Inquiry sought into grain pricing

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Jenne BrammerThe West Australian
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A petition is circulating among WA farmers urging the State Government to inquire into grain network pricing.

Organised by "a group of likeminded farmers", the petition will be presented to State Government early next year and was instigated amid concerns CBH could be offering preferential network pricing to farmers close to Bunge's receival points.

Although the Pastoralists and Graziers Association said the petition was not initiated by its organisation, sentiment behind it echoed the lobby group's concerns that preferential treatment was being offered to farmers benefiting from storage and handling competition near Bunge's catchment area.

PGA interim grains section chairman Gary McGill said he had not yet seen the petition, but was aware of its existence and was keen to sign.

Mr McGill said he had no issue with farmers being offered premiums through CBH's trading and marketing arm, provided that market was open and transparent. Currently farmers in these areas can achieve about a $5 premium to other growers when selling grain to CBH.

But Mr McGill said some farmers near the Bunge catchment were believed to also be receiving possible preferential network pricing.

"CBH's preferential treatment for certain growers has raised questions about the operation of a co- operative structure within WA," he said.

"We welcome competition as it bears down on costs, but CBH is not responding to the competition as most companies would, which is to cut costs and become more efficient.

"Instead they are grabbing hold of capacity from growers in other areas to cross-subsidise this exercise.

"That contravenes what is understood with a co-operative, whereby costs and benefits are shared equally."

Mr McGill said the competition in the Bunbury area would, over time, increase throughout the State as new investors entered the market, putting the co-operative model under increasing pressure.

He said he understood the purpose of the petition was to register growers' concerns.

"CBH operates under a Bulk Handing Act and if it is breaking away from non-cooperative practices, then it's possible the Government may want to show an interest," he said.

Meckering farmer Darren Morrell said in a letter to _Countryman _he also had concerns about network pricing. He cited another cross- subsidisation issue as the incremental reduction of freight rates in the Bunbury catchment.

An example of this is the Wagin site, where freight rates have reduced from $20.32/tonne in 2011-12 to $16.80/tonne in the 2015-16 season, he said.

"This is not the market determining freight rates, it is CBH manufacturing pricing so the haemorrhage of grain to a competitor is minimised," Mr Morrell said.

"Again, this discount is recouped by increased freight charges for selected sites outside the immediate catchment.

"Long-running cross-subsidisation issues for growers delivering direct to port or the standard gauge line is a continuing bugbear. The denial of the practice by board and management is also long-running."

Mr Morrell said the petition was a great opportunity for growers as an inquiry into network pricing would lead to a better understanding of the challenges CBH faced in adhering to the co-operative principles and whether they are suitable for the current changing environment.

CBH general manager of operations David Capper said there was no differential pricing of storage and handling fees across the network.

In relation to freight rates, Mr Capper said the reduction in rates for Wagin was a fantastic result and most rail sites across the State had seen a reduction in freight rates since CBH's investment in rolling stock and the introduction of rail operator Watco.

He said recent press over site-based pricing referred to marketers offering growers grain prices on a site basis rather than on a zone basis.

This is separate to the storage and handling fees that CBH charges, Mr Capper said.

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