In 2008, the Australian Government deregulated the marketing of bulk wheat exports by removing the ‘single desk’ operated by AWB (International) Limited. Wheat Exports Australia (WEA) was established under the Wheat Export Marketing Act 2008 (WEMA) to administer an accreditation scheme for bulk wheat exporters. The Wheat Export Accreditation Scheme 2008 (Scheme) also came into effect on 1 July 2008, making it possible for any trader, once accredited, to export bulk wheat from that date. Port terminal operators wishing to export were required to satisfy an additional ‘access test’ to gain accreditation. The legislation also required the Productivity Commission to conduct a review of the arrangements, commencing no later than 1 January 2010 and reporting to the Australian Government by 1 July 2010. Among other key messages, the Commission has found the transition to competition in the exporting of bulk wheat has progressed relatively smoothly, particularly given difficult international trading conditions; the regulatory arrangements for marketing bulk wheat exports have been beneficial during the transitional phase since deregulation; the accreditation scheme, Wheat Exports Australia and the Wheat Export Charge should be abolished on 30 September 2011; the port terminal access test has provided greater certainty for traders and made access easier, more timely and less costly than it could have been by relying on potential declaration under Part IIIA of the Trade Practices Act; however, there are still some transitional issues associated with port access and contestability in the logistics supply chain.wheat export marketing act; wheat export; Accreditation Scheme; wheat export; Wheat Exports Australia; bulk wheat; accreditation; grain supply; export supply chain; single desk

Commission, Productivity

English

Research Papers in Economics

    
  INTRODUCTION  35
 
1 Introduction 
The current wheat export marketing arrangements commenced on 1 July 2008, 
requiring that exporters of wheat in bulk be accredited. Wheat Exports Australia 
(WEA), a new regulator, was established under the Wheat Export Marketing Act 
2008 (Cwlth) (WEMA). WEA administers the Wheat Export Accreditation Scheme 
2008 (Cwlth) (Scheme), which also came into effect on 1 July 2008. 
In effect, the current arrangements deregulated bulk wheat export marketing, 
removing the requirement that individual proposals to export bulk wheat be 
approved by: 
•  the Minister for Agriculture, Fisheries and Forestry, from December 2006 until 
30 June 2008 (an interim arrangement) 
•  the operator of the wheat single desk prior to December 2006 
–  AWB (International) Limited (AWBI) and its predecessor, the Australian 
Wheat Board. 
The export of non-bulk wheat (in bags and containers) was deregulated in August 
2007. 
The industry is currently in transition. The new arrangements have been in place for 
two years, and only one full marketing year has been completed. The move to a 
deregulated export market environment has had implications for participants in all 
sectors of the wheat export industry — including growers, plant breeders, bulk 
handling companies, rail and road transport service providers, port operators, and 
wheat marketers and buyers. It has also had flow on effects to the domestic wheat 
industry. The wheat marketing arrangements have introduced marketing that is 
more sophisticated, making the business environment more complex. Some industry 
participants have faced challenges adapting to this complexity. The challenges have 
been exacerbated by the recent decrease in the world price of wheat and the 
appreciation of the Australian dollar. 
At the time the new legislation was enacted, provisions were made for the 
Productivity Commission to conduct a review of the arrangements, commencing no 
later than 1 January 2010, and reporting to the Australian Government by 1 July 
2010. This inquiry is that review.     
36  WHEAT EXPORT 
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1.1  What was the Commission asked to do? 
The Australian Government asked the Commission to examine the operation and 
effectiveness of the current wheat export marketing arrangements.  
Under the terms of reference, the Commission was asked to consider how individual 
components of the WEMA and the Scheme affect relevant stakeholders, and the 
costs and benefits they deliver. The Commission is also required to provide 
comment on those aspects that are working effectively and identify those that 
require change. 
The inquiry covers the operation of the WEMA and of the Scheme, including: 
•  the effectiveness of the arrangements in meeting the objectives of the WEMA, 
including the role of WEA 
•  the suitability of the eligibility criteria for accreditation of exporters 
•  the appropriate level of assessment of each applicant for accreditation by WEA 
against these eligibility criteria 
•  the appropriateness of the access test requirements for accreditation of port 
terminal operators as exporters 
•  the effectiveness of, and level of competition in, the transport and storage supply 
chain for wheat 
•  the availability and transparency of market information. 
In considering any changes to the operation of the WEMA or the Scheme, the 
Commission was also asked to examine how such changes would affect 
arrangements to fund WEA, and the use of cost-recovery mechanisms. 
1.2  The Commission’s approach 
In responding to the terms of reference, the Commission has considered the 
effectiveness of arrangements for the bulk wheat export industry’s transition to a 
competitive marketing environment. 
The existence of three distinct regional wheat markets, each with the legacy of a 
single dominant bulk handler–exporter has resulted in port access, and related 
supply chain issues, being the major areas of concern in this inquiry. The 
Commission has taken account of the fact that the supply chain is shared with other 
grains, but has been constrained by the terms of reference to consider it in the 
context of wheat.     
  INTRODUCTION  37
 
