Logistics News

ACCC to intervene on wheat export system

Australia’s competition watchdog will work with the wheat industry to iron out bugs in Viterra’s newly proposed auction system for port capacity allocation

By Anna Game-Lopata | April 13, 2012, 2012

Australia’s competition watchdog will work with the wheat industry to iron out bugs in Viterra’s newly proposed auction system for port capacity allocation.

The Australian Competition and Consumer Commission (ACCC)
is concerned the dominant grain handling service provider’s suggested system is too similar to the one operating in Western Australia, where recent auctions have highlighted a number of operational problems.

“Large volumes of capacity have not been allocated through auction, despite the record breaking crop harvested this season,” says ACCC chairman Rod Sims.

Despite additional measures incorporated in the Viterra system,
including improved transparency and flexibility to move shipping slots, Simms has called for more time to consider potential modifications before introducing the system to South Australia.

“The ACCC is mindful that the industry is currently considering how to respond,” Simms says.

“This is an industry-wide problem and more time is required to properly explore potential solutions.”

The ACCC’s decision to intervene follows calls from the Grain Producers South Australia (GPSA) for the state’s Essential Services Commission (ESCOSA) to monitor access and pricing across the whole wheat export supply chain, reported earlier in the week by SupplyChain Review.

The GPSA submission was one of seven made to ESCOSA’s review into whether the current port pricing and access regimes in South Australia should be continued for a further five-years.

In its submission, GPSA, which claims to represent all South Australia’s grain producers, calls on the government to prevent “vertically integrated access providers” setting terms and conditions that “discriminate in favour of their downstream operations” and to provide incentives to reduce costs and improve productivity.

Viterra, which currently owns and operates approximately 95 percent of South Australia’s storage and all of its port terminal capacity, recently provided the ACCC with an undertaking including the proposed an auction system to allocate port terminal capacity among competing exporters.

“The ACCC acknowledges that Viterra has approached its obligations under its access undertaking in good faith and the concerns the ACCC has identified are largely industry issues, rather than a reflection on Viterra’s approach,” Rod Sims says.

Sims says the ACCC will work with Viterra and the industry to ensure that the best possible auction system can be introduced in SA for the benefit of the bulk wheat exporting industry and the wheat industry more broadly.

“Given the need for further industry consultation, this will involve extending the timelines set out in Viterra’s access undertaking without penalty to Viterra,” Sims says.

The ACCC has a role in approving access undertakings for wheat exporters as part of the deregulation of the wheat industry.

“Access undertakings are intended to ensure that third party exporters are able to access the port terminals operated by vertically integrated port terminal operators, ensuring fair competition in the market for the export of bulk wheat,” Simms says.

The ACCC is under pressure as part of Viterra’s September 2011 undertaking included an obligation to introduce an auction system for the primary allocation of port terminal capacity by May 2012.

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