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18 responses to “Hockey’s Graincorp decision”

  1. Chris

    On the other hand many local farmers saw deregulation and privatisation as a backward step. Their fears appear to have been realised in that handling costs, they claim, have risen by as much as 40 to 50%. There have also been service difficulties and the neglect of infrastructure.

    IIRC there were farmers who supported removal of the single desk policy, especially those in WA. I can’t remember the exact reasons why but I think it was something to do with them thinking they could get better prices if they were allowed to sell direct.

    But it is now probably not possible to go back to some combo of farmer/public ownership and control.

    The farmers aren’t prevented from starting a co-op to do so though are they? Probably comes back to being able to raise sufficient capital though.

    For example, we built eight oil refineries. Singapore built one, knowing that the true competition would be with the rest of the world. Guess which model looks like surviving into the future?

    How much of that is due to Australian governments in the past needing to spread the money around to as many of the states as possible rather than explicit policy of having them compete against each other? Also I bet the government in Singapore faces a lot less environmental opposition to building a giant refinery than governments in Australia would. They are able to basically do what they want, especially with big economically valuable projects, and if you don’t like it you can go to jail….

  2. still@downfall

    Thanks Brian for this post. The centre right free traders like Sloan fair went off their heads and Paul Howe in The Australian wanted the removal of family farms to be replaced by corporations.
    Mick Keogh of the Australian Farm Institute wrote an opinion article in reply to Howe and the title could be applied to most of the detractors to the decision to block ADM’s takeover of Graincorp – Agricultural ignorance no problem for those with an opinion about Graincorp

  3. Geoff Henderson

    Paul Howe seems to have forgotten that some American success rides on subsidies. See here:
    Does Howe plan to subsidise farms under his model?

    I feel it is right to hold the Graincorp in Oz, but confess I have no idea of a balanced argument for or against. For me, I can’t take Graincorp in isolation. It seems another example of selling off our country, and I really think that we have done enough of that.
    Likely there are various economic arguments that encourage us to sell stuff. But it all seems too easily done, and damned irksome when we sell to countries that simply ban us from buying land in their country.
    But the arguments IMHO are not all plain economics. There are cultural, social, national interest matters to consider.

  4. Terry2

    As noted, CEO of Graincorp, Alison Watkins has resigned : to take up a position as Managing Director for Australia of Coca Cola Amatil.

    It seems that she was just there to see the ADM acquisition through and had already lined up another job. Usually, an appointment of this sort at Coke would have taken months of screening prior to appointment.

  5. John D

    Interestingly, Robert Gottliebsen in Business Spectator came out in support of Hockey. Gottleibsen is not a raving nationalist and his arguments are well worth reading:

    n my view Treasurer Joe Hockey made the correct call on GrainCorp. If GrainCorp can find the right management and directors, the company now has the opportunity to be the ‘Big Australian’ of agriculture. In other words it could duplicate, in agriculture, what BHP Billiton has done in minerals.

    Australia has set up agriculture as the next major growth industry for the nation. But the world of agriculture is changing and the rewards of the industry are going to the transporters and processors of agricultural products. If agriculture is indeed going to be a growth industry we will need a national champion in those growth areas. And GrainCorp is our one and only opportunity to have such a champion.

    Joe Hockey almost certainly made his decision without my assistance. But as the treasurer and his people were deliberating last week I set out very clearly why the losers in the GrainCorp proposal were the farmers and the Australian nation. The winners were the management and, in the short term, the shareholders……
    In my view, the three main reasons stated for agreeing to the takeover of GrainCorp either do not stack up of are offset by the disadvantages. People like the Business Council of Australia indicate that the GrainCorp rejection will frighten off overseas investors. Overseas investors only have to look at how we approved the Canadians bid for Warrnambool Cheese in a way that severely disadvantaged local bidders to see that there is no general anti-foreign bias.

    Most realistic overseas investors would understand that bids to change a national infrastructure company, which provides the lifeline for the farming community, into an international player in competition for capital and resources with rival overseas agricultural industries will usually be blocked.

    The second reason that is touted is that Archer Daniels Midland would have provided the $250 million to $500 million required to improve the GrainCorp infrastructure. In the last 10 days I have addressed the trustees of more than 1500 self-managed superannuation funds. If a proper agricultural infrastructure company is set up then Australia can raise that money very easily. And setting up that structure must be the first task of GrainCorp management. I have no doubt that Archer Daniels Midland would have been aware of the global thirst for good infrastructure investment projects. However they may not have been aware that, in Australia, that desire is strongest among the self-managed funds, which are the largest players in the superannuation capital arena with a market share of over 31 per cent.

    The third reason people give for acceptance is that Australian farmers would have gained access to the Archer Daniels Midland customer base. That sounds like a good idea but Australian grain is in big demand and GrainCorp should know who the large buyers are and also be able to contract with large trading houses like ADM without giving them ownership.

    It’s true that shareholders would be much better off in the short term accepting the takeover offer. They have been badly treated. But when you own part of a nation’s vital infrastructure you cannot assume that you will be allowed to sell that infrastructure to people who are overseas rivals –particularly in an industry that we have earmarked for national growth.

