Growcom questioned over code

Growcom recently circulated a “Consultation Paper” seeking feedback from growers regarding the Australian Competition and Consumer Commission (ACCC) recommendations for amendments to the Horticulture Code of Conduct.

The paper is interesting on a number of fronts. Firstly, it purports to represent “Industry’s Preliminary Response” to the recommendations.

How Growcom can present the “Industry’s response” before they even consult with Industry is interesting. We should hardly be surprised however, as this has been their approach throughout the whole Code debacle. Growers may also be interested in two significant issues highlighted by the paper.

Growcom is seeking to argue that the Code was introduced to address ‘market failure and uncertainty in transactions between growers and wholesale traders’. This is not correct.

It was introduced to promote contractual clarity and transparency – and these issues apply equally across all sectors of the horticulture industry. It is also a gross exaggeration for Growcom to claim ‘market failure’, which is also quite contrary to the conclusions of the government’s own adviser, The Centre for International Economics, which concluded that the Central Markets were in fact, very competitive.

In relation to the ACCC’s recommendations, Growcom has been totally inconsistent regarding the use of documented terms of trade as the basis of the commercial relationship between growers and traders.

Growcom supports a terms of trade document which provides for a Trader acting as an Agent. This will mean that all the risk rests with the grower and there will be no certainty as to what the return price will be. The Trader will deduct their commission from the return to the Grower once the produce has been sold and once the Agent has received payment from the Buyer.

However, Growcom continues to reject the Trader having terms of trade documentation to act as a Merchant whereby title and risk pass to the Merchant and the grower receives a return price based on the sale price of the produce less an agreed margin.

Both methods would provide clarity and both provide a clear mechanism for determining what the return price to the grower will be, and under both scenarios, the grower will receive a market-based return.

However, the Agency transaction means that all risk remains with the grower who will also have to pay GST and additional administration costs, while under a Merchant agreement that has been rejected by Growcom, there is provision for the transfer of title and risk to the Trader, a cost effective basis for administration and greater flexibility to accommodate the commercial needs of the Grower.

One really must ask what Growcom’s motives are when they continue to back away from the Code being extended to other sectors of the industry so as to create a level playing field, and when they remain opposed to supporting recommendations by the ACCC that would provide growers with contractual clarity and transparency, in a manner that is workable and cost effective for the Central Market System.