YESTERDAY MARKED THE FIRST ANNIVERSARY OF DEREGULATION OF THE WHEAT INDUSTRY IN AUSTRALIA.  USUALLY WHEN AN ANNIVERSARY OCCURS FOR AN EVENT IT IS A TIME FOR CELEBRATION, BUT FOR THE WHEAT INDUSTRY THERE IS LITTLE TO CELEBRATE.  THE AUSTRALIAN WHEAT INDUSTRY HAS FOUND IT DIFFICULT TO ADAPT TO THE DELETERIOUS CHANGES THAT DEREGULATION HAS BROUGHT WITH IT. THE NATIONAL PARTY WARNED THE GOVERNMENT OF THE PROBLEMS THAT DEREGULATION WOULD BRING AND, WHILST WE WERE BERATED AS MERCHANTS OF DOOM, UNFORTUNATELY OUR PREDICTIONS HAVE STARTED TO COME TRUE. THE CRACKS ARE STARTING TO APPEAR IN THE FUNDAMENTAL STRUCTURE OF THE INDUSTRY. SYSTEMIC PROBLEMS ARE CREEPING INTO THE SUPPLY CHAIN, MARKETING AND QUALITY CONTROL ASPECTS OF THE INDUSTRY THAT WERE NEVER AN ISSUE UNDER THE SINGLE DESK. WHICH PART OF THE INDUSTRY IS SUFFERING THE MOST? OF COURSE WE FIND THAT THE COST OF DEREGULATION IS BEING SHIFTED TO THE GROWER. WITH THE LOSS OF THE NATIONAL POOL HEDGING PROGRAM WE HAVE SEEN LOWER PRICES TO THE PRODUCER, WITH THE STRESS ON INFRASTRUCTURE AND THE DISARRAY CAUSED BY A DYSFUNCTIONAL SUPPLY CHAIN HAS SEEN LOWER PRICES FOR EASTERN AUSTRALIAN PRODUCERS IN COMPARISON TO THEIR WESTERN COUNTERPARTS. THERE IS ALSO A CONCERNING TREND IN QUALITY CONTROLS MEASURES FOR EXPORT WHEAT. THE IRONY IS THAT UNTIL TWO YEARS AGO, THE SINGLE DESK HAD BI-PARTISAN SUPPORT IN AUSTRALIA PARTICULARLY FROM THEN OPPOSITION LEADER KEVIN RUDD WHO ON THE 8TH FEBRUARY 2007 WROTE TO A CONSTITUENT SAYING “THE AUSTRALIAN LABOR PARTY HAS SUPPORTED THE SINGLE DESK WHEAT MARKETING ARRANGEMENTS FOR OVER 65 YEARS SINCE 1939. DURING THAT PERIOD LABOR HAS BEEN A STRONG SUPPORTER OF THE CURRENT SINGLE DESK MARKETING ARRANGEMENTS AND IT REMAINS LABOR POLICY THAT THE SINGLE DESK SHOULD REMAIN IN PLACE WHILE EVER THESE ARRANGEMENTS HAVE SUPPORT FROM THE GROWERS AND THE COMMUNITY AS WELL AS DELIVERING A BENEFIT TO AUSTRALIAN WHEAT GROWERS.” MR RUDD EVEN QUOTED A STUDY FROM ECOTECH WHICH STATED THAT “ON THE BENCHMARK OF AUSTRALIAN PREMIUM WHITE GRADE OF WHEAT, THE SINGLE DESK CAPTURES A PREMIUM BETWEEN $15 AND $30 A TONNE”.  THE REPORT STATED THAT “THE TOTAL ANNUAL VALUE TO AUSTRALIAN GROWERS ON AUSTRALIAN PREMIUM WHITE IS $80MILLION” AND “ON ALL GRADES THE AVERAGE PREMIUM ATTRIBUTED TO THE SINGLE DESK IS $13 A TONNE AND THE TOTAL ANNUAL VALUE ON ALL GRADES IS $200 MILLION”. IF ONLY PRIME MINISTER RUDD HAD READ HIS OWN LETTER WE WOULD STILL HAVE THE SINGLE DESK THAT PRIME MINISTER RUDD SAID WAS WORTH $80 MILLION DOLLARS IN PREMIUM PRICES TO THE INDUSTRY. HOWEVER, DESPITE SUPPORT FROM