ACCC approves long term agreements at Viterra’s Bulk wheat port terminals

3 December 2015

The Australian Competition and Consumer Commission has released a final decision to approve Viterra’s proposal to introduce long term agreements (LTAs) to allocate port capacity at its six South Australian bulk wheat ports.

“The ACCC considers that Viterra’s proposal, submitted in November, substantially addresses concerns raised in the ACCC’s draft assessment to not approve Viterra’s June proposal,” ACCC Commissioner Cristina Cifuentes said.

Key amendments of the November proposal included a mechanism for the ACCC to review the initial long term capacity allocation process and a reduction of the initial term of the LTAs from five to three years.

“These amendments, together with other features and safeguards in the proposal, strengthen the negotiating position of the smaller and medium sized exporters and represent an outcome that is expected to better facilitate effective competition in the South Australian bulk wheat export industry,” Commissioner Cifuentes said.

This decision means that Viterra’s current auction system for allocating port capacity will be replaced by a negotiation based framework using LTAs as the primary allocation method from 2016-17. The current first-in-first-served (FIFS) process will be carried over, with some modifications, to allocate a reserved amount of short term capacity on an annual basis.

Viterra formally lodged an initial proposal in March 2015 and made subsequent revisions in June, September, and November.

The ACCC has engaged extensively with stakeholders and Viterra throughout this period to arrive at an outcome that is expected to provide greater certainty to exporters and port terminal operators and enable improved planning around grain export programs, infrastructure and supply-chain logistics.

The ACCC’s complete assessment of the Viterra proposal is set out at:

Viterra 2015: Project overview

Background

Under the Port Terminal Access (Bulk Wheat) Code of Conduct (the Code), the ACCC has a role in approving capacity allocation systems used by port terminal service provider’s to allocate port capacity.

On 12 March 2015, Viterra lodged an initial application and proposed port loading protocols. Following a period on industry consultation, Viterra provided a revised proposal on 12 June 2015.

The ACCC released a draft decision on 16 July 2015 to not approve Viterra’s proposal. While there was broad industry support for the concept of LTAs, the ACCC had several concerns with the June model, including that:

  • Viterra would have considerable discretion in relation to the allocation of long term capacity in the event of oversubscription and some exporters would likely not have been in a position to effectively negotiate for capacity.
  • The proposed five year term for LTAs might effectively lock in a market structure dominated by the largest exporters for a significant period of time.

On 22 September 2015, Viterra lodged a revised set of protocols addressing key concerns raised in the ACCC’s draft decision. Viterra then submitted further revised protocols on 10 November 2015 making a minor amendment to clarify its September protocols.

 

Release number: 
MR 240/15
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