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Rural and Regional Affairs and Transport References Committee-Senate Standing Ownership arrangements of grain handling Final report, dated December 2013


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The Senate

Rural and Regional Affairs

and Transport

References Committee

Ownership arrangements of grain handling

Final report

December 2013

© Commonwealth of Australia 2013

ISBN 978-1-74229-925-9

This document was prepared by the Senate Standing Committee on Rural and Regional Affairs and Transport and printed by the Senate Printing Unit, Department of the Senate, Parliament House, Canberra.

Membership of the committee

Members 44th Parliament

Senator Glenn Sterle, Chair Western Australia, ALP

Senator the Hon Bill Heffernan, Deputy Chair New South Wales, LP Senator Alex Gallacher South Australia, ALP

Senator Sue Lines Western Australia, ALP

Senator the Hon Ian Macdonald Queensland, LP

Senator Peter Whish-Wilson Tasmania, AG

Members 43rd Parliament

Senator the Hon Bill Heffernan, Chair New South Wales, LP

Senator Glenn Sterle, Deputy Chair Western Australia, ALP

Senator Sean Edwards South Australia, LP

Senator Fiona Nash New South Wales, NATS

Senator the Hon Lin Thorp Tasmania, ALP

Senator Peter Whish-Wilson Tasmania, AG

Other Senators participating in this inquiry

Senator Chris Back Western Australia, LP

Senator the Hon Richard Colbeck Tasmania, LP

Senator Anne Ruston South Australia, LP

Senator Rachel Siewert Western Australia, AG

Senator Dean Smith Western Australia, LP

Senator John Williams New South Wales, NATS

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Secretariat

Mr Tim Watling, Secretary (from 17 July 2013) Mr Stephen Palethorpe, Secretary (until 16 July 2013) Dr Jane Thomson, Principal Research Officer (from 21 October 2013) Dr Richard Grant, Inquiry Secretary (from 16 May to 30 August 2013) Dr Chris Curran, Principal Research Officer (until 5 July 2013) Mr Terry Brown, Principal Research Officer (until 5 July 2013) Dr Sean Turner, Principal Research Officer (from 16 May to 30 August 2013) Mr Alistair Cadman, Principal Research Officer (from 16 May to 30 August 2013) Ms Trish Carling, Senior Research Officer Mr Nick Craft, Senior Research Officer (until 31 May 2013) Ms Kirsty Cattanach, Research Officer Ms Lauren Carnevale, Administrative Officer Ms Madeleine Willis, Administrative Officer (from 16 May to 23 July 2013)

PO Box 6100 Parliament House Canberra ACT 2600

Ph: 02 6277 3511 Fax: 02 6277 5811 E-mail: rrat.sen@aph.gov.au Internet: www.aph.gov.au/senate_rrat

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Table of contents

Membership of the committee ......................................................................... iii

Chapter 1.............................................................................................................. 1

Ownership arrangements of grain handling .......................................................... 1

Terms of reference .................................................................................................. 1

Interim reports ........................................................................................................ 1

Order under the Foreign Acquisitions and Takeovers Act 1975 ............................ 2

Committee view ...................................................................................................... 2

Appendix 1 ........................................................................................................... 5

Submissions received ................................................................................................ 5

Appendix 2 ........................................................................................................... 7

Public hearings and witnesses ................................................................................. 7

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Chapter 1

Ownership arrangements of grain handling Terms of reference 1.1 On 16 May 2013 the Senate referred the matter of ownership arrangements of grain handling to the Rural and Regional Affairs and Transport References Committee (committee) for inquiry and report.

1.2 On 14 November 2013, the Senate agreed to the recommendation of the committee that this matter be re-adopted in the 44th Parliament for inquiry and report by 11 December 2013.

