnam through the container trade, because
they undermined the AWB brand. Our wheat currently has the reputation as
being the best in the world, through strict quality assurance. Can we afford to
AWB is not currently hedging currency. This will have a severe impact, given
that it is one of the three components of pool management. Security and price
stabilisation far outweigh benefits of the highs and lows, bang or bust, of
deregulation. Wheat is our biggest commodity, so our industry won't survive
with the volatility experienced in a deregulated market. It's okay for the other
commodities to trade domestically in a deregulated market, as they are smaller
parts of enterprises, so the effect is not so great.
The decision by SAF to decide on deregulation without consulting growers is a
16.02.07 - 13 -
farce. There are between 9 and 14,000 farmers and horticulturists in South
Australia. SAF could not confirm the exact number of subscribers, but thought
they may have about 3000, thus representing fewer than a third of the growers.
So how can the Grains Council decision be a true representation of SA
Did the trader on Grains Council declare a conflict of interest in this matter,
and did he abstain from voting on the issue? I intend to request a return of
levies paid, as many other growers I have spoken to will do. Therefore, I ask
the Panel to disregard their decision on the grounds that it does not reflect the
majority of grower feelings.
Can anyone give an example of any deregulated market that is it better off?
The dairy industry is a glaring example of being worse off and prices to
consumers have risen accordingly. Have we learned nothing from past history?
We were given one piece of advice when we started farming: never ever get
rid of the single desk.
What will happen if AWB is out of the picture? What will happen is a small
percentage will achieve some very high prices for some of their grain. In a big
harvest year, some will be able to market their grain well, but have you thought
of those 70 per cent or so who rely on the pool for marketing? They will
achieve low prices in a deregulated market and not survive. So the whole
industry will collapse, all for the sake of minority greed.
If AWB is forced out, it will be trader versus trader, with prices forced lower
and lower, without the single desk regulations in price. With alliances such as
GrainCorp, Cargills already in place, Glencorp USA and a US company busy
buying up ABB shares, there will be takeovers as they jockey for supremacy.
Do you want to be responsible for handing the US multinationals our grain
trade on a platter? Thank you.
MR RALPH: Thank you, Karen. You're clearly strongly in favour of the
single desk. I take it from your comments that you would like to see the
current structure retained and with no separation between AWBL and AWBI,
is that right?
MS BURROWS: Until someone can prove that they have got the expertise to
handle it, which I think it has taken a long time to build up markets to have the
expertise to have these 24 people doing what we haven't got time to do, and
until I could have positive proof, yes.
MR RALPH: If there was a separation, you would expect that all those
marketing people that you're referring to would still be retained by AWBI.
16.02.07 - 14 -
MS BURROWS: I would, but you've got to also have interaction. You can't
have one body sitting over here doing the marketing and someone over here
running the business, and then not getting the market signals. You've got to
have the interaction of the two, I believe, for it to work effectively.
MR RALPH: Thank you. Next is Robert Norris.
MR ROBERT NORRIS: I am a single desk supporter. I have just jotted down
a few notes, and really it has all been said. I will just be very brief, because it
is only repetitive.
Buyer of last resort, as in 92, this is the good points of the single desk. This
last year, our 2006 market was really driven by the domestic market, it was
very unusual. In the normal year, when we have a lot greater tonnage,
particularly as in Eyre Peninsula, our marketing here is really driven by export
Single desk guarantees us security of payment. We've got our excellent quality
control, no other countries can keep up to us. We've got our Golden Rewards
program. We have our existing silo system, which is best for storing grain, as
against on-farm. I have tried a little bit on-farm, and I was very glad to sell it.
It's got huge problems. I have heard a lot of people spending a lot of money
building on-farm storage, and it seems a little bit silly when we already own
and operate the silo systems, and yet people are willing to invest outside of that
system. Surely collectively we would be better off investing in the one.
We have excellent risk management and our existing system has proved to be
pretty good. It's all been said before, particularly with managing the money
market, forward selling, keeping some of the system for later on when prices
Even our private advisers that are out there analysing the industry admit that
they rarely can better the pool. It makes sense that a big volume of grain, with
one seller, has to be better overseas. You've got your customer relations,
quality, it's all interrelated. What about all our breeding and research programs
we have got in place? We've got good existing systems.
I know of a few of our neighbours that did go into contracts, went in and most
of them have lost large amounts of money - I'll quote 70, 80, 100,000 - and
now they have to try and get that back somehow, and this was forward
contracts. I find wheat hard enough to grow, without trying to sell it. My
expertise isn't in that area. I'm happy to let it be pooled and sold under single
Just backing up what has been said before: my father has been to America and
16.02.07 - 15 -
talked to farmers and they all envy our single desk, as wheat growers. We
don't want to go down the path of our egg and dairy industries, surely, or back
to pre-single desk days, as experienced by my grandfather. I believe the
principles are still the same.
I have a cutting here, perhaps I will email it to you or something, it's a letter
from Western Australia and this was when the debate was raging about the
Barley Board single desk: I will just be brief. It says:
South Australian grain growers, stay with what you know, stay
united, stay with a single export desk through your marketing body,
ABB. Improvements can still be made when you retain control.
The two free market alternatives only keep the door open for
exploitation of farmers. Hundreds of them will become suppliers to
three or four multinational purchasers. It's called economic
rationalism, the latest pseudonym for freedom of choice or, put it
simply, open slather.
It goes on to say we've got the opportunity to vote yes or no. It says here:
There's little debate in the west. We were promised a new
alternative, which would facilitate entry into markets where a grain
pool was inoperative. There would be no competition in
established Western Australian export markets. The GLA has
opened no new markets. Our single export desk is in jeopardy.
The new traders, like Brookes Grain, are simply exploiting the
many advantages of the cooperative bulk handling system to
compete in the same marketing arena. In reality, CBH
and this is what happens with the single desk -
CBH guarantees the quality of the grain the traders are selling.
This brings us to the ridiculous situation where our grower-owned
handling authority virtually underpins the rogue trader's product
quality in well-established CBH markets.
