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Tuesday, 3 June 2008
Page: 4279

Mr TRUSS (Leader of the Nationals) (10:57 PM) —Single desk marketing arrangements for wheat began almost 70 years ago and have served the Australian grain industry well. Over a period of several decades, single desk marketing arrangements were put in place for many commodities by governments of all political persuasions to provide some support for farmers desperate to find a way to obtain a fair value for their production. Farms were small and did not have access to sophisticated market intelligence or any dispute settlement arrangements. The farmers were completely at the mercy of local town merchants, who often grew rich while they remained poor. The establishment of single desks put some marketing power in the hands of farmers. Industries prospered, handling facilities, rail lines and storages were built and export markets were established. Organised marketing helped to build Australian agriculture and established our international reputation as a reliable supplier of quality products. Our nation was dependent on agriculture, and wool still provided over half our exports fewer than 50 years ago.

These arrangements have never been supported by the multinational traders or the capital city academics. But those people have never laboured to produce a crop only to have it sold at prices way below its worth. Over the years, key elements of the single desk have been stripped away. There has been a separation of storage and handling functions from marketing, the domestic single desk was scrapped and other sellers have been allowed increased access to the export market, especially in bags and containers. Declining grower control and the corporatisation of the Australian Wheat Board dramatically changed the operations of the marketer, and I doubt all these changes were in the best interests of the industry.

Farmers still support the single desk. Surveys show that more than 70 per cent of wheat farmers support a single desk, and support is highest in areas where the wheat industry is most dominant. Many are resigned to the fact that this government is going to take away their single desk, but they still believe in the single desk as the best way to maximise returns for the national crop, for them and for their country—and the facts support them. All the properly conducted reviews of the marketing arrangements, including those under the National Competition Policy, found that the single desk had delivered higher returns to growers. There are variations in the calculated size of these benefits. I have seen figures ranging from $5 to $70 a tonne, but they all show a net benefit.

In letters to wheat growers last year the then opposition leader, Kevin Rudd, wrote:

A study by Econtech of the premium attributed to the single desk indicates that on the benchmark of Australian premium white grade of wheat, the single desk captures a premium of between $15 and $30 a tonne. The total annual value to Australian growers of this premium on Australian premium white is $80 million. On all grades the average premium attributed to the single desk is $13 a tonne and the total annual value of the premium on all grades is $200 million.

So only last year the Leader of the Opposition was not only, as he said, supportive of the single desk; he was arguing with growers that it delivered substantial financial benefits to them.

It is not that farmers are satisfied with the performance of the current managers of the single desk, AWB and AWBI. AWB under its previous management let Australia and its grain growers down. The behaviour of some of the AWB staff in Iraq was unacceptable and offensive. Some of these people will now rightly face the legal consequences of their actions.

But it is not necessary to abolish the single desk because the current managers betrayed their trust. We do not abolish pensions because some people wrongly claimed or someone in Centrelink acted fraudu-lently. We should fix the problems of the single desk, not cast it aside when it has been good and beneficial to growers.

Let us make it absolutely clear. This bill does not create a new single desk. It is the end of the single desk. The new arrangements merely create a licensing scheme for prospective exporters. While the WEA will vet applications, the government will not be standing behind or underwriting the decisions of this government agency. In an incredible precedent the new minister has already given an export permit to Glencorp, a company which has been named as corrupt for its rorting of the oil for food program and a number of other United Nations programs.

Farmers will have no assurance that their wheat will be marketed well or that their payments will be assured. Our crop marketing will not be coordinated or managed. There will be no-one to sustain long-term contracts with our international customers, no-one to manage essential carryovers to secure the nation’s food supply and no receiver of last resort for farmers if the market were to collapse. There will be no-one committed to the interests of the Australian industry in the world markets.

In Kevin Rudd’s letter to growers he also said:

Labor’s policy is to continue to support the single desk while we are convinced that there is strong economic value in the single desk for growers and the Australian economy and it retains the support of growers and the community.

While Labor gives lip service to single desks before elections, Labor state governments have systematically dismantled every single desk marketing arrangement under their jurisdiction, usually immediately after the state election. Now it is federal Labor’s turn to dismantle the marketing arrangement that has served this nation well. Labor advocates collective bargaining for work-ers but battling farmers have to fend for themselves.

Those who are applauding Labor tonight are not the farmers or the country towns dependent on the wheat industry who know their incomes and security are being put at risk. The winners are the multinational grain traders, some of those who buy Australian wheat, and our grain-growing competitors. Should it not ring alarm bells that the people who are most critical of the single desk are our competitors, those trying to sell against us in a seriously subsidised and distorted world market?

