04/03/2003 - 21:00

Growers split on handling plan

04/03/2003 - 21:00


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MUCKINBUDIN wheat farmer Allan Watson and Morawa wheat farmer Chris Moffet should have a lot in common. But their common interest in the future of WA’s grains industry is divided by their off-farm roles.

Growers split on handling plan

MUCKINBUDIN wheat farmer Allan Watson and Morawa wheat farmer Chris Moffet should have a lot in common.

But their common interest in the future of WA’s grains industry is divided by their off-farm roles.

Mr Watson is chairman of CBH while Mr Moffet is a director of AWB Ltd and the two organisations are struggling to find common ground.

The split between these organisations could profoundly affect the handling and marketing of WA’s wheat harvest – and the returns to WA wheat farmers.

CBH and AWB purport to share the same goal: an integrated, world-class, grower controlled Western Australian wheat industry

They agree the industry could be run more efficiently, with potential annual savings of up to $40 million.

But beyond the shared rhetoric, they are divided about the best way to boost efficiency.

Mr Watson believes AWB’s ultimate goal is clear.

“What AWB clearly wants is to merge with CBH,” he said.

“If they can’t do that, they want some form of joint venture. They want to control the supply chain in WA.”

Mr Watson believes the role and structure of the two organisations is part of the problem. AWB is an Australian Stock Exchange-listed company with obligations to share-holders while CBH is a cooperative with limited capital.

“They are two very different companies with two different objectives. Its very hard to form a joint venture,” Mr Watson said.

AWB State manager Lisa Wilson said she believed the institutional differences were outweighed by the commonality of interest and the shared desire to serve growers.

Ms Wilson said AWB was seeking a “true partnership”.

“We are not seeking to be a dominant partner,” she said, adding: “we don’t want to be subservient either.”

Unfortunately, the two sides even have trouble agreeing on what has been proposed.

Mr Watson said CBH had been trying in vain to get a detailed joint venture proposal from AWB, but to date had only seen a memorandum of understanding.

In contrast, Ms Wilson claimed that AWB had put up “comprehensive proposals”.

The latest flash point in this long running debate is the question of who controls CBH’s extensive assets, built up over many years of cooperative ownership.

Mr Watson said AWB originally wanted to buy a 50 per cent interest in these assets but is now talking about a 99-year lease.

Ms Wilson disputes the 99-year figure but agrees that AWB has talked about a 20-year lease.

Either way, WAFarmers is implacably opposed.

“WA growers would not agree to any sell off of CBH, nor will they agree to a long-term lease that would effectively move control of CBH to AWB Ltd,” said WAFarmers grains section president Peter Wahlsten.

WAFarmers has effectively endorsed the latest proposal from CBH, which wants to provide a wider range of storage, handling and logistics services to WA wheat growers.

This would effectively return WA to pre-1989 arrangements.

The corollary of this proposal is that AWB would be pushed into a secondary sales and marketing role in WA – the State that provides 30-40 per cent of Australia’s wheat.

Ms Wilson believes there are flaws in CBH’s plan. For instance, the estimated cost savings and increased efficiency are based in part on a study that looked at the benefits of a three-way merger between CBH, Grain Pool and AWB.

If the two organisations cannot reach agreement, AWB could be-come a direct competitor to CBH by building its own grain storage and handling facilities at WA’s main ports.

“We’ve looked at a fall-back opt-ion,” Ms Wilson said.

“We’ve been quite up-front about that. It helps with our negotiations.”

She said AWB had looked at ports in WA and taken options over some land. However, she insisted this was not AWB’s preferred model.

Mr Watson said he believed such a move could spell an end to the wheat export monopoly held by AWB International, the sister company of AWB Ltd.

“If AWB (Ltd) do move into WA, it will be another nail in the coffin of the single desk,” he said.

The CBH camp took comfort from a speech by Ron Greentree, the chairman of NSW-based grain handler GrainCorp, at last week’s Pastoralists and Graziers Association convention in Perth.

Mr Greentree vigorously criticised AWB, arguing that its change from a statutory corporation to an ASX-listed company had “fundamentally changed” its behaviour, which he labelled “aggressive”.

AWB’s commercial tactics have included building new storage facilities in competition with established bodies like GrainCorp.

“You certainly have a chance to shape more sensible arrangements than competition brought us in the eastern States,” Mr Greentree said.

“In the east, we have competitors trying to cherry pick each other’s business by building new storage and handling facilities within sight of each other, then using murky pricing to draw grain away from other storages in the region.”

In contrast to farmers who want to abolish the single desk, Mr Greentree has an alternative solution.

“The reform required is simple. We must separate AWB International away from its ASX-listed service provider, AWB Ltd,” he said. “AWB International should become a separate, not-for-profit company whose sole job is to manage contracted service providers and maximise pool returns for growers.”


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