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.