ACTING CHAIR —We now proceed to witnesses from Wheat Exports Australia.

Senator NASH —Welcome, gentlemen. To start with I have some questions concerning the accreditation process and, in particular, an explanation of surrendered accreditations. On the website there is one from Sumitomo from 19 May this year and one from GrainCorp Ltd from 25 May last year—I am guessing that GrainCorp changed into another formal guise or something—but can you explain for the committee the reasons for surrender for those two particular companies.

Mr Woodley —In the case of GrainCorp, they initially had accreditation for two of their companies and then decided that they only needed accreditation for one. In the case of Sumitomo, they had been accredited for quite some time but with Sumitomo’s ownership of Australian Bulk Alliance, ABA, through their purchase of shares from Viterra they went from a 50 per cent ownership to a 100 per cent ownership of that company. That company in turn owns the Melbourne terminal operator which is the provider of terminal services at Melbourne Port terminal. Because of that, Sumitomo group, as a group, were seen to then be required to comply with the access test arrangements under the act—or Sumitomo Australia; that is the accredited body. As there is no access undertaking in place at present, they were obliged effectively to surrender their accreditation. But they surrendered their accreditation voluntarily because at this stage being a provider of port terminal services they do not have an access undertaking.

Senator NASH —And with GrainCorp, did they have any reason why they kicked off with two separate companies that they wanted both to be accredited?

Mr Woods —No.

Senator NASH —No idea?

Mr Woods —No, they didn’t. They just surrendered one eventually, using the one they are now accredited for as their vehicle for exports.

Mr Woodley —As an example, AWB have three of their companies accredited. It is unusual, but—

Senator NASH —Okay. So how is it all going in general? Are you happy with the way it is all proceeding?

Mr Woodley —Yes.

Senator NASH —Good. Why am I not surprised you just said that?

ACTING CHAIR —Is that a question or a value statement, Senator Nash?

Senator NASH —No, it was a question. I know these gentlemen are very, very keen in doing what they do. In terms of the Productivity Commission report, when are you expecting any kind of response from government? Obviously any potential changes from that are going to have to come to WEA to deal with, so what is the sort of time frame of dealing with any changes that might arise out of that Productivity Commission report?

Mr Grant —Perhaps I can take that question. The PC is due to report to government by 1 July. The act stipulates that the government must release the PC’ s report within 15 sitting days, I think it is—I can check that for you. There is no constraint or time line scheduled for when the government must respond to the PC’ s report, so really the response is in the government’s hands and the timing of any changed arrangements, if any, to WEA and the operations of the wheat marketing system will be in accord with the government’s response.

Senator NASH —Whenever; that is fine.

Senator BACK —The draft Productivity Commission report is out though, isn’t it?

Mr Grant —It is.

Senator BACK —It recommends that Wheat Exports Australia actually be dismantled.

Mr Woods —Correct.

Senator BACK —Can you give me the authority’s reaction and the department’s reaction to that draft recommendation?

Mr Woodley —Our position is: it is business as usual; it is business as usual until and if the government makes changes to the act and to our responsibilities.

Senator BACK —I imagine it would be business as usual. That was not really the question. The question was: what is wheat export’s reaction to the draft recommendation should it be implemented? Do you support it? Do you oppose it?

Mr Woodley —All I can say is that we did submit a public submission in response to that draft report, and that elucidated some areas of detail around the accreditation scheme and also made some recommendations to the Productivity Commission of other issues that maybe they should have a look at. With respect to the recommendations, it is not for us to make any comment.

Senator BACK —Given the fact that your response was public, could you advise the committee in very brief terms as to what the main thrust of your response was to the draft?

Mr Woodley —Yes, and I have it here before me.

Senator BACK —That might be easier, if you would care to table that.

Mr Woodley —Eight pages—I can hand it to you if you wish.

Senator BACK —Table it and—

Mr Woodley —It is largely just to clarify some matters in the report. As you said, it is a draft report. They clearly have indicated that in some areas they needed to look further at some issues. They have asked certain questions. They have asked for certain information to clarify their own thoughts before producing the final report, so we just commented on some areas that were relevant to the operations of WEA and the accreditation scheme, and gave some further detail on some of those points.

