NATIONAL COMPETITION POLICY: by Paul RussellNews Weekly
SA Government heads towards dismantling single selling-desk for barley
, July 31, 2004
On June 30, the South Australian Minister for Agriculture, Food and Fisheries, Rory McEwen, introduced a bill into the State Parliament with the expressed intention of satisfying the National Competition Council's aims at breaking up the barley single selling-desk.
The Barley Exporting Bill 2004 will repeal the Barley Marketing Act 1993 and "avoid a competition policy payment penalty of $2.93 million from the 2003 (NCC) assessment".
This follows deregulation of the industry in Victoria in 2001 and the creation of a Grain Licensing Authority in Western Australia in 2002.
The South Australian Bill is based upon the Western Australian model of creating a Grain Licensing Authority (GLA), whereby special export licences can be issued to bodies other than the traditional single selling-desk entities (Grain Pool in WA and ABB Grain Export in SA) which will retain the main licences. The safeguards built into the GLA's operation are intended not to create disadvantage to the main licence-holder and to protect their existing overseas markets. This, at least, is the theory. However, many growers and the South Australian Farmers Federation (SAFF) have expressed serious reservations about the scheme and the application of the National Competition Policy generally.
In their recent submission to the Productivity Commission regarding the Review of National Competition Policy Arrangements, SAFF raised a number of critical issues about the effect of NCP on rural communities (see www.saff.com.au
The report argued for a fair application of the "Public Interest Test" to include social, environmental and regional
concerns as well as "purely economic imperatives". It warned: "Rural and regional locations unavoidably entail issues and costs related to distance, infrastructure and small, heavily interdependent local populations." It also said: "Any economy that appears to 'work' in theory, but does not enhance the social and environmental aspects of the triple bottom-line, is not a viable economy."Australian farmers to suffer
SAFF echoed comments of other primary industry groups in relation to the distortion of world export market prices. Rural industry export subsidies in countries "not bound by rigid NCP-style deregulation" create a downward trend in returns to farmers in Australia. Therefore, dismantling the protection that the single selling-desk provides to barley-growers, for example, could hardly be in the long-term 'best interest'.
SAFF and WAFF have flagged their intention to lobby the Federal Government and to campaign against NCP. South Australian Farmers Federation president, John Lush, recently pointed to the negative effects of NCP in the grains, dairy and chicken meat industries and the wine sector in South Australia, declaring that "this NCP is stone raving madness."
Not only is the South Australian Bill poor policy based principally on the Rann Government's desire to unlock the NCP cash payments: it is also bad timing.
Since the announcement in May of a merger of the three major grain bodies (ABB Grain Ltd, Ausbulk Ltd and United Growers Holdings), the organisations have been working towards full unity by September 30 of this year.
The speculation and uncertainty created by the Barley Exporting Bill may well precipitate an unnecessary drop in share prices. With more than 50 per cent of shares in the new entity in the ownership of farmers themselves, any drop in share prices would be a double whammy for primary producers.
In light of the estimated $16 million per annum in projected savings to the industry as a result of this merger, $2.93 million in NCP payments seems paltry - especially for a government boasting a $264 million surplus.
Both the Liberal State Opposition and the Democrats have recognised these concerns and have vowed to block the legislation in the upper house. Liberal rural spokesman, Caroline Schaefer MLC, called for a properly resourced review to look into what changes, if any, were needed to the current arrangements. "If such a review were to identify a net public benefit in the retention of the single selling-desk then South Australia would not have competition payments withheld," she said.
It is interesting to note that the recommendation that South Australia pursue the Western Australian GLA model came from the National Competition Council itself.
The WA legislation was successful in as much as it "unlocked" previously withheld NCP payments. However, the jury is still out on whether or not the workings of the GLA have returned benefits to growers.
This new arrangement has only been in place for one completed harvest and the information released to date from the first year's review is inconclusive. While the review notes an increase in return for the 10 per cent of growers who sold through new special licensed exporters, the recent downturn in the international market is likely to adversely affect prices in the coming year.
Grower concerns that the special licence-holders would "cherry-pick" the market, leaving the main licence-holder as the purchaser of last resort, can only be tested over a number of seasons. The report lamented the fact that no new markets were created through the licensing provisions in the last year. If this continues to be the case, we could see WA licence-holders in direct price competition with the main licence-holder in the same export markets. This would only serve to drive down returns to growers.
A curious statement on the WA GLA website should be of great concern to grain producers nationally. While claiming to support the principle of the single selling-desk, it contradicts itself in answering an FAQ: "Does the legislation sunset the single desk?"
The website says: "The legislation provides for the expiry of the Grain Marketing Bill 2002 once restrictions have been removed from the national wheat marketing legislation. In simple terms, it provides for deregulation subsequent to the deregulation of the national wheat single desk."
So, who's kidding whom?
- Paul Russell is South Australian president of the National Civic Council. The above is an unabridged version of the article which appeared in the 31 July 2004 print edition of News Weekly.