In assessing the effectiveness of the transitional arrangements, the Commission has 
been mindful of the long history of regulation, and the costs and difficulties faced 
by all parties during the transitional period.  
In response to the Commission’s draft report, the Victorian Farmers Federation 
expressed concern that the Commission had ‘focused on broader regulatory issues 
of service providers within the industry’, and not given sufficient attention to the 
impact of regulatory reduction ‘on growers as members of “regional communities”, 
“consumers” of the industry services in question, and members of the “Australian 
Community” in general’ (sub. DR65, p. 1).  
The NSW Farmers Association expressed similar concern:  
The effective contraction of the growing of grains as a direct result of deregulation will 
have a dramatic effect on farmers, regional communities and infrastructure. 
(sub. DR91, p. 17) 
The Association further noted that decisions relating to wheat export marketing 
should have the support of the majority of growers, and advocated that a democratic 
survey of all registered wheat growers in Australia be undertaken as part of the 
inquiry to assess their experience of deregulation (sub. 49; sub. DR91). 
The Productivity Commission’s terms of reference required it to consider   
improvements to the new structure of the industry, and the Commission’s charter 
further requires it to consider the issues from the perspective of maximising benefit 
to the community as a whole, not to one single sector of the community. The 
benefits and costs associated with a change to regulatory arrangements will vary 
across sectors of an industry and the community generally. For some groups the 
benefits are direct and identifiable. However, for other groups the impacts may be 
quite diffuse and less tangible. The Commission’s recommendations are based on 
its assessment of the issues put before it as part of the inquiry process, rather than 
the level of support for a particular position. 
There are difficult tradeoffs to be made in deciding the best path forward. In making 
its recommendations, the Commission has had concern for immediate impacts, but 
has also recognised the need to focus on how the industry can best position itself for 
the future in a highly competitive world market.     
38  WHEAT EXPORT 
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Some issues relating to the timing and scope of the inquiry 
Some stakeholders considered that the timing of the inquiry was premature because 
the arrangements are being assessed after only one full cycle of marketing, as noted 
by M I & H I Gooding: 
Firstly it is a bit too early to be making any definitive statements as to how the new 
wheat marketing regime is going. It needs at least five years before a true picture 
emerges. (sub. 31, p. 1) 
The Department of Agriculture and Food (Western Australia) also stated that ‘it will 
clearly take a number of years before the industry adjusts to this new environment’ 
(sub. 34, p. 9). 
In addition, a number of stakeholders expressed disappointment that the scope of 
the inquiry did not include consideration of the single desk arrangements: 
•  In my opinion I find it difficult to comprehend how the Commission can fully meet 
their stated aim of independence by discarding the ‘Single Desk’ option even if it is 
used as a base case. It is hoped that the methodology to support the Commission’s 
findings will clearly identify and quantify as to whom, how and what benefits and 
losses are being incurred in the current system. (Sunridge, sub. 20, p. 1) 
•  We are very disappointed the terms of reference for this inquiry do not include an 
examination of what might have been had any attempt been made by government to 
seriously look at the best possible marketing system for our export wheat. The 
current act is not a marketing system — it is merely deregulation with a legislative 
program to support it. (R H & M J Billing, sub. 30, p. 1) 
•  It is my belief that it is unfortunate this inquiry will not compare the current 
arrangements against the former arrangements, when the objectives of the Act are to 
‘promote the development of a bulk wheat industry that is efficient, competitive and 
responsive to the needs of wheat growers’. (Kay Hull MP, sub. 36, p. 1)  
The timing and scope of the inquiry were defined by both the review provisions 
contained in the WEMA, and the terms of reference.  
Moreover, advice from the Department of Foreign Affairs and Trade (DFAT) 
(sub. 22) indicated that a return to the previous arrangements does not appear to be 
a viable option, at least in the context of the current trade environment. DFAT 
advised that under proposed World Trade Organisation rules to come out of the 
Doha Round of trade negotiations, changes to the single desk marketing 
arrangements would have likely been required had the WEMA not been introduced. 
It further advised that under the provisions of the Australia–United States Free 
Trade Agreement, the single desk arrangements could not be reintroduced with 
respect to the United States.     
  INTRODUCTION  39
 
