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Wednesday, 28 November 2012
Page: 10030


Senator EDWARDS (South Australia) (12:32): I rise today to speak on the Wheat Export Marketing Amendment Bill 2012, and I commend Senator Siewert's involvement in this process. I must say that I concur with her comments about the collegial work that has been done in the interests of trying to get a reasonable result between us, right up to the point where we came into the chamber today.

I have taken particular interest in the progress of this bill and the profound impacts that it could have on the grain industry across Australia. My interest is twofold. As a South Australian I know just how important this industry is. South Australia is a major exporter of grain—the second largest exporting state after Western Australia—and accounts for approximately 30 per cent of Australia's grain exports. We export, on average, 4.3 million tonnes, with a value this year of around $1.3 billion. Secondly, as a member of the Senate Rural and Regional Affairs and Transport Committee, I have fully participated in two recent inquiries—the first into operational issues in export grain networks and the second into the bill before us today.

Deregulation has been good for the wheat industry. On that I think we all agree. Wheat Exports Australia has done a good job in monitoring the transition to deregulation. It issued licences that allowed growers to export directly to markets abroad. In 2008-09, 14.5 million tonnes of wheat was exported, and three years later it rose to 18.7 million tonnes. Wheat Exports Australia has helped to facilitate this.

While I will outline a need for some retained oversight, I am not advocating the preservation of Wheat Exports Australia in its current form, nor am I advocating that there needs to be regulation forever. What I am advocating is that, for the next period of deregulation, we need some light-touch regulation and oversight in place so that growers are not disadvantaged. In doing this, we can have the most open, fair and competitive grains market possible.

I say this in the context of a maturing wheat market but one which I believe requires a bit more settling before we throw the gates wide open to the forces of the global commodity market without our domestic operating environment being functional and fair. The majority of wheat growers still want to pay for ongoing oversight. Let me make it clear to anyone who is listening outside this chamber that wheat growers have always paid 100 per cent for their oversight since deregulation began, after the abolition of the single desk, in 2008. Wheat Exports Australia has always been funded 100 per cent by growers.

I now turn the chamber's attention to what it is the wheat industry needs during the next phase of deregulation. The industry still needs national oversight on information, transport and the quality of wheat exported from Australia. This bill does not tell us who is going to ensure grain quality standards for wheat. Wheat needs to have its quality certified as accurately as practicable to facilitate trade and certainty for buyers. Buyers need the best possible information about the quality, type and standard of wheat that they are purchasing. They also need certainty that the wheat they order is the wheat they receive. The industry needs oversight of shipping slot allocations and auctions to ensure equitable and fair access for all. The industry needs timely and accurate grain stocks information to facilitate an open, well-informed, competitive market.

During the first inquiry we heard evidence from the Australian Securities Exchange:

ASX believes the current grain stock reporting framework is inadequate and, if not revised, will result in a sub-optimal outcome for Australia's grain industry. An opportunity to truly maximise the benefits available from the deregulation process will be lost.

That is from the ASX's representative at that inquiry. This bill in its original form offered none of these things. The bill only contemplates dealing with one aspect of the industry—marketing—without consideration of grain classification, access to storage facilities or access to efficient transport infrastructure. All of these elements need to be considered as part of the deregulation. It just throws growers to the wolves in its current form. The subsequent amendments proposed by the Greens that Senator Siewert refers to now go some way to addressing these issues by including a mandatory code of conduct.

The United States is often held up as the bastion of free trade and open markets, but even they have the Federal Grain Inspection Service, which is responsible for grain classification and inspection of grain-handling facilities. In Canada, the Canadian Grain Commission regulates grain handling through grain quality and quantity assurance programs and carries out scientific research on grain quality and grain safety to support the grain-grading system.

I would also like to address the attacks that the coalition have sustained over not supporting this bill and the apparent hypocrisy of being the party of free enterprise but not supporting further deregulation at this time. We do support the full deregulation of the wheat market. We are the party of individual freedom and free enterprise and we still believe that an efficient private sector, rather than government, unlocks opportunity and generates incentive. Our opposition to this bill is not inconsistent with our core values. You cannot have a competitive market if it is an evolving monopoly.

