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January 1, 2007
by Morton I. Sosland Editor-in-Chief
If any forecast may be made of what lies ahead in 2007 for the world grain industry, the most likely is major change in how the two single-desk selling organizations function. The prospect that the Australian and Canadian entities with monopoly powers over marketing of wheat and other grains will be quite different by year’s end than they have operated for the past three-quarters of a century is hugely significant. It is comparable to — if not more important than — the transformation that saw the end of the monopoly purchasing powers of those two once pre-eminent grain buyers: Exportkhleb in the Former Soviet Union and Ceroilfoods in China.
This year marks the 25th anniversary of World Grain magazine. Looking back to those beginning years, when buying by Exportkhleb and Ceroilfoods moved markets and determined the pace of global grain trade, and realizing how what was then the Australian Wheat Board (AWB) and the Canadian Wheat Board (CWB) played similarly all-powerful roles, it seems as if a historic era for global grain markets is ending, and that a new chapter is at hand.
While the two grain buyers gave way to the opening of domestic markets, the changes in prospects for the monopolies have much different propellants. Competitive sellers have long criticized the Canadian and Australian marketing systems, mainly contending that government participation, no matter how restrained, gives unfair advantage. Even domestic support for these monopolies, which had their origins in the Great Depression and rural populism, has not been universal. The tipping points this year are quite different, even though each experienced increasing challenges to the single-desk concept.
In the case of Canada, it is leadership of the government by a Conservative party committed to revamping the CWB that seems to hold out the likelihood of change. The government intends to conduct a plebiscite among prairie growers on the monopoly, but only on barley. The CWB, which fiercely opposes the government’s moves, has asked that the grower vote address wheat marketing also. When it comes to the idea of the CWB sharing marketing power, its chairman called this an illusion. He said that without the monopoly, “there is little value in the ongoing existence of the CWB.”
The situation in Australia is the fieriest. This is due to the way AWB Limited, the listed company that assumed the mantle of the Australian Wheat Board, has exposed itself to attack for its under-the-table dealings with the deposed Iraqi dictator, Saddam Hussein, in order to maintain its wheat supplier position. A commission named by the government, in response to charges that AWB violated the United Nations’ oil-for-food program provisions, criticized AWB and its board and leadership in strong terms. Calling it “a failure in corporate culture,” the commission cited the possibilities of criminal charges being brought against the individuals involved. It did not express an opinion on whether AWB should be stripped of its monopoly, but noted how the company “has lost its reputation” and that many customers will no longer deal with it.
Australia’s prime minister has promised major reform of AWB Limited. The company has tried to take the initiative by proposing that the monopoly power be spun off to a separate entity, AWB International, owned by the country’s grain farmers. AWB Limited would continue to supply services and would operate as a competitive merchandiser. Its critics contend such a split is insufficient, that the monopoly power needs to be removed, and that other grain companies should be allowed to compete.
“A dominance of self-importance” is one term used by the commission to attack the AWB. Some might say that is the inevitable result of monopoly power. Whatever, it is certainly creating a new and hopefully happier chapter in how grain is marketed around the world.