GRAIN HANDLING INDUSTRY

Mr PEDERICK (Hammond) (11:02): I move:

That this house establish a select committee to investigate the grain handling industry, and in particular—

(a) the capacity of the market to ensure a vigorous and competitive marketplace for grain growers;

(b) grain classification and standards, and whether internationally approved grain testing options should be available to growers on request;

(c) service delivery, including human resources, operating hours and storage capacity of grain handling points;

(d) export and shipping arrangements, including port access and associated costs;

(e) grain quality management, including receiving and out-turn;

(f) open and transparent information on all grains, including stock disclosures;

(g) adequacy of road and transport infrastructure for the grain industry; and

(h) any other related matter.

Before I commence speaking—

Mr Williams: You have commenced speaking.

Mr PEDERICK: Well, I have commenced speaking to the motion, but I would just like to indicate to the house my interest in grain growing. My family has been growing grain in South Australia since 1840. I have held grain shares, but I do not believe I have any shares in my name as I speak. My father does have a limited number of grain shares, so I just lay that out for the house's information.

It became very apparent to me during harvest from the number of calls from grain growers and truck operators that there were major problems with the way receivals were classified during harvest. Yes, we did have a difficult harvest, but we have had difficult harvests before. I myself endured a difficult harvest in 1992, when we had rain during harvest and we had shot or sprouted grain. This is where grain starts to grow in the head. Thankfully, South Australia did not have the same problems as New South Wales where, after many years of drought, massive amounts of rain fell on the crops, and the sprouting I saw in the photos was just tremendous.

There certainly were issues, and everyone knows that as soon as there is shot grain and too much rain during a harvest people will be losing money, essentially. Shot wheat especially cannot be used for good bread making. Viterra, which owns probably 95 to 98 per cent of the storage facilities throughout South Australia, made a decision not to use what is called a falling number machine.

A falling number machine is a grain quality test which measures the degree of weather damage in wheat and is based on the unique ability of alpha amylase (an enzyme released during seed germination) to liquefy a starch gel. The strength of the enzyme is measured by a falling number defined as the time in seconds required to stir plus the time it takes to allow the stirrer to fall a measured distance through a hot aqueous flour or meal gel undergoing liquefaction. The falling number test is an alternative to visual assessment for sprouted grains and always overrides the official grain assessment. While I am talking about falling number tests, Grain Trade Australia in its recommendations for classification states:

If 1 per cent or more sprouted grains are present (more than three grains per 300) conduct a Falling Number test on that load and classify accordingly...It should be noted that a Falling Number result always overrides the sprouted grain tolerance for each wheat delivery. Where a Falling Number result is reported, report result to the nearest second.

Falling number is a test that goes over 300 seconds or five minutes, and, yes, it does take a bit of time, but it certainly can give us as accurate a measurement as we can get at this stage of the quality of grain.

Visual assessment, which is what Viterra chose to use during harvest because they had the excuse of saving time, is just not accurate. When I met with Viterra representatives, they said farmers were looking at buying their own falling number machine—they might get a $10,000 Chinese machine—and they asked whether it would be calibrated or not. I said that you could have 400 or 500 eyes across the state as classifiers and none of those sets of eyes are calibrated with each other. This is the whole issue. Relying just on visual assessment alone caused much grief and much angst throughout this harvest.

It all depends on an individual's perception when they do the 300 grain test in a tray on the visual assessment, and all in the name of so-called saving time. I have received reports directly and in my office that grain growers from the Riverland were driving down to the grain flow site at Pinnaroo because they were using falling numbers and making $130 a tonne. That is serious money. That is serious money for a B-double load of grain; it would be about $5,000 a load.

There were many instances of this across the state. We had farmers at Cowell who brought in their own falling number machine—I think they sourced that through CBH in Western Australia—so that they could have a good look at what they were getting and whether it was worth taking their grain to Crystal Brook. We had EP Grain using a falling number machine, and it managed to secure at least 100,000 tonnes of grain, I believe.

So, there is a whole range of issues relating to falling numbers. Viterra decided not to use them on site. They were running what is called a 1,000 tonne average, but that average was coming way out above classification in reports made to me, especially from the Pinnaroo site.

