Alpha I am aware of the water issue and it alone is what is causing the face of grain markets to change so rapidly. (A good book I have just read is 'Outgrowing the Earth' by Lester Brown). New markets are emerging every day because where water shortages emerge in the overpopulated regions of China and India both through competition and aquifer depletion, water credits can be gained through the importation of grain - use someone elses water to produce your food. India has just announced it will import half a million tonnes of wheat (First import since 1999) and China has an 'estimated' 20 million tonne production shortfall in grains for this year. There will be no shortage of buyers for grain and they will have to compete visciously to obtain requirements. Just like any other market.
The problem is not the Single Desk, the problem is when it is in the hands of a publicly listed company and zero transparency exists in cost accounting and price achievements. I would be able to swallow the Single Desk if it were held by a grower owned co-operative (like CBH) in a corporate structure similar to that of Fonterra where equity is tradable. But it isn't.
The rice industry may have a Single Desk but it is not held by a publicly listed company. The Rice Marketing Board is grower owned. Sure it is going gangbusters but with what benchmark are you comparing with? Over half the world eats rice on a daily basis.
We are now entering a bull market for food commodities because of water and energy pressures with the consumer base expanding from supermarkets to now include service stations. Niche markets are opening up every day because of this fierce competition for a depleting supply chain. Moving grain in bulk will always return you an average price. I spend more to produce higher quality wheat than my neighbours so why shouldn't I be rewarded with an premium at the expesnse of others. Last time I looked the AWB is not pumping anything in this State into infrastructure to value add grains. In the MidWest of the US, a completely free market, entire cities are founded upon a single grain trading entity and its value added business models. Decatur in Illinois is one example I have seen where over three quarters of the city both directly and indirectly are employed by ADM - Archer Daniels Midland. I have met with the Assistant to the Chief Executive, the infamous Marty Andreas!
Maybe we should create a Single Desk for iron ore too. We'll give the monopoly powers to BHP and then all the nations iron producers can market through them? Who would be the winner? Not the shareholders of Rio, Iron Ore Holdings or Mount Gibson!
AWB's right of veto over applications to the WEA will be removed. The Single Desk will stay but it will technically not be a monopoly acquirer anymore. And like on Business Sunday today implied, all the big growers will be wooed across to lucrative contracts with domestic and international grain traders. If you're too lazy to learn how to be a part of the process, then farming in the new century is not for you.
AWB Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