GROWERS, COMMUNITY, AND DESPITE THE PROVEN BENEFITS TO INDUSTRY, THE RUDD GOVERNMENT DEREGULATED THE INDUSTRY AND A YEAR DOWN THE TRACK IT IS THE GROWERS AND THE INDUSTRY THAT ARE SUFFERING THE PRICE OF THIS BAD POLICY. THE LABOR PARTY DECEIVED THE INDUSTRY INTO THINKING THE SINGLE DESK WAS SAFE PRIOR TO THE ELECTION AND THEN THEY CAME TO POWER AND DECIDED TO THROW WHEAT PRODUCERS TO THE WOLVES OF DEREGULATION. A YEAR AGO THERE WAS A PROTEST OUTSIDE THIS PARLIAMENT BY WHEAT GROWERS. A YEAR AGO THE WHEAT GROWERS’ FEDERATION OF WESTERN AUSTRALIA THAT REPRESENTS NEARLY 90% OF WHEAT GROWERS VOICED THEIR OBJECTION TO DISMANTLING THE SINGLE DESK AND A YEAR AGO LONG-TIME WHEAT INDUSTRY LEADER, BOB IFFLA, DESCRIBED THE GOVERNMENT’S ACTION BY SAYING: "THE GOVERNMENT IS BREAKING UP THE INDUSTRY IN A WAY THAT THE AUSTRALIAN WHEAT GROWER WILL BE HUNG OUT TO DRY. THE BILL REPRESENTS THE 'DIVIDE AND CONQUER' APPROACH TRADERS AND OUR INTERNATIONAL COMPETITORS HAVE BEEN WANTING FOR YEARS". TODAY HIS WORDS ARE PROPHETIC BECAUSE WE SEE HUGE CRACKS IN THE INDUSTRY’S VERY STRONG REPUTATION THROUGH THE LOSS OF STABILITY THAT THE MARKETING OF A SINGLE DESK GAVE TO THE INDUSTRY. THE INDUSTRY UNDER A SINGLE DESK HAD A SECURE SUPPLY CHAIN, THE STRONGEST QUALITY CONTROL MEASURES OF ANY INDUSTRY AND THE FLEXIBILITY TO MARKET ANY TYPE OF WHEAT THAT AUSTRALIA FARMERS PRODUCED. TODAY, THERE IS NO FINANCIAL SECURITY FOR GROWERS AT POINT OF SALE, OR AFTER.  THERE IS NO BUYER OF LAST RESORT THAT IS NECESSARY IN A LARGE PRODUCTION YEAR, OR BACK-TO-BACK GOOD HARVESTS, AND IN YEARS WHERE QUALITY IS OUTSIDE THE NORMAL RECEIVAL STANDARDS. THERE IS NO ABILITY TO BLEND GRAINS EFFICIENTLY TO BRING THEM UP TO A HIGHER QUALITY ON A NATIONAL SCALE AND THUS PRODUCE A BETTER PRICE FOR THE GROWERS. THERE IS NOBODY TO HANDLE AND PAY FOR THE DELAYS OF SHIPMENTS AND DELAYS BECAUSE OF CUSTOMER COMPLAINTS ON QUALITY. THE LOSS OF THE GOLDEN REWARDS PROGRAM WHICH WAS WORTH UPWARDS OF $30 A TON HAS BOTH LOWERED GROWER RETURNS BUT ALSO REMOVED AN INCENTIVE TO GROW BETTER WHEAT. THE INDUSTRY HAS LOST THE COUNTERVAILING POWER AGAINST BULK HANDLERS AND FREIGHT PROVIDERS WHICH HAS MEANT AN IMMEDIATE RISE IN TRANSPORT COSTS FROM REGIONAL GRAIN HANDLING MONOPOLIES. THESE ISSUES WERE PREDICTED A YEAR AGO AND THEY ARE NOW HEADLINE ARTICLES FOR THE WHEAT INDUSTRY. THE MINISTER FOR AGRICULTURE MISLEAD THE PUBLIC INTO THINKING THAT THINGS HAD NEVER BEEN BETTER, WHEN ON 4TH OF JUNE HE SAID THAT “SINCE GROWERS WERE GIVEN A CHOICE AS TO WHOM THEY WANTED TO SELL TO, FIRST OF ALL YOU FIND THAT ON THE EAST COAST