As approximately 65-75% of annual wheat production in Australia is exported, conduct of the wheat export market is critical for producers. Port access for exports is limited and there is strong competition with exporters of wheat and other commodities. Current systems favour large operators with control marketing and significant infrastructure including storage, transport and handling. Exporters offset high shipping and compliance costs against the prices paid to grain growers. Therefore it is natural that growers are seeking a fair and transparent means of resource allocation, thereby improving port access for all players and maintaining healthy competition for their wheat.
The current Access Test for Port Terminal Services specified by the Wheat Export Marketing Act 2008 (WEMA) will be abolished in 30 September 2014, and replaced by a mandatory Code of Conduct to be administered by the ACCC. The Australia federal election is set for 14 September 2013 and at this stage it is unknown whether a change in government would have an impact on the Code although it seems unlikely.
Key principles of the Code have been agreed and will cover the obligations of the port terminal operators in relation to access to port services, transparency and dispute resolution processes. The draft Code is being prepared and a public consultation is expected during 2013.
A mandatory Code is preferable to a voluntary Code in that it is enforceable. However, a mandatory system can add layers of complexity, increased administration and legal costs. Prices paid to growers reflect all risks in the supply chain, so it is possible that any added cost of administering a mandatory Code would then be passe
Another issue being considered is the obligation of terminal operators to comply with continuous disclosure rules as defined in the WEMA, such as reporting of stocks held. On one hand, the information as to the levels of stocks held away from port provides a major advantage (some may consider unfair) to those operators that are vertically integrated. However, is it really in the best interest of Australia’s wheat growers to publish the stocks of stored grain? By sharing the commercial advantage amongst all exporters, would we not weaken our bargaining power with our export customers? Care needs to be taken to ensure that growers do not erode market position in the pursuit of transparency.d on to producers and result in even greater pressure on prices received.
Finally, one of the main lessons learned from the implementation of the Horticultural Code of Conduct is that it must apply across the industry as a whole in order to avoid discrimination or favouring of a particular industry segment.
The primary aim of deregulation is to promote healthy, natural competition so care must be taken to over-regulate the deregulated wheat market.