1.3 The committee was required to inquire and report on the following:

The ownership arrangements of grain handling, with particular reference to whether:

(a) such arrangements are in the interests of:

(i) Australia's farmers; and

(ii) Australia's long term food security interests;

(b) there are potential impacts on competing grain traders' access to grain handling facilities, ports, silos and transport infrastructure;

(c) there are potential impacts for grain traders, and a competitive marketplace, of access to warehoused grain stock information;

(d) there is potential for conflict between the responsibility to shareholders and the best interest of Australian producers and consumers; and

(e) any other related matters.

Interim reports 1.4 In the 43rd Parliament, the committee tabled a first interim report on 31 July and a second interim report on 30 August 2013.1

1.5 The second interim report provided an overview of the takeover bid by Archer Daniels Midland (ADM) for GrainCorp Limited (GrainCorp) and the regulatory

1 Senate Rural and Regional Affairs and Transport References Committee, Ownership arrangements of grain handling, First Interim Report, 31 July 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Rural_and_Regional_Affai rs_and_Transport/Grain_Handling/First_Interim_Report (accessed 29 November 2013).

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reviews conducted by the Australian Competition and Consumer Commission (ACCC) and the Foreign Investment Review Board (FIRB).2

1.6 The interim report considered perspectives on the merits of ADM's bid with focus on concerns raised to the committee about the potential impact of the bid on the interests of Australia's grain farmers as well as the Australian grain industry and Australia's long-term food security interests more broadly.

1.7 The report highlighted the extent of cross-ownership in the Australian grain handling market and the anti-competitive harm that the ADM's proposed takeover of GrainCorp could have had on the market. In the interim report, the committee questioned whether this ownership structure and the potential anti-competitive impacts had been adequately considered by Australia's regulators while drawing attention to ADM's record as a corporate citizen which contributed to the low level of trust that Australian grain growers have in the company.

Order under the Foreign Acquisitions and Takeovers Act 1975 1.8 On 4 October 2013, the Treasurer, the Hon Joe Hockey MP signed an interim order under the Foreign Acquisitions and Takeovers Act 1975 (FATA) to extend the statutory time period for a decision on the proposed acquisition to be made by 17 December 2013.3

1.9 On 29 November, the Treasurer made an order to prohibit the proposed acquisition by ADM of 100 per cent of the shareholding in GrainCorp under the FATA.4

Committee view 1.10 The Treasurer's 29 November announcement went to the heart of the committee's inquiry. The committee determined that many of its concerns had therefore been substantively addressed.

1.11 Nevertheless, the committee will monitor the outstanding concerns of Australian grain growers, including port access and anti-competitive behaviour within the industry. These and other unresolved matters raised in the committee's second interim report may be the subject of future committee inquiry.

2 Senate Rural and Regional Affairs and Transport References Committee, Ownership arrangements of grain handling, Second Interim Report, 30 August 2013, http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Rural_and_Regional_Affai rs_and_Transport/Grain_Handling/Second_Interim_Report (accessed 29 November 2013).

3 The Hon Joe Hockey MP, Treasurer, 'Foreign investment application: Archer Daniels Midland Company's proposed acquisition of GrainCorp Limited', Media Release, 4 October 2013, http://jbh.ministers.treasury.gov.au/media-release/005-2013/ (accessed 29 November 2013).

4 The Hon Joe Hockey MP, Treasurer, 'Foreign investment application: Archer Daniels Midland Company's proposed acquisition of GrainCorp Limited', Media Release, 29 November 2013, http://jbh.ministers.treasury.gov.au/media-release/026-2013/ (accessed 29 November 2013).

