Australia: Demystifying WA’s ‘price advantage’ for graingrowers

ABB announced on December 8 that there has been considerable debate recently regarding claims that South Australian growers are being disadvantaged by poor cash feed barley prices compared to their interstate counterparts.

Some reports have suggested this might be $25/tonne in favour of ‘market’ cash prices in Western Australia over what growers can get in South Australia.

The Single Desk too has come in for unjustifiable criticism.

It’s important to ensure we’re comparing apples with apples and, before assigning blame, to revisit the underlying philosophy of the desk.

Like the ‘Three Musketeers’ refrain, the Single Desk is “one for all, and all for one”. All growers can contribute to an export pool (in SA this can be up to 2.2 million tonnes annually) and equally share in proceeds of selling that barley internationally over the 18 month period demanded by the buyer.

This is important for overseas buyers because they don’t all want, nor could they have, all of our barley at once. The desk benefits SA growers in later reaping areas who would be denied the chance to provide grain, say, for early shipping orders which rapidly fill at the start of harvests.

The South Australian Farmers’ Federation says cash prices paid to SA barley growers are averaging $25/tonne lower than that paid WA growers. But there is a catch.

WA growers must deduct the $8.95/t receival fee built into the price being offered because of the direct billing system that operates there but not in SA.

Geographically, SA growers are further away from Asian and Middle East markets than their WA counterparts. It takes an extra five days for SA barley to reach Asian destinations compared to WA. This shipping difference explains another $10/tonne ‘advantage’ for WA growers.

There is also a $2 higher cost in “storage and shipping costs” for SA, compared to WA. So, these three transparent and fixed amounts account for $21 of the so-called ‘$25 advantage’ to WA growers.

The difference in average prices for feed barley WA versus SA is maybe $10 – but can be lower or higher. Interestingly, some pundits have said that despite all the brouhaha on this issue, the real difference might be $4/tonne.

It’s important to note, the more barley that goes into cash, the less is available to the pool (the Single Desk in SA, and ABB’s Grain Australia partnership with Grain Pool in WA).
ABB will always support the Single Desk principle. Through experience we’ve found that international buyers know they have no-one else to go to, to negotiate a cheaper price, if they want SA growers’ barley.

We also know the majority of SA growers support the desk. Growers must avoid becoming the silent majority and voice that support if they want the desk to continue.

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