Interesting development down under

[AdamSmith]

AWB pushes full deregulation
COMMENT
Matthew Stevens
November 22, 2006
STRIFE-PRONE AWB Limited is pushing for complete deregulation of its controversial single desk, rather than any federal Government plan for punishing partial reforms of its mandated wheat monopoly.
Management of the national wheat pool have delivered the apparently self-defeating position in briefings of federal Government ministers over recent weeks.

The AWB meetings have been in preparation for the near-certain post-Cole-report reforms, with Treasurer Peter Costello and Foreign Minister Alexander Downer understood pushing for an immediate end to AWB International's power to veto bulk wheat exports.

Just incidentally, the AWB's position is that removal of the veto would mean the end of the national pool and single marketing desk anyway. But only in the most damaging way possible.

The politically blighted manager of the national wheat pool argues that partial reform could at best only reconstruct the contorted wheat market system and at worst only damage the wheat growers, shareholders of AWB, and the national interest.

Implicit in the AWB's position is an understanding of its deep public frailty in the wake of the disaster in Iraq.

There is an acute understanding of the Government's delicate position, given the likelihood of aggressively negative findings and recommendations by the Cole commission.

Essentially, while telling government that the national pool and single desk marketing of wheat is probably still the most financially muscular way of selling our wheat, it has privately accepted the system is doomed.

But it says the Government can do something more positive than simply punishing AWB, its shareholders and potentially the national interest.

If reform is necessary, then according to AWB, it should go all the way. With one vital caveat: ensure there is a transition period of maybe three years. The AWB has called in KPMG to help it anticipate the commercial impact of any negative findings and recommendations by commissioner Cole.

At the core of KPMG's work is an effort to redraft the corporate constitution that governs the board of both AWB and its subsidiary, AWB International.

While AWBI is a subsidiary of AWB, it is also, oddly, its employer. AWBI is Australian wheat's global marketing arm and it enforces the bulk export veto. And it is AWBI that employs AWB to run the national buying pool.

AWB reckons that any sustainable change to the nature of the single desk will require constitutional and legislative reform to first allow the demerger of AWBI from AWB and then to allow each to compete in a contested wheat marketplace.

Now, the prospect of a fully deregulated AWB, while it might be currently untenable to his National Party crew members, could offer John Howard a bit of a win-win option.

Not only would the Prime Minister be able to sate the community's deep anger over the betrayal of confidence that was the AWB's dealing with Saddam Hussein's regime, but it would simultaneously deliver an Australian ace in the push to revive the Doha trade talks.
Monopoly marketing agencies such as AWB and Canada's still government-owned Wheat Board have been targets of the World Trade Organisation and, more hypocritically, the US, in trade talks.

As it stands, under a WTO framework agreement forged in 2004, government-mandated monopolies such as the wheat traders are to be eliminated by 2013. Which is one reason why Canada has moved to scrap its wheat pool in favour of a contested marketplace - although there is a serious push to slow the process from a target date of mid-2008.

That the staged surrender of the single desk could be a "political bargaining chip in the broader context of negotiations" to kick-start Doha is an idea that will be pushed in a speech to be delivered on Friday in Perth by former ambassador to the General Agreement on Tariffs and Trade and chairman of the Australian APEC Study Centre, Alan Oxley. While his conclusion is the product of starkly different forces, it is in total accord with AWB management.

"Whatever and whenever a result is achieved in the Doha Round, marketing arrangements like the Canadian Wheat Board and the Australian Single Desk system are unlikely to survive.

"In anticipation of this development, the industry should plan now for adjustment to the new environment to ensure growers can compete effectively and hold their market share in world markets," he will say.

One other delicacy to emerge yesterday is that it seems AWB's two heads might well be talking different languages when it comes to reform.

While AWB managing director Gordon Davis has been talking big-ticket reform to cabinet ministers, the chairman of AWBI, Ian Donges, has declared himself the "guardian of the Single Desk".

In the introduction to an AWBI report on conduct of the national pool, released yesterday, Donges wrote:

"... I see the role of the AWBI chairman as being a guardian for the Single Desk, the National Pool and supporting wheat marketing legislation".

[Incognito]

CBH offers free wheat storage in row with AWB

RHIANNA KING


CANBERRA

WA grain handler CBH is providing growers with free wheat storage in the growing stand-off between farmers and monopoly wheat exporter AWB.

About 75 per cent of WA farmers are choosing to warehouse their wheat rather than sell it to the beleaguered exporter.

CBH, which has failed twice in its bid to end AWB's monopoly and export WA growers' wheat at a higher price, is waiving the 45<cents> a tonne storage fee until December 15 - when it hopes the future of Australia's wheat exports will be clearer.

CBH spokesman Rhys Ainsworth said it would be unfair to charge growers a storage fee when so many did not want to sell their wheat to the national pool.

"We're encouraging growers to deliver wheat into warehousing because of uncertainty, and felt that if CBH was suggesting to growers they should warehouse, we felt we should make it free," he said.

"In excess of 70 per cent of wheat has come to CBH warehousing, that is a fairly good indicator that growers are voting with their wheat."