OF AUSTRALIA PRICES HAVE GONE UP TO CLOSE TO PARITY WITH THE CHICAGO PRICE.” UNFORTUNATELY, THE REALITY OF WHEAT PRICES IS COMPLETELY DIFFERENT. MR BURKE NEGLECTED TO MENTION THE HUGE LOSS TO GROWER RETURNS FROM THE LOSS OF THE NATIONAL POOL HEDGING PROGRAM. THIS LOSS OF INCOME FROM THE 08/09 POOL HAS BEEN ESTIMATED AT $1.25 BILLION DOLLARS WHICH COMES DIRECTLY OUT OF THE POCKETS OF WHEAT GROWERS. THE NATIONAL POOL UNDER THE SINGLE DESK WOULD HAVE HEDGED THE CROP AT HISTORICALLY HIGH CHICAGO PRICES. THE STANDARD POOL HEDGING PRE- SOWING – FEBRUARY/ MARCH – 2 MILLION TONNES, AT SOWING – APRIL/MAY – FIVE MILLION TONNES, EARLY SPRING – AUGUST/ SEPTEMBER – EIGHT MILLION TONNES.  THEREFORE FOR THE 08/09 POOL EIGHT MILLION TONNES OF WHEAT WOULD HAVE BEEN LOCKED IN AT OVER $400.00 PER TONNE.  THIS EQUATES TO OVER A BILLION DOLLARS IN VALUE AND SPREAD OVER THE TOTAL POOL TONNAGE AND WOULD HAVE MEANT A SIGNIFICANT INCREASE IN THE VALUE PER TONNE. ALSO WE ARE SEEING DISCREPANCIES IN PRICES BETWEEN THE EAST AND WEST COAST MARKET, WHERE THE EAST ARE RECEIVING $35 LESS PER TONNE DUE TO THE  DYSFUNCTION OF THE SUPPLY CHAIN BECAUSE THE INFRASTRUCTURE WASN’T READY FOR MULTIPLE SELLERS. AN ARTICLE IN THE LAND DATED THE 6TH FEBRUARY “GRAIN OFF THE RAILS” STATES THAT “TRUCK DRIVERS WERE FORCED TO WAIT AS LONG AS 16 HOURS TO UNLOAD AT GRAINCORP’S EXPORT TERMINAL AT NEWCASTLE” “TRUCKS QUEUED WITH GRAIN FOR A SHIP TAKING 20,000 TONNES OF WHEAT DELIVERED ENTIRELY BY ROAD RATHER THAN RAIL.” “THE SITUATION WAS AGGRAVATED BY THE FACT THREE GRAIN SHIPS FAILED SURVEY AT THE PORT THIS WEEK, DELAYING LOADING BY AT LEAST A DAY UNTIL THEY WERE CLEANED………..” THE ARTICLE GOES ON TO SAY THAT… “THE INCIDENT HIGHLIGHTED THE FRUSTRATION AND LOGISTICS NIGHTMARES NEWLY ACCREDITED WHEAT EXPORTERS ARE EXPERIENCING IN THEIR FIRST YEAR OF EXPORTING BULK WHEAT SINCE AWB LTD LOST ITS SINGLE DESK WHEAT EXPORT POWERS.” THE COST BURDEN OF DELAYS AT PORT WOULD FIRSTLY BE BORN BY THE TRANSPORT OPERATOR, BUT THESE COSTS ULTIMATELY ARE PASSED ON TO THE GROWER. STATE BASED REGIONAL MONOPOLIES ARE CONTROLLING GRAIN FROM FARM GATE TO PORT AS BUYERS IN THE MARKET BUT ALSO AS RAIL TRANSPORT OWNERS. THE NEW WORLD OF DEREGULATION ALSO HAS WORRYING SIGNS FOR OUR EXPORT MARKETS WITH A LOSS OF CONFIDENCE IN OUR INDUSTRY FROM INTERNATIONAL CUSTOMERS. THE AUSTRALIAN FINANCIAL REVIEW ARTICLE DATED 24TH MARCH 2009 “LOGJAM FORCES WHEAT CUSTOMERS INTO ARMS OF RIVALS” DETAILS HOW “ASIAN CUSTOMERS ARE THREATENING TO ABANDON AUSTRALIA AS A LONG TERM WHEAT SUPPLIER”. THE ARTICLE STATES THAT ‘AUSTRALIA’S THREE BIGGEST WHEAT MARKETS – INDONESIA, SOUTH KOREA AND JAPAN – HAVE EACH RAISED CONCERNS THAT SHIPS ARE BEING FORCED TO WAIT FOR SEVERAL WEEKS TO LOAD GRAIN AT FOUR PORTS IN WESTERN AUSTRALIA, THE BIGGEST GRAIN-PRODUCING STATE.”  