The wheat industry is dominated by a few large players who, without appropriate oversight, may act in a way that disadvantages growers so that in the long term we may not have a viable wheat industry. Now that is market failure. We see it in other sectors. Some would argue we see it in the retail sector now. There is no value in market failure. We can have further deregulation when the industry is ready. We have come a long way since the abolition of the single desk in 2008 but to completely abandon oversight now, at some arbitrary date that was set five years ago, would be like removing the training wheels from your child's bike for the first time without equipping them with a helmet.

When deregulation began in 2008 the government promised to do a few things. They promised to ensure effective competition, establish a market regulator with some teeth and provide fair and reasonable port access for other exporters to prevent the development of three regional monopolies. What we've seen during this first period of deregulation is a partial transition to that goal. The growers of Australia have said to me that Wheat Exports Australia has served its purpose and we need to move on, but we need some form of oversight in the short term to ensure the momentum is not lost or indeed that we go down a low road. And, while some will run around claiming we need to deregulate for deregulation's sake, how many markets are truly free markets? Most markets like banking and communications contain some kind of oversight, while bodies like ASIC and the ACCC work to ensure that markets are as open and fair as they can be. Why should one of this country's largest industries and biggest agricultural exports be any different?

We have heard a lot about Western Australian representative organisations that support this bill and further deregulation now. Let's just make sure we all understand the unique position Western Australian grain farmers are in. CBH receives and stores more than 90 per cent of grain produced in Western Australia. It is a co-operative which includes roughly 4,500 growers, so the growers own CBH. It has facilities able to store 20 million tonnes of grain and, as well, port capacity of more than three million tonnes. This is quite different from the markets in South Australia and the eastern states, where the storage, transport and port facilities are owned by a small handful of large multinationals whose sole interest, quite rightly, is to provide a return to their shareholders. A quick glance at the history of the grains industry in those states shows that they too started off with grower co-operatives which were eventually corporatised and sold off. You would have to be off with the fairies not to think that, at some point, the growers in Western Australia would not do or contemplate the same--particularly when some estimates put CBH's worth at $7.93 billion. In fact, in early November, when Archer Daniels Midland Co. initially looked at purchasing GrainCorp, Corporate Agriculture Australia managing director Gordon Verrall came out and said that the interest might spark Western Australian growers to sell up. Mr Verrall said:

Once farmers in Western Australia understand just how much their co-operative is worth, it will definitely put pressure on CBH to reassess the corporatisation process. That'll become more apparent in the next few years, driven by those exiting the industry and those undergoing succession issues, who would appreciate a cash lump sum.

That is the growers taking the cash off the table.

CBH director Vernon Dempster reportedly told an industry conference that the foreign takeover of GrainCorp would have serious implications for grain growers on the eastern seaboard. He went on to add that ADM's loyalties would never be aligned to Australia. He is reported to have said:

Their loyalties are going to be to their shareholders. The worry would be whether ADM are going to be more hungry and more exploitative than the current owners, and there would be a suspicion that perhaps they would be.

So clearly some sandgropers are cognisant of the implications for growers in a completely deregulated market with no oversight. It is only a matter of time before growers in Western Australia are grappling with the same issues as growers in South Australia and the eastern states—unless, of course, we do something about it now. During a hearing into this bill I asked GrainCorp about voluntary codes of conduct and whether they knew of any successful voluntary codes of conduct in the agriculture sector. I got the following response: 'No, not that we're aware of.' This view was later confirmed by the ACCC at the same hearing. The voluntary code of conduct was only looking at those things which are relevant to the operation of port terminal facilities. Under the terms of reference of that voluntary code of conduct, development committee up-country stock information is not directly relevant to the operation of the port facility and therefore would not come out. This code would be voluntary. After 2014, a party may simply opt out and not be bound by either access undertakings or the code—that is, if they actually get anybody to sign up to it. My experience with these voluntary codes of conduct is that it takes a long time, if ever, for parties to actually put their signature on the bottom line.

Debate interrupted.