DFAT also noted that Australia’s removal of the single desk marketing 
arrangements had enabled it to ‘strengthen its advocacy in favour of agricultural 
trade reform, in both the WTO [World Trade Organisation] and FTA [Free Trade 
Agreement] negotiations’ (sub. 22, p. 2).  
The Commission’s approach, therefore, has been to work within the given policy 
settings to consider possible improvements to the arrangements that have been put 
in place. 
1.3  Conduct of the inquiry 
The terms of reference for this inquiry were received from the Assistant Treasurer 
on 30 September 2009. Under the terms of reference, and according to provisions in 
s. 89 of the WEMA, the Commission was required to report by 1 July 2010.  
In addition, the Productivity Commission is required under its own Act, and by the 
terms of reference, to provide an opportunity for participants to respond to a draft 
report. This meant that the initial hearings, forums and due dates for submissions 
coincided with peak harvesting times in the major wheat growing states. Hearings 
on the draft report also coincided with the crop sowing period. 
Concerns about the inquiry schedule were expressed by growers and industry 
representative bodies: 
•  At the outset it is important to note that WA Farmers is extremely disappointed with 
the timing of the submission as well as the dates provided for the Public Hearings 
and Forums in Western Australia which are set for the busiest and most important 
time for grain growers, being in peak harvest times. This has meant that many grain 
growers have not been able to play as active a part in the debate as they would have 
liked. (The Western Australian Farmers Federation, sub. 29, p. 5) 
•  It must be recorded the dates of public hearings and public forums on the Wheat 
Export Marketing Arrangements organised by the Productivity Commission shows 
a complete disregard or/and knowledge for the industry in Western Australia with 
the dates scheduled to be during peak harvest time. (Pike Family Trust, sub. 18, 
p. 1) 
•  We have considerable concerns about the timing of the public hearings and 
roundtables being in the middle of harvest this year and then further consultation 
following the draft report in the middle of sowing next year. Whilst the VFF 
understands the timelines the Productivity Commission is working towards, the 
timing will raise questions amongst growers as to the willingness of the 
Productivity Commission to truly consult with farmers. (Victorian Farmers 
Federation, sub. 40, p. 1)     
40  WHEAT EXPORT 
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Similar sentiments were expressed in a number of other submissions (for example, 
R & L Guest, sub.  6; M B  Scott, sub.  10; R H & M J Billing, sub.  30; Grain 
Growers Association, sub. 41). 
In response to these concerns, the Commission made efforts to facilitate the 
involvement of growers, given their constraints, throughout the consultation 
process. The Commission consulted and invited feedback in the following ways. 
The Commissioners and team undertook informal industry visits prior to the receipt 
of the terms of reference in order to be able to release an issues paper as soon as 
possible after the inquiry was announced.  
The issues paper and a circular announcing public hearings and public forums were 
sent to all Senators in the five wheat growing states and to House of Representative 
members whose electorates include wheat growing areas. 
The inquiry was advertised nationally, including in regional areas (table 1.1), and 
the Commission promoted the inquiry on its website. 
Table 1.1  Print advertising for the new inquiry, and all public 
hearings and forums 
State Publication 
New South Wales  The Sydney Morning Herald 
 The  Land 
Victoria The  Age 
 Weekly  Times 
Queensland The  Courier-Mail 
 Queensland  Country  Life 
South Australia  Adelaide Advertiser 
 Stock  Journal 
Western Australia  The West Australian 
 Farm  Weekly 
A media alert was issued, and advertisements also placed in each of the relevant 
metropolitan and regional papers regarding the hearings and forums (table 1.1). The 
Commissioners also undertook radio interviews on the ABC to draw growers’ 
attention to the public forums in regional areas. The hearings and forums were held 
in a major wheat growing area in each wheat growing state, in addition to 
metropolitan areas (table 1.2). 
The purpose of the due dates for submissions is to encourage participants to get 
their submissions in prior to public hearings. However, the usual practice of the 
Commission is to accept submissions for the duration of the inquiry, with the caveat     
  INTRODUCTION  41
 