General purpose wheat which needs a falling number of 200 was going into a bunker and coming out on a 1,000 tonne test at times well over 400, so well into good quality milling grade wheat. What happened here is that we had loads of grain going all over the state because not only was visual assessment the only assessment being used but there were also different tolerances of how many per cent of visual grain, how many per cent of sprouted grain, would be used to knock the wheat into another classification. So, there was a stage where the assessment was tougher down at Keith; so all the South-East trucks were coming up, blocking up the system at Tailem Bend, where a lot of my local growers deliver.

There were many, many stories of problems with classification around the state, and I had many discussions with people from Viterra. I must commend Paul Tierney, Corporate Affairs Manager, for always getting back to me and keeping me in the loop, and I kept him in the loop. As I said to Paul the other day, 'If we are not getting hit around the head with an issue, if there was not an issue, we not would not have to act, but we have to act because there is so much angst across the state.'

I think the worst story I heard about a load being shuffled around the state was a load of barley, which got taken into the Gladstone silo, but because of different classification and storage issues it came to Adelaide, and then it went to Ardrossan. At the end of the day, the farmer just got frustrated and went back to his home silo at Gladstone and tipped it off. We need to go through major issues as far as classification is concerned.

We also need to look at the broader issues of the shipping stem, demurrage costs, whether competitors in the system can get their boats in on time, and we need to look at the efficacy of information, the transparency of information. We also need to look at the whole transport arrangements in this state regarding both rail and road and every matter to do with grain, and the readiness, especially of Viterra, this year. They were building bunkers throughout harvest. They had couple of bunkers they were building at Tailem Bend that were not ready until the end of January. They should have been ready at the start of harvest because Tailem Bend is a significant site.

There are many, many issues. I would call on the house in a bipartisan approach to set up this select committee. There are no real politics in this. We need to do this for the farmers of this state, and I urge everyone in this parliament to get on board and to set up this select committee, because it needs to happen. We need to do it for the multibillion dollar grain industry for this state that has enough to put up with, without being unable to deliver grain at the appropriate times and at the appropriate classification.

Just in my closing remarks, this is not just about Viterra; Viterra is the main operator. We also need to look at what the other options are in this state, what other people are doing and what options may be there in the future, and we must also make it far more streamlined so that we do not see this level of angst again in the industry. So, I move this motion today and I hope that everyone can come with me.

Mr VENNING (Schubert) (11:13): Some would say it is probably unwise for me to say anything during this debate, but I will. I do rise to support the member for Hammond's motion asking for a select committee, but I do straightaway, instantly, declare my conflict of interest in this matter.

A little bit of history here, madam: my father was a director of Cooperative Bulk Handling many years ago. He ended up as chairman of directors of that company, Cooperative Bulk Handling. My brother Max then became a director of SACBH and then chairman of AusBulk, and then, of course, he was one of the chief motivators in amalgamating the company. Today he is a director, one of two Australian directors, the only farmer director of Viterra.

So, that does put me in direct conflict not just within the parliament and my job here but also within our family, because we just cannot discuss these matters—and he does not, because now that it is a publicly listed company with a share price, you just cannot discuss it. I said to him that, if I was as unpopular in my job as he was and in his, I would have to consider my position. That is a bit tough, because my brother Max takes his job very seriously and he has done all he can—farmers ring him up all hours of the night—that is technically allowed in the situation we now see ourselves to address this. So, I do have a conflict.

I also have a conflict in that I am still a wheat and barley grower, and it will always be that way. As an MP, one can have a conflict or semi-conflict or even a strong interest in the matter. If it is an interest outside of this place, it does put us under some question regarding conflict. So, I will be very careful in what I say and do. However, I understand this is going to be supported by the government, and I hope it is because it is worthy of it, as this issue needs to be aired.

It is both a sad and a good day in relation to this issue. It is good because the state had a very good harvest—an abundant harvest one would say in biblical terms. However, that abundant harvest caused a bad day in that there was so much grain that the system could not cope with it and the inability to handle the crop caused a lot of concern amongst the growers and they certainly were not satisfied.

