Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Standing Committee on Agriculture, Resources, Fisheries and Forestry
11/05/2012

COOKE, Mr Hugh, Senior Manager Corporate Services, Wheat Exports Australia

LUCAS, Mr Jason, Senior Manager Operations, Wheat Exports Australia

WOODS, Mr Peter, Chief Executive Officer, Wheat Exports Australia

[11:34]

CHAIR: I welcome representatives of Wheat Exports Australia to our hearing. You have had the opportunity of listening to the other evidence we have received today.

Mr Woods : We have.

CHAIR: Very good. Most of the submissions are on our website. We are always trying to be as transparent as we can, so the information is out there. Thank you all for being here today. Although the committee does not require you to give evidence under oath, I should advise you that this hearing is a formal proceeding of the parliament and warrants the same respect as proceedings of the House. Giving false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. The committee has your submission, No. 11. You might like to give us an overview, as you have heard the other evidence; we would certainly appreciate that.

Mr Woods : Thank you. I have a brief opening statement. I use the acronym 'WEA' to refer to Wheat Exports Australia in this opening statement. WEA was established on 1 July 2008 under the Wheat Export Marketing Act 2008. WEA's role is to accredit fit and proper exporters of bulk wheat, monitor those exporters and ensure continuous disclosure of the shipping stem at wheat export terminals. WEA has no role in storage and handling, transport, marketing, publishing statistics—other than in our annual reports and growers reports—setting receival standards or classifying wheat varieties.

At this point I would like to table the growers report that I believe you have. This was published in December 2011 and provides information on the 2010-11 marketing year—from 1 October 2010 to 30 September 2011—including an overview of the accreditation scheme, key exporter statistics, accredited exporter activity, commentary on WEA's visit to South-East Asia, a history of regulation in Australia and world wheat price trends.

I would like to present the committee with some updated bulk wheat export statistics. For the period 1 October 2011 to 30 April 2012, more than 10.8 million tonnes of wheat have been exported by 18 accredited exporters to 31 countries. This is a 16 per cent increase compared to the same period in 2010-11, when 9.2 million tonnes were exported. Asia continues to be a dominant destination for Australian bulk wheat exports: eight of the top 10 countries importing Australian bulk wheat are in the Asian region. Indonesia remains the primary destination for Australian bulk wheat, purchasing 16.5 per cent of bulk wheat exports over the seven-month period for this marketing year.

On 23 September 2011, Minister Ludwig, the federal Minister for Agriculture, Fisheries and Forestry, announced that the government had substantially accepted recommendations from the Productivity Commission inquiry report into wheat export marketing arrangements but determined that their implementation would occur in three stages. Stage 1 was in October 2011. WEA has been operating a lighter-touch accreditation scheme, meaning all forms were reviewed and simplified; non-mandatory conditions of accreditation were removed; the scheduled audit plan was withdrawn—WEA now only undertakes audits based on identified risks; and the number of members was reduced from six to four.

WEA is in the process of winding up. This involves employee assistance with career coaching and career progression; contingency plans for the loss of employees, staff redeployments and redundancies; transferring the monitoring of the shipping stem to the ACCC; disposal of assets; and storing and archiving material in accordance with the national archive requirements.

WEA has valued its early participation in reviewing and providing comments to DAFF on a draft of the Wheat Export Marketing Amendment Bill 2012 prior to tabling. WEA notes the provisions in the bill for an extension to 30 September 2014 of the current access test to be met by export port terminal service providers who also export bulk wheat or who are associated entities of such exporters. WEA also notes that the industry has started work on a voluntary code of conduct which is intended to replace the access test from 1 October 2014. WEA believes the deregulation process has proceeded relatively smoothly, and, pleasingly, no accredited exporter has experienced financial or other difficulties adversely impacting on its relationship with industry stakeholders, particularly growers. Nevertheless, the Australian wheat industry continues to face a number of critical infrastructure and competitive challenges. For example, an article in World Grain on 24 April 2012 entitled 'Coalition calls for the support of US export program' stated that members of the coalition to promote US agricultural exports asked the US legislators in a19 April letter to maintain funding for the US Department of Agriculture exports program when the Committee on Agricultural Nutrition and Forestry considers re-authorisation of a new Farm Bill. The article indicated that the coalition members called, significantly, for funding the market access program at no less than $200 million annually and the foreign market development program at no less than $34.5 million. It further stated that these programs bring together non-profit US agricultural trade associations, farmer cooperatives, non-profit state regional trade groups, small businesses and the USDA to develop results-oriented strategic plans and share the cost of implementing them to support the US agricultural industries international marketing.