that the later they are received, the less scope the Commission has to consider them 
in preparing the draft or final report respectively. 
Table 1.2  Schedule of public hearings and forums 
Location  Date 
Initial round 
Horsham forum  Monday, 23 November 2009
Melbourne hearing  Tuesday, 24 November 2009
Geraldton forum  Tuesday, 1 December 2009
Cunderdin forum  Wednesday, 2 December 2009
Perth hearing  Thursday, 3 December and Friday, 4 December 2009
Brisbane hearing  Monday, 7 December 2009
Dalby forum  Tuesday, 8 December 2009
Dubbo forum  Wednesday, 9 December 2009
Sydney hearing  Friday, 11 December 2009
Adelaide hearing  Monday, 14 December 2009
Port Lincoln forum  Tuesday, 15 December 2009
Draft Report  
Melbourne hearing  Wednesday, 28 April 2010
Perth hearing  Monday, 3 May 2010
Sydney hearing  Tuesday, 11 May 2010
Adelaide hearing  Monday, 17 May 2010
The Commission advised growers at the hearings and forums, and in 
correspondence to peak bodies, that their submissions would continue to be 
accepted and taken into consideration after the due date. 
In conducting its inquiry, the Commission consulted widely, including through 
discussions with interested parties such as WEA, growers, grains industry 
representatives, accredited exporters, bag and container exporters, potential bulk 
exporters, bulk handling companies, the Australian Competition and Consumer 
Commission and relevant government departments (appendix A). 
Fifty-six submissions were received prior to releasing the draft report. An additional 
44 submissions were received between the draft and final reports.  
The Commission thanks all inquiry participants for meeting with Commissioners 
and staff, facilitating visits to many industry sites and making submissions to the 
inquiry.     
42  WHEAT EXPORT 
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1.4  Guide to the report 
Chapter 2 of this report provides an overview of the industry, putting the current 
wheat export marketing arrangements in context. Chapter 3 examines marketing and 
pricing in the post-deregulation environment. Chapter 4 assesses the export 
accreditation scheme. Chapter 5 addresses issues relating to the ‘access test’ for the 
use of port terminal facilities. Chapter 6 examines the competitiveness and 
effectiveness of transport, storage and handling. The availability and transparency 
of information provision are discussed in chapter 7. In chapter 8, issues relating to 
the quality standards system, including plant breeding and the collection of End 
Point Royalties, are discussed. The remaining industry good functions are covered 
in chapter 9.  
Appendix A lists the participants that made submissions to the inquiry and the 
consultations conducted by the Commission, including public hearings and forums. 
Appendix B provides a brief description of the methods used by growers to market 
and price their wheat. Appendix C provides an overview of the experiences in other 
Australian and international grains and agricultural industries in relation to the 
administration of export accreditation schemes, and arrangements for the provision 
of industry good functions. 

Wheat Export Marketing Arrangements

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Wheat Export Marketing Arrangements

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