Wheat change is coming: time to help not hinder
Despite Labor's repeated reiteration that its election policy will be implemented, the Wheat Export Marketing Alliance continues to chase media exposure for its push to stop even limited deregulation. The alliance is right to highlight the need to consider all the issues for growers under a new system but its increasingly shrill denunciations of the new Agriculture Minister are unlikely to achieve this result.
The attempt by some wheat growers to refashion AWB Limited as a resurrected wheat export monopoly, instead of a traditional listed company, is a bad idea. Deregulation is already bad news for AWB. Not only will it lose what little remains of the single desk, but unless it can modernise its constitution which currently gives growers uncommercial rights over ordinary shareholders, the company will face commercial hurdles not shared by any of its new competitors. Yet stymieing these much needed reforms is what a noisy group of wheat growers is trying to achieve.
In the past AWB Limited was a key mover behind the scenes in whipping up wheat grower support for the single desk. This was only to be expected; AWB, as the holder of the single desk veto power had every interest to perpetuate the fiction that the single desk helped growers. But after years of wheat growers being told by AWB that support for the single desk is vital, it is perhaps unsurprising some have yet to catch up with the new reality.
It is not as if the old single desk model exists now. Gone is the regulation of domestic wheat. Gone is AWB's veto over other exporters, gone is the prohibition on exporting wheat in containers, gone is AWB's position as the only exporter of bulk wheat. Also gone a long time ago is the old government wheat board; that bit the dust with the privatisation of AWB Limited in 1999.
With the election of Kevin Rudd, AWB read the writing on the wall for the single desk and set out to refashion itself as a viable operator in the new environment. The proposed changes to AWB's constitution that bring it more into line with other major listed companies were a logical and welcome development. However these changes failed to pass in the face of near hysterical fear mongering by opponents. To make matters worse, instead of a board committed to change, the recent AWB elections saw no-change candidates elected resulting in a split board.
Since the election the Labor Government has reiterated its intent to reform wheat marketing in line with its election policy - not the full deregulation the industry needs, but a step in the right direction. At the very least Labor will never let AWB - an organisation it regards as discredited and aligned to the National Party - retain the single desk.
Some think Labor can be stopped from deregulating wheat export by the Coalition using its numbers in the Senate to stymie reform. This is wishful thinking as there are enough sensible Liberals prepared to cross the floor on this reform. Change is coming, the only question is will AWB be in a position to adapt to it?
Without the current legislative protection of holding the single desk licence, AWB will become vulnerable to legal challenge from non-grower shareholders for not maximising shareholder returns as required in the Corporations law. Perhaps most importantly, failure to normalise their constitution could well mean AWB will fail to meet the standards of governance mandated by the new licensing system and thereby be denied to the right to export Australian wheat. It would be ironic if the very growers who supported AWB's role in the Food for Oil bribery scandal are instrumental in causing AWB to fail to gain a licence to export wheat.
Much was made within farmer circles of the potential reduction in grower representation if the changes had passed. An agriculturally focussed company such as AWB should have meritorious growers on the board as a matter of sound business sense - as ABB or Incitec Pivot already do - but this is quite different from the current situation of having board members elected to represent geographic regions as if they were agri-politicians instead of major company directors.
But none of this angst by agri-politicians and lobbyists is particularly surprising. Like other groups to lose government protection over the past thirty years of reform, it is natural to cling to the old certainty than embrace the new, more risky, future. In the 1980s Labor pressed on with major reform despite a seemingly never-ending procession of special interest groups pleading their case. There is no reason to assume this new Labor government will squib reform of wheat marketing.
But if this new Labor government is to lay any claim to matching the reform credentials of the Hawke-Keating governments much more than the low-hanging fruit of wheat marketing will need to be picked. If Rudd chases the mantle of reformer then the current corporate beneficiaries of regulatory largesse - for example those from industries still reliant on protectionist tariffs - will need to refashion their operations to meet the new environment.
Those companies which do this before the regulatory axe falls will have the greatest chance of prospering, while those who practice denial and continue to rely on the whim of government may find the future increasingly hostile.