West Australia’s Agriculture Minister Kim Chance's decision to allow an Eastern States grain trader to export malting barley from West Australia (WA) to China has stunned the State's primary exporter, Grain Pool, and left the future of its export monopoly unclear, West Australian Newspapers Limited reported on January 3. NSW trader Brooks Grain was initially refused a permit to export 35,000 tonnes of WA malting barley to China by the Grain Licensing Authority (GLA) but had the decision overturned on appeal to the Minister.

The Grain Pool has the monopoly over bulk exports of barley, canola and lupins from WA but rival traders can apply for special licences to export outside the single desk system following the partial deregulation of exports last year. Grain Pool general manager Andy Crane said the Minister's decision to overturn the GLA's independent ruling had serious implications for the single desk.

"A single desk only works in a market like China when you are the sole seller," he said. The reasoning the Minister offered for overturning the initial decision showed a lack of understanding about how the single desk worked. "We can't allow the single desk to be cherry picked, otherwise we are going to see its death by a thousand cuts," he said.
The fact that Brooks Grain intends supplying a new customer, not currently buying from Grain Pool, did not matter.

"The issue of whether Grain Pool has previously supplied a particular customer in China is irrelevant," Dr Crane said.
"Grain Pool markets all the available malting barley to China, managing supply routes to achieve the highest possible prices and part of that price management often involves deliberately not selling to certain buyers."

Mr Chance defended his decision, saying it was based on market data including two independent analyses of malting barley markets in China. The new licence was unlikely to affect the Grain Pool's ability to generate "a significant premium" in other parts of the Chinese market. "Granting of the export permit, in this case, is unlikely to adversely impact on the State's reputation as a grain exporter nor will the State's grain industry be disadvantaged," he said.

"In reaching my decision I also noted the price quoted in the applicant's case was above that currently being attained for malting barley in China." Dr Crane said the Minister was misinformed because the Grain Pool was yet to establish a malting barley price in China for the current season. "We can also show excellent prices for single cargos, but it is about achieving high prices for the entire crop," he said.

It was "staggering" Grain Pool had not been approached during the appeal process for information on market prices and customers. "We don't even know what the appeal process is," he said. "The barley market is not transparent and no independent expert could form a reliable judgment on the impact of such a licence on the single desk without at least testing the publicly available information with the Grain Pool's marketers."

Mr Chance said figures showed China imported about 1.9 million tonnes of malting barley in 2002-03 and was expected to increase its barley imports in 2003-04 as demand for beer rebounded following the SARS outbreak. He said in the past five years the Grain Pool's share of the Chinese market had been below 15 %. Dr Crane said the Grain Pool and east coast barley marketer ABB controlled 80 per cent of Australia's malting barley exports to China under their Grain Australia alliance.

Controversy has surrounded the GLA since it began issuing special licences in October. Its approval of permits covering more than 430,000 tonnes of feed barley to the Middle East sparked calls for a review of the GLA from farm lobby group WAFarmers and led to Grain Pool setting up a special "traders" pool to prevent grain being dumped in its pools if sales by its rivals fell through. WAFarmers repeated its call for an immediate review of the GLA, describing the Minister's actions as "quite stupid".

04 January, 2004