Parliamentary Committees

SELECT COMMITTEE ON THE GRAIN HANDLING INDUSTRY

Adjourned debate on motion of Mr Brock:

That the final report of the committee be noted.

(Continued from 19 September 2012.)

The Hon. A. PICCOLO (Light—Minister for Communities and Social Inclusion, Minister for Social Housing, Minister for Disabilities, Minister for Youth, Minister for Volunteers) (11:30): I would just like to make a few comments on this report. I will not go into much detail because the Chairman actually spoke on the report at length when it was introduced before Christmas and I do not wish to re-cover all that ground that was covered here. However, there are a couple of things that I would like to say.

First of all, I would like to congratulate the Chairman (member for Frome) on chairing a very good committee. I would also like to acknowledge the contributions made by the members for Chaffey, Hammond and Mawson who, with myself, worked very well on that committee. It was quite an extensive inquiry and, during the progress of that inquiry, we met a lot of people and heard quite different opinions. However, one thing that was quite evident—which I believed all the time and which was reinforced by this committee and also by the sustainable farming committee which I sat on for a while—was the importance of the agricultural sector not only to our economy but also to all those communities in the rural and regional areas.

I would also like to thank all the witnesses who gave their time to make the inquiry a very worthwhile and thorough inquiry. While the inquiry was established to look into what happened in terms of Viterra's takeover of the grain industry in terms of grain handling that particular year, it was made very clear that there was a whole range of issues that needed to be addressed and I would perhaps like to highlight a couple of the key issues.

Certainly there are other issues that are important but the ones I would like to highlight are the issues around road rules which were brought to the committee's attention and the importance of making sure that both state and local government work together to make the lives of the people who transport grain easier, to make sure we get people on the right roads in the right direction and keep them on the roads for as little time as possible, partly for cost and safety and also for a whole range of environmental reasons. Hopefully that work will continue based on our recommendation.

The other issue at the time—and to some extent it has been addressed now—is the industry perhaps not having a strong advocate across the board. At the time we were having this inquiry the Farmers Federation was having some difficulties and we now know that it has been replaced by Primary Producers SA. Hopefully, with a new structure in the agricultural area, they will have a stronger voice to government and we will improve communication with government as well. That is not to say that the Farmers Federation did not do a good job and I did enjoy a very productive relationship with the Farmers Federation, but certainly there were issues within the federation that needed to be sorted out.

The other issue I would like to talk about is the lack of competition in this industry. The critical issue—and the one which probably took up most of our time and the one which was probably most debated—was the lack of competition in the storage, marketing and handling of grain in the industry. Certainly a number of witnesses, particularly farmers and the farmers' representatives, made it quite clear that their ability to get a fair price for their product or to store their product at a fair price or to transport their product at a fair price was limited by the fact that, in terms of purchasers, there were very few purchasers and there was a virtual monopoly in the industry.

That evidence was shown in two ways. One was that they made a comparison of various storage and handling costs and transport costs in other states, where South Australia had a higher cost than other states and in other states there were more competitors in the marketplace. That was probably the major issue that we need to address and how you address that is not easy. Clearly one of the dangers of deregulating the industry is that it does not actually just create competition. In fact it has been made quite clear that, in this particular industry, the deregulation of the marketplace in fact has created a number of not monopolies but duopolies, which means it has not helped the industry at all.

It was also very refreshing to see that most of the groups who spoke on behalf of farmers did not want regulation for the sake of regulation or did not want to go back to the old model. There was more competition in the marketplace, so they wanted people to make sure there was fair competition. The growers understood that they needed to compete in the marketplace and were prepared to do so but, unfortunately, with having one major marketing, handling and storage company, it makes it very hard for them to do so.

One of the key recommendations made by the committee is that the state government should explore authorising the Essential Services Commission of South Australia to undertake a review of the entire grain supply chain, with the objective of establishing arrangements to provide the basis for pricing of and access to grain storage and bulk handling facilities, including up-country services, that are consistent with the requirements of a competitive and deregulated wheat export market.

It is important to make sure we have a framework in this industry which actually promotes competition, which enables the growers to get a fair return and that different people in different parts of the industry get a fair return. At the moment the evidence suggests that is not the case and it would be appropriate to have some sort of inquiry to see how we actually achieve that outcome. How do we ensure that we have competition in that sector?

The second recommendation was that the new Small Business Commissioner prepare a code of practice for the farming sector. Both the Small Business Commissioner and the code of practice are as a result of two inquiries which were initiated by the Economic and Finance Committee when I was a member, and I think the member for Mawson was also a member at the time. As a result of that we brought legislation before this house.

Small farmers are, in fact, probably the biggest number of small businesses that we have in this state. It was unfortunate that at the time that legislation was opposed by those opposite us, but certainly the Small Business Commissioner is working on that and that should enable the farmers in our state to deal with the big players in the marketplace to make sure that if a dispute arises that there is a good, fair and satisfactory outcome. I look forward to when that code of practice is introduced.

