News Weekly, July 14, 2001 There is a strong push to abolish the single selling desk for wheat. But there are good economic reasons for keeping it, argues Dale Metcalf, a Western Australian wheat farmer.
In 1996 I had the good fortune to visit one of the largest flour milling operations in the world, the Bogasari Flour Mill in Indonesia. One of its leading managers told me why he won't buy wheat from India: because the shipments typically contain about five per cent sand.
They tried buying from the US, but while the big American grain traders bid each other down in price by about $US12 a tonne, the wheat delivered was well below the quality expected - "we got what we paid for", I was told.
In contrast, they preferred to buy Australian wheat because of the guaranteed quality product for price and the service provided by the Australian Wheat Board.
The Indonesian experience illustrates why Australia has such a high reputation among overseas flour millers.
The opponents of the AWB International single selling desk are the multinational grain trading houses, the wheeler-dealer traders, the marketing boards of our competitors in other producing countries and their governments.
US President Bush, in a recent letter to John Howard, said the US wants an end to the single selling desk and relaxation of quarantine rules as a condition of Australia's proposed free trade agreement with the US.
A handful of Australian free-trade purists farmers also support deregulation of the AWB. They all have a similar manta - competition will reduce handling and marketing costs, and improve returns to growers through better prices.
Notably, virtually none of out overseas flour-milling clients support abolition of Australia's single selling desk. They support Australia's wheat marketing system.
In countries like France, grain market deregulation has led to resurgent farmer interest in co-operatives.
Historically, the AWB International, the sole marketer of Australian wheat, was established by forward-thinking producers who did not want to see a repeat of the 1930s, when international traders exploited Australian growers.
The AWB has provided an efficient grading and storage system, allowing it to pro-actively market Australian wheat, something that the international grain traders will have no interest in doing if we lose our single selling desk.
AWB International sets clear criteria for each grade of wheat and grades into which each variety is acceptable. Lower-grade varieties, with poor milling and/or poor baking quality are used for feed grain and fetchs a lower return. Higher grade varieties fetch a premium, as with high grade wheat for noodle production in Asia.
Every load of wheat delivered to an AWB authorised agent is subjected to a series of tests before being given a grading. The test records for each load for its hectolitre weight, protein, moisture, screenings, foreign seeds, chaff and insects. At the completion of harvest, the quality standard of every grade at every recieval point is known.
This comprehensive testing procedure allows for computer-monitored active stack management for all grades of wheat, so that that the AWB can deliver the quality and tonnage required to any customer.
This means that millers and bakers around the world can reasonably predict the end product. These buyers can be supplied to their specifications from more than 180 locations in Western Australia alone, including three to five grades of wheat from each site. Grain from several sites can easily be blended to specification at the export terminal.
This highly efficient stack management system gives the AWB a powerful marketing advantage.
Through active stack management, repeat consignments can be made to the same specifications, knowing the grade supplied is going to conform as previously.
It has real cost benefits for our customers. Continuity of supply at a known quality makes milling profitable. The miller doesn't have to do the blending and consequently doesn't need to keep high stocks-to-use ratio stockpiles.
This promotes confidence in the buyers and translates into a premium price for Australian farmers.
Other services add to the AWB's marketing strength. Having good technical staff to follow through each consignment, means they can fine-tuning future consignments.
Unique to Australia, the AWB has set up the Baking Institute in Singapore to train bakers, biscuit-makers, pastry-cooks. They come from countries that purchase Australian grain and learn the art of using flour produced from the various grades of wheat.
This provides feedback to the AWB's marketing people on the properties of flour from each grade. The same grade may show different characteristics from different states in a given year. This is important information for both millers and bakers.
The AWB is a highly effective marketing tool for Australian farmers. No wonder the international grain traders want to see it dismantled.