I know that I could have sold some grain. It goes on further, there's details and
that. I'll email it through.
We could have sold, and of course this was going into the domestic market, but
there was no Golden Rewards, there was no quality control, there wasn't
anything, it was just, "Tip it up in the auger, put it in here, and we will give you
so much a tonne for it." So it sounded very much like the American system to
16.02.07 - 16 -
Just going on, it sounds to me in principle the idea of AWI being farmer-owned
and controlling the single desk does sound as though it needs exploring further.
As for the agro politics of it all, the numbers, I'm not well versed enough to
really comment a lot further than that.
All I can say is I know what my grandfather experienced in the 1930s, and we
certainly don't want to go back to that and I agree with Ms Burrows, we're flat
out now filling out GST forms and everything else. Thanks very much.
MR RALPH: Thank you, Robert. The next speaker we have is Max Wilksch.
MR MAX WILKSCH: Thank you. Mr Chairman, this will take seven
minutes, so you may choose to cut me off at my knees or give me one of Jeff
Mr Chairman, members of the Consultation Committee and ladies and
gentlemen: firstly, I am obliged to state that since I hold a public office with
the SAFF Grains Council the following comments are my own thoughts and
I am not representing SAFF in any way.
As we have obviously seen, there's no other issue in Australian agriculture that
so incites and polarises grain growers as the wheat single desk. Most of the
arguments for the support of the single desk are obsolete, historic, unproven,
unscientific, unresearched, hypocritical or just plain silly. Most of them are
only justified because they are motivated by fear - fear of the future and fear of
Whilst farmers uphold the absolute necessity of monopoly acquisition and
marketing for their wheat and the dire consequences for themselves, their
families and their regions without it, they, and all the rest of Australia, sell
every other product they grow, produce or mine without a single desk. Canola,
lupins, peas, lintels, chick peas, beans, feed and malt barley, oats, hay, wool,
meat, butter, wine, bauxite, coal, iron ore, uranium - all are marketed every
day, every year and no single desk. So what is it about wheat that is so
The one possible exception, I think, is rice, which if my memory is correct is
protected by a single desk because it's a small export industry based on one
region. It's at the opposite end of the scale to wheat, which is grown in every
state and most regions, is the major 18 to 20 per cent player of the world export
market, and ought to be mature enough to live without protection.
In the last eight years of public life, both with South and as a director of ABB
Grain Limited, I have publicly defended the single desk selling system and
16.02.07 - 17 -
I will defend it no more, because I'm tired of defending the indefensible, of the
futility of trying to hold out against the inevitable, because if the single desk
does not go now in 2007, it surely will in 2010, when it's going to be reviewed
under the National Competition Policy agreement.
The current arrangement is not compliant and should it somehow survive 2010,
then the WTO negotiations, which deadline in 2013, will see its demise. The
single desk is politically expendable, it's philosophically outdated, and it's
In the last eight years, I have seen eight single desks disappear - three in WA,
one each in SA and Victoria, and three in New South Wales - and guess who is
next? Even AWB Limited, in its demerger proposal of November 06, seeks to
negotiate a new services agreement between AWBI and itself, and I will quote,
"For a defined transition period to a contestable market." I believe we have
three years maximum until deregulation occurs, and if I believe something is
inevitable, then I see no point in fighting and resisting.
You can call me gutless, a traitor or a hypocrite, if you will, but I would rather
accept change, adopt and adapt to it, make the best from it, and get on with the
more important things in agriculture, rather than continue this futile reverence
over a flawed ideology. What right have you got to force your views of wheat
marketing on every other grower in Australia, from Geraldton to Geelong to
Consequently, Mr Chairman, I support an immediate repeal of the current
Wheat Marketing Act and the introduction of a three-year phased in period of
rigorous accreditation, leading to full deregulation in 2010.
In the interim three-year period, that's 07 to 09, we need an authority, and the
WEA would be fine, to accredit and give financial approval to all potential
Australian wheat marketers. There should be no restriction on tonnages, thus
enabling all buyers to accumulate grain. Financial accreditation and the
powers of enforcement will give confidence to growers and marketers alike.
All marketers must be members of NACMA. There must be open and
unrestricted access for all marketers to all port facilities and no discrimination
by major bulk handlers against any other marketers, both in receivals and
The single desk system must not be replaced by regional monopolies centred
on the major bulk handlers, that is, ABB, CBH and GrainCorp. AWB must
have every opportunity, along with all others, for fair and unrestricted access.
All grain prices and pool returns must be posted net of receival fees and
finance costs so that all posted prices reflect the true net value of the grain to
16.02.07 - 18 -
the grower. All storage companies must be compelled to make full disclosure
at all times to all marketers of all the grains in storage. A new WEA should be
established to take control of QA, R and D, export development, et cetera, and
that this authority be controlled by growers and marketers and industry reps.
Wheat growers must be financially compensated by both the Federal
Government and AWB Limited for the sacrifice of the single desk and that this
compensation be put into a trust fund to advocate for, and advance, the wheat
industry into the future. This three-year transition must be utilised to fully
stake out the direction for the deregulated industry post-2010.
Mr Chairman, it depends on your time frame. I would like to try to rebut some
of the continuing arguments that are put forward to justify the single desk, and
that's your discretion.
MR RALPH: We'll give you a couple of minutes.
MR WILKSCH: Okay. Firstly, whilst I have publicly stated my belief that a
single seller of Australian wheat will extract more dollars from the marketplace
than multiple sellers, that is not the same thing as saying that, "You will get
more money in your pocket." All the studies of single desk marketing, both
private and Government-funded, have been unable to agree on whether there is
a premium, and if so, how much. What they do agree on is that you cannot
define whether the premium, if any, is due to the selling system or to the
quality of the wheat or the relationship with, and reliability of, the marketer.
When currency hedging, financing, underwriting, ship chartering, rail freight,
supply chain charges and bonuses are all negotiated uncontested by a
monopoly service provider, then you as a grower miss out, as the recent WEA
national pool report clearly shows. The 2000 NCP review found that the
introduction of more competition into export wheat marketing would deliver
greater net benefits to growers and to the wider community. If I can quote,
"No single desks, therefore no pools." That's absolute rubbish.
