GrainCorp a bitter twist in our love affair with agrarian socialism

In The Australian today:
“Let’s start the week with a heretical thought: Australian farmers aren’t idiots. If they are concerned about the proposed acquisition of GrainCorp by Archer Daniels Midland, their fears shouldn’t be dismissed as hysterical rants.”

About Henry Ergas

Henry Ergas is a columnist for The Australian newspaper and the inaugural Professor of Infrastructure Economics at the SMART Infrastructure Facility at the University of Wollongong. The SMART Infrastructure Facility is a $61.8 million world-class research and training centre concerned with integrated infrastructure solutions for the future. Henry is also Senior Economic Adviser to Deloitte Australia. Prior to these concurrent roles Henry worked as a consultant economist at NECG, CRA International and Concept Economics. Henry's previous career was as an economist at the OECD in Paris, where amongst other roles he headed the Secretary-General’s Task Force on Structural Adjustment and was Counsellor for Structural Policy in the Economics Department.
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16 Responses to GrainCorp a bitter twist in our love affair with agrarian socialism

  1. Tel

    From a national security perspective, it isn’t unreasonable to put a proviso that the new owners cannot physically remove infrastructure and take it away with them (I doubt they would have any good reason to do so). Should there be a war or something, government can always pass extra war powers acts as they need to (they tend to do that anyway).

    From the farmer’s profit perspective, I guess they are worried that the new owners will impose a fat markup but that in itself would encourage competitive infrastructure building. The idea of putting grain in a barrel isn’t exactly the crown jewels of trade secrets. Any numptie can do it.

  2. fred

    That bloke has had too many positions to know what is going on in the real world.
    He has been out of touch with the people that it will effect to know what is going on.
    In other words he is a b/s artists.
    The only thing he worries about is the $$$$$$$s in his pockets.
    I bet he crawled for every position he has had.

  3. Tom

    Who is “that bloke”, Fred? Someone from ADM or Henry Ergas? You needs to be more specific.

  4. Zulu Kilo Two Alpha

    Graincorp only handles half the grain produced on the East coast anyway – here in the Wild West, Co operative Bulk Handling stores and transports my grain for about 14 dollars a tonne less then Graincorp charges the Eastern States growers – Growers may demand of the new owners that they reduce costs…..One of the joys of farming is that you are the only business that pays freight and handling both ways…

  5. Maws

    Graincorp only handles half the grain produced on the East coast anyway – here in the Wild West, Co operative Bulk Handling stores and transports my grain for about 14 dollars a tonne less then Graincorp charges the Eastern States growers

    There’s a reason for that…..GrainCorp brought out Gardner Smith (mainly for their infrastructure, being storage facilities and transport hubs)….. didn’t hear anyone complaining then.

  6. Token

    From a national security perspective, it isn’t unreasonable to put a proviso that the new owners cannot physically remove infrastructure and take it away with them (I doubt they would have any good reason to do so). Should there be a war or something, government can always pass extra war powers acts as they need to (they tend to do that anyway).

    Reading the article, it seems a lot of the infrastructure has been made redundant by the desire to create higher value product.

    And even GrainCorp’s network of up-country silos now faces serious competitive threats. Under the Wheat Board monopoly, deliveries in each area were once mixed into that uniquely Australian product, “Fair Average Quality” wheat. Replicating the massive concrete silos in which that mixing occurred would have been enormously costly and inefficient.

    But competition has undone that one-size-fits-all approach, with the segregation of grain into many quality classes giving growers scope to profit by improving their product mix. As that happens, yesterday’s soaring towers are being replaced by tarpaulin-covered bunkers, each reserved for a particular quality grade.

    That dramatically reduces the investment required to bypass GrainCorp’s services, be it through on-farm storage, domestic demand from flour mills or feedlots or new storage providers. Growers are therefore less exposed to GrainCorp than they once were; and, should ADM hike its charges or reduce its service standards, it can expect to face a sharp market reaction, devaluing the $2.7 billion acquiring GrainCorp will have cost it.

    What a great way to cut through the hysteria on this issue.

  7. Jessie

    Zulu Kilo Two Alpha,

    To lay with one hand the power of the government on the property of the citizen and with the other to bestow it upon favored individuals to aid private enterprises and build up private fortunes is none the less a robbery because it is done under the forms of law and is called taxation.”

    Note use of term corporate welfare in Cato Institute 1995 paper.

    Would be interested in a comment on the history of the Diesel Fuel Rebate Scheme, which morphed with support of research into the 2012 Low Aromatic Fuel Bill AVGAS/COMGAS $800 million+ project for rural Australians that sniff petrol.
    The Excise Tariff Amendment (Aviation Fuel Revenues ) Bill 1999 assisted many to remain and be fully serviced in remote lands. Lands that remained unproductive under cultural and environmental regimes.

  8. MACK1

    Interesting polling results on this (and other subjects) at the ABC’s vote compass

    The vast majority want more controls on foreign investment.

  9. Token

    Interesting polling results on this (and other subjects) at the ABC’s vote compass

    The vast majority want more controls on foreign investment.

    Is the definition of “foreign investment” is provided with the survey?

    If it isn’t it is as meaningless as “austerity”.

  10. Combine Dave

    The vast majority want more controls on foreign investment.

    Simply pathetic….

  11. stackja

    I wonder why overseas buyers see value that Australians do not. My various company shares are not for sale.

  12. Tel

    David:

    Unilateral free trade has a proven record of promoting prosperity. Hong Kong and Singapore, both island nations with no mining or agriculture industries, have benefited immensely from freely buying and selling with the world.

    Not open slather free trade, everything is closely supervised.

    http://www.sla.gov.sg/htm/ser/ser0306.htm

  13. Jessie

    Thanks Walrus,
    I read a full excise credit system will be in place (?harmonisation by 2015 with the exception of 50% discount for alternative fuels) and those receiving fuel excise credits of over 3million will have to join, participate and measure in the Greenhouse Challenge. Otherwise the maps are very nice.

    Tel is looking in the right direction I think.

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