ACCC warns of barley breeding pitfalls in InterGrain proposal

ACCC warns of barley breeding pitfalls in InterGrain proposal


Grain Producers Australia Chair Andrew Weidemann.

Grain Producers Australia Chair Andrew Weidemann.

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​GRAIN Producers Australia (GPA) have backed the competition watch-dog's view about the proposed acquisition of InterGrain by Australian Grain Technologies.

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GRAIN Producers Australia (GPA) have backed a newly released finding by the competition watch-dog expressing initial concerns about the proposed acquisition of InterGrain by Australian Grain Technologies (AGT).

GPA Chair Andrew Weidemann said the ACCC’s interpretation of the potential AGT purchase “confers” with his group’s view on it “almost verbatim”.

He said that stance was outlined in GPA’s submission to the ACCC’s investigation process; in particular relating to the potential loss of market competition and increased End Point Royalties (EPRs) charged to farmers for barley breeding.

Mr Weidemann said ACCC Agricultural Commissioner Mick Keogh’s statement last week expressing initial concerns about the proposed deal would now see further talks held between grain farmers, the ACCC and AGT, to try and resolve any concerns.

The ACCC’s preliminary view is that the proposed acquisition may “substantially lessen competition” for the breeding and development of barley seed varieties for the Australian market, a statement said.

AGT is Australia’s largest wheat breeding company and has an expanding barley breeding program, supported by its international shareholder and partner, Limagrain.

InterGrain has wheat and barley breeding programs with breeding facilities in WA, SA and Victoria.

The University of Adelaide, which until recently competed with AGT and InterGrain, announced in April 2016 that it was withdrawing from barley breeding.

Mr Keogh said the proposed acquisition would combine the only two significant players in barley breeding and development, in Australia.

“The ACCC is concerned that the loss of competitive tension may allow the combined entity to reduce investment in the research and development of new barley seed varieties and to raise the levels of the royalties it charges farmers for using its seeds,” he said.

While AGT and InterGrain also overlap in the breeding and development of wheat seed varieties, the ACCC’s preliminary view is that the combined entity would continue to face sufficient competitive constraint from alternative wheat seed breeders and threat of new entry.

Mr Weidemann said in addition to the AGT, three other wheat breeding companies operated in Australia in seeking to develop new varieties for the local market which meant there was “enough competitive tension”.

But he said there would be “no competitive tension for barley breeding” and a monopoly situation created, if the proposed acquisition of InterGrain by AGT went ahead, leaving only one entity operating in the market.

Mr Weidemann said this year EPRs raised an estimated $150m across all grains in charging farmers an average of about $3 per tonne which included collecting about $40m from barley breeding programs.

He said the Australian barley breeding market was also too small to attract any other players in the future, to expand competition in barley breeding.

“We think there’s a way forward here but it’s around the creating of a work-able model for the setting of ERR’s,” he said.

“It’s time we actually had this conversation as an industry because growers are putting out a lot of money for plant development and we need to receive value for money for it.”

GPA’s submission recommended implementing an EPR review committee to establish a process that would “ensure the fair and equitable return test setting of EPRs by all seed breeding companies and to ensure all parties interests are managed”.

“This committee would include the required skills to assess the variety against the proposed EPR by the breeding company,” it said.

GPA said producers were concerned about the setting of EPRs which were fundamentally well supported but “AGTs purchase of InterGrain could mean producers were left without the level of competition in seed/variety production required to enable fair and transparent determination of the market pricing for EPRs”.

It called for transparency to ensure continued investment in varieties to suit Australian farmers and warned of market failure in the current collection process for EPRs.

“From the producer’s perspective the recent announcement by AGT of their intention to purchase InterGrain has the ability to strengthen the balance sheet in the area of Barley Variety development,” the GPA submission said.

“However, it also comes with concerns regarding reduced competition in the breeding of new varieties, in particular barley.”

The ACCC has invited further submissions from interested parties in response to its statement last week, ahead of a final decision due to be announced on May 25.

AGT was established in 2002 and is owned by the Grains Research and Development Corporation (GRDC), Limagrain, the SA government and the University of Adelaide.

InterGrain was established in 2007 and is owned by the WA government and the GRDC.

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