After deregulation, there will be half a dozen Australian companies dying to
get in and export wheat and offer pools, because pooling takes the financial
risk off them and gives it back to you. AWB, ABB, GrainCorp, CBH, Grain
Pool, Emerald, Brookes, Glencorp, Elders, will all be trying to market your
grain. Since deregulation of the malt barley industry in New South Wales,
there have been three pools operating, not one.
3 is a quote, "My father told me that before AWB in 1939, growers were ripped
off by unscrupulous traders." That is historical irrelevancy. This is 2007. The
information flow now of what is happening to world and domestic grain prices
is appalling for its volume, not its scarcity, and any grain grower who is
16.02.07 - 19 -
ignorant is ignorant by his own choice.
4, a quote again, "Without the single desk, the wheat prices will collapse and
communities will die." Since World War II, communities have been dying and
farmers going broke, and with domestic single desks as well. Through all this
time, the one fact that has remained constant is the immutable laws of supply
and demand. Prices will probably marginally rise without a single desk, as the
cost of services is competed down.
5, "We need a single desk to set quality standards, send market signals, and
direct R and D." This is also wrong. 12 years ago, there was no canola
industry in Australia. Since 1994, an industry has grown across all states,
regulated itself, promoted and developed the crop and its end uses, set in place
QA, R and D and export standards, and built a prosperous domestic and export
industry - from scratch, and it never had a single desk.
6, "The single desk is a buyer of last resort. It will take everything we grow.
Remember 1992." This belief gets far more credibility than it deserves.
I think, and you can prove me wrong, that the AWB charter obliges it to take
all wheat that meets its standards. That is not the same as an obligation to buy.
Every grain quality has a price. Some buyer will see value in every grain, no
matter what the quality. The question actually is: what might you have got for
your grain in 1992, if there had been a competitive market? What we need is a
receiver of last resort.
How much more are you going to give me, chairman? That's it?
MR RALPH: Half a minute.
MR WILKSCH: Okay, I'll wrap it up. Chairman, I think it's time we moved
on from the single desk to the things that really matter in our industry. They
are: roads and road infrastructure, road transport regulations and restrictions,
national transport uniformity, the rail system, science and research, GM
technology and the removal of the state moratoria.
I will finish on this note: outside this building there is a railway line owned by
a private company, while the State Government is levying Eyre Peninsula
wheat growers to pay for the sleepers under the track. The absurdity of this
situation highlights what happens when we cling to outdated ideologies and
neglect the things that really matter. Thank you.
MR CORBETT: Cummins, you've got a unique characteristic, I must say, and
this is a compliment to you. I think out of all the cases we have heard around
Australia, we have heard the best case for no change from Karen Burrows and
we have heard the best case for change from Max. So congratulations, it's
16.02.07 - 20 -
certainly at either end of the spectrum, but they were great speeches.
Karen, I would like to say to you that I do hope the Prime Minister hasn't made
his mind up, because I don't intend to waste my time, and I'm sure other
members of the Panel don't, going around Australia listening to viewpoints. I
believe the fact that the Prime Minister and Mark Vaile and others have asked
for this work to be done is in fact a recognition of the fact that they do want to
hear, as directly as they possibly can, from the wheat growers themselves.
But the fact remains that there is, and the Prime Minister is hearing and I'm
sure others of Government, a great divergence of points of view. People have
asked why is this up for debate. It's simply up for debate for the divergence of
points of view that you have just heard here this morning. That's why it's up
for debate, and I think the Government are genuinely trying to make a decision
that is in the interests of everyone.
Your speech, Max, of course we have heard the argument put around Australia.
The majority of wheat farmers are for the single desk and the majority of wheat
farmers are for some modification to the single desk, acknowledging that it's
not now suiting the present structure and different needs across Australia, what
it did say four or five years ago.
Most people that are for the single desk are genuinely worried about the fact
what do they do with their wheat in a bumper season. Those people that are
dependent upon the export market, which tends to be the South Australian and
Western Australian market, they are worried about what would happen in the
market with competing people and all those people.
Given your argument, and very lucidly put, and your long-term participation in
the industry, do you see any structure that may accommodate a deregulation of
the market, as you're arguing for, but at the same time give protection to those
people that are genuinely concerned about the issues that you have outlined in
your speech? Is there any type of halfway house or transitional process that
will give these people confidence through time?
MR WILKSCH: I'm sure, Roger, whatever I say won't give people any
confidence. I would have thought that under deregulation, particularly in the
first three years, if we restrict the marketers to existing Australian companies -
that is, well known Australian brand names, and I have listed some of them
off - who would be financially accredited, that is, in their ability to guarantee
and to pay, so very little would change in the next season that growers would
not even blink, because we would be dealing already with the companies we
now know who would be obviously offering the same structures as we
currently have, that is, pooling, mostly pooling, cash, et cetera.
16.02.07 - 21 -
I'm naive, or whatever, I can't see what the fear is because AWB is not going to
go away, ABB will be here with its ears pinned back, along with Brookes,
Glencorp, Elders, I've named them all there. They will be here offering the
same services and competing down all the costs, financing, underwriting, all
MR CARROLL: Max, presumably you would fund the Wheat Export
Authority through a levy, and that would remove the inequity that the export
oriented districts like this face. Can you just run through for me the services
that they would provide. What are the industry good functions that you would
need to have provided by the Wheat Export Authority?
MR WILKSCH: I would have thought initially financial accreditation is going
to be the key, so there is security for growers. The other things, like R and D,
are occurring anyway, and they will occur irrespective of whatever system we
put in place. Product development, market development, things like that, I
would think, will probably need to be coordinated by WEA, but the companies
themselves, like AWB, ABB, they will be out there doing their own work, and
I would have thought ultimately what the WEA has to do is going to be
reasonably minimal; it's going to set its overall export standards, the QA and
the R and D guidelines, just like any other industry does and regulates itself.
