Submission to the Senate Inquiry into Operational issues arising in the export grain storage, transport, handling and shipping network 12 May 2011 GrainCorp Operations Limited Level 26, 175 Liverpool Street, Sydney NSW 2000 PO Box A268, Sydney South NSW 1235 T: 02 9325 9100 F: 02 9325 9180 www.graincorp.com.au ABN 52 003 875 401 Table of Contents Terms of Reference ............................................................................................................................................. 3 Structure of this submission ................................................................................................................................ 3 Executive summary ............................................................................................................................................. 4 Responses to matters raised ............................................................................................................................... 5 Matter A .............................................................................................................................................................. 5 Provision of access to the GrainCorp storage and handling network ......................................................... 5 Port elevators as ‘essential infrastructure’ ................................................................................................. 6 Provision of access to the GrainCorp port elevator network ...................................................................... 7 Matter B............................................................................................................................................................... 7 Eastern Australia grain market .................................................................................................................... 7 Grains market structure .............................................................................................................................. 7 Significant public information is available ................................................................................................... 8 Efficient market operation .......................................................................................................................... 8 Is grain stock information ‘proprietary’? ..................................................................................................... 9 Vertical integration in the Australian grain supply chain ............................................................................ 9 Matter C ............................................................................................................................................................. 10 Rail transport ............................................................................................................................................. 10 Matter D ............................................................................................................................................................ 11 Definition of ‘redelivery’ of grain .............................................................................................................. 11 Competition issues related to ‘redelivery’ ................................................................................................ 11 Matter E ............................................................................................................................................................. 11 Grain receival standards ............................................................................................................................ 11 Provision of grain storage and handling services ...................................................................................... 12 The need for flexibility in assessing grain .................................................................................................. 12 Experience from the 2010/11 harvest ....................................................................................................... 13 Training of grain assessment staff ............................................................................................................. 14 Certification of testing equipment ............................................................................................................ 15 Grain testing and assessment during harvest ........................................................................................... 15 Export grain quality ................................................................................................................................... 16 Matter F ............................................................................................................................................................. 16 Regulation of port access .......................................................................................................................... 16 Booking of elevation capacity at GrainCorp ports ..................................................................................... 17 Exports this year ........................................................................................................................................ 17 Removal of Government support for transportation of grain by rail ........................................................ 17 2 Submission to the Senate Inquiry into Operational issues arising in the export grain storage, transport, handling and shipping network Terms of Reference Operational issues arising in the export grain storage, transport, handling and shipping network, with particular reference to: a) any risks of natural, virtual or other monopolies discouraging or impeding competition in the export grain storage, transport, handling and shipping net‐work, and any implications for open and fair access to essential grains infrastructure; b) the degree of transparency in storage and handling of grain and the appropriateness of any consequent marketing advantages; c) equitable access to the lowest cost route to market, including transport options; d) competition issues arising from the redelivery of grain; e) the absence of uniform receipt, testing and classification standards and practices and any implications for growers and/or for Australia’s reputation as a quality supplier; f) equitable and efficient access to the shipping stem; and g) any other related matters. Structure of this submission GrainCorp will address the terms of reference in the order in which they appear above. As a number of the matters addressed in the Terms relate directly to matters that have been or are currently under examination by the ACCC, relevant submissions are appended to this submission. 3 Executive summary Matter A No evidence has been presented to support a view that GrainCorp has not provided fair and open access on commercial terms to parties seeking access to GrainCorp’s grain storage, handling, or port elevator infrastructure. Several enquires have confirmed that GrainCorp does not have monopoly advantage at its country network, including the recent Productivity Commission review. Matter B For a deregulated market to operate effectively there has to be a balance between the information held by one sector of the industry and another, in a manner that doesn’t confer upon one sector unreasonable market power. Calls for the release of previously unpublished information on grain receivals, and grower warehouse stocks by site and by grade, represent an attempt by grain traders to reverse the shift in market power back to growers that has occurred since the removal of the ‘single desk’. Matter C Rail and road transportation of grain from storage (ex a bulk‐handling network or ex‐farm) is available to all grain traders and buyers on a commercial basis. Access to transport capacity is primarily determined by the willingness of a participant to commit to contracts with transport providers on a commercial basis, or to manage the risk associated with purchasing transport (rail or road) on an ad hoc, ‘spot’ basis. Matter D GrainCorp actively seeks the delivery of grain from third party storages or ex‐farm storages into the company’s bulk‐handling network. Matter E Uniform grain standards are applied in the form of grade standards agreed by industry through the Grain Trade Australia (GTA), Australian Oilseeds Federation (AOF) and Pulse Australia (PA) Standards Committees. The wide variation in grain quality means that grade standards are set and applied in a manner that will ensure that grain can be received, stored and out‐turned to meet the requirements of grain consumers. Since the removal of the bulk wheat export monopoly, there have claims about a ‘decline’ in the quality of wheat exports has been made. No data has been provided to substantiate these claims. Matter F No evidence has been presented to substantiate any claim that GrainCorp has denied access to any party seeking commercial access to its port elevator network. The system of booking and allocating elevation capacity at GrainCorp ports is fair, transparent and minimises the price inflation effect of booking speculation that would be a component of any booking system that permitted transfer and trading of elevation capacity. 4 Responses to matters raised Matter A (a) any risks of natural, virtual or other monopolies discouraging or impeding competition in the export grain storage, transport, handling