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- 3 December 2003
Wine Grapes Marketing Board (Reconstitution) Bill
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Page: 5822
Second Reading
Mr GRAHAM WEST (Campbelltown—Parliamentary Secretary) [9.38 p.m.], on behalf of Mr David Campbell: I move:
That this bill be now read a second time.
I seek leave to have the second reading speech incorporated in Hansard.
Leave granted.
This Bill that I now put before the House is a proposal to reconstitute the Wine Grapes Marketing Board as an agricultural industry services committee and for other related purposes. This will mean that instead of being constituted under the Marketing of Primary Products Act 1983 as the Board currently is it will be constituted under the Agricultural Industry Services Act 1998 and supplemented with some additional powers that will expire on 31 December 2007.
The Wine Grapes Marketing Board represents wine grape growers in the Murrumbidgee Irrigation Area, an area consisting of the City of Griffith and the Shires of Leeton, Carrathool and Murrumbidgee.
The Board was originally constituted in 1932 under the Marketing of Primary Products Act 1927, which is now the Marketing of Primary Products Act 1983. The main purpose of these Acts was to vest in the Boards the ownership of all the product of the growers they represented, with the intention that Boards could market it, or influence the marketing of it, on growers' behalf.
Until 31 July 2000, the Wine Grapes Marketing Board vested all grapes grown in the Murrumbidgee Irrigation Area and used that power to act on behalf of the growers to negotiate a yearly price for each variety. The Board also set terms and conditions of payment for wine grapes.
Under National Competition Policy, the Wine Grapes Marketing Board was reviewed in 1996. The review recommended that the Board continue to set and enforce terms and conditions of payment but that the emphasis be on encouraging more growers to trade under contract and reduce their need for the reserve powers of the Board.
A second review of the Board was carried out in 2001, which recommended that the Board be allowed to continue with the power to set terms and conditions of payment but only as a default position in cases where growers had not developed contracts with wineries.
With the end of vesting in 2000, the Marketing of Primary Products Act 1983 is no longer suitable legislation under which to provide these powers. In any case the intention is to only grant these powers as a transitional measure until 31 December 2007, whereby it is expected that most sales will be made under individual contracts. In this case, it is more appropriate to achieve this aim under specific legislation than to try and use the Marketing of Primary Products Act 1983 that is based on the concept of vesting.
That is why I am now introducing this Bill before the House as a proposal to reconstitute the Wine Grapes Marketing Board under specific legislation, with sunsetted powers.
As this Bill is designed especially for the wine grapes industry of the Murrumbidgee Irrigation Area, I would like to digress for a moment to briefly outline the significance and special features of the wine grapes industry in this area.
The Murrumbidgee Irrigation Area currently produces around 200,000 tonnes of wine grapes, which is around 48 per cent of NSW production. These grapes are produced by some 520 growers who deliver to 16 wineries in the area.
The typical Murrumbidgee Irrigation Area farm size is between 10 and 20 hectares (25 to 50 acres), and is commonly a mixture of citrus and wine grape production. The South Australian Riverland and the Murray Valley, together with the Murrumbidgee Irrigation Area, all have similar production systems, with large numbers of growers selling their grapes to a limited number of wineries. This feature is linked to the original development of these irrigation areas with small holder fruit blocks for soldier settlers and, later, new immigrants.
In contrast, the wine industry in most other wine regions of Australia is based on a more universal production system, in which wineries have their own vineyards, or vineyards produce for specific wineries under contract. In that system, the going price for wine grapes and the application of terms and conditions of payment are not such an issue.
The few wineries of the South Australian Riverland, the Murray Valley and the Murrumbidgee Irrigation Area produce a large proportion of Australian wine output. Wine is an agricultural product with a long time lag between picking the raw product and selling bottled wine to the consumer, and this is an environment in which many small growers need to conduct business with their customer, the winery, with some security.
In the South Australian Riverland 80 per cent of the grapes are either produced by or sold to wineries under some form of contract, and in the Murray Valley the proportion is about 50 per cent. In the Murrumbidgee Irrigation Area this proportion is less than 25 per cent.
Under these circumstances it is obvious that government intervention could be employed to encourage the greater use of contract trading in the Murrumbidgee Irrigation Area for the benefit of both the grower and the winery they supply. That is what this legislation aims to do.
This legislation will empower the Wine Grapes Marketing Board to assist growers in the drawing up and negotiation of individual contracts for the sale of their grapes to wineries and encourage the Board to develop a code of conduct for contract negotiations. Up until 31 December 2007 the Board will also be able to set default terms and conditions for payment that will apply where no contract has been arranged.
The legislation will also authorise the Board to collect and disseminate market and price information that will help growers remain up-to-date with the market factors that will influence the prices that wineries are likely to offer.
In addition to this, the Board will be authorised to provide growers with industry services such as supporting viticultural research and development, facilitating access to education and training in relation to viticulture and supporting generic promotions of the region's wine products.
I turn now to the main provisions of the Bill.
