3.  Wheat marketing arrangements

The Cole inquiry into AWB’s involvement with respect to the UN Oil For Foods Program has raised questions about whether the Single Desk (SD) for the bulk export of Australian wheat should be retained. 

• The SD wheat marketing system has been in place for approximately 60 years.   It was originally created in 1939 to secure the supply of all available wheat to assist with the allied war effort.
• In 1999 the Wheat Board was corporatised and subsequently privatized into AWB Ltd. AWB listed on the Australian Stock Exchange in August 2001 following the build up of $600 million in cash reserves through a levy on all wheat exports ie the Wheat Industry Fund or “WIF”.
• The Federal Wheat Marketing Act 1989 legislates the SD system and AWB International (AWBI) as the SD manager.  AWBI is the subsidiary of AWB Limited; the grower controlled publicly listed company formed after the privatisation of the previous Government statutory body, the Australian Wheat Board.  
• The Wheat Export Authority as an independent statutory authority has the power to permit wheat exports in containers and bags. This amounts to an average 4 per cent of wheat exports. WEA also monitors AWBI's performance and reports on how it benefits growers.
• The SD in practical terms allows AWB to aggregate and strategically market the wheat from Australia’s 29,000 wheat growers to around 50 countries throughout the world.  Australia despite being a small wheat producer (with only 3% of global wheat production), accounts for between 15-18% of global wheat exports. 
• A February 2006 Rural Press survey of 1000 Australian growers found that 73% supported the SD with 69% believing that AWB should remain as the manager of it.
• The Cole inquiry was instructed to report on whether decisions, actions, conduct or payments by Australian companies mentioned in the Volker Report breached any Federal, State or Territory law.  The Inquiry report was released on the 27th November and found that 12 executives (11 from AWB and 1 from Tigris Petroleum) could face criminal charges and jail terms for deception and possible breaches of banking regulations and the Corporations Act.  Despite the inquiry terms of reference not extending to matters concerning the SD, the Federal Government in its response on the 5th December announced that the power of veto would be given to Minister for Agriculture Peter McGauran until 30th June 2007.  On the 22 December the Federal Government approved 2 bulk wheat export permits; one to CBH for 500,000 tonnes and one to the consortium ‘Wheat Australia’ for 300,000 tonnes.  On Tuesday 22 May 2007 the Federal Government announced that the grains industry would have until the 1 March 2008 to establish a new entity to manage the single desk, that AWBI would manage and market the 2007-08 wheat harvest; that the power of veto held by the Federal Agriculture Minister would be extended until 30 June 2008 and that exports of bags and containers would be deregulated

NSW Farmers' Association policy on the issue from the 2007 Annual Conference is as follows;

“That the Association work with members, other State Farming Organisations, the Federal Government and relevant industry organisations to develop a new grower controlled entity before 1st March 2008 to manage the wheat export single desk which;
i. maximises pool returns
ii. has access to a capital base which ensures high first payments and an effective hedging strategy”
 
“As changes result in Australia’s wheat marketing arrangements, NSW Farmers’ Association should engage with key industry stakeholders and Government to support a broadening of Government policies relating to the export of wheat so that these policies incorporate:-
a) A long term view /benefit of the wheat industry;
b) A retention of the basic business benefits available to growers under the current wheat marketing arrangements;
c) Support for pooling arrangements which are subject to strict public reporting requirements and which provide payment security;
d) Need for greater transparency of commercial signals and information across industry;
e) A regulated wheat export system that requires exporters to operate within predetermined compliance and enforcement frameworks     
f) An openly contestable export market for bags and containers
g) A reduction of costs across the grain value chain
h) The provision of regular updates to members and requests for industry input for such negotiations”.