MR RALPH: Thank you very much, Max. The people we have heard this
morning are the ones who registered at the door to speak. Now we are in the
situation where anybody else who would hike to speak, I invite them to their
your hand up. The microphone will be brought to you.
MR FRANCIS BEINKE: Francis Beinke, from Cowell. I take a rather
cynical viewpoint, on behalf of the Government. I think the PM did make his
mind up a long time ago. It was either just prior to or just after he became
Prime Minister, I had the opportunity to ask him a question at a meeting and
I said, "Will you look after the single desk on behalf of us grain growers?" He
said, "For only as long as it is needed."
I think he has been on a path of looking for an excuse to get rid of the single
desk, on behalf of vested interests around the world, for a long time. We all
know his policies. I think he has used the Iraq debacle as a scapegoat, to move
on the single desk and get rid of it. He knew, along with his Ministers, what
was going on, no doubt about that. There will be nobody charged as a result of
the Cole Commission, mark my words; they're not game enough.
As far as Max's point of view about other grain buyers is concerned, it's all
very well, but most of you should remember John Elliott's crude attempt to
move in on the Australian Wheat Board at the time of the deregulation of the
domestic market. He then went on to destroy Elders financially. The
16.02.07 - 22 -
Government, in their watch dog role, failed to see the collapse of HIH, coming
at them like a train wreck.
There will be collapses of grain marketing companies. We can't get access to
any of their financial reports. We can get access to AWB's financial report, we
can read it - not that I do, but we can. So I think we are fairly reasonably safe
under the AWB, and I think we should look after it. It's a risk worth hanging
MR CARROLL: Francis, surely you would have to put GrainCorp, ABB,
CBH and companies like that in the same bracket, Elders, you get access to
their accounts as well, or Futuris at least.
MR BEINKE: I have not access to them, but I suppose if you're a shareholder,
MR CORISH: Francis, I know exactly where you're coming from in regard to
corporate collapses and the impact that that can have, and you said we are
protected as grain growers, or as wheat growers, with AWB there. Since 1999,
effectively once you deliver your wheat to AWB, you do become an unsecured
creditor. So the situation is not that much different. You're relying on the
corporate strength of the company, as Karen Burrows rightly pointed out.
There have been claims that certainly since 1999, directors of AWB have
potentially a problem. They are charged with maximising the return to growers
and they also are charged with ensuring that they provide the maximum
dividend possible to the B class shareholders, which of course can be growers,
but also now increasingly can be members of the public, or other corporate
So the proposal that has been put forward by Victorian Farmers Federation,
and it's along the lines of what AWB is proposing itself, would put the single
desk in the hands of AWBI or, in VFF's case, a similar body, which is in fact
grower-controlled and grower-owned, and take away that potential conflict of
Based on the comments you made, do you think that is a worthwhile
consideration, and possibly the way to go to ensure that we don't get some of
the problems you've outlined occurring in the future?
MR BEINKE: I would have to confess not knowing a lot about that aspect of
it, but, yes, I agree that there is conflict or potential for conflict there, and I
think there will need to be some changes. But I wouldn't like to offer a way
out of it, because I don't know enough about it.
16.02.07 - 23 -
MR RALPH: As I said, we are not expecting people at meetings to be able to
answer how it should be done, because obviously it is a very complex matter.
What we are just trying to ascertain is where people fall, on which side of the
divide between retaining a continuing relationship between the listed company
and the operator of the pool, or having a separation between the two and
contestability in relation to the services between the farm gate and the ship.
MR BEINKE: At the time of the deregulation of the domestic market, Trevor
Flugge said at a public meeting in Cleve that the whole thing may fall over.
Obviously he had misgivings about the direction they were going in. I was
conservatively supporting the privatised company, but I certainly had some
misgivings about it, because for a start I don't understand how companies work
like in a shareholder basis.
I have stuck with my B class shares, I haven't sold them, and I stuck with them
on the firm belief that if you believe in your own industry, you should invest in
your own industry.
MR RALPH: Thank you very much, Francis.
MR GEOFF KROEMER: Geoff Kroemer, Tumby Bay. I congratulate the
speakers who have spoken today, I think they have covered the situation pretty
well. I agree with Karen that the single desk is there for the export. With the
deregulation of the domestic market, in my belief geographical, where you're
situated, is very important and deregulation was brought in for the eastern
states to get into those domestic markets because it's a growing industry in
I believe that the present thing - I support the single desk because we need it
here. As Karen pointed out, Australian wheat versus Australian wheat in
international markets is amazing. We don't really need it. We've got away
before without it, I think. Domestically it's covered in the regulation at the
moment that you can sell to your neighbour, if he was lucky enough to have a
piggery or a feedlot, and I think it's fairly well covered. So I would like to
support the single desk.
As far as having too many bodies bringing in more and more bodies, we could
end up like the Wool Board, where we've got that many bodies and they don't
know what each other is doing and it was a hell of a mess, and hopefully it's
going to get sorted out one day. I would just like to pass that on to the meeting,
MR RALPH: Geoff, you've said the single desk, but you didn't really express
a view whether you want to stay with the status quo or whether you would like
to see some separation. Could I just get where you stand in respect of that
16.02.07 - 24 -
MR KROEMER: I think the single desk, as it is, I always thought that the
Government were the overseers of that, but during the Cole Inquiry, they ran
for cover as quick as they could go, which is unfortunate. I think that no matter
what governing body you've got there, when a thing like the Cole Inquiry
comes, they find a scapegoat, and the Wheat Board was the scapegoat in that.
MR RALPH: But where would you stand going forward?
MR KROEMER: I think the same, with the Government showing a bit more
responsibility as the - they're good enough to come out and donate our money
that we didn't get paid from Iraq's wheat debacle in 92 in the first Gulf War,
without consulting us; and yet when it comes to a crisis like the Cole Inquiry,
as I say, they scuttle for cover. So they can't have it both ways, they have to be
solid in all respects.
MR RALPH: Thank you very much, Geoff. Anybody else like to speak?