Senator NASH —Just back to the accreditation: I notice that three of the companies on the accredited list, CBH Grain, GrainCorp Operations and Viterra, on 18 December last year—I will just read what it says; it will be easier. It says:

Can you just explain what the condition is that was revoked in December and then what the variation was in April for those three companies?

Mr Woods —The conditions that were varied and revoked were in relation to the first 12 months to 1 October last year in relation to access arrangements, so in the changing from the WEA looking at access arrangements and ports until the ACCC had access undertakings in place. Then it took us a little bit of time to get some legal advice on the change in the condition and the form it should be and work through that, and there were some delays in processing it.

Senator NASH —So what actually was the condition that was revoked?

Mr Woodley —When the access undertakings were put in place, there was a period of 14 or 21 days when people had the opportunity of appealing against that access undertaking. If someone had appealed against that access undertaking, effectively the access undertaking then does not take effect until that appeal is heard. In normal circumstances those appeals may take months or even years to be resolved, so the original condition was to ensure that, in the case that there was an appeal, the access undertaking would effectively take effect. As it turned out, there were no appeals—

Senator NASH —I will have to wait until the Hansard comes back to make sense of that one.

Mr Woodley —It is a highly complicated arrangement. It was put in place for that period of 21 days in case there was an appeal. There were no appeals, therefore it was no longer necessary and it became redundant.

Senator NASH —Why did it then only apply to CBH, GrainCorp and Viterra and not any of the other companies?

Mr Woodley —Because they were the only three accredited exporters that were required to have an access undertaking with respect to the port terminals that they owned and provided services through.

Senator NASH —Yes, that makes sense. Thank you very much. On 12 January this year you decided to impose a further condition on the accreditation renewal of OzEpulse. What was the further condition?

Mr Woods —It was a tonnage restriction.

Senator NASH —And why was that?

Mr Woods —In going through their renewal process they were looking at having some new financial facilities developed and they did not eventuate. They wanted a restriction in place on the tonnage that they could export.

Senator NASH —So they wanted a restriction on the tonnage they could export?

Mr Woods —Yes.

Senator NASH —Why would they ask you to put a restriction on the amount of tonnage they could export? I don’t quite follow that.

Mr Woods —Exporting tonnage as part of our accreditation process is looking at an export proposal—so, what an exporter is thinking they will export over the next year, two years or three years—and depending on that the board then considers the finances of the company, the capability, the payment terms and all those sorts of things. So a tonnage restriction does provide everyone with some flexibility to aid in accreditation.

Senator NASH —So it makes them look a more viable company when you stack up their financials to what they are actually planning to do—is that the point of it?

ACTING CHAIR —It is more so that they can meet the financial obligations that that limit provides—

Mr Woods —That’s right.

ACTING CHAIR —rather than have a bigger limit and then be questionable as to their financial capacity.

Senator NASH —That is just what I was getting at, but I probably need it from them, Acting Chair—thank you for being so helpful, though!

Mr Woodley —Also, it is an issue that can be revisited—and it has been revisited in the past—where a company that had a tonnage restriction then applied to have that increased, and we reviewed their situation, their financials, and in that case approved it.

Senator NASH —Okay. Where are we at the moment—and I know we have this discussion every time but we will have it again—with the world price of wheat, compared to when I last asked in February?

Mr Woods —The world price of wheat is not ours and we do not control it. It is sitting out there at the moment. The Aussie dollar has fallen; therefore the price of wheat has increased over the last 10 days. World stocks are sitting right up there. There has not really been a change.

Senator NASH —I actually just wanted a figure at the moment.

Mr Woods —A figure of what it is worth today?

Senator NASH —That would be great.

Mr Woods —The market at the moment is trading, for example Melbourne, at just over $200 a tonne for hard 1. It is freely available on the internet.

Senator NASH —I know lots of things are freely available on the internet but if we did that with everybody, Mr Woods, we would only be able to spend half a day here and it would not be much fun at all. Do you have the figure for any other grades, or is that the only one?

Mr Woods —No. I can table this if you like. APW, which is pretty much the benchmark grade at the moment, in Melbourne is just short of $200. So it is around that $200 mark.