A grower may contract with a winery for a delivery at harvest, which fixes the price that will be paid, the conditions relating to quality that may affect that price, and the dates by which the price will be paid, either in full or in instalments. To be eligible for exemption from the Board's default terms and conditions of payment, a contract has to either be made before the first Monday of December in the calendar year preceding delivery, unless it covers more than one harvest whereby it may be entered into at any time before the first delivery of wine grapes under the contract.
Where such a contract has not been made, a delivery of grapes by a grower to a winery or other buyer will be subject to the terms and conditions of payment that have been set by the Board and published in the Gazette and in a newspaper circulating generally throughout NSW.
Payments that are late according to the Board's prescribed terms will be subject to interest and any money due to the Board may be recovered as a civil debt.
The Bill contains three important provisions designed to facilitate competition in the Murrumbidgee Irrigation Area wine grape market. I will address each of these in turn.
Firstly, buyers of wine grapes grown in the Murrumbidgee Irrigation Area will not be permitted to take delivery of those wine grapes, without a complying contract, unless a price schedule has been given to the Board on or before the 30th of January preceding harvest. Buyers will be required to supply the Board with a price schedule of the minimum prices they will pay for each variety of wine grape and the conditions under which any price offered can be altered after delivery.
Secondly, downward variations may be made to the price schedule as the season progresses. These variations will only come into effect if before 30 January the Board has been provided with at least 48 hours notice of the variation or in respect of a variation on or after 30 January if the Board has been provided with at least 24 hours notice of the variation.
Thirdly, buyers of wine grapes grown in the Murrumbidgee Irrigation Area who are not buying under a complying contract must, on delivery, provide documentation to the person who delivers the load that specifies the date of delivery, quantity and variety of wine grapes delivered and any other matter that may influence the final price to be paid as well as any details from the price schedule relevant to the delivery.
To ensure that the Board's revenue base is secure and in order to collect and disseminate useful market information, wineries are to provide the Board by 1 May each year with a report that sets out all the deliveries it has taken during the period commencing 1 July and ending on 14 April in that year. In terms of contract wine grapes the report will give details of who has delivered the wine grapes and the quantity and variety of the wine grapes. The report in respect of non-contract wine grapes on the other hand will include all these details as well as the price. There is also provision for a subsequent report to be provided to the Board on or before 30 June which is designed to account for wine grapes bought at the end of the season.
As an agricultural industry services committee under the Agricultural Industry Services Act 1998 the committee may perform prescribed services for its constituents and collect a compulsory charge from those constituents in order to cover the cost of providing the services.
The Board will retain its corporate name – 'The Wine Grapes Marketing Board' which as far as membership is concerned will continue to consist of 7 members. Of these members, five are to be elected by the Board's constituents and two are to be appointed by the elected members.
The Board's constituency will be the same as that of the present Board: all wine grape growers in the Murrumbidgee Irrigation Area (excluding wineries that also grow grapes) and who harvest more than 20 tonnes of wine grapes in a year.
The services that the Board will provide are those that were recommended in the recent National Competition Policy review of the Board's functions. Some of these services are:
1. Providing assistance with developing contracts, contract provisions and a code of conduct,
2. The promotion of the use of contracts,
3. The collection and dissemination of market and industry information,
4. The facilitation of research and development,
5. The provision of education and training in relation to grape production,
6. Providing assistance with generic promotion of the area's wine products in association with organisations representing wineries in the Murrumbidgee Irrigation Area, and
7. Representing the local wine industry in relation to the provision of these services.
In addition, the Board will be empowered to set and enforce terms and conditions of payment for wine grapes. Although the proposed Bill contains this, along with other countervailing powers designed to implement the recommendations of the National Competition Policy review of the Board, the proposed legislation is designed to sunset in December 2007. At that time the Wine Grapes Marketing Board will automatically be constituted under the Agricultural Industry Services Act 1998 and thus only have the powers of an agricultural industry services committee under that Act.
There will however be an opportunity for the board, before its current powers expire, to request the government of the day to undertake a further review of these powers under national competition policy principles. If the board can establish that some or all of its powers in relation to the setting of terms and conditions of payment, provide a net public benefit, the Parliament could be asked to extend the sunset date in respect of those powers.
This bill that I now put before the House will assist the wine grape industry of the Murrumbidgee Irrigation Area to move from its past regulated market environment, with the disadvantages of government intervention in the market place, to a future in which suppliers and purchasers of wine grapes will increasingly deal together with commercial contracts. The legislation will provide a protective mechanism for a defined transitional period by controlling the setting and enforcement of terms and conditions of payment in a way that is agreeable to both parties.
I commend the bill to the House.
