The analysis for malting barley showed that the operations of the Board
delivered a small net benefit to producers. It indicated that the Board price
discriminated between domestic and export markets and, as a result, prices on
the domestic market were higher. This implies that processors of malting
barley paid a higher price, resulting in a net cost to them.
a best estimate of the export demand elasticity of –10, the results
indicated a net gain to grain producers of $0.206 million per annum, a net
processor/consumer loss of $1.235 million per annum, and an overall net cost
of $1.029 million per annum. These results assumed that the Board knew with
certainty the values of export demand elasticities, and further that it used
that knowledge to maximise returns to growers. In sensitivity analyses these
assumptions were relaxed, but the results were seen to be quite stable and
there was never likely to be a net (positive) benefit for the NSW economy as
a whole from price discrimination in malting barley markets.
Failure of the NSW Grains
Public Accounts Committee of the NSW Parliament found that reasons for
failure of the NSW Grains Board included a conflict between the Board
structure and incentives, industry change, the high growth strategy pursued
by the Board in later years, and other operational factors (Public
Accounts Committee 2001). These reasons are not related to the
public benefit test. However, there is a link in that the high growth
strategy appears to have been prompted by the deregulatory push and the
review under National Competition Policy (NCP) guidelines (Wyatt
and Allen 2000, p. 3).
Issues in monopoly selling
results above indicate that in a strict consumer surplus/producer surplus
context there were unlikely to be net public benefits from the price
discrimination model used to assess the activities of the NSW Grains Board.
Examination of Figure 1 leads to the conclusion there are never likely to be
net public benefits in this context.
transfer of product from domestic to export markets leads to higher prices
paid by domestic consumers or manufacturers, a transfer of surplus in the
domestic market from consumers or manufacturers to producers, and an
associated efficiency loss to consumers or manufacturers. Product shifted to
the export market is likely to earn a lower price with no net gain. However,
there are other broader considerations that can be considered in considering
such arrangements (Lipsey et al. 1981).
review of the national Wheat Marketing Act by an independent Committee also
considered the effects of single desk selling of bulk export wheat (Irving,
Arney and Lindner 2000). This Committee could not find clear,
credible and unambiguous evidence that these arrangements for the marketing
of export wheat were of net benefit to the Australian community.
is very difficult to do in the broader context beyond consumer
surplus/producer surplus measures. Irving
et al. (2000) considered that any single desk price premiums were
likely to be small; and that because there was uncertainty about the
magnitude of the key effects (single desk price premiums, innovation in
marketing, and grain supply chain costs) there was uncertainty about whether
or not there were net benefits to Australian wheat growers and the Australian
Federal Government response was to retain the legislative underpinning for
Australia's single desk arrangements for exporting wheat (Truss
2001), with a possible review in 2004 depending on government
barley, the deregulation of the Victorian industry in 2001 (Brumby
and Hamilton 2000) occurred on the basis that there was no
compelling reason for an export monopoly and that this was expected to
stimulate investment and innovation. While the South Australian and NSW (Amery
2000) industry regulated arrangements have been maintained, the
Victorian move will provide additional dynamics and a test of state
availability and level of cash prices offered to Victorian producers, and the
development of a freer market with more certainty for companies and investors
will allow an interesting comparison in 5 or 10 years time.
there have been changes in the co-operatively-owned Bulk Handling
Authorities, with Graincorp and VicGrain merging, The Grain Pool of WA and
Co-operative Bulk Handling Limited merging, and GrainCo taking over the NSW
Grains Board. At least some of these entities are becoming involved in
is also vertical integration with AWB Limited and FreightCorp combining in
joint rail freight agreements to invest in Victorian and NSW rail and grain
handling infrastructures. These include construction of high volume grain
freight consolidation facilities at several centres and investment in grain
wagons for rail transport.
there is an expansion of handling and transport authorities into grain
trading, and of trading organisations into handling, transport and storage.
This vertical integration should allow further competition and efficiencies
in the industries.
is no doubt being driven by commercial pressures, but also by the public
inquiry process in the competition policy framework as evidenced in Irving
et al. (2000) and NSW
Government Review Group (1999).
the time being, the debate about monopoly selling powers has appeared to
subside. However, the issue will surface again if governments again decide to
review legislation. The measurement of direct benefits from single desk
selling will be complicated by new commercial structures, but there will be
more information as a basis for analysis.
may also be less importance placed on the net public benefit test if NCP
guidelines are watered down. However, debate and analysis of the benefits
from a single desk arrangement will be part of the process.
Richard (2000), 'State Government Retains Vesting Powers of NSW Grains
Board', Media Release, Minister for Agriculture, Sydney.
John and Hamilton, Keith (2000), 'Victoria opens its $102 million barley
market to export competition', Media Release, Minister for Agriculture and
Office of the Treasurer, Melbourne.
for International Economics (1997), Review of the Victorian and South
Australian Barley Marketing Act 1993: Under the National Competition Policy
Review Legislative Restrictions on Competition, Canberra.
of Australian Governments (1995), Competition Principles Agreement,
Memorandum between Governments, Canberra.
R.J. and Griffith, G.R. (2001),
‘Single Desk Selling by the NSW Grains Board: Public Benefit or Public
Cost’, Australian Agribusiness Review, Paper 6, Volume 9. Available on line at: http://www.agrifood.info/Review/2001v9/Farquharson/FarquharsonGriffith.htm
G.R. and Mullen, J.D. (2001), 'Pricing-to-market in NSW rice export markets',
Australian Journal of Agricultural and
Resource Economics 45(3): 323-334.
Malcolm, Arney, Jeff and Lindner, Bob (2000), National Competition Policy Review of the Wheat Marketing Act 1989,
NCP – WMA Review Committee, Canberra.
Richard G., Langley, Paul C. and Mahoney, Dennis M. (1981), Positive
Economics for Australian Students, Weidenfeld and Nicolson, London.
Strategy Group (1996), 'Economic Analysis of the Value of the Single Desk',
Confidential Report to the Australian Barley Board, Sydney, April.
N. and Davenport, S. (1999), ‘Plant and Animal Health Regulation: Some
Competition Policy Issues’, Agribusiness
Perspectives, Paper 19. Available on line at: http://www.agrifood.info/Review/Perspectives/milham.htm
Government Review Group (1999), Review
of the NSW Grain Marketing Act 1991: Final Report, The Government of New
South Wales, Orange.
Accounts Committee (2001), Inquiry
into the Collapse of the New South Wales Grains Board, Report 10/52 (No.
Warren (2001), 'Wheat single desk to remain', Media Release, Minister for
Agriculture, Fisheries and Forestry, Canberra.
S. and Allen, L. (2000), 'NSW Grains Board losses top $8.5m', [Online].
[2000, 28 July].