Senator NASH —Okay. Apropos of a conversation we had last time about the price of wheat being a result of the world market, I would like your comment on this—and I will read it out for the benefit of the Hansard. This is from a Canadian wheat board media release of 25 March this year:

I guess that is the direct antithesis of your view that there is no impact at all from the deregulation. Do you have a comment for the committee? Should we just dismiss the Canadian Wheat Board’s view?

Mr Woodley —The only comment that I can make is that there are multiple exporters competing for Australian grain and previously there was just one opportunity to provide grain. Inherently when there is competition and choice, they do nothing other than to increase marketability, and if demand increases one would expect the price would increase.

The other thing, as I think has been instanced at previous hearings, is that we have got evidence from a number of the accredited exporters who had previously been trading on the world scene and using grain from sources other than Australia, who are now sourcing that grain for their markets from Australia. One would expect that the greater competition for Australian grain would increase the price that growers in Australia would get for their grain.

Senator NASH —You would expect that, unfortunately—

Senator HEFFERNAN —That is—

Senator NASH —No—I have got just one more question and then you can have it.

Mr Woods —If I can just add on to that: this is Australia’s competition not being able to compete in the market. Of course there are going to be some sour grapes—

Senator Sherry —Just before we go on; Senator Faulkner is replacing me until 6 pm

CHAIR —Welcome, Senator Faulkner!

Senator Sherry —And Senator Ursula Stephens is replacing me between 6 pm and 6.30 pm.

Senator NASH —It takes two to replace you; that is impressive!

Senator Sherry —And Senator Faulkner is well known as a farmer about town. Senator, you will be fascinated by the discussions.

CHAIR —Mr Woods, you were answering Senator Nash’s question.

Mr Woods —It is the view of one of Australia’s competitors that they are finding it difficult to compete in the world market. That is really no big surprise to anyone: they cannot compete against Australia and they could not compete against AWB. The market fluctuates all the time.

Mr Grant —I will just add that I think the PC did look at this in response to a number of submissions on this issue. They made some comments in their draft report, so it might be useful to have a look at that as well.

Senator NASH —Yes, I was at a few of the meetings. I have read the draft report and in my view there are probably some slight differences in the reporting of the draft. But that is entirely up to the Productivity Commission.

I am probably in completely the wrong place to ask, but have the products that Australian farmers have to market their wheat improved or changed in any way from the point of view of the WEA since we had the change to deregulation?

Mr Woods —I suppose it is not really our area, but there is a broader range of pool products, cash grain prices and some new innovations coming in over the next year in the way that growers will be able to sell to accredited exporters.

Senator NASH —Okay. Are growers able to benchmark those products against similar sorts of products offered in countries overseas at all? Can they get any kind of sense of how ours stack up, I guess, compared to those on offer in other countries?

Mr Woods —Benchmarking against other countries is always difficult because of fluctuations in the dollar and currency differences in that respect. You have also got yield differences that you need to take into account in all those sorts of things. But the benchmarks are the world futures markets. Everyone is using those as their price.

Senator HEFFERNAN —They all set their bet on the same market.

Mr Woods —It is discoverable.

Senator NASH —Are there any changes in how farmers have been able to access whether or not they are comparable to other countries over recent years? Has anybody been responsible for it? It is not an area that I know a lot about—has there been much done in the past by you or any other organisations to provide that information to farmers?

Mr Woods —There are a number of industry advisors that provide this information to any grower who wants it, and it is actually in the Land newspaper every week.

Senator NASH —Do you do it at all, or is it not part of your lot?

Mr Woods —We do not need to. Everyone else does it.

Senator HEFFERNAN —You ring up and get it every day.

Mr Woods —If there are enough people doing it, we do not need do it.

Senator NASH —Have you ever done it? Is providing that kind of information anything you have been involved in?

Mr Woods —We have provided some fact sheets occasionally to inform people of what is happening in the industry, but it is happening well now. The government marking programs that they had a few years ago has kicked in, and people are looking at risk management more. There are more pools being operated. The Kondinin Group do all sorts of reports on those sorts of things. There is no need for us to be going into that space.

Senator NASH —Thank you, Mr Woods.