MR JIM WEDDING: Jim Wedding, Arno Bay. I think I've got to have a bit
of a go at Max here. He's very conveniently forgotten that the American wheat
farmers are subsidised. Bush has just announced that he would like
$124 billion for the next five years to prop up American farmers. If we
deregulate, I think we would have to have the same subsidy in Australia.
So perhaps if you gentlemen have got the PM's ear, you would like to tell him
that we would like the same sort of subsidy, too, and I think probably the single
desk would go away very quickly. So that's my point, $124 billion for the next
five years is the subsidy the Americans probably will receive. And we don't
have any subsidy. We have our single desk, which the Americans recognise as
a far better system than their selling system.
So I would hate to go their way, open slather, as Max Wilksch has suggested.
MR RALPH: Jim, we have to report back on the views. You are clearly in
favour of the single desk?
MR WEDDING: Absolutely.
MR RALPH: Then what about where you sit on this divide that we are getting
across the country between those who want to maintain the status quo in terms
of AWBI staying as a subsidiary and those who want to see a separation, where
would you stand there?
16.02.07 - 25 -
MR WEDDING: I think there's a lot of work to be done there. I don't think
we know all the details.
MR RALPH: No. But in principle?
MR WEDDING: Probably there could be some change made there, but a lot
of work to be done to sort of see what scenarios would occur. As it stands, it's
probably not ideal, so there could be some changes made there. But the single
desk has functioned very well for 60 years. I don't think the Government has
ever had to put money into it. When they guaranteed our returns to farmers,
I don't think they ever put money into it. So it's served us very well, and will
continue to do so.
MR CARROLL: Jim, I think the American subsidies amount to somewhere
around $160 a tonne of wheat. The studies that Max is referring to of the
benefits that the single desk achieves, probably in the optimum side, come out
at somewhere around $6 a tonne. So if the Government was, through the
World Trade negotiations, able to get the Americans to agree to reduce their
subsidies by $20 a tonne, would that be a suitable trade-off? I'm not sure this is
within our brief, but I'm just going to put the question to you anyway.
MR WEDDING: Bush is pushing for this 120 billion for the next five years.
Now, it is an election year there. The Americans have a very strong farmers
lobby. We have a very weak lobby, but they have a very strong lobby. He will
probably get that through, because this is their election year.
You said $5 a tonne. I understand there was an inquiry that came up with
$10 a tonne.
MR CARROLL: Even if it's 10 and you can get (indistinct).
MR WEDDING: I think one inquiry did say $10 a tonne. It's not so much
that, it's we get the market quality, AWB look after the quality, because they
have got the single desk. Also, they can, by taking all the grain in, you can
have grain from Kimba at 12 per cent, which is worth big money, grain from
Cummins at, say, 10 per cent, which is not worth too much. So you can
combine the two together and flog it off at 11 per cent and still get a good
return, because under 10 per cent protein, it's not worth too much.
So they control the whole lot. They can mix it up in Port Lincoln and still sell
MR CARROLL: If I were a Kimba farmer, though, I wouldn't be too happy
that I was subsidising the Cummins farmers.
16.02.07 - 26 -
MR WEDDING: Exactly right, and you'll find, if you had a meeting at
Kimba, they would probably not be that much in favour of the single desk.
I think there would still be a majority that would be, but there are some vocal
farmers there, for sure, and we have got one on the ABB Grains Council, who
is probably saying more than he should.
But in a democracy, and I think we have got a democracy, I would like to see a
vote taken at the end of the meeting to see those who support it, those who
don't, and get the percentage that do support it. But you're right, the Kimba
farmers, with their 12 to 14 per cent protein, would probably not support - the
support wouldn't be as good there, but it still would be a majority.
MR NEVILLE WILL: Neville Will, Karkoo. I'm extremely nervous. I would
just like to congratulate Max on the words he has said; every word he has said,
I agree with. Single desk really isn't in my vocabulary much. I think there are
a lot more important things we need to get on with, as far as we can regulate in
a deregulated market and Max has pointed out how financial accreditation and
those sort of things can be put in.
I think while this debate is going on, we should be even pushing harder to
perhaps put regulations in place at the amount of money that bulk handlers can
charge us. They have got monopolies. I think that could be regulated. It is in
the coal industry in Queensland. There's a place called Dalrymple Bay where
they load coal. There are boats waiting out there all the time, and the
Queensland Government have regulated what they can charge for (indistinct)
fees, so I can't see why things like that can't be done, and I would just like to
congratulate Max. Thank you.
MR RALPH: Thank you, Neville.
MR CORISH: Neville, in an area where the export market is very important,
we have heard comments that, in a deregulated market we are going to have
Australian wheat competing against Australian wheat, potentially in overseas
markets. You don't see that as a major impediment, you see that as a positive
rather than a negative, by your comments?
MR WILL: Yes, we're selling bulk commodities now. As far as all this
quality goes, there is a quality part, but it's a niche market nowadays. People
want bulk grain at the best price they can possibly get it, so I don't see a
There are 19 different pool options we can use this last harvest and most of
those are just related to financing costs. So you can sort of see that there's still
a bit of fat in the system there that people are playing with. I haven't got a
problem with that.
16.02.07 - 27 -
The problem I've got is getting these buyers accredited to make sure they pay
us, and I think there's probably good systems that can be put in to guarantee
MR CORBETT: Neville, we've heard an argument about deregulation and the
international market and the fact that we've got 15 per cent of that market,
there's this great fear that we compete against ourselves. The people that argue
against us having a single desk point out that most of the grain is sold by
people that own it, and therefore they have a vested interest in getting the
highest price they can. The remaining 85 per cent, in the main, is provided by
people that already have their established customers and are in the market to
buy grain to sell to those customers. Having bought it, they want the highest
Whereas the current single desk arrangement really only have a mandate to sell
it, so they are always in the marketplace where they are tendering the lowest
bidder because they have to sell the wheat and they're selling it at the growers'
expense. All they have to do is sell it because they've got no competitive
pressure to get the maximum price, the competitive pressure is to sell not to get
That's the argument that has been argued and in fact the argument is that, if
anything, the structure may be pushing down the price rather than pushing it
up. I'm not saying I agree with that argument, I'm trying to be as neutral as
I can, but it seems an argument that I would like to hear your view on.