It will be noted that Australian exporters currently compete in many of the same markets as the US. WEA recognises that substantial structural change has occurred in the wheat industry over the last four years. Continued adjustment is necessary to ensure that the Australian export wheat industry continues to improve its competitiveness and efficiency in order to compete effectively in international markets.

I would like to draw your attention to key areas requiring attention as observed by WEA, identified in our submission and endorsed in a number of submissions to Senate and other inquiries. These are: unequal access to wheat stocks information; port access; management of the supply chain and port capacity information; and integrity of Australian grain exports. Thank you.

CHAIR: Thank you for putting that on the record. We have heard evidence about quality and issues like that. I understand that the US has a crop quality report that goes right through their season. Do you have any information on that?

Mr Woods : There is information in our submission on that. Mitch Morison explained that very well, and there is also the ASX submission to you. The US and Canada both produce those reports. The USA produces a report—my understanding is that it is an annual report—that is provided to all of the industry. They also provide it to all the millers and use it to help the mills determine the quality of the wheat for that particular year—because it does change due to seasonal characteristics at times—and to determine the milling performance of the grain they are going to be purchasing. In Australia, Grain Growers Ltd, who appeared earlier, are looking to produce the first report of that kind since 2005. My understanding is that there are some other organisations, bulk handlers, who are producing those sorts of things. It would be good to see one very well written report provided from proper sampling.

CHAIR: A report that has integrity everyone can accept.

Mr Woods : A report that is done from randomised sampling and those sorts of things.

CHAIR: Do you have a view as to who could do that?

Mr Woods : No.

Mr TEHAN: I do not know whether you can answer this question, but I will ask it anyway. Do you think we should move to the next stage? Do you think this bill should be supported?

Mr Woods : We are an organisation that implements policy and we would not comment on that question at all.

Mr TEHAN: Okay. I thought that was the answer I would get. Going to your four specific points, I think you have nutted a lot of what we have heard. Your first point is about unequal access to wheat stocks information. In the system in the US, where they use the ABS, the ABS has the power to require and put together this information. Do you think that could do with the unequal access to wheat stocks information?

Mr Woods : It is for a matter of people other than us to determine how it is done. Certainly, the US has a complicated system, in that 60,000 people are surveyed—farmers, cooperatives, mills—and it is a requirement that they have to fill out the forms. They have a very good system. We get USDA World Agricultural Supply and Demand Estimates monthly, which we know are based on good statistical reliability over there. It is good information and it provides transparency of information.

We have had the luxury of sitting up the back and hearing most of the earlier speakers, and from talking to all the farmer groups—and I commend that a number of weeks ago GPA had every farmer group, the grain growers and the government at a meeting in Sydney to discuss these sorts of issues—everyone is of the same view that there is an issue; how it needs to be addressed is the next question that those organisations need to talk about.

Unfortunately, some of the conversations this morning probably did not do justice to this debate. It tended, from where I was sitting, to get moved towards premiums. Transparency of stocks information is not about premiums. I refer you to the ASX submission and the submission that John Crosby made in March to the Senate grain networks inquiry; they have the number of the debate there. If you look at what happens with the futures markets and with most other markets there is a full transparency of information. The futures markets and the ASX market operate through a system where you cannot declare something to someone else until you do it through a centralised system so that everyone has equal access to the information. That is not happening at the moment. How it should happen is not up to me, but this is not about three bulk handlers. This is about the industry.

Whether the debate stretches down to the farm level or, as suggested in John Crosby's submission, down to anyone who stores 10,000 tonnes of grain for a fee—and have that as the cut-off—that is the debate that needs to happen, as well as to who does it. But transparency of information will not disadvantage anyone. How can you go out and say you are getting a good price today if you do not know, and you are the only person in Australia who has that stock of wheat? How do you know you are getting a good price if you are one of 10,000 growers, with 5,000 tonnes that you need to offload quickly?

Mr TEHAN: I could not agree with you more. Do you think that we are putting regulation on growers if we adopt something like the US model, where they have to compulsorily fill out these forms of what they have on the farm et cetera? Do you think growers, given that they understand this issue of transparency, would therefore be prepared to adopt that type of model?