Mr ADRIAN PICCOLI (Murrumbidgee) [9.39 p.m.]: While the Opposition will not oppose the Wine Grapes Marketing Board (Reconstitution) Bill, it is necessary to raise a number of concerns of individual wine grape growers in the Riverina. The bill has come about as a result of an extensive period of negotiation between the Wine Grapes Marketing Board in the Riverina and the Department of Agriculture. After four years of reviews resulting from the national competition policy, the Wine Grapes Marketing Board and individual wine grape growers were confident that a bill reflecting their views and the needs of the industry would be presented to them and to the Parliament. However, at the last moment, as is common with the Government, it has let down the people that it purported to represent.
I understand that the Wine Grapes Marketing Board does not oppose this legislation in its current form. I have spoken to individual wine grape growers who are not particularly happy with parts of it. According to the growers, the bill gives wineries too much power and removes much of the bargaining influence of grape growers. The difficulty for wine grape growers is that there are several hundred grape growers and only a handful of wineries, which are mostly family owned. The same could be said for many agricultural commodities. The difficulty with having many suppliers and only a few purchasers—that is, the wineries—is that the market powers favour the wineries. Therefore, wine grape growers seek some protection and assistance when they negotiate to sell their grapes to the wineries for a fair and reasonable price.
The particular difficulty for wine grape growers is that they cannot store their harvested grapes, as grain or other commodities can be stored; they have to be sold immediately. Once the grapes are on the back of a truck they have to be delivered, so wine grape growers do not have a great deal of choice. They feel vulnerable when they deliver to a particular winery because, basically, they have to take the price they are offered. I am a personal friend of a number of families that own wineries in the Riverina, and I know that they feel particularly vulnerable. Most wineries act responsibly in their negotiations with wine grape growers. However, it must be remembered that the wine industry in Australia has expanded rapidly through exports, particularly in the past five years.
The wineries need to remain competitive with their international competitors from Chile, South Africa and other countries if they want to expand their markets in the United States of America, Asia, the United Kingdom and Europe. Therefore, they need to buy the product at a reasonable price. This legislation will not provide the Wine Grapes Marketing Board with an opportunity to receive an unfair price for the product. The board understands that successful wineries and expand wineries need somewhere to place their product, so the success of the wineries is very much linked to the success of wine grape growers.
However, wine grape growers want to be treated fairly and to have a fair negotiating position when they deliver their truckloads of grapes to the wineries. That is what they hope this bill will provide. However, I believe in many respects it has let them down. I have been asked by the Wine Grapes Marketing Board to ask the Minister—and I know that the shadow Minister for Agriculture in the Legislative Council has sought an answer to this question—if this bill as introduced does not sufficiently satisfy or address the needs of the wine grape growers of the Riverina whether the Government will consider amendments to it. I hope the Wine Grapes Marketing Board is provided with a satisfactory answer to that question. Having introduced the bill, the Government will be reluctant to introduce further legislation to amend it.
Some wine grape growers are surviving on an income of less than $9,000 a year and this bill is important to them. They want to have some power when they deliver 20 tonnes of grapes to the winery. It is difficult when wine grape growers do not know the price until they deliver their grapes. At least a grain grower knows the indicated pool price or the cash price that is on offer. They can see at any time of year the spot price for wheat in Chicago, New York or Sydney. But for wine grape growers it is basically a lottery every year. The industry was looking for some protection in the form of a price guarantee. The wineries intend to offer contracts for the growing of grapes but they will not indicate in those contract a specific minimum price. Basically growers have to deliver X tonnes of grapes and on the day of delivery they will be told the price they will get. That is fine for the wineries, but it provides no certainty of investment for wine grape growers or for a family that relies on cheques from the wineries every year.
In addition, if payment is left entirely to the wineries many wine grape growers question what terms of payment they will receive. For example, in what period and how often will payments for grape deliveries be made? As I said, the Opposition will not oppose this legislation. However, significant questions have been raised by individual wine grape growers. The Wine Grapes Marketing Board has indicated to the Government that it supports the legislation. However, it seeks a commitment from the Government that if this bill does not work in the interests of wine grape growers amendments will be introduced at some future time. I hope the Minister and the Department of Agriculture look favourably on that request. I hope the bill works in the interests of wine grape growers. I am confident that the good relationship in the Riverina will continue for the good of wine grape growers, wineries and the entire New South Wales community.
Mr KERRY HICKEY (Cessnock—Minister for Mineral Resources) [9.48 p.m.], in reply: This legislation will help the wine grape industry in the Murrumbidgee Irrigation Area to maintain stability in the supply of grapes to local wineries while the industry adjusts from the conditions that existed under vesting. The provisions of the bill encourage suppliers of grapes to contract their sales to their buyers while giving a transitional period of protection in relation to terms and conditions of payment for grapes that are not yet delivered under contract. This transitional period will last until December 2007. The legislation also provides for the Wine Grape Marketing Board to facilitate the use of suitable contracts between growers and wineries through the development of a voluntary code of conduct and draft contract provisions. This legislation will create an appropriate environment of transition to open negotiations between Murrumbidgee Irrigation Area wine grape growers and the wineries that buy their grapes. I commend the bill to the House.
Motion agreed to.
Bill read a second time and passed through remaining stages.
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