I will not go through the technical problems in sprouted grain and the test because the member for Hammond has already done that very well. With the falling number machines and farmers being downgraded, which could cost thousands of dollars less per load—as I said, up to $130 per tonne which could be up to $5,000 per load of downgrading–in those instances, these falling number machines should have been used. I will not wear the argument that these machines were not available because I was in Western Australia during that time and there was any number of these machines not being used. They could have been brought over and rented, or whatever, from Western Australia. They were available but for some reason they were never asked for.

I believe that where there was some dispute in relation to the load, where this downgrading was about to happen, the grower should have had the right to ask that these machines be used because then there is no doubt. Having a visual inspection on a loss like that I do not believe was fair or right. That is the nub of the whole problem, the nub of the huge losses that some farmers took purely on a visual appraisal. As I said, the member for Hammond has explained the technicalities of that, so I will not go any further into it.

I inquired of the company (not my brother) about the use of these machines and the company correctly said that, if every load was tested with a falling number machine, it would have caused huge delays at the receival points. Yes, it would have. However, I am not saying that. When there was no dispute and the load went through on sample, there was no problem. If the grower knew or could actually see that the grain was sprouted, there was no problem. However, when there was a dispute, I believe that every grower should have had the right to ask that a machine be used. That was not the case—at least initially. Yes, I agree that it would take more time if every load was tested; there is no doubt about that and there was a big enough delay as it was. However, I still believe that when there is a contested downgrade that the machine should always be used.

We also found that during the harvest there was competition with Viterra. I am careful about what I say here about this whole Viterra thing. I have said before in this house that I hate to use the phrase 'I told you so'. However, if you go through my earlier speeches in this house (17 or 18 years ago), you could see this coming when we started to deregulate our grain system. At the time we had a grower-owned handling and storage system and grower-shareholders in both the barley board and the wheat board. We only needed to allow private business into that. We have monopolies here that should never have got into the hands of private companies because that is what we now have—a private company basically in charge of a monopoly.

I do not want to throw any ideas around about that but we, the farmers, via this house, deregulated the barley industry. It happened in here and I fought against it. It was the same with the Wheat Board before that. We are a part of the problem that we now see ourselves in. They were ripe for the picking and the only reason they could not have been picked is because they had the protection of this parliament through statutory laws. We took them away and we allowed private enterprise to come in and pick the cherry. Now, one company, Viterra, has the lion's share of the storage and handling and, of course, more importantly, controls ports. This is not a good situation, and I think we need to work through that.

However, the parliament could have avoided this. I know that of the members in this place—and most of them are still here—only five MPs supported the push to try to stop the Australian Barley Board losing the single desk status and its right. As soon as that went, the rest automatically fell over; it had to, under corporate law. It could not remain like that, so now we have the farming situation, with the storage that the farmers built now in the hands of private enterprise. All the farmers got out of that were shares, and a lot of them had to sell those during the drought. So now we have this problem.

The other thing is competition in the system. We have to do whatever we can, wherever possible, to make sure that we have competition. We heard Crystal Brook mentioned today by the honourable member, and why? In Crystal Brook we had Viterra operating as well as the Australian Wheat Board, operating as GrainFlow, and because they were side by side we had competition and guess what? Better service. Viterra would sometimes close its yard at 6 o'clock on a good reaping day, but GrainFlow stayed open until midnight.

In fact, I got home at 10.30 after a meeting, and I delivered a load at quarter past 12 that night! I had to put on the coloured vest, and I looked around and farmers were manning the silo on a second shift. Great! That was fabulous. I say 'Good on them.' Dave Arbon was a local farmer up there who managed the wheat board site, and good on him. He motivated himself and we got good service. So, competition always needs to be there.

I welcome the fact that Viterra does realise the problem it is having. It does realise it has made mistakes, and it is having a report put together, chaired by Rob Kerin. SAFF is involved as well, and I do question that. I do not believe SAFF gets any glory out of what has happened because I blame it a lot for what has happened. There was no leadership at all in relation to the history of this issue, but I do welcome Viterra's efforts to fix the problem. I do not think it will happen again. As I said, it is good news that we had a great year, but it is bad that we were not able to handle the crop. However, generally we were very lucky.