MR WILL: Yes, I probably tend to agree with that. I'm not quite sure, really,
where you're coming from there, but I would tend to agree with that. I sort of
believe that monopolies become big, fat and lazy, or can do.
MR RALPH: Neville, just in passing, you mentioned that you wanted to see
some control over the charges that could be made, and you quoted Dalrymple
Bay where the charges have been fixed. I think that's a good example of what
you wouldn't want, because having fixed the charges, the owners of Dalrymple
Bay have essentially been saying that they are not prepared to put in the
investment to increase the capacity because it won't give them a sufficient
return, and that of course leaves all the ships standing out there because they
haven't got the facilities, increased size of the facilities, to handle increased
So you need to be a little careful that regulating the price might stop the
investment in the infrastructure to allow you to actually ship what you want to
16.02.07 - 28 -
MR WILL: Yes, it is regulated and they are expanding those facilities as
much as they can. But it is regulated to a point and they have to justify what
they can charge. They just can't charge whatever, and it's indexed and things
MR RALPH: Is there anybody else who would like to speak?
MR PAUL KADEN: Just a couple of things I will pick up on. Paul Kaden,
from Cowell. That question about the Kimba farmers wouldn't be terribly
happy about having to blend their wheat, precisely because of that argument
AWB introduced the matrix system. They are rewarded for the value of the
protein they are producing, so let's put that one to bed.
Quality is so important. It might not in the end up in dollars in your pocket -
well it does - but not as a premium, but it will end up as market access. If
you've got five people marketing into the Indonesian market all at the same
price, then quality will win out every time. Quality is so important in the
I want to point out to Max: Max said, and I agree with him, "Sure, there will
be pools run in a deregulated environment." There will be many pools, they
will be small, they won't have the critical mass that the AWB currently has,
and consequently, such as happened with Grain Pool in Western Australia last
year, the pools are closed, the pools run for a very short period of time, and are
One of the things we have currently with the AWB system is that we have the
pools run over most of harvest, usually closed towards the very end of harvest,
and that gives we growers the security and knowledge of the pricing. That is
The other thing I will argue is that these cost analyses are done on the benefit
of single desk, $9 I thought it was, not 10, but $9, $5 - that does not take into
account the time that I'm going to have to spend, or the consultants that I am
going to have to employ, to do the marketing for me. That is just straight out
analysis of what we can get out of the international market. It does not take
into account all the other benefits that I get as a grower.
One last thing I will close on: Single Vision, the study that was done by GCA
and others on where the industry is going into the future, I think it was out to
2020, something like that. It was clearly stated there that our overseas buyers,
our overseas customers, many, many of them, are now looking to secure their
purchases from a single seller of a country, ie, Australia, AWB, single desk.
I'll leave that one with you.
16.02.07 - 29 -
MR RALPH: Thank you, Paul.
MR DEAN FUSS: Hello. Dean Fuss, Cummins. Can any of the Panel please
give us a bit of an idea of how they think a separated single desk may work.
I think there's a lot of us here who have heard about the concept, but have no
real idea of how this may work in real effect. Is there any who can give us that
sort of information?
MR RALPH: Our task is not really to describe what should happen, as I said,
or what we think the should happen, but rather what growers think. Maybe if I
use one example, which is the VFF model that has been put to us at the
meetings we had in Victoria, where they have set out their principles and
essentially their model would have an organisation controlling the single desk,
that organisation could be AWBI or it could be another company, if
disentangling the present AWB was impracticable or impossible to achieve.
But there would be a complete separation of the functions that AWBI currently
carry out with the functions that AWBL carries out, and AWBI would be
controlled by the A class shareholders, in other words, the growers. It would
be engaged only in the marketing of wheat from Australia and it would buy
services on a contestable basis, either from AWBL or from other suppliers, but
it would control the marketing of wheat in bulk.
My colleagues could help me here, but I think their model would include
freeing up, deregulating, the sale in containers and bags. Is that their model or
not? Yes, there are some people who argue that should be freed up and others
who believe that it should still be under the control of the WEA. But
essentially, that's how the single desk would work.
The company, whether it's AWBI or another company, operating the pool
would also have the veto and would not be involved in commercial-type
activities, such as AWBL is now with Landmark, et cetera.
MR FUSS: So in that situation, would that still be open to the same inquiry in
2010 that will probably pull the plug on it now?
MR RALPH: It has no impact on the inquiry in 2010, nor 2013 in relation to
the World Trade Organisation.
MR FUSS: Thanks.
MR BRENDAN FITZGERALD: Brendan Fitzgerald. I would just like to
clarify one of Peter's comments and that is the duty of a director of AWB, and
that is to provide a maximised return for growers and then provide a reasonable
rate of return to B class shareholders - not maximising return, Peter, and I think
16.02.07 - 30 -
that's something that probably clarifies that.
The other comment that I would just like to make is that the Government's
position in the Cole Commission and pre-that, we have seen a Government that
supported humanitarian aid in Iraq, that acknowledged that freight was paid by
AWB to a company there, they acknowledged a tax deduction. We have seen a
Government that employed Trevor Flugge for a million dollars a year to give
out financial aid to the Iraqi people, and acknowledged as being an aid
provider. Then we have just seen a Government that has been totally
influenced by George Bush to have a complete back-flip, employ the Cole
Commission to totally exonerate itself from any knowledge of what was
happening, and have all the blame on to AWB.