    Labor was wrong to sneer about “open for business”. We should be open to business that is in our interest, not every shonky deal that overseas investors want to sell us or business that only makes sense in terms of the strange beliefs of free market extremists.

  6. mindy

    The Americans in particular saw it as inherently evil and a form of subsidy.

    As Geoff aluded to above, particularly hypocritcal from the land of the agricultural subsidy.

    I think Hockey has made the right decision and that this is the better outcome for Australian farmers.

  7. jungney

    I don’t have a problem with protectionism especially as administered from a single desk; it’s a form of communalism in the face of global markets. More fun is the fact that Hockey is now learning some Australian history; he’d do well to learn up on Black Jack McEwen if he’s going to learn how to deal with the tail that wags the dog.

  8. eilish

    I am concerned to find I’m in agreement with Barnaby Joyce on this one. I don’t know whether to high five Mindy or give condolences.

    I’m clearly not as clever as Bernard Keane: but really, selling control of Australian wheaty things to America? Surely not of a long term benefit.

  9. Bolter

    Chris – WA farmers wanted the single desk gone as they have a fundamentally different market to the East coast. WA grain is nearly all for the export market. As such WA grain growers felt the Wheatboard was dominated by East coast concerns that had little to do with West Coast production and markets. CBH is a co-operative of 4000 WA farmers and they have made some significant capital investments in infastructure in WA and a wheat terminal in Newcastle. It is hard to say from the outside though if it being local is an overall positive or negative.

  10. Paul Norton

    Paul Howes is in favour of capitalist creative destruction of family farms but against capitalist creative destruction of alumina smelters. This is the brains of the AWU at work.

  11. peter

    Probably no surprise that the US State Department has expressed it’s disappointment with the decision. I wonder if that means more hardball from them on negotiations over a free trade agreement.

  12. golly

    How do we reconcile this event with the (in my view fatuous) claim that we live in a neoliberal hegemony?

  13. still@downfall

    [email protected] 9 & [email protected] 10
    Correct there is a different view in WA pushed mainly by one of the farm organisations, PGA. The new member for O’Connor, Rick Wilson previously had a role at PGA as explained in the WA newspaper Farm Weekly, ADM call ‘disgraceful’: PGA.

    Key Western Australian Pastoralists and Graziers Association’s grains committee members will arrive in Canberra on Monday to witness their former colleague and now Liberal O’Connor MP Rick Wilson’s maiden speech in the House of Representatives Monday night.
    Mr Wilson, Gary McGill and Leon Bradley campaigned heavily for deregulation of the AWB wheat export market over more than two decades.

    But not all WA farmers hold the same view, the comment section of the article linked to above is an interesting read.

  14. Graham Bell

    Terry2 @ 4:
    You mentioned one of the most serious problems in Australian business: Seat-warmers. Hit-and-run CEOs. Here today and gone tomorrow.
    Not only are many of these people grossly overpaid by the mug shareholders but they have almost no responsibility whatsoever if their actions cause widespread harm to the people and firms they are paid to serve. Yeah, we know; you can take them to court, eventually, and then what?

    I have just listened to Susan George on BBC World Business Report; she was talking about the ruin suffered by thousands of Mexican small farmers when NAFTA was set up. There are some lessons in that for Australian grain-growers. Not sure if what she said there is available as a transcript somewhere …. but I did find this link which you may find enlightening http://www.tni.org/article/democracy-danger-rise-illegitimate-authority

  15. Graham Bell

    Among the reasons that so many farmers were opposed to flogging off GrainCorp to ADM was that farmers are better educated nowadays and so too are their kids.

    I’ll bet more than one child of a grain farmer has said “Hey Dad, if we sell out to them, we will end up in the same mess as did farmers a couple of hundred years ago with The Enclosures in England and The Clearances in Scotland. Don’t let them do it.”

    Claims that the opposition to the sell-off of GrainCorp is simply naive nationalism – and a return to the bad old days of protectionism – is nothing but a load of low-grade commercial spin. That sort of advertising is believed only by the gullible. Only a sucker would fall for it.

  16. Graham Bell

    The ADM-GrainCorp issue has become a watershed.

    The dishonesty of both sides of Australian politics on foreign ownership of Australian productive assets has been exposed. Neither side wants to know the extent of foreign ownership, investment and loan-sharking. The Lefties, by their complicity, have been exposed as being merely the left hand of piratical capitalism.

    The old stunts for shutting up anyone who questions any aspect of foreign ownership and control no longer work. The usual false allegations of protectionism, nationalism, racism, being opposed to progress, naivity and all the rest have become laughable. Nowadays, only fools believe the fairy-stories circulated by those seeking to carve up Australia like a melon.

    The problem is that although many Australians have finally woken up to what has happened to their industries, it is too late; most of the damage is now irreparable.

    If you think my views are extreme, you should hear what others are saying off-line. I’m quite mild by comparison.

    This issue is a real watershed.