The Federal Government will be under growing pressure to remove AWB's power of veto after Commissioner Terrence Cole hands down his findings into the oil-for-food scandal on Friday.

WA Pastoralists and Graziers Association grains section president Leon Bradley said it was unusual for farmers to warehouse their wheat, but they had no choice.

"In a normal year, farmers can't wait to get grain into the receival point and assign it to AWB, but the concerns and serious reluctance farmers have with dealing with AWB means that about 75 per cent of them are withholding it," he said.

Mr Bradley said he was disappointed but not surprised that AWB had again used its power of veto to deny CBH access to the export market. Farmers could not believe that the Government would force them to deliver to the disgraced AWB when there were better options.

An AWB spokesman would not reveal details of the company's 2007 contracts, but said speculation it had pre-sold four million tonnes of wheat was greatly exaggerated. He was confident AWB would be able to meet all its contracts, even if WA growers withheld 75 per cent of their wheat.

WA Liberal MP Wilson Tuckey is pushing a private member's Bill which would end AWB's monopoly.

"There are 6000 to 7000 registered wheat growers in WA, most of whom never attended a rally or voted for AWB Ltd Directors, however when put to the test by a better price offer they have voted with their grain production and they don't want to gift it to AWB," he said yesterday.

Grain offer: Trucks unload grain at a CBH terminal. The grain handler is waiving the 45<cents> a tonne storage fee for wheat until December 15.

November 21, 2006

[liberty]

The mainstream media carries precious little commentary on the state of the AWB. That might interfere with their self-appointed role as official cheerleader for the single desk.

Thankfully we have access to the internet to keep us up to date. What happens in Australia is going to have a critical impact on the future of the single desk in
Canada.

[Incognito]

The CWB’s farmer-controlled board of directors will hold a regularly scheduled meeting in Winnipeg Nov. 21-23.
___________________________________

Do you think AUS AWB is even on the agenda?

[malleefarmer]

AWB is resigned to losing its status as the nation's monopoly wheat exporter after Terence Cole hands down his report into the Iraqi kickbacks scandal on Friday.
The Australian understands that AWB has accepted the loss of the so-called single desk, which has protected its monopoly for more than 60 years, is inevitable.

And it is now preparing for what it hopes will be an orderly transition to full deregulation of the market, which would allow other companies to export bulk Australian wheat.

It believes a slow transition is in the best interests of shareholders, grain growers and Australia's international trading reputation.

AWB would not comment yesterday, but it is believed it has taken advice that its current position, as the only company able to export wheat, is not sustainable.

The changes were likely to be forced on AWB as part of a new World Trade Organisation agreement, irrespective of Mr Cole's report, which is likely to recommend that charges be laid against former AWB executives involved in the $290million kickback scandal.

Mr Cole has been investigating accusations that AWB rorted the UN's oil-for-food program by paying bribes to secure lucrative wheat sales to the regime of Saddam Hussein.

AWB's acceptance of the inevitability of reform allows John Howard to avoid a damaging split in the Coalition.

A group of six Liberal backbenchers have been campaigning for reform for months. Peter Costello has expressed sympathy for farmers forced to deal with AWB, when higher wheat prices were offered by rivals.

But Nationals leader Mark Vaile and Trade Minister Warren Truss are staunch supporters of the single desk.

Reform of the wheat market would drag Australia into line with Canada, which recently adopted 2013 as the date for deregulation of its wheat board, which in turn brings both countries in line with new global rules on export competition. A WTO framework agreement of July 2004 put monopolies such as AWB up for "further negotiation' but stopped short of making them illegal.

The federal Government will now be able to use the single desk as a bargaining chip in negotiations for export competition.

AWB's campaign for a long transition is backed by some of its major overseas clients, which have this week inundated the Prime Minister's office with letters of support for AWB.

Foreign companies in Indonesia, Malaysia and Vietnam have expressed concern about changes to the single desk and, in particular, to a campaign by the West Australian grain giant CBH, which wants to export wheat to its own mills in Indonesia.

Indonesia's Fugui Flour and Grain company wrote to Mr Howard on November 15, saying it was "particularly concerned" about changes to the single desk.

Malayan Flour Mills, which has operations in Vietnam and Malaysia, has also backed the single desk, saying "we wish to appeal to the Australian Government not to permit the CBH group to export wheat to its subsidiaries in Asia".

"There are four major wheat exporters in the world. In our experience, Australia is one of the more reliable and consistent," it wrote.

Malaysia's Federal Flour Mills has written several letters to Mr Howard, saying "we will not feel comfortable" dealing with companies other than AWB.

AWB has not given up the fight for its future as a grain exporter, with chairman Ian Donges yesterday vowing to win back even the Iraq market, which was lost when AWB was exposed as the largest single supplier of illicit funds to Saddam's regime. The US snatched most of the Iraq market from AWB.

[AdamSmith]

I am too curious as to what Agstar77, Vader, wilagro and any other CWB cheerleaders have to say about this development and respond to the comments about Canada and it's wheat Board in the above articles?

What say you, guys?