I have another little issue here. I believe that farmers should cooperate more with each other. We got our crop in half a day before the storm. Why? We knew it was going to come, we knew a month before that we were going to have some weather problems, and we got other machines in from the east, where it was too green for farmers to reap. We brought their machines in and really got into it, and we took our crop off before the storm.

After that, we went across and returned the favour later. It is silly to see machines idle in the shed when there is work to do, so more farmers should get out there and cooperate, particularly when we are going to have weather interfering with harvests. We want to see more cooperation with farmers, reaping a month, say, before the others. It works, and a bit of cooperation and common sense is needed there.

I think this select committee will be interesting. I presume that the minister will say that the government is going to support this. I cannot and will not be available—I do not think it is wise that I should—but I certainly support the motion.

The Hon. M.F. O'BRIEN (Napier—Minister for Agriculture and Fisheries, Minister for Forests, Minister for Energy, Minister for the Northern Suburbs) (11:23): The government supports the motion. The previous speaker is very fast off the blocks—obviously a former sprinter. I would have liked to have been able to get in behind the shadow minister because this is very much a bipartisan proposition, and we are putting forward two of our parliamentary secretaries in recognition of how seriously we take this proposition. Also, the Independent, Mr Geoff Brock, is chair. We want this well handled and, as far as the government is concerned, we want a bit of intellectual horsepower put into the process.

South Australia is on track for a record harvest in terms of both total grain production and yields per hectare. In fact, the PIRSA Crop and Pasture Report, which was released today, has revised up the harvest to a record 10.34 million tonnes, which contributes around $3.4 billion to the state's economy, so we are talking about a very important contributor to the South Australian economy. According to ABARE, South Australia's estimated wheat production is more than double the five year average production, with yields estimated at a record 2.56 tonnes a hectare. Barley production is estimated at a record 2.64 tonnes a hectare, while canola yields are estimated to be a record 1.85 tonnes a hectare.

Coincidentally, this record harvest coincides with a 5.5 per cent rise in international wheat prices and an 8.4 per cent rise in international barley prices during the December quarter. Normally, this would be unequivocally good news for South Australian farmers, particularly coming at the end of a prolonged drought that strained not just individual farms but entire communities.

I am aware of some farmers that were at their wits' end as to how they would find the money for fertiliser for the last season. They were stretched to the very limits financially. My understanding is, if we had remained in drought, we would have had widespread bankruptcies across the rural sector. More favourable growing conditions across South Australia compared with the previous season provided an opportunity for people to address cash flow deficits and have probably restored the financial underpinnings to a lot of family farms.

Unfortunately, this uplifting result was marred by excessive rain in some areas, which not only resulted in a reduction in grain quality for some farmers but also shortened and delayed the harvest season. Normally, the downgrade is in the range of 4 to 6 per cent; this year it was around 40 per cent. The shadow minister made reference to the predicament elsewhere in Australia. Fortunately, we did not have the 50 per cent downgrade that occurred along the eastern seaboard. We were probably fortunate in having the 40 per cent but, as I said, it is usually 4 to 6 per cent.

A record harvest was always going to be a major test of the logistics and infrastructure of South Australia's grain harvesting, transport receivals and storage systems. The wettest December in 18 years, with rainfall over such a wide area of the state, helped to complicate an already difficult situation. I think we all acknowledge that. I have had several discussions with Viterra, and they acknowledge and are fully aware that the situation was not managed as well as it could have been.

The question now is: how do we respond in a way that addresses the grain industry's demands for answers and Viterra's ability to put in place systems that will minimise the chances of a repetition of the unacceptable problems faced this summer? I believe that the interests of the farming industry will be best served by a post-harvest review that is quick, responsive and dedicated to putting in practical and affordable measures so that our grain-handling system can cope with the combination of factors that arose this harvest. That is why I have supported the decision by Viterra to commission an independent review.

To that end, the company has appointed Rob Kerin to conduct this review—and it was something that I asked for when I met with them. I am particularly pleased that Rob has decided that he will take on this role. I am sure that members opposite have gained a certain sense of reassurance and surety in the stewardship that Rob will give this particular process. I also insisted that PIRSA be represented, and that request has been acceded to. In addition, Peter White, the President of the South Australian Farmers Federation, will also be represented on the working group. I have a lot of time for Peter. He is a very level-headed individual and has considerable analytical ability, so he will be a benefit to this process.

