“United States and European farm support programs are the major contributors to the very international market distortions they are trying to combat,” said AWB Limited Chairman Trevor Flügge in Russia today.
Speaking at the International Grains Conference in Moscow, Mr Flügge said these support programs, which, in the US, last year exceeded US $20 billion, were a ‘head in the sand’ approach to grain marketing, and must be addressed immediately by US and EU leaders.
“Technological advancements mean that customers’ requirements are becoming increasingly sophisticated. This is placing enormous pressure on us, as suppliers, to perform and is driving a new age of supply chain management. And yet many agricultural commodity traders continue to trade wheat as they have done for hundreds of years in an environment increasingly demand driven with a focus on the needs of customers and not the whim of suppliers. This is just operating in the dark ages,” he said.
“International studies show US farmer support estimates for wheat in 1999 were US $228 per hectare, which equates to over AUD 430 per hectare. A recent USDA report further illustrated this point by noting that US support programs resulted in an extra 4 million hectares of grain planted each year in the US,”
“Many in the international trading environment recognise the need for change, but the current systems do not exist to allow change to occur easily. The policy environment severely distorts the flow of market signals back to growers, thus insulating them from critical feedback on the needs and requirements of customers.
“The impact of these policies should not be underestimated. US and EU subsidies are destroying the livelihoods of efficient producers such as Australia. However, they also prevent poorer countries from building and developing a sustainable agricultural sector because it is simply not profitable for these industries to grow, thus ensuring a reliance on imports.
“Maintenance of these policies will guarantee that food security continues to be an issue in these nations and that the economic development of some of the world’s poorest countries will be held back,” he said.
Speaking about Australia’s system of marketing, Mr Flügge said that while still unique, it allowed Australian growers to respond directly to customer needs with a focus on quality, branding and consistency of supply.
“Australian growers have no government support, no subsidy payments or government financial backing of any kind. Our system recognises that the marketing relationship between the producer and consumer must go beyond that of a simply trader and capture value for both parties,” said Mr Flügge .
While in Europe Mr Flügge will meet with officials from the OECD, WTO and ECC to discuss a range of issues relating to grain trade and marketing. He will highlight to officials the problems with the current trading environment for grains and the need for a strong commitment to greater agricultural trade reform through forums such as the WTO to improve this situation.
“It is important that trade and economic officials understand the evolving marketing environment in the global grains industry today and why it is important that we have a trade policy environment which will allow us to take full advantage of these changes.
“It is also important that they recognise that the Australian system of marketing allows us to successfully market 18 million tonnes of wheat each year without any government financial assistance or support and without needing to resort to aggressive discounting in the market place,” Mr Flügge said.
For further information contact: Jo O’Connell in AWB Limited Public Affairs on (03) 9209 2555 or 0407 310 250