Mr Woods : There are only a couple of growers that I have run across in the last few years who have said no, but once you sit down and talk to them, and say: 'Do you actually realise it is not your stocks in the silo at Gilgandra that anyone is talking about? This is an aggregated stock level. There's still only one company that would know your stock levels. The industry doesn't know what you own. They just know generally what is at the silo in Gilgandra, or in the Newcastle port zone.' And usually they are comfortable with that.

Mr TEHAN: In terms of port access, which is the second issue you raised, do you think the ACCC: (a) has the resources; and (b) has the knowhow and the understanding of the issues to be able to deal with port access issues in a further deregulated market?

Mr Woods : Four years ago the ACCC had a huge learning experience, and I think they would be the first to admit that. They have done an absolutely marvellous job at coming up to speed and understanding the situation in a time frame that just blew my mind away—how quickly they picked all this up. They certainly are on the ball, and they have some wonderful people in there doing that. But I would refer you to an article, a Q and A with Rod Sims in 'Australian Company Director', where in part of that article he indicates, 'Finally, I want to promote a much better understanding of why, when and how to regulate monopolies. It is fair to say that this is a bit confused at the moment. While as a country we probably have too much regulation generally, when it comes to monopolies our regulation can be too light handed. We do not have, for example, effective regulatory mechanisms for airports or some ports that export wheat.'

CHAIR: Could you table that for us when we finish so that we can take that as an exhibit?

Mr Woods : I can.

Mr TEHAN: Yes, that would be useful. Just following up on that, have you heard specifically what the problems are with the current access regulations that he might have been referring to when it comes to ports?

Mr Woods : No. The ACCC is working through an auction system in South Australia and there is an auction system in Western Australia. The ACCC is looking at that because there were some issues with three auctions late last year that have caused concern for the industry, and my understanding is that the ACCC is looking at that closely.

Mr TEHAN: Does that tie, in a way, to the third point you make about managing the supply chain and port capacity information? Do you think that flows into this whole issue around port access?

Mr Woods : The bill certainly looks at supply chain and continuous monitoring—continuous monitoring of the shipping stem; stating, 'Here is what bulk handlers need to be telling everyone about shipping': what slot to fill, when ships are expected, when they are expected to load and when they are expected to leave. That is important information, and the bill will standardise that across Australia. I think that is very important. It is the upcountry area that the WEA has no remit in that people are concerned about.

Mr Lucas : On that, we probably cannot stress the importance of that enough. We have exporters who may get a quote or a tender from one of our overseas customers. They have little, or not complete, access to the information to enable them to tender properly. Therefore, growers are having reduced competition in that fashion because the exporters do not understand the wheat stocks available and they cannot tender properly for that grain.

Mr Woods : And they cannot always get it to port in the time frame that they would like to.

CHAIR: And is that a transport issue or a logistic issue?

Mr Woods : It is a transport and a logistic issue, and then you also come down to if there are stocks at port that they can buy. Yes, there could be; who owns them? And at what cost? So, it is someone getting backed into a corner.

CHAIR: So that goes to all information flow situation: to make it a transparent process so that it drives the market—or people can operate within the market with that free information?

Mr Woods : They can make a decision having full information.

CHAIR: As Jason just said, if somebody gets an overseas opportunity—a query from a buyer—they can then look to see what is available and say, 'We can fulfil that contract'.

Mr Woods : Yes.

Mr Lucas : Fulfil it and determine to which port they will accumulate to best suit that market for transport, as you said. Which port is most effective and most competitive to get it into that market?

Mr TEHAN: Just one more on the integrity of the Australian grain exports: we have heard evidence about Wheat Quality Australia. With them playing their role, and with finance to play their role—depending on what is agreed—do you see that as being enough, that they can play the role in ensuring that integrity of the Australian grain exports?

Mr Woods : I think Wheat Quality Australia have a key part in here and, as other participants said earlier on, it is a 10-year time frame, from whoa to go, in developing varieties and getting the right varieties and knowing which varietal grade they will fall into—you need to be able to knock them off early if they are not going to perform—what functional traits are needed and what areas they can be produced in. My understanding is that they are struggling for funding, but they are a very key part of this industry.

Mr TEHAN: Thank you for spending so much time in giving an overview of what is happening. We appreciate it and appreciate your work.

CHAIR: Thanks for your frankness.

Mr Woods : Thank you.

Resolved (on motion by Mr Lyons ):

That this committee authorises publication, including publication on the parliamentary database, of the transcript of the evidence given before it at public hearing this day.

Committee adjourned at 11:56