I have been assured by Viterra that the independent examination of this year's harvest will critically evaluate its performance and identify ways to improve service delivery. I believe that they are actually quite serious about this. They have purchased a big business and, unless they start to get things right and get on top of this within the next couple of months, they are going to find that the inherent value in the business that they have acquired will dissipate, and dissipate rather rapidly.

This process means a thorough analysis of the issues and consultation with stakeholders, and I hope a conclusion will be arrived at within several months—and I think that is Viterra's desire also. We want to ensure that all the changes in staffing management (and they came through as being a major issue), plus capital acquisition, are decided upon so they can be put in place.

As far as the motion is concerned, I commend the shadow minister because, rather than buying into a Viterra witch-hunt, I think there has been an acceptance by the opposition that Viterra will attempt to get its house in order, but there are some bigger and broader issues that have to be addressed in relation to grain handling that go well beyond the issues that were foremost in primary producers' minds this particular season but also intersect with the immediate issues.

One of these is grain classification and standards and, importantly, the new and fast testing technologies that we hope will be explored by the select committee. Fortunately, there is a meeting, I think within the fortnight, at the Waite Institute, which I am attending, which is bringing the industry together to look at this issue of technologies. The shadow minister talked about the delays associated with the falling numbers machine. We are hoping that ultimately we might be able to arrive at a cheaper and faster testing proposition that can get away from visual inspection.

Similarly, export and shipping arrangements need serious consideration. I am a former executive of Elders and I have had a discussion with them—actually, well in advance of this issue—and they have their concerns. I think we have to ensure that everyone gets access, and that leads me on to the competitiveness within the sector.

It was a monopoly single desk structure. We have to ensure that it is further widened to competitive pressures, and I believe that the select committee will address that issue as well and ultimately come back to the parliament with a set of recommendations which address all of the terms of reference and give us a fairly clear idea where we ought to be taking the industry within the state of South Australia. So the government is very firmly behind the select committee and will provide whatever necessary support through PIRSA to ensure that the resources are there.

Mr BIGNELL (Mawson) (11:33): I also rise to support this motion and commend the member for Hammond for bringing it to the house, and also the minister for agriculture. We have been in discussions over the past few months about some of the concerns that I picked up out in the regions when I was carrying out the infrastructure discussions throughout regional South Australia in the second half of last year.

Even before harvest began, I was starting to hear some real concerns in various parts of the state about the way things were headed and the changes that had been made during the preceding 12 months, so I think it is timely that we have a select committee look into these affairs because the engine room of this state's economy is out in the grain fields of this state, and we need to do everything we possibly can to support our farmers and make sure the dollars stay in the regions and in South Australia rather than go offshore.

Some members opposite have mentioned that they have either held shares or are current shareholders in the grain industry. That would not come as a surprise to anyone, of course, because of the way the shares were given out after the industry changed a few years ago. While I might not be a financial shareholder in any company, entity or farm, everyone in this house has an interest in the grain industry, and it is with that in mind that we need to get this select committee together and not only take submissions here in Adelaide but also get out into the regions. I am looking forward to doing that with the members for Frome, Chaffey, Light and Hammond and getting out on the road and taking evidence out there and seeing first hand what people are up against in the regions.

The Hon. S.W. Key: If successful in being voted in.

Mr BIGNELL: Yes, if successful in being voted in. I do not want to be too pre-emptive in suggesting that that might be the make-up of the select committee. We have five people with the grain industry at heart, and we have a strong interest in ensuring that the regions and the people in the regions have the very best model in place so that they can get the very best price for their grain and have to go through the least possible inconvenience to get that grain from their farm into the silos and off to market. I commend the motion and look forward to spending the next few months working on it.

Mr PICCOLO (Light) (11:36): I rise to support the motion and the establishment of the select committee. I will speak briefly to it to bring to the attention of the house a meeting I attended on Tuesday 1 March with 170 local farmers at the Freeling Football Club to air their grievances regarding the management of this year's grain harvest by Viterra. The meeting was organised by the Freeling Agricultural Bureau on behalf of local farmers, who had been very vocal about the perceived failures around the delivery, grading and storage of the 2010-11 harvest.

