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ACCC Policy Gone Mad.

On ABC radio yesterday I heard the news that the AWB and Graincorp will merge.

The result is that our grain farmers will have changed a regulated Government monopoly with a charter to see it maximises return for grain farmers to a Privately owned monopoly which has as its charter the maximisation of profit for share holders. Farmers, the customers, are to become the milking cows for shareholders.

Now some will say “well that is the outcome of the market system”, and so it is, a monopoly or a market arrangement very similar in characteristic to a Monopoly.

But it is not possible to say that farmers will be better of with this system, to the contrary, the loss of just a few say $5 to $10 will damage farm gate prices, together with the loss of the single desk at $15 to $30 a significant portion of return to farmers is gone.

And to demonstrate the reality of the loss of competition, there have been many times when the competitive prices offered $5 or so per tonne between and AWB depot and a Graincorp depot, and it does move from time to time move from one to the other. Grain farmers will loose all this and who knows how much more as the monopoly sets up for business.

Competition by its nature is not homogenous and the competition for farmers is heavily leaned toward monopoly on both the marketing and inputs side of our production system. Monopoly gives a market advantage to its holder. Those who do business are disadvantaged economically. And that is the problem, farmers are the only ones who resemble a pure market, the exercise of excess market power confront us in our daily business.

The economic imperative identified so long ago as Engel's Law states that "as incomes increase, the proportion of income spent on food falls."
What this means for food producers is that over time there is a constant adjustment underway, a tightening from year to year, we never catch up and so the result of all our deregulations has been to exacerbate the endeavour to slow adjustment.

Since the days of Paul Keating and Fred Hilmer the competition policy of our nation has steered toward a theory so flawed as to be laughable. The ACCC through the Trade Practices act are the driver, pushed by government and certain industry organizations.

I wonder if the ACCC will fail us again….there is no evidence our politicians have the slightest idea what is going on.

Replies to This Discussion

Permalink Reply by Andrew Phillips on August 1, 2010 at 12:52pm

Hi Rowell,

A good and informative piece, especially for those of us with little or no upfront experience in the grain industry.

All primary production sectors have suffered the continued ideological assault by these rampant globalists, so it should come as no surprise that grain growers are also in their sights.

Here in SA, barley growers did their best to maintain their single desk for marketing, but through the National Competition Policy the Howard government used the farmer hating state Labor government to bully growers to accept the changes. Judging by comments in papers and television by many growers, I don't believe it's been the success that proponents of the change had expected. Many South Aussies wanted to wait several years or more to watch their counterparts in WA and see how they fared with deregulation, but time is of the essence when you're trying to flog a dead cat in a sack....

It is true that monopoly gives power to the holder. Sooner or later, economic growth results in a monopoly or some form of cartel as businesses grow and destroy their weaker competitors. This being the case, why on earth shouldn't the power of the monopoly rest with the farmer, the very person on whom rests the greatest risk in this entire economic pursuit?

Furthermore, the economic welfare of entire regions rests upon the financial success of the primary producer. I could be an economic heretic in the minds of economic rationalists, but surely the idea of a monopoly in the hands of growers represented by a single desk marketing board directing profits back to those who produced the commodity for sale is in the national interest?

I cannot answer whether the ACCC will fail Australian producers again, but I have no doubt that the politicians have a very clear idea of what is exactly going on.

Permalink Reply by Rae Billett on August 1, 2010 at 7:57pm

Please keep fighting, my family depend on people like you to keep fighting. The ACCC is laughable. They are bureaucrats being paid to do? They do nothing..They sit in an office and have not the slightest idea what is going on in 'the real world'. It is just another level of inept government.

I cannot bear seeing Australia going down the drain because of these people. Sell out, sell up what difference does it make to them. They live in the city. Do they know or care, what is happening in country Australia?

They should. It is their country too. The ACCC has failed everyone since Alan Fels left not just Australian producers.

Permalink Reply by Cate Stuart on November 18, 2010 at 10:47pm

Geeze Rowell, i came in here to have a look around just before bed and found your discussion. A great read - and a sad reality...i think i will be having nightmares tonight over this one- considering we are thinking about turning one property into cropping only...hm...more to consider!
Cheers Cate :)

Permalink Reply by Rowell Walton on November 19, 2010 at 7:01am

Andrew, the usual process would be to identify the effect of the competition imbalance and rectify it with a countervailing mechanism...not to give farmers all the power at all. In this way market power is approaching balance and market outcomes then are at least fair and equitable to both participants.

I am drawn back to this segment by Cate...I would be careful Cate but simply remember that in todays world there is a higher level of volatility and no protection if things come unstuck.

Permalink Reply by Cate Stuart on November 19, 2010 at 8:00pm

Thanks mate. The problem is we all have to try and make a quid the best way we can just to get us through. I reckon those of us who survived the drought, then the gfc, then the floods - well mate, i just hope we can survive the government, but i know we can adapt to just climate.
But as you rightly point out the volatility is another risk - for gods sake keep your fingers crossed that we make the right decision, and then make it though hey?
Cheers Cate :)

Rowell Walton said:

Andrew, the usual process would be to identify the effect of the competition imbalance and rectify it with a countervailing mechanism...not to give farmers all the power at all. In this way market power is approaching balance and market outcomes then are at least fair and equitable to both participants.

I am drawn back to this segment by Cate...I would be careful Cate but simply remember that in todays world there is a higher level of volatility and no protection if things come unstuck.

Permalink Reply by Andrew Phillips on November 21, 2010 at 9:24am

I understand your comments about trying to find some balance in the control of pricing for primary produce and would be happy for it to be so, however, I still stand by my comments that it is inevitable that competition will result in the strongest parties forming a cartel of some form or another-to the detriment of consumers and smaller competitors alike.

I would be interested to know of the sort of counter balance mechanisms you envisage to rectify the current imbalance and will certainly push your ideas as far and wide as possible. I guess many of my opinions have been influenced by listening to producers who would like to return to the days of industry boards representing their sector and having the ability to influence a base floor price for their goods. I have no doubt some people have managed to flourish under deregulation, but from what I hear the majority feel they've been sold a pup.

Cate Stuart said:

Thanks mate. The problem is we all have to try and make a quid the best way we can just to get us through. I reckon those of us who survived the drought, then the gfc, then the floods - well mate, i just hope we can survive the government, but i know we can adapt to just climate.
But as you rightly point out the volatility is another risk - for gods sake keep your fingers crossed that we make the right decision, and then make it though hey?
Cheers Cate :)

Rowell Walton said:
Andrew, the usual process would be to identify the effect of the competition imbalance and rectify it with a countervailing mechanism...not to give farmers all the power at all. In this way market power is approaching balance and market outcomes then are at least fair and equitable to both participants.

I am drawn back to this segment by Cate...I would be careful Cate but simply remember that in todays world there is a higher level of volatility and no protection if things come unstuck.

Permalink Reply by Rowell Walton on November 21, 2010 at 10:16pm

G'Day mate....will have a struggle finding a recipe, as I reckon the best mechanisms are now considered from the past...so we surely need a new form of countervailing mechanism.

You will not beat the single desk used by others still, the NZ Dairy I believe is sold via a single desk, much of the worlds food is bought through a single desk purchaser, buggered if I know how to counter that without a similar countervailing system...or if that if so abhorent then accept that those who are not in reciept of this fair system are then dudded by the failure of government to provide and are thus compendated for its inadequacies.

Maybe we just give up and accept that farming is no longer a business to be involved in and let those who perceive a food security problem purchase the said areas and the rest of us will go find something elses to do.

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