I guess that's something the industry has to manage and we have to put that
aside and get on with it. I would just like to reinforce those comments. Thank
MR RALPH: Brendan, I think the comment that Peter made about
maximising the return to shareholders, that's essentially the genesis of the
conflict, that while there is a requirement to pay reasonable returns, it's difficult
to define "reasonable" and then there is the inevitable desire for any board that
has a company listed on the Stock Exchange to see that return by way of
dividend increasing over time and getting the share price up. That's what
actually generates the conflict, and that can permeate down through an
organisation so that it can be rather difficult even to ascertain as well as to
That was, I think, Peter representing your view. We know what the
constitution says. It's the implementation of the constitution that actually
creates the difficulty.
MR FITZGERALD: I couldn't agree with you more.
MR RALPH: Thank you.
MR CORBETT: Could we just ask you, on your concluding comment there,
Brendan, you said you agreed with the chairman. Can I assume from that that
you're a single desk man in favour of some change? Is that the inference of
your comment then?
MR FITZGERALD: I was answering the question about providing a
reasonable rate of return.
MR CORBETT: I know you were, but then the conflict was pointed out and
you said, "I couldn't agree with you more," and sat down. So I'm just
16.02.07 - 31 -
interested, are you supporting the single desk as is or are you supporting a
single desk or change or do you have some other position? Because from your
comments, I don't understand your position.
MR FITZGERALD: I didn't make comments on that deliberately. But I can,
if you want.
MR CORBETT: We are here to hear your opinions.
MR FITZGERALD: Yes. I'm very much supportive of the single desk system
because I think that overall it gives the growers an opportunity to market their
grain overseas. One of the problems that I see personally is that, or see in the
market, is that competition is the driving force to drive costs down, and that's
where we should have more competition. But competitive selling drives the
price down as well. Competitive use drives the price up, and my view is that
the Australian grain industry is not addressing competitive use.
There are opportunities out there today and in the future that grain, particularly
wheat, can be used as biofuels and grain energy and compete against the food
space. Unless that position is addressed in the future, all we're doing today is
looking back at the past and perhaps rejigging it as the way to the future. We
must have competitive use in the Australian grain industry for us to get a better
price, because in a deregulated market, the same as we have seen in Telstra,
competition lowers prices, that's what it's about. That's worldwide, that's why
the US Government has to pick up $146 a tonne, the American grain grower,
because the competitive system has let the growers down.
Not that there's something wrong with that, but the reason is that the public at
large demands cheap grain prices, cheap food, and it's industry's purpose to
provide that. So from a growers' point of view, you're always going to get
cheap grain in a competitive market, unless you raise the opportunity of
competitive use. I think there's a real classic opportunity today, where we have
seen the biofuels industry challenge the food space, to get a much better price,
and I think part of Australia's grain future should be in that space.
MR CARROLL: Brendan, if you were changing the wheat export marketing
arrangements, what would you do to encourage development of new uses of
wheat, what's important there? Do you let it reside in one commercial
company or do you set up an enhanced Wheat Export Authority to develop
MR FITZGERALD: If we are serious about challenging the food space, just
putting aside the question you've asked me, we have to be serious about
encouraging another use, and that is a competitive use. The biofuels industry,
wheat makes the best grain energy plant of any, better than sugar cane, better
16.02.07 - 32 -
than sorghum, better than corn. The reason why that is is because it has
30,000 genomies and its by-products are much better.
The future of the grain industry in Australia is going to have a version of that.
To argue and rejig the past without looking as part of the future is not going to
raise the grain prices here. Corn producers in the US, I was talking to the
president of corn producers here a couple of months ago, they have been trying
to export corn like they have for a long time and they are always price-takers,
not price-makers, because that's what you become in a deregulated marked.
But they have got a policy, which is in their mission statement: never export a
kernel of corn. They say it twice, just in case you didn't hear it first.
What that clearly says, in the capital of deregulation, that it hasn't worked in
the growers' favour. If we are going to superimpose the same thing on wheat,
where are we going to be and what are our alternatives? I guess what you as a
committee are here for is to hear alternatives, which I think you're going to get,
and I'm just putting that the biofuels industry is another alternative. I'm not
going to answer and get into views and whatever on what if and whatever; I'm
talking about the broad changes that would need to be made.
MR RALPH: Thank you, Brendan. Anybody else like to speak?
MR PETER GLOVER: Morning, Peter Glover from Yeelanna. I learned long
ago never to pass anything up that Max Wilksch said flippantly, so I listened
with interest to his comment. I think his reasoning is always excellent and, as
he explained, tries to go through the base and the facts of the matter rather than
theories and hearsay and history. So that was very good.
I think the first comment he made is probably the critical one, is the single desk
completely gone, end of story, and if that's the case, by 2010 or 2013, then the
sooner we get on and deal with that, as he said, the better. If it's not the case,
then there is a pretty reasonable argument for continuing to get maybe a $5 or
$10 tonne bonus to farmers.
The second point, he used the example of the canola industry, which has
worked quite well. The point out of that, I think, is most farmers would agree
the marketing from a growers' point of view has been difficult and subject to
many fluctuations and subject to huge variation between individual growers
and probably between areas as well, and not something that most of us enjoyed
too much. So the answer will be if there's a system somewhere in the middle
that can give more orderly marketing, then I'm pretty sure most growers would
agree with that. Thank you.
MR RALPH: Thank you, Peter.
16.02.07 - 33 -
MR JEFF PEARSON: Jeff Pearson. Thank you, Mr Chairman, for allowing a
repeat. I think Peter Glover just raised a very valid point, and Max used the
example. Max is my neighbour, incidentally, and I don't think the fence is
actually electrified at the moment between us. I think Peter raised a very good
point in that whatever we are doing in this regard, Max used the canola
industry as an example of what can happen. I think we have to be mindful of
comparing apples with apples. In fact, there are growers on the Eyre
Peninsula, for instance, that can't even grow canola, so let's get real about it.
We are all wheat growers, and so there's a numbers equation that comes into
this that has a determination in terms of future marketing.
I omitted a paragraph previously that I didn't know whether you would accept
as relevant, but it's supporting what Brendan Fitzgerald just said a moment ago,
and that is that I believe that the future of Australian growers, particularly from
areas like Eyre Peninsula, where there is extremely limited opportunity to
access the domestic markets, is in value adding to bulk raw products. I just
wanted to leave that with you, to support what has previously been advised.
