CBH backs Grain Express

The shift away from CBH's rail monopoly, enforced by the Australian Competition Tribunal (ACT) and Australian Competition and Consumer Commission (ACCC) late last month, came into effect on Monday, making Grain Express a voluntary system for growers during the upcoming harvest.

While CBH stood by its well-established claim it wasn't afraid of competition on the tracks - since the revoking of its exclusive dealing notification for Grain Express - it also joined a number of local grain marketers in saying it hoped growers wouldn't instigate a radical change in the way grain was transported from CBH's up-country storage facilities to port.

But that wasn't to say Aurizon (formally QR National) wouldn't mount a competitive campaign to see its WA fleet of rolling stock back on WA rail lines or growers wouldn't seek non-CBH grain transport agreements if they promised a cheaper pathway to port.

Although Aurizon wouldn't comment on whether it planned to provide CBH with some competition on the tracks in the future, CBH general manager of operations Colin Tutt said the company faced a battle to maintain the cheapest freight rates and best value for money for growers throughout the State's grain-growing regions, given there was a real possibility Aurizon would soon re-enter the grain freight market in WA.

Late last week Mr Tutt told Farm Weekly the large majority of Aurizon's WA rolling stock assets had been stationed at locations throughout the Avon Valley since the company's contract with CBH finished last year.

"There's no doubt Aurizon will be putting proposals to different exporters as we speak but they have to compete against our model," Mr Tutt said.

"Ours is a model which makes grain ownership work at a port level and once growers select another transport provider the grain will go back to a site level cost.

"Even if Aurizon does manage to run a train, it'll need 500,000 tonnes of grain to make it viable and then it will have to travel to pick it up.

"The aim is to make sure CBH's model is the most competitive option and growers choose it as a default."

In a statement released late last week, Mr Tutt said the procedural change would ensure that if marketers wished to co-ordinate transport outside the CBH system they would be responsible for communicating their freight rates and services to growers directly.

He said keeping tonnes in the CBH system would help to keep storage, handling and freight costs low because CBH was able to find efficiencies in a bulk system with greater volumes.

"There may be pockets in the network where other companies can provide cheaper freight and growers will pick and choose which company to use accordingly," Mr Tutt said.

"CBH has got to provide freight across the entire network so the way grain is moved to an export position from CBH's up-country facilities will no doubt change."

He also said it was important growers knew they wouldn't need to do anything differently if they wanted to continue to have CBH manage their grain to port as well as have access to Quality Optimisation and the full suite of services through LoadNet.

But will CBH's suite of products and services be enough to convince growers to stick with Grain Express?

"It might not be because growers will always gravitate towards the least cost pathway," Mr Tutt said.

"But Grain Express works on the premise of all growers working together and once CBH starts losing volume or moving into smaller volume areas we won't be able to make it work.

"There needs to be a lot of pressure put on CBH to ensure it has the most competitive freight