SOME ASIAN FLOUR MILLS HAVE TURNED TO THE UNITED STATES AND CANADA TO SECURE WHEAT AT HIGHER PRICES.  THE ARTICLE SAYS THAT “THE BOTTLENECKS HAVE BEEN COMPOUNDED BY THE DEREGULATION OF THE WHEAT EXPORT MARKET LAST YEAR, WHICH LED TO 23 EXPORTERS ATTEMPTING TO SHIP GRAIN TO WESTERN AUSTRALIA’S PORTS IMMEDIATELY AFTER THE RECENT HARVEST, THE SECOND BIGGEST RECORDED”. “UNDER THE OLD SYSTEM, AWB HELD A MONOPOLY OVER WHEAT EXPORTS AND WAS ABLE TO COORDINATE THE TIMING OF SHIPMENTS.” THE ARTICLE QUOTES SEVERAL CUSTOMERS ON THEIR EXPERIENCE WITH DEREGULATION BUT THE SADDEST INDICTMENT ON THE STATE OF OUR SUPPLY CHAIN IS DELIVERED BY THE CHAIRMAN OF INDONESIA’S WHEAT FLOUR ASSOCIATION, FRANCIS CUS WELIRANG, WHO STATES THAT “HIS MILLS WERE BEING FORCED TO SECURE SUPPLIES FROM CANADA DUE TO THE LONG DELAYS IN AUSTRALIA.  HE EXPECTED TOTAL IMPORTS FROM AUSTRALIA THIS YEAR TO BE FAR LOWER THAN THE 2.7 MILLION TONNES ORIGINALLY FORECAST.” “THE FIRST EXPERIENCE OF DEREGULATION HAS BEEN VERY BAD FOR US,” MR WELIRANG SAID.  “THE INFRASTRUCTURE IN AUSTRALIA IS JUST NOT ENOUGH.”  MR WELIRANG, WHO IS DIRECTOR OF INDONESIA’S BIGGEST FLOUR MILL, BOGASARI, ESTIMATED THAT AUSTRALIA LOST UP TO 150,000 TONNES IN WHEAT SALES TO INDONESIA, WORTH ABOUT $50 MILLION AT CURRENT PRICES.” “IT IS UPSETTING. WE WILL SEE IF IT IMPROVES, BUT IF THIS HAPPENS AGAIN OUR CONFIDENCE IN AUSTRALIA WILL BE LESS.” HE SAID.  “CLEARLY THE PREPARATIONS BEFORE DEREGULATION WERE NOT GOOD. WE HAVE NEVER EXPERIENCED DELAYS LIKE THIS BEFORE. WE ARE USED TO CONTINUOUS DELIVERY.” THE YEAR HAS ALSO SEEN CONCERNS FROM CUSTOMERS OVER WHEAT QUALITY. REUTERS REPORTED ON THE 3RD OF JUNE THAT EGYPT HAD QUARANTINED 11,000 TONNES OF UKRAINIAN AND AUSTRALIAN WHEAT OVER QUALITY CONCERNS BECAUSE IT WAS "SPOILED AND NOT FIT FOR HUMAN CONSUMPTION." HISTORICALLY QUALITY CONTROL WOULD HAVE BEEN THE RESPONSIBILITY OF THE SINGLE DESK; HOWEVER UNDER DEREGULATION OUR REPUTATION AS A WHEAT PRODUCING COUNTRY IS AT THE WHIM OF SHORT-CUTS AND EXPORTERS WHO ARE RARELY AUDITED. THESE ARE THE ISSUES THAT THE INDUSTRY HAS CONFRONTED DURING THE FIRST YEAR OF DEREGULATION.  