MR RALPH: Thank you very much, Jeff. Is there anybody else who would
like to speak?
MR PAUL KADEN: Tony Kaden, Cowell. I just have a short comment.
I agree with everybody, fully agree with everybody, all the speakers, Max and
Neville. If Max thinks he's the eternal judge on the good of the wheat market,
I don't know how he thinks he's better than all the wheat growers, or it must be
the majority of the wheat growers, in America and the American treasury. We
must be a big force - they must consider us, even though we are only exporting
15 or 20 million tonnes, they must consider us a big force on the market to be
all out to get rid of us.
He used the example of the grapes, the wine industry. They seem to be in a bit
of a mess now, they've got a glut. Evidently we are $5 or $10 a tonne better off
with the Wheat Board. I don't care if we are $5 or $10 per tonne worse off. I
would sooner know that we've got a company that can - a board - that can
extract the most out of the market, rather than have a year like this, where some
people end up getting $300 a tonne, because they got in first, and the others
down the line are lucky to get $240 a tonne.
Then we will have a year like next year - this year hopefully - 30 million
tonnes and we have a mob of private buyers going around bidding for the
lowest price, and we are going to end up with about $120 a tonne. Or we have
a rusty year like we had in 69, and all we had was a heap of canary seed to sell;
and 92, where we had a heap of chook X to sell. I would like to see you sitting
home on your computer trying to sell that then.
16.02.07 - 34 -
I think stick to the devil we know, rather than heading off into outer space with
something that's pie in the sky dreams, that you blokes think you can do better
off with. It's 1 per cent of the wheat growers that seem to be able to sell their
wheat privately at this stage of the game. When you've got all the rest of us to
compete with selling it privately, see how you go. Thanks.
MR RALPH: Tony, clearly you're in favour of the single desk. Do you have a
view of separation or do you want to stay with the status quo of the AWBI
continuing as a subsidiary of AWBL?
MR KADEN: Thanks for mentioning that, yes. No, I'm thinking that way,
too, like the suggestion of the Victorian wheat growers. Although we've just
about got all our shares left in the Wheat Board, a bit like others, we invest in
our own industry, and they have dropped a half what they were and we all wish
we would have sold them about 12 months ago, thanks to the Americans, I
would like to say, who seem to dictate to our Government the policy. We go to
war, we get rid of our Wheat Board.
No, I would sooner get an extra $10 a tonne, or whatever it might be, for my
wheat rather than it be paid to the shareholder - well, paid in dividends to the
shareholder - and if the Wheat Board wants to keep the shareholder happy, they
can continue with their Landmark and whatever else for their shares. It's more
going back to what it was before.
I would sooner see it separated and any profits, extra made out of it, goes into
the wheat grower rather than have to answer to the B class - well, keep the B
class shareholders happy, particularly when there's been less and less growers
B class shareholders, like you say, the big companies are coming into it, buying
up, superannuation firms and God knows what else. Okay, thanks.
MR RALPH: Thank you very much, Tony. Anybody else like to speak? If
not, I would like to do two things.
One is that I would like to thank you very much for coming along this morning,
giving up your time. I realise that time is precious, particularly when
conditions aren't so good and there's a lot to be done. Our job, of course,
would be futile if people like you didn't come to these meetings. So on behalf
of my colleagues and myself, I would like to thank you for taking the time to
come and give us the benefit of your views.
The second is the way in which the meeting has been conducted by you, the
fact that while you may not have agreed with individual speakers, they have all
been given the respect and chance to have their views expressed, without
interruption, and that again reflects great credit on you and what we have seen
in the way in which you have behaved this morning. It's not that it's
16.02.07 - 35 -
unexpected, because I think that's what we come from expect from people who
live in the country towns and have usually pretty strong communities and have
respect for one another. While it may not be unexceptional in that sense, it's
still worthy of comment, I think, that we have had the meeting in the way we
have this morning.
I would just like to repeat two things. One, as I said, our task, which we are
taking seriously, is to report back to Government what growers think. We will
not be expressing our own views, as they may be, we will be doing our very
best to report what you've said.
I also would encourage you, particularly if you haven't spoken this morning,
but also including those who have spoken, to put in written submissions. As
I said, they don't have to be a technical document or anything else, a letter of
half a page or a page is sufficient so that we are reflecting the views of the
maximum number of growers.
If attendances keep going as they are, and we're now about two-thirds of the
way through the process, we will have had somewhere between 10 and
15 per cent of all the growers in Australia attend the meetings. So we will be
getting a fairly representative view and hopefully we will also be hearing from
others who, for various reasons, can't get to these meetings.
We have a little slip that you can get from the department people here, or from
any of the members of the committee, that will give you that address, give you
the phone number and fax number and email address, et cetera. Thank you
very much. I do appreciate you're coming here this morning.
MR WEDDING: Mr Chairman, would I be out of order in asking (indistinct)?
MR RALPH: The difficulty with a vote - we have done it in respect of a
particular proposal, and I am surmising on this because I haven't discussed it
with anybody in Government - I think the reason why they wanted this type of
consultation rather than try to get to a vote is, as you've heard here this
morning, it isn't just a question of either/or, either status quo or deregulation.
What we have heard here and what we have heard in other places, and the
balance varies from place to place, is some people favour deregulation, some
people favour status quo. Both those tend to be minorities. The majority
generally flows across the spectrum with a common thread of a single desk, but
different ideas about whether or not you strengthen the WEA or whether you
don't and so on.
MR WEDDING: Sorry to cut in, but the main point (indistinct) and I'm a
great believer (indistinct) to propose a vote.
16.02.07 - 36 -
MR RALPH: Effectively you'll get a vote if you put a submission in, because
we will be counting up the number of people in favour. I think we have heard
here this morning, too, that there is a majority for single desk, but there are
different views about what kind of a single desk, and that nuance is what we
will be trying to reflect back to the Government. Thank you very much.
MEETING ADJOURNED ACCORDINGLY
16.02.07 - 37 -