Wednesday, December 06, 2006

Want to export wheat your own way? Just try.

That's how it has been until now.

In this morning's Canberra Times I outline the bizzare Catch 22 that awaited would-be exporters, "the best catch there is":

ANALYSIS: Level playing fields with catch in the rye

Until now anyone has had the right to apply to compete with the AWB in selling exporting wheat. Australia’s Wheat Export Authority considered applications on their merits.

But there was a catch, imposed by legislation. Joseph Heller would have called it “Catch 22”.

The Wheat Export Authority was only able to approve applications if they had been approved by the AWB itself.

And the AWB’s criteria for deciding whether or not to let in a competitor?

Well, it had nothing to do with whether or not that competitor had the financial capacity for the job or whether or it would be able to get wheat growers higher prices.

CBH is Western Australia’s third-largest exporter selling around three million tonnes of grain each year. At the moment it is only able to export grains such as barley and canola because the AWB won’t let it export wheat.

Last month it applied for the right to export two million tonnes of Western Australian wheat to Indonesia, Malaysia and Vietnam, at what it guaranteed would be higher prices than the AWB had been offering.

And the AWB’s Response, delivered last month, as it was awaiting what turned out to be damning findings from the Cole Royal Commission?

It said “no” because in its words, approving the application “would not be consistent with the intentions of the Wheat Marketing Act”.

Why not?

Apparently the intention of the Act “is not to create competition with the National Pool that would undermine National Pool returns.”

Indeed, given the AWB’s status as a private company, the directors would have probably been failing in their fiduciary duty to shareholders if they had allowed in a competitor.

That’s why the Prime Minister yesterday stepped in to remove the AWB’s power to veto wheat exports by competitors, and that’s why, despite the bluster of AWB supporters such as Senator Barnaby Joyce, he is most unlikely to ever give it back.

Farmers get new avenue for wheat

Australian farmers will soon be free to export wheat through an organisation other than the AWB.

Prime Minister John Howard announced plans yesterday to remove the AWB's power to veto the export licence applications of its competitors. Instead, for an interim period of six months, that power will be given to Australia's Agriculture Minister Peter McGauran, who will exercise it in consultation with other senior ministers “in the national interest”.

By contrast, the AWB's legislation has essentially required it to exercise its veto power in its own interest. Last month the AWB rejected an export-licence application by the West Australian grower-owned trader CBH, saying that it was obliged to protect the interests of the growers that sold through it. CBH said last night it would resubmit its application to Mr McGauran as soon as the legislation passed.

The compromise legislation was approved by a meeting of Coalition MPs yesterday morning and will be rushed through Parliament before it rises for the year tomorrow.

It is needed to end what is effectively a grains strike by Western Australian growers, 70 to 80 per cent of whom are withholding this year's crop from the AWB, some of them storing it in CBH-funded warehouses, until CBH is granted an export licence.

The circuit-breaker mirrors one proposed last week by Senator Andrew Murray, of the Australian Democrats, who moved in the Senate that the AWB's veto power be transferred to the Treasurer. Mr Howard said yesterday that he had seen Senator's Murray's proposal and that “if there is any coincidence, well there is nothing wrong with that”.

He said he had decided to move the export power to Mr McGauran rather than to the Wheat Export Authority in the wake of the Cole royal commission, because “the Wheat Export Authority itself was, how shall I put it, the subject of comment by Cole”.

Over the next three months the Government will consult widely about whether there is any need to continue with a single-selling desk backed up by an export veto.

“People can now have a proper debate about the merits of a single desk. I mean there are single desks and single desks and it depends who operates it. Some people argue, I am not saying this is my view, but I am injecting this into the debate, some people argue you can have a single desk operated by an entirely different company which is owned by the growers. Others argue you need a situation where an enhanced or changed Wheat Export Authority licenses a number of exporters; others argue for full deregulation, others have got other proposals,” Mr Howard said.

West Australian Liberal MP Wilson Tuckey who had been preparing a private member's Bill to end the single desk, said he was happy with the Prime Minister's interim arrangement.

National Party Senator Barnaby Joyce, who is a strong supporter of the single desk, said he was “far happier with the minister having control than what the alternative was, which was that we lose the single desk complete deregulation”.

He signaled that the fight wasn't over, saying that over the coming months growers had to “absolutely bang their pots and get on their tractors and tell the whole world, especially those living in Canberra, that they do not want to lose the single desk”.