Wednesday, May 30, 2012

Grain handling monopoly disadvantages wheat farmers

Vanguard June 2012 p. 8
Duncan B.

Traditionally, the marketing of wheat within Australia, and of wheat and flour for export, was undertaken by a single statutory authority, the Australian Wheat Board.

(Above: a Cargill grainflow receiving site)


The Board’s trading monopoly derived from complementary Commonwealth and State government legislation. State legislation empowered the Board to acquire wheat grown in each State, except for wheat committed to interstate trade, and made the Board responsible for intra-state marketing.
Under Commonwealth legislation the Board was made responsible for handling exports of wheat and wheat products, and for interstate marketing of wheat. Storage and rail transport of grain was handled by State-owned grain elevator boards, or their equivalent, which acted as agents for the Wheat Board in each state. Upon delivery of wheat to the railway siding, the grower received a first advance from the Board: the first advance represented a substantial proportion of the estimated final price of the wheat, and was financed by means of a government-guaranteed loan from the Reserve Bank.
This system worked well for many years to the benefit of wheat farmers, but of course it had to go! The agri-business giants could not make a profit from Australia’s grain harvest while grain handling and marketing was in Government hands.
The Australian Wheat Board and the state grain handling authorities were the victims of the privatisation mania that swept Australia in the nineties. Since then there have been various take-overs and mergers, so that we have the situation today where 50% of the Australian wheat market is controlled by two companies, Cargill and Glencore.
Swiss-based Glencore is the world’s largest commodity trader, with interests in oil, grains and metals. Glencore is working on a take-over of miner Xstrata and also controls 60% of the world’s zinc, just to mention some of its activities.
Glencore recently took over Viterra, which was Canada’s largest grain trader in a $6 billion deal. In this way Glencore acquired Viterra’s grain handling facilities in Australia. Thanks to this deal, Glencore will control 90% of South Australia’s up-country storage and handling infrastructure and the state’s export terminals. Glencore is now selling the Viterra operations in Canada and Australia to Canadian fertiliser and pesticide company Agrium. This includes the grain trader ABB, formerly the Australian Barley Board, which Viterra acquired in 2009.
In 2010, Agrium sold the AWB grain handling and trading business to Cargill for $870 million, after earlier purchasing AWB for $1.2 billion.
Vanguard readers are excused for being confused by all this! Australian wheat farmers were told that deregulating the Australian wheat export market would drive efficiencies and ensure the best use of resources. All that has happened is that they have traded a Government-owned monopoly for monopolies owned by some of the world’s biggest agri-business exploiters. Unlike the Government-owned grain handlers, these companies act in their own interests, not those of the grain growers. That’s why we have to kick them out.

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