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Senator Glenn Sterle

Chair

Appendix 1 Submissions received

Submission Number Submitter

1 Archer Daniels Midland

2 Mrs and Mr Gillian and Don Haling

3 Grain Trade Australia Ltd

4 AgForce Queensland

5 Australian Grain Exporters Association

6 Pastoralists and Graziers Association of WA (Inc)

7 Grain Producers SA

8 Grain Producers Australia

9 GrainCorp Limited

10 Victorian Farmers Federation

11 NSW Farmers' Association

12 Southern Agventure Ltd

13 Link Agricultural

14 Mr Jock Munro

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Additional information received

• Received on 1 July 2013, from Archer Daniels Midland (ADM). Answers to Questions taken on Notice on 18 June 2013. • Received on 30 July 2013, from the Australian Competition and Consumer Commission. Answers to Questions on Notice on 16 July 2013. • Received on 31 July, from Archer Daniels Midland (ADM). Correspondence. • Received on 2 August 2013, from GrainCorp. Answers to Questions on Notice

on 16 July 2013.

Tabled documents

18 June 2013, Canberra, ACT: • Tabled by Senator the Hon Bill Heffernan. o Email: dated 18 June 2013. o Email dated 18 June 2013.

o Document from the Parliamentary Library: company detail - Archer Daniels Midland (ADM), dated 14 June 2013. o Chairman's letter proxy statement form 10-K. o ASIC - current and historical extract - Archer Daniels Midland

Company (ADM). o Document from the Parliamentary Library: Archer Daniels Midland (ADM), dated 14 June 2013. o Email: dated 14 June 2013. • Tabled by Mr Ian Pinner, President, ADM Grain Group, Archer Daniels

Midland. Opening statement.

16 July 2013. Sydney, NSW • Tabled by GrainCorp. Opening statement. • Tabled by Victorian Farmers Federation. Opening statement. • Tabled by NSW Farmers'.Association.

o Opening statement. o Map: blue dots represent GrainCorp sites in New South Wales.

Appendix 2

Public hearings and witnesses

Tuesday, 18 June 2013, Canberra, ACT

• BETHELL, Mr Kit, Senior Director, Government Relations, Europe, Archer Daniels Midland Company • PINNER, Mr Ian, President, ADM Grain Group, Archer Daniels Midland Company

Tuesday, 16 July 2013, Sydney, NSW

• ARNEY, Mr Darren, Chief Executive Officer, Grain Producers South Australia • AUCOTE, Mr Chris, President, Australian Grain Exporters Association; General Manager, Bunge Australia • BRADLEY, Mr Leon, Committee Member,

PGA Western Graingrowers, The Pastoralists and Graziers Association of Western Australia • CROSBY, Mr Justin, Policy Director, New South Wales Farmers Association • EADY, Mr Michael, Director,

Fuel, Transport and Prices Oversight Branch, Australian Competition and Consumer Commission • EASTBURN, Mr John, Chairman, Grain Growers Limited • GREENTREE, Mr Ron, farmer • HONEY, Mr Geoff, Chief Executive Officer,

Grain Trade Australia • HOSKING, Mr Brett, President, VFF Grains Group, Victorian Farmers Federation • HOSKINSON, Mr Mark, Chairman,

Grains Committee, New South Wales Farmers Association • MUNRO, Mr Jock, Grain Grower, Southern New South Wales • MURRAY, Miss Nina, Grains Policy Director, AgForce Grains Limited • NEWTON, Mr Wayne, AgForce Grains President,

AgForce Grains Limited • RICHARDS, Ms Rosemary, Executive Officer, Australian Grain Exporters Association • ROLLINGS, Mr Jonathan, General Manager,

Foreign Investment and Trade Policy Division, Treasury

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• SHERIDAN, Mr Stephen, Manager, VFF Grains Group, Victorian Farmers Federation • SOUTHAN, Dr Michael, General Manager, Grower Engagement, Grain Growers Limited • TRIGG, Mr Angus, Director,

Government and Media Relations, GrainCorp • WATKINS, Ms Alison, Managing Director and Chief Executive Officer, GrainCorp • WEBB, Ms Rose, Executive General Manager, Mergers and Adjudication

Group, Australian Competition and Consumer Commission • WEIDEMANN, Mr Andrew, Chairman, Grain Producers Australia • WILSON, Mr Brian, Chairman,

Foreign Investment Review Board • WOODS, Mr Peter, Project Manager, Grain Producers Australia