Sims stands firm over access to Graincorp shipping terminals
Rod Sims, chairman of the Australian Competition and Consumer Commission, says it will be "difficult" to ensure the mandatory code of conduct governing access to the critical bottleneck infrastructure - being negotiated at present - will be as effective as the existing regime.
He said that easing controls over wheat access to the terminals - which on the east coast are owned in a near-monopoly by wheat exporter and takeover target GrainCorp - risked giving too much power to GrainCorp and its counterparts in Western Australia and South Australia, to the potential detriment of farmers and rival wheat exporters.
"It is purely commercial behaviour for any company that has ownership of a bottleneck infrastructure to want to keep its competitors out," Mr Sims said.
"I'm all in favour of the market working, but I know what the market working means when you own a bottleneck infrastructure facility and you're competing upstream or downstream with other players. It's clear what's going to happen."
Mr Sims said he would prefer the present regime remain in place, but said the ACCC was working "very hard" to ensure the code replacing it would be as effective. "We [should] get an effective mandatory code, which assures us of effective access for competitors to the bottleneck infrastructure. But if we can't get that - if that turns out to be too hard - then yes, we should happily go back to what we have now, which is the current undertaking regime," he said.
Mr Sims' comments come as the government weighs up a proposed $3.4 billion takeover of GrainCorp by US agribusiness company Archer Daniels Midland, which the ACCC has approved. The takeover - backed by GrainCorp's board - has sparked fears access to the terminals could be jeopardised.
"The terminals are what we deem essential infrastructure - it is the only way we can get bulk grain in and out of the country," said Brett Hosking, grains group president of the Victorian Farmers Federation. He said any deal governing access needed to have "teeth", and said it should be in place before the sale of GrainCorp was considered.
ADM has tried to ease concerns, telling a federation meeting last month that it wanted "as many growers as possible using the ports". The ACCC, along with terminal owners, grain exporters and farmers, is negotiating a mandatory code of conduct to replace an "access undertaking" regime introduced after the implosion of AWB.
GrainCorp has argued that the access regime should be lifted, calling for regulation to be applied "lightly and evenly". It argues that it has a "strong incentive" to give access to its ports for wheat exports.
"It would absolutely make no commercial sense for us to restrict access to other exporters," a spokesman said.
In 2011, on the back of a Productivity Commission recommendation, the federal government unveiled plans to lift the access regime and replace it with a voluntary code of conduct. This was later boosted to a mandatory code of conduct.
Frequently Asked Questions about this Article…
The dispute centres on who can use Australia's coastal grain export terminals. GrainCorp and a small number of terminal owners control key east‑coast facilities, and regulators, farmers and rival exporters are negotiating a mandatory code of conduct to ensure fair access for wheat exporters. There are fears that easing controls could let owners favour their own businesses and harm competitors and growers.
Rod Sims is the chairman of the Australian Competition and Consumer Commission (ACCC). He has warned it will be difficult for a new mandatory code of conduct to be as effective as the current access undertaking regime, and said that if a strong code can't be achieved the ACCC would prefer to keep the present regulated regime.
GrainCorp has argued the existing access regime should be lifted and for regulation to be applied "lightly and evenly." The company says it has a strong incentive to allow access to its ports for wheat exports and that it would make no commercial sense to restrict other exporters.
A proposed $3.4 billion takeover of GrainCorp by US agribusiness Archer Daniels Midland (ADM) has heightened worries that terminal access could be jeopardised. The ACCC approved the takeover, but farmers and regulators are negotiating a code to make sure competitors continue to have effective access. ADM has tried to allay concerns by saying it wants as many growers as possible using the ports.
The mandatory code of conduct is a negotiated set of rules to govern access to bottleneck grain export infrastructure. It is intended to replace the current "access undertaking" regime introduced after the AWB implosion. The article notes the regime was proposed to be lifted in 2011 following a Productivity Commission recommendation, originally to a voluntary code and later to a mandatory code — with the ACCC working to make the new code effective.
Farmers and rival exporters call the terminals "essential infrastructure" because they're the only way to move bulk grain in and out of the country. If terminal owners can favour their own downstream or upstream businesses, it could give them too much market power, potentially hurting growers' returns and the ability of other exporters to compete.
If negotiators cannot secure an effective mandatory code that guarantees access for competitors, Rod Sims and the ACCC have said they would prefer to revert to the current access undertaking regime — effectively keeping stronger regulatory controls in place over the terminals.
Investors should watch the government decision on the ADM‑GrainCorp takeover, the final shape and strength of the mandatory code of conduct, statements and enforcement actions from the ACCC, and any indications that terminal owners might restrict access. These developments can affect GrainCorp's competitive position, market power concerns and broader sector dynamics for Australian wheat exports.
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