THE GOOD NEWS IS THAT IT IS NOT TOO LATE TO UNSCRAMBLE THIS EGG OF DEREGULATION. THE AUSWHEAT PLAN DEVELOPED BY THE WHEAT EXPORT MARKETING ALLIANCE IS STILL AS RELEVANT TODAY AS IT WAS WHEN IT WAS CREATED. THIS PLAN SAW THE CREATION OF A ‘GROWER OWNED AND CONTROLLED, SINGLE SHARE CLASS, SPECIAL PURPOSE COMPANY, WITH A CHARTER TO MAXIMISE NATIONAL WHEAT POOL RETURNS, WITH FULL AND DIRECT ACCOUNTABILITY TO SHAREHOLDERS’. AUSWHEAT WOULD HAVE TAKEN OVER THE FUNCTIONS OF THE SINGLE DESK AS A LOW COST INDUSTRY OWNED MANAGER THAT WOULD BE FOCUSSED ON MAXIMISING GROWER RETURNS. THE AUSWHEAT OPTION MAY NOT HAVE BEEN PERFECT, HOWEVER IT WOULD HAVE BEEN BETTER THAN THE CURRENT SYSTEM WHICH SEES CRACKS STARTING TO APPEAR IN OUR EXPORT REPUTATION. I WOULD LIKE TO CONCLUDE BY GIVING YOU AN IDEA OF HOW A YOUNG GROWER HAS BEEN AFFECTED BY THE NEW WORLD OF DEREGULATION. ADAM CANNON WROTE TO ME ABOUT HIS EXPERIENCE WITH SELLING WHEAT AFTER THE 2008 HARVEST. ADAM WRITES: IT SEEMS TO ME THAT GROWERS HAVE BEEN BADLY DISAPPOINTED BY THE NEW ‘DEREGULATED’ INDUSTRY.  I WOULD HAVE LIKED TO HAVE SEEN IT WORK IN THE INTEREST OF GROWERS. I FEAR WHAT WILL HAPPEN IF ALL PRODUCTION AREAS HAVE A GOOD YEAR – WILL CASH BUYERS JUST SHUT THEIR BOOKS, AND GROWERS BE LEFT WITH MEDIOCRE POOLING OPTIONS THAT DON’T REWARD THEM PROPERLY FOR QUALITY AND PROVIDE HIGH PERCENTAGES UP FRONT?  WHAT WAS WRONG WITH CASH BUYERS COMPETING WITH THE NATIONAL EXPORT POOL, OR EVEN HAVING MULTIPLE ACQUIRERS ACCUMULATING WHEAT INTO A SINGLE EXPORT POOL?  WHERE HAS THE QUALITY REWARDS SYSTEM GONE? IT APPEARS FROM WHAT I HAVE SEEN THAT GROWERS HAVE NOW BECOME MUSHROOMS.  THE TRADE IS PICKING OFF PARCELS THAT IT WANTS, DEMANDING HIGHER STANDARDS FROM GROWERS, BUT ONLY PAYING ON BASE GRADE LEVELS.  IT IS OBVIOUS WHAT IS HAPPENING WITH PREMIUMS FOR PROTEIN, SCREENINGS ETC. OUTSIDERS CAN CLAIM THAT GROWERS CHOOSE TO SELL.  THAT IS TRUE, BUT WE CANNOT HOLD OFF SELLING FOREVER.  WE HAVE CASH FLOW DEMANDS, AND MUST SELL EVENTUALLY TO MEET THESE COMMITMENTS, SUCH AS FUNDING THE PLANTING OF THE NEXT CROP. MR PRESIDENT, THE FIRST YEAR OF DEREGULATION HAS SEEN CRACKS FORMED IN THE FINE REPUTATION OF THE WHEAT INDUSTRY.  THE CRACKS ARE APPEARING IN QUALITY, SUPPLY AND RELIABILITY WHICH ULTIMATELY RESULT IN LOWER RETURNS TO THE GROWER.  LET US HOPE THAT THIS WORRYING TREND CAN BE REVERSED IN THE YEARS TO COME. NOW IS THE TIME FOR THE GOVERNMENT TO REVIEW THE WHEAT INDUSTRY MARKETING ARRANGEMENTS.  I WILL BE PUTTING A QUESTION TO MINISTER BURKE ASKING THE GOVERNMENT TO COMMISSION RESEARCH TO REVIEW THE IMPACTS OF DEREGULATION ON THE COSTS TO THE WHEAT GROWER, THE IMPACTS ON QUALITY CONTROL, SUPPLY TO EXPORT MARKETS, THE LOSS OF REPUTATION AS A RELIABLE SUPPLIER AND THE INFRASTRUCTURE NEEDS FOR THE INDUSTRY IN THE FUTURE.