Senator HEFFERNAN —Could I just clarify a couple of things that have just been said. The bloke that used to run my show—and we won the crop competition last year—now works in Canada for the second largest wheat grower over there. The price of Canadian wheat, where they want to dismantle the desk at the present time—you would agree with that?—

Mr Woods —Yes.

Senator HEFFERNAN —cannot compete with us. If you take out the differentiation in the Canadian dollar versus the US dollar, because of our appreciation they were $10 ahead of us, but they are now looking to grow crops other than wheat in Canada because they are in the same boat as we are. Despite what all that other garbage is about, the reality is that they actually want to dismantle their—

Senator NASH —I would suggest, Senator Heffernan, that given I respect your opinions and your views—

Senator HEFFERNAN —I am telling you these other facts. If you want to know where to look it up—you do not know—you look it up on the Bloomberg site every day.

Senator NASH —Where we differ, Senator Heffernan, is perfectly fine, but I certainly give you the respect of having your own view on matters and you should respect mine.

Senator HEFFERNAN —That is all right. Thank you very much.

CHAIR —Despite my ongoing desire to hear the argument keep going, Senator Heffernan, I must call you to order and ask questions of the officers.

Senator HEFFERNAN —Thank you very much.

CHAIR —We appreciate your input.

Senator HEFFERNAN —Thank you very much, Fiona, too.

CHAIR —I am sure you will sort it out after the tea break.

Senator HEFFERNAN —She is all right. Can I just go to port access. We have not dealt with this, have we?

Senator NASH —With what?

Senator HEFFERNAN —Port access.

Senator NASH —Who?

CHAIR —I am a little bit lost, Senator. Do you want to ask questions of the officers?

Senator HEFFERNAN —I do. In the Land on 29 June there was a two-page article about the grievances of the industry regarding the arrangements with the three major grain corporations and CBH. Are you familiar with that?

Senator BACK —What date was that, Senator Heffernan?

Senator HEFFERNAN —It was 29 April: ‘Pressure points: port access dogging wheat trade export’.

Senator BACK —It was 29 June. It was last year.

Senator HEFFERNAN —My first question is: do you give credence to the Australian Grain Exporters Association? Are they reliable?

Mr Woods —They are an industry association of grain exporters.

Senator HEFFERNAN —Of some credit?

Mr Woods —They have been around for quite some time.

Senator HEFFERNAN —In response to the Productivity Commission’s draft report on wheat marketing arrangements, the AGA claimed:

You would be aware of that. The AGA submission argued the auction system had actually distorted market signals, reduced competition and increased costs for the supply chain, which flowed through and created lower prices for growing. This is because of the way they are organising the port. Further to that:

Do you have any comments to make about that sort of behaviour by the people that actually own the infrastructure?

Mr Woods —I think for both of the ones that you quote there there have been numerous submissions to the Productivity Commission, and they are currently looking at this. As far as those areas go, they are access arrangements that are under the ACCC area.

Senator HEFFERNAN —I am aware it is an issue for the ACCC, but I am also aware it is an issue for this committee. If you like, I can table this article. CBH, GrainCorp and Viterra are all going along with further deregulation of the industry in their submission to the productivity mob. It appears to me that the rest of the industry is being held to ransom.

Mr Woodley —I think it is fair to say that this issue is probably the biggest issue that the industry is discussing at the present time. You have referred to that article. There have been a number of articles about these issues. The Productivity Commission themselves have indicated that they believe that is the biggest issue that they are addressing in their review. Clearly these sorts of issues are subject to their review, as it was in the draft report, and I am sure they will be coming out with a little bit more information in their final report.

Senator HEFFERNAN —Would it be fair to say that when the AGEA says that the system needs to be fair and transparent, given the evidence in those articles, that might not be the case.

Mr Woodley —I think there has been a significant change in the last year or two. A year or two ago, there were no access undertakings. The access undertakings were put in place, as you are aware, on 1 October last year. They have been in place since that time. I think everybody has acknowledged that, since the access undertakings have been in place, there is greater transparency. The problems of the first harvest after deregulation did not occur last year. I think everyone will still say that there are still some issues to be addressed, including the bulk handlers themselves. As I said, it is still the biggest issue facing the industry at the current time.