While the farmers at the meeting were very civil in their behaviour, they were still quite angry about the way they perceive that Viterra managed the recent harvest. Farmers expressed concerns about the following: first, inconsistencies in the assessment and the grading of grain delivered to local silos and other facilities; secondly, the long delays and queues in the unloading of grain at the various facilities in the electorate and their region; thirdly, inconsistent messages regarding the site allocation, in other words, farmers are being sent from one site to another to unload, and that has caused quite a bit of grief among the farmers; and, fourthly, they were concerned about the poor site operating times, in other words, the farmers think that when the sun shines you have to harvest but the sites are closed.

Additionally they also talked about the out-turning pricing policy by Viterra and had concerns about whether grain purchased from the farmers at one grade was being onsold at the same grade in the same markets. Concerns were also expressed about the sharing of information, and it was the farmers' view that certainly some of these issues could have been avoided had Viterra been prepared to share information about the harvest or the management of it. As the member for Hammond already mentioned, there are issues around competition in the actual market itself.

While the mood of the meeting suggested that some of the concerns were addressed—the Viterra people at the meeting addressed some of the practical issues—there was still certainly an underlying lack of trust in Viterra among many of the farmers. Viterra has commissioned an independent review of the management of the recent harvest under the guidance of former Liberal premier the Hon. Rob Kerin and with the involvement of the South Australian Farmers Federation's Mr Peter Smith. That working party, I understand, hopes to report by mid to late May this year, which obviously will be a welcome input into the process that hopefully we are establishing today.

While farmers welcomed the post-harvest review by Viterra, they are still concerned about its independence. In fairness to Viterra, on the night of the meeting they agreed and appointed a silo committee to help with some of the practical issues in that region, and that is a welcome addition to helping address the issues. My personal view is that this proposed parliamentary inquiry is very worthwhile and would complement the Viterra inquiry, as I said, and also would help ensure confidence of farmers and industry more generally in its recommendations. I will be consulting further with local farmers and other people in the industry to ensure their concerns are addressed. This week I met with Viterra and had a tour of one of its sites, so I got a better understanding of how the operation works.

In closing, I would just like to say that, if it wants to have a harvest of trust, Viterra needs, first, to sow the seeds of transparency and accountability.

Mr PEDERICK (Hammond) (11:40): I know that many other members on this side of the house could speak on this debate, but they are very keen—as I am sure members are on the other side—to put the vote and, if possible, get this committee going and on the ground.

I would just like to acknowledge the Hon. Robert Brokenshire, who moved a similar motion in the upper house, because we both recognised that a motion of this kind needed to come forward for the farmers of this state. In saying that, I also acknowledge the bipartisanship and goodwill of this house. It is not often that we see goodwill like this in this house, and I acknowledge the minister for agriculture's words today, as well as the contributions of the member for Light and the member for Mawson.

I think that, if it is established today, this committee will do very good work. We will be able to hear from trucking operators, farmers, operators of grain silos and grain traders, as well as any other matter that might be relevant that we may have missed in the reference points. I believe that it will be an involved committee. The main focus will be on the classification and storage problems from last harvest, which will need to be dealt with early in the committee proceedings.

However, there are many other things that we need to debate, as I said in my earlier speech, about transport, infrastructure and other items that, perhaps, the parliament can assist with over time. With those comments, I applaud the bipartisanship of the house today, and I hope that we can get this committee established.

Motion carried.

The house appointed a select committee consisting of Messrs Bignell, Brock, Pederick, Piccolo, Treloar and Whetstone and the mover; the committee to have power to send for persons, papers and records, and to adjourn from place to place; the committee to report on 14 September 2011.

Mr PEDERICK (Hammond) (11:44): I move:

That standing order 339 be and remain so far suspended as to enable the select committee to authorise the disclosure or publication as it thinks fit of any evidence presented to the committee prior to such evidence being reported to the house.

The DEPUTY SPEAKER: I have counted the house and, as an absolute majority of the whole number of members of the house is not present, ring the bells.

An absolute majority of the whole number of members being present:

Motion carried.