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Tuesday, 2 December 2008
Page: 45

Senator HEFFERNAN (5:03 PM) —I present an interim report of the Select Committee on Agricultural and Related Industries on the pricing and supply arrangements in the Australian and global fertiliser market.

Ordered that the report be printed.

Senator HEFFERNAN —by leave—I move:

That the time for the presentation of the final report of the Select Committee on Agricultural and Related Industries into pricing and supply arrangements in the Australian and global fertiliser market be extended to 30 June 2009.

Question agreed to.

Senator HEFFERNAN —by leave—I move:

That the Senate take note of the report.

The timing of the Senate Select Committee inquiry into the fertiliser industry could not have been better, because farmers could not have been under more pressure from what is perceived to be a serious monopoly of the fertiliser industry in Australia. The committee members were me, Senator Farrell, Mary Jo Fisher, Christine Milne, Fiona Nash, Glenn Sterle, with participating members, Ian Macdonald, Barnaby Joyce, Richard Colbeck and Russell Trood. There were good presentations of evidence, but the committee considered the market dominance of large players in the fertiliser industry seriously compromised effective competition. For that reason we were able to take a lot of evidence, some of which was taken in camera. Most of the evidence given in camera was given by people who felt seriously intimidated by the industry, either as a supplier or a reseller, who obviously had to continue to do business with what is virtually a monopoly in eastern Australia. You have one player who has 70-odd per cent of the market and 100 per cent of the production, and you have another player in Western Australia, CSBP. We took the view that these players have serious market share. We heard evidence of fertiliser being withheld from the market in the lead-up to last season’s supply. A lot of farming communities were very distressed by increasing fertiliser prices, for which there seemed to be no good reason other than that is what the market would bear. In fact, an American consultant presented in Sydney to a fertiliser industry forum, at which I was present, and he used very blunt language, by saying, ‘Last year, we got away with it. We had several price rises of $100 a ton that weren’t justified by increasing prices; it was simply that the market would bear it.’

The committee’s view is that we should continue to look at the fertiliser industry. We will be doing so next year. Obviously some of the major players will respond to this report, and we look forward to their responses. We also had the ACCC in. We will be recommending in due course that the ACCC be given the powers to make the fertiliser industry more transparent and have more competition in it.

I declare an interest in this. I am a worn-out farmer, wool classer and welder. The experience of farmers was that last year fertiliser was held in stores, awaiting the price increase that was coming. The market intelligence said the price was going to go up. This time last year, or a bit before, there was a lot of fertiliser in sheds that could have been supplied at $700 a tonne. By one means or another, that was withheld from the market till the selling season in the new year and it came out of the stores at between $1,200 and $1,700 a tonne. You cannot blame some of the resellers, who, when they got it into their stores, would have been able to resell at it at $700 but found they could put $300, $400 or $500 in their pocket by hanging on to it.

The observation has been made that there is a collapse in the global fertiliser cartel. The Russians have caused that to happen in part, to the point where, on the Black Sea at the present time, DAP, which is priced at US$245—which would be A$368 FOB—is still being priced in Australia at $1,700 a tonne because the same companies are saying, ‘Now we’ve got all this expensive fertiliser inventory.’ The same goes for urea. The committee has taken evidence from a lot of people who feel very distressed that they got done over as the price rose and now they are going to get done over as the price falls. Bear in mind that the price of products like anhydrous ammonia, which are not stored, has not fallen as the world global price has. To the people who are saying that they got serious inventory at higher prices: if it was good enough on the way up to withhold it from the market and cop the price rise then it ought to be good enough on the way down for growers to get the benefit of the price fall.

In due course we will report further to the Senate. The committee have a lot of work to do. A lot of people have given us evidence which flies in the face of what the ACCC was able to report. I look forward to working cooperatively with other members of the committee and the professional secretariat. The professional secretariat, Jeanette Radcliffe, Peter Short and Rosalind McMahon, have done a fantastic job and we would like to thank them as well. Thank you very much.

Question agreed to.