Senator HEFFERNAN —We will take up the question of further deregulation of the ports and transport system and this whole issue with the ACCC.

Mr Woods —That is certainly something that the PC is looking at and, as you said, fair and reasonable access is what was in the minister’s second reading speech when this act was released.

Senator HEFFERNAN —It does not appear to be the case at the present time. Thank you very much for that.

Senator BACK —I just wonder if you could give me some indication of what the change in percentage—speaking of Western Australia now—in terms of the receivals by CBH or Grain Pool operators following deregulation in 2008-09 and 2009-10? Can you give us those figures?

Mr Woodley —We are not at liberty to give you figures of individual companies. If I refer you to our marketing year 2008-09 report to growers, we did give some information in a more generic sense. We indicated the actual percentage of grain exported by the top exporters and also gave some information on tonnages there. I can read that out or just leave it with you. Unfortunately, we are not in a position where we can indicate what the actual tonnages from individual companies are.

Senator BACK —I was not interested in individual exports. Prior to deregulation in Western Australia, CBH or Grain Pool took the entire harvest, yes?

Mr Woodley —Prior to deregulation, AWB would have received all of the wheat that was destined for export.

Senator BACK —And then following deregulation?

Mr Woodley —Following deregulation, AWB has not received 100 per cent of the wheat destined for export.

Senator BACK —Can you give us some breakdown perhaps of CBH versus the others?

Mr Woods —No, we can’t.

Mr Woodley —We are not in that position I am afraid.

Mr Woods —I do not think it is near the figures you are talking about. There are 29 exporters. We know that, as Senator Nash has indicated, the world price is low and in all states growers are sitting on a lot of grain. Therefore it has not been sold to anyone yet.

Senator BACK —That was a further question I was going to ask. My first question was to try and get some idea of the change in relationship of CBH to others receiving wheat. The second question relates to on-farm storage following deregulation. What percentage of the harvest has remained in on-farm storage as opposed to that going into common storage?

Mr Woods —We do not know. ABARE are doing the statistics and reporting on that. We have no role.

Senator HEFFERNAN —The other question is: how much of that hasn’t got weevils in it.

Senator BACK —My next question goes to that—

Mr Grant —Maybe I can help. The ABS and ABARE together, as Mr Woods pointed out, do release monthly estimates of wheat stocks held. That information is publicly available on ABARE’s website. My recollection is that the most recent survey came out just a couple of days ago.

Senator BACK —And that is available on ABARE’s website?

Mr Grant —Yes, it is.

Senator BACK —Thank you. As Senator Heffernan has alluded, one of the concerns being raised is the possibility of variable standards of grain storage on farm. Have you any comments or observations to make on that?

Mr Woods —We were asked similar questions at our last appearance and it is not for us to comment on that. All the bulk handling companies and exporters are working on quality assurance programs that they are in control of.

Senator BACK —My final question also goes to port access. In the summer of 2008-09 there was great controversy and concern off Fremantle about loading of vessels and who had priority et cetera. Can you tell me whether this most recent harvest experienced the same problems, or had they been resolved?

Mr Woods —No. They are not fully resolved. CBH introduced the auction system that Senator Heffernan was talking about before. No, there were not ships queued up at port but then the season was different again and we did not have the delay in harvest and the rain events and those sorts of things that we did the previous harvests. There has not been the volume of grain trying to be exported out of the ports, therefore that has changed the whole logistics process.

Senator BACK —And tonnages of wheat produced in this last harvest would be available on whose website—ABARE’s?

Mr Woods —They are the only ones that publish docs and they are doing that monthly at the moment.

Senator BACK —You just made reference a few moments ago to the Canadian circumstance. Is there any evidence of the Canadians trying to adversely impact on our markets by price manipulation? Are you aware of anything of that nature?

Mr Woods —We are not aware of anything like that. We know that Australian exporters are taking grain to more countries and more end users than has been the norm.

Senator BACK —Yes. That is our observation as well.

CHAIR —Thank you. As there are no further questions of the officers, I thank Mr Woodley and Mr Woods.

[5.28 pm]