Australia is not a large producer of grain but, because of our small domestic market, we are a major exporter. Australian wheat growers are more dependent, more exposed to the export market than other national industries. We grow a high-quality product that can bring a premium on the world market or allow us to make sales in glut times when lower quality producers are unable to place their crop. The single desk has helped to develop and retain our crop quality and consistency. It has enabled the profits from blending to meet delivery specifications to be returned to farmers, not the marketers or the handling companies. It has ensured that available premiums are harvested for growers and not traded off in competition or to make poor-quality overseas produced wheats more saleable.

Australia needs a single desk for wheat because most of our customers are single desk buyers—Egypt, India, Pakistan, China, Japan, Iraq and effectively also dominant customer countries such as Indonesia. If we have a dozen companies seeking to sell our wheat to a single desk buyer, the buyer will choose the supplier offering the lowest price, and the lowest price will then be passed back to Australian farmers. No-one will be able to demand a premium for Australian farmers, as a competitor will simply undercut his bid. The price will spiral downward because there will always be farmers who cannot store their own crop or who urgently need a cash flow.

Growers’ returns will be lower as a result of the abolition of the single desk and the profitability of the industry will decline. Most of the world’s grain is traded by a small number of giant multinational companies. Many are privately and family owned, but they are all foreign owned. None of these corporations have ever demonstrated any primary commitment to Australia. Only the AWB had the international network, the market contacts and the volumes to be a genuine international trader in its own right. I have no confidence that any other Australian company, includ-ing the ambitious domestic grain-handling monopolies, can match the global marketers on the world stage. They are already teaming up with multinationals in relationships that will grow increasingly uneven.

GrainCorp, which has virtual monopoly control of the grain storage and handling system in New South Wales, Victoria and Queensland, including the ports, has already ditched its ties to growers and exposed itself to takeover. The world’s biggest trader, Cargill, already has a share of ownership. Cargill is the company which bought up most of Australia’s oil seed-crushing capacity and then progressively closed it down. Instead of being a significant exporter of oil seeds, Australia now imports vegetable oils from the US, South America and other countries where companies like Cargill are active. I fear for the future of Australia’s grain growers if—or is it when?—Cargill acquires ownership of the entire eastern states grain network. CBH in WA will also be a foreign acquisition prize, and I note moves from some of the state producers in Western Australia to change its structures in a way that would make it easier to be taken over. The bill being debated tonight is a significant step towards the loss of Australian control over our grain industry.

Internationally, most of the critics of our single desk marketing arrangements come from the United States and Europe. Most of our major customers actually support a single desk because they have had confidence in the professionalism and reliability of their Australian suppliers. US and EU farmers acknowledge that their own marketing arrangements are a shambles. However, they enjoy the luxury of almost unlimited price support and other subsidies which make them immune to the impact of marketing decisions. The latest US farm bill, which passed just a week or two ago, boosts subsidies to $260 billion, including for wheat, and ensures that US farmers pay little price for poor marketing decisions. Australian farmers have no such support and will bear the full price of any reductions in their return that might arise from this legislation.

The Nationals have been long-term supporters of the wheat single desk. It has been a fundamental tenet of our party. The industry, through the Wheat Export Marketing Alliance, was working to put together an alternative manager of the single desk, as they were invited to do so by the previous government. The new minister was initially reluctant to meet with them and, when he finally did meet with them, he told WEMA that he would not even countenance their proposal, as the government had made a pre-election commitment to abolish the single desk. So the efforts of the growers to put together an alternative to the AWB were thwarted. They were not given an opportunity to bring this idea to fruition.

This new proposal fails to address key concerns of the industry. I am concerned that the new legislation will not ensure that returns to growers are maximised in every season. I am concerned that the premiums for quality Australian wheat will not be preserved and returned to growers. I am concerned that Australian wheat stocks cannot be managed and moved on time to port when there are many buyers and exporters. I am concerned that profits from blending will be dissipated and lost to growers. I am concerned that the industry good benefits formerly required of the single desk manager will not be able to be sustained. I am concerned that a multitude of licensed exporters will not be able to compete effectively against subsidised US and EU growers, especially the single desk buyers. I am concerned that, in the absence of a national pool, long-term contracts which Australia has had for many years and which have underpinned our industry, especially in times when there was high production, will not be able to be honoured. I am concerned that there will be no buyer of last resort and no-one to fund crop carryovers to ensure that we can be a regular supplier month in and month out.

My objective in looking at the best options for wheat marketing is to maximise the returns to growers and to our nation from our wheat crop. I want those returns to go to growers and to Australia, not to multinational grain traders. I am not convinced that this legislation will deliver on those objectives, and for that reason the Nationals will be opposing the bill.