Australia's wheat marketing regulations should be abolished by September next year, the country's Productivity Commission said in a draft report released Monday. It said the A$13.9 billion ($12.7 billion) industry, the world's fourth largest exporter of the grain, had proved adaptable following the end of a single-desk marketing system for bulk wheat since mid-2008.
"The commission considers that both the interests of the industry and the wider community would be best served by continuing deregulation of the bulk wheat export market," presiding commissioner, Wendy Craik, said in a statement. The commission also proposed that the country's Wheat Export Accreditation Scheme be dropped on September 30 next year.
As well it proposed the current regulator, Wheat Exports Australia, together with a wheat export charge, should be abolished at the same time. But it proposed an access test for port terminal facilities should continue until September 30, 2014, after which access issues could be addressed under Australia's Trade Practices Act.
A number of Australian grain exporters had complained that they had not had a "fair go" since bulk wheat exports from Australia were opened up to competitors nearly two years ago. They argued the liberalised system had fallen short of expectations following a single-desk marketing monopoly run by AWB Ltd.
They said the country's three largest grain handlers and the operators of the main grain ports, GrainCorp Ltd, leading Canadian grain firm Viterra and farmer-owned CBH Group had became regional monopolies dictating the terms of wheat exports. All three firms deny the claims. Alan Winney, chairman of Emerald Group, which this month became 50 percent owned by Japan's Sumitomo Corp, said the system introduced in 2008 had given the bulk handlers' grain marketing arms a natural advantage.
"You've got storage and monopoly groups that have marketing groups in house and they tend to favour those marketing groups in terms of access to storage, market information and the like," Winney told Reuters. Sumitomo already owned 50 percent of the Australian Bulk Alliance in a joint venture that was formed with ABB Grains, before the South Australian firm was bought by Viterra in a $1.4 billion deal last year.
"Because Viterra took over ABB there are pre-emptive rights that existed so Sumitomo has the opportunity to consider whether it wants to move to 100 percent of ABA," said Winney. The three bulk handlers gave pledges relating to open access to their facilities to the Australian Competition and Consumer Commission last year in order to maintain their wheat export licences.
The productivity commission received 56 initial submissions including one from AWB, which claimed it could not see an improvement in the efficiency of the wheat export market as a result of the changed regime. AWB said the current arrangements could potentially result in anti-competitive arrangements.
"The perception that the port terminal facilities have natural monopoly characteristics is correct," AWB said in its submission said. Bulk handler, GrainCorp, which handles most of the grain exported from eastern Australia, said it made no sense to disadvantage other grain exporters as it needed them on its side to maximise the use of its grain handling facilities.