The end of the single desk has exposed farmers to new risks and big losses.

THREE years after Labor deregulated Australia’s wheat market and split the Coalition along the way, farm groups say the new system is proving to be a dangerous and freakish place that has already brought one co-op unstuck.

Farmers complain that the deregulation was rushed through parliament with little thought given to developing the new business environment.  This was partly because Labor saw an opportunity to divide and destabilise the Coalition, which it succeeded in doing.

The experience of one NSW marketing co-operative is proving to be a salutary lesson for the industry.

Gilgandra Marketing Co-operative Ltd (GMCL) has been unable to recover the $3 million it is owed from a Bangladeshi export contract. Despite a win in the NSW Supreme Court to recover grain sitting in containers at the Bangladesh port, the co-op has failed to recover any of its property. The loss has caused enormous hardship for the 60 farmers who gave their grain to GMCL and have not been paid.

GMCL chairman Warwick Moppett says his experience shows that there are unscrupulous players at work in the market, and that stronger regulation is needed.

“I definitely think, like any open market, there’s got to be licensing so cowboys don’t come in,” he says.

GMCL was burnt by a local export company that defaulted on its payments after the wheat had left Australia.

The co-op chose this company because it offered a higher price at the time. Mr Moppett’s concerns are strongly backed by the farm lobby groups that want the government to return to the so-called “single desk”.

Wheat farmer Jock Munro, who is also a member of NSW Farmers’ grains committee, says the deregulated market might appear to be working well when demand is strong, but it could prove disastrous for farmers in times of falling grain prices.

Mr Munro is pushing for stronger legislation to ensure farmers are not left in the lurch, as he argues that under the new system they could find themselves with no buyer for their grain.

“No one is obligated to clear the crop — there is no guarantee it will be sold,” he says.

Farm groups lay the blame on former agriculture minister Tony Burke, who was responsible for the legislation that went through federal parliament in June 2008.

Victorian Farmers Federation’s president Andrew Broad, who developed a close working relationship with Mr Burke, describes wheat deregulation as a “real failing” on his part.

He nominates wheat marketing as one of three areas in which Burke performed poorly as agriculture minister.

“There was no real rollout of business development around the grain industry,” he says, which left the deregulated industry “rudderless.”

Independent MP Tony Windsor strongly opposed the legislation when it went through parliament, as did other independents and the Nationals.  The influence of the independents in the lower house, and the Greens’ control of the Senate, could provide the conditions for a push to re-regulate export marketing.

Mr Munro says that prices are now more volatile, and this will prompt farmers to adopt a more conservative stance about the amount of wheat they are willing to grow.

Last week, he was quoted a price for his crop, and the next day it had fallen by $15 a tonne.

“That is the sort of instability that growers are putting up with and they don’t like it,” he says.

The new system is problematic for buyers of Australian wheat because information about its quality is now more fragmented compared to the old single desk operated by the Australian Wheat Board, says Mr Munro.

“We are losing our reputation for quality,” he says.

The experience of wheat farmers in Gilgandra shows the dangers of trying to secure higher prices through small exporting companies.

About 60 farmers in the area are owed about $3 million after the marketing company claimed that its buyers had defaulted.

The loss has put great financial stress on farmers in the region. Share farmer David Hall, who grows his wheat on land leased in Brewarrina, in northwestern NSW, about 400km north of his home town of Condobolin, had to sell his machinery in order to remain solvent. He said it was the last thing he needed after surviving 10 years of drought. Mr Moppett says Mr Hall has managed to survive the ordeal but only through “some mates helping him”.

GMCL onsold the wheat from the local farmers to a dealer called Australian Commodity and Merchandise (ACM). The Australian revealed that ACM’s sole director was Alam Mohammed Jehingir, a Bangladeshi national who ran his business out of a small office above a fruit shop in the Sydney suburb of Riverwood.

GMCL then took ACM to court after a cheque for $600,000 bounced and the co-op was owed a total of $3m. It spent almost $700,000 in legal costs trying to regain title to its wheat.

Justice Michael Slattery ruled that 190 containers held in storage in Bangladesh were the property of GMCL, but this proved to be a Pyrrhic victory.

Two weeks later, a court in Bangladesh ruled in favour of the local buyers.

Mr Moppett travelled to Bangladesh last Easter in order to meet government officials. Despite meeting the commerce minister, he was unable to secure control of remaining wheat.

Mr Moppett believed that ACM will be paid surreptitiously for the sales, despite claiming that it is now insolvent because its buyers have defaulted.

“I have proof that he delivered all the wheat and he’s getting paid another way,” he says.

Records show that Mr Jehingir owns two residential properties in Australia, and Mr Moppett wants the receiver to pursue them. Mr Moppett also blames the shipping companies because they released the wheat to the local buyers.

“This is very painful,” he says.

The loss is not covered by export insurance because GMCL sold its grain to a local company.  “All we did was deliver to someone in Australia.”


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