The third recommendation deals with the parliament establishing a standing committee on primary industries with the final objective to make sure that we acknowledge the importance of primary industries to this economy. Minister Gago recently introduced a bill in the upper house to amend the Parliamentary Committees Act to enable a reference regarding primary production specifically to the ERD Committee.

Firstly, that is a good thing in itself and, secondly, I think it is an appropriate committee given that on the Sustainable Farming Committee (the other committee I sat on) a lot of the issues which arose from primary production's point of view was that interface between the environment and farming and also urban development. All of those issues are covered by that committee already, so it is a good place to put that reference regarding primary production in there. That will enable the industry and the sector to have a committee where they can have their concerns voiced and inquiries undertaken.

I would like to commend the minister for bringing the recommendation to parliament; it certainly has my full support. As I have said, it is quite clear that primary industries is an important sector to both our economy and our community. If we can follow up those recommendations made by the committee which I have alluded to today, I think that we will have a healthy and competitive industry which will bring returns not only to farmers, but to the economy as well.

Mr VENNING (Schubert) (11:38): I am amazed that I have not spoken on this issue before, but I just checked and I have not. I will speak very briefly though and I will declare my interest, again, as a grain grower and certainly my family is still very much involved. I did give evidence and I welcomed the committee when it came to Crystal Brook. I think it was the first time that we had a parliamentary committee in Crystal Brook, so it was a unique opportunity and I certainly appreciated the opportunity.

It is always a difficult situation when we have a situation like we have now with the monopoly that Viterra had and now taken over by Glencore and these discussions and the committee have highlighted this very well and all the speakers have picked up on this. Access to our ports is a most important issue, and I notice now that the same thing is happening in most of the other states in relation to this. I think this was all brought on by the concern—I think it was the 2011 harvest, when there were many—

An honourable member: 2010.

Mr VENNING: The 2010 harvest. There were a lot of issues out there. The farmers were extremely anxious and there was a lot of heartache, particularly in relation to grain classifications, because Viterra at that time did not have enough falling numbers machines. These visual appraisals were giving different classifications at various silos, and some of those classifications could be thousands of dollars per truckload difference. So, you can understand when the farmers are having a reasonable year, they see this as depending on which silo they go to as to what grade they get, and that was causing a lot of angst.

Now, at least Viterra, now Glencore, have gone in and bought more falling numbers machines. I could not understand at the time why they could not borrow these machines from over the borders, because there were plenty of them in Western Australia not being used. These machines were only used in those years when you have these wet harvests when you get sprouting of grain, so Western Australia had plenty of machines, but the situation we have got here is they do not talk to each other and they did not look to borrow or rent them from interstate. They could have and they should have. This is part of the reason I think this select committee was set up.

I do appreciate the opportunity for this to be tabled in the parliament, because I do not believe government, particularly this one, takes enough notice of what happens in relation to issues like this. We need to ensure competition in both storage and handling and the marketing. How we do that with what we have got now I do not know, but at least this report does highlight some of the situations that we now find ourselves in.

Our farmers have to remain viable, and the costs to the grain supply chain beyond the gate are the most significant costs. If you had to say where our farmers are not remaining competitive, it is these off-farm costs that really are hampering our farmers: the cost of the storage, the handling, the rail and the port costs. It all has to be transparent, and I will be careful what I say, but we have got one rail operator—Genesee & Wyoming operate all of the grain trains—and now we have got Glencore, who were Viterra, operating most of the storage.

It will be very difficult for them not to get into some cosy arrangement to set it all up. So it makes it very difficult for a competitor to come along and to, first, be able to get space, to do that competitively, to be able to get space on the train at a competitive price, and then to get access to the port. It is all too hard, and we, the farmers of the state, are at the mercy of this huge multinational company who can take on governments and win, and win regularly. Glencore are a massive company. We do have this monopoly, but you cannot blame Viterra—

Mr Brock interjecting:

Mr VENNING: Yes. The member for Frome just reminds me that GrainCorp have just been taken over as well. This is happening, as I said earlier, in other states. You cannot blame Viterra for this now and you cannot blame Glencore, because we have done this ourselves. We have done this ourselves. Read Hansard—good production—and read the speeches that have been made in this place in the last 25 years. Some young fool in this place about 20 years ago said, 'If you do this, you'll end up handing it to a multinational.' It is all there for you to read, and look at this. So, you really cannot hammer Glencore.

Mr Pengilly: Now an old fool?

Mr VENNING: I'm an old fool, you're right. I hate this, 'I told you so' stuff, but it sort of happens, doesn't it? I just did, I think. Seriously, it is a very important matter, but it is all now commercial and this is what has happened. We have done it. As I said, only five of my colleagues could see that when this house actually deregulated the Australian Barley Board, which of course was a South Australian company, headquartered in South Australia, our largest company—when we deregulated that you handed it away.

I well recall a meeting that we had up at the Colonial restaurant, the motel up at Glen Osmond, at the toll gate. That was the meeting; that was a single meeting when we changed the way everything happened, when we decided to put the ABB grain marketing in with the SACBH, the handler. That was a chronic mistake because now not only have we given a monopoly to our marketer we have expanded that monopoly to include the handling and the storage as well.

That has a real commercial advantage because when you are marketing, if you know, firstly, how much grain you have, you know where it is, you know the grade it is, that is a huge benefit over any opposition that would come along—a huge benefit. How do you pull that down? I know that the select committee addresses that and that it is very difficult, but we have done it, we are there now, and it is not good. I think this has been a very appropriate and timely review of where we are now. I will say that I am quite appreciative of the sentiments of most members of this parliament—I think I could almost say all—on how serious a matter this is, but what do we do about it?

I know a lot of our young farmers think, 'We're good, we're tough, we can live with this,' but I have been around long enough to know that businesses—particularly multinational businesses that have a monopoly—with the power they have, you can bet your boots they will exercise it to gain market share and then drive down the price and drive up the profit for them. That is business, that is how these companies are successful, and that is what they do all over the world.

Our farmers who are on the end are not well placed to be able to compete against this, particularly when we have seen our farmer representation body going through the doldrums. I am pleased we have got through that and come around the corner. Let's hope that we all need Grain Producers SA and Primary Industries SA to succeed to be able to lobby strongly for our farmers and work with this parliament to be able to put matters in place. I congratulate the committee on its work and its findings. I find that committees like this are one of the most effective outreaches of this parliament, and I think it is certainly money well spent. I support and agree with this report.

The SPEAKER: Member for Frome.

Mr BROCK (Frome) (11:46): Thank you Mr Speaker, do I get five minutes or 10?

The SPEAKER: If the member for Frome speaks, he closes the debate.

An honourable member interjecting:

Mr BROCK: Five years, thank you, I wouldn't mind five years! I again thank everybody in this house for their cooperation and their input into this select committee on grain handling. As all the members have indicated, and I have been making quite plain out there, it has the full support of the House of Assembly in the South Australian parliament. From our visits out into the regions, it was evident, as other speakers here have said, about the heartache and the frustration that has happened out there.

I certainly commend this report to the house, and there are a couple of things I want to touch on. One of the recommendations was that the federal government establish an independent body to oversee the classifications of grain. I think that is still one of the very important issues because we are in an international market, we are competing against the international players overseas and, as has been indicated by previous speakers, we have two major international companies—Glencore and also ADM—that are now going to be the major players within South Australia. I think this is a very important issue and that this government needs to put pressure on the federal government to put that in there.

The third recommendation was that the state government review the costs and benefits of establishing an agreement with the Western Australian government for participation in the Australian Export Grains Innovation Centre. I think it is very important that we do value-adding and look at all the research and development to ensure that we get the best opportunities for our grain when it goes overseas because at the moment, as we see it, we bundle it up, we mix it and then send it across, and it is too important not to get that correct.

Another recommendation was that the state government establish formal arrangements for consulting with the grains industry and local government on planning for each harvest, a rationalisation of the grain receival centres and designation of access routes, being rail and roads to the ports. That is very important—and I will go a bit further later on—because local government seem to get missed out of this here.

Even now, through the Glencore operation, I understand that they are going to be zoning certain areas, so that you can only go to certain areas to deliver your harvest, and that the freight differentiation to each different location is different. It also means that if you have to go Port Pirie from certain areas of Wandearah, you have to then double-handle it to go to Wallaroo. So, it is always a cost factor in the industry.

Another recommendation was that the state government undertake a review of the Maritime Services Act 2000, and we do have an issue with the accessibility of non-Glencore players out there. However, I would hope that the government takes that onboard. The other recommendation is that the state government, in consultation with local councils, transport operators and the industry itself, talk on a regular basis about what are the issues, what are the frustrations, the ports and all of that.

Again, I really emphasise that the government take that one on board. The member for Light has also indicated that the Small Business Commissioner is now an advocate for farmers and that we need to make certain that the farming groups are aware that the Small Business Commissioner is there to assist those people who may have any issues in the grain producing area.

The final recommendation is that the South Australian Parliament establish a standing committee on primary industries. I understand that the Hon. Gail Gago in the other house (Minister for Agriculture, Food and Fisheries) recommended on 2 May that the ERD Committee be facilitated as part of this recommendation. The Hansard record of 2 May 2013 shows that the Hon. Gail Gago said:

According to Primary Industries and Regions SA's 2011-12 Scorecard, the state's agriculture sector has a farm-gate value of $5 billion. This includes the production of commodities for food, wine, fibre and other agriculture-based products; and South Australia's food and wine industry generates $16 billion in revenue annually and accounts for around half of SA's total merchandise exports.

With all due respect to the ERD Committee, I believe that it is very important that the government looks at establishing a standing committee for all primary production in this state. Primary production is here and will stay here; the resource industry will come and go. I strongly request that the state government looks at that one quite seriously.

In closing, I take the opportunity to thank this parliament, first, for allowing me to chair this committee; it was a great honour. I learnt tremendous stuff out there. I would also thank very seriously the member for Hammond, the member for Mawson, the member for Light, the member for Chaffey and also David Pegram, our parliamentary officer, John Parkinson, the research officer, and all our staff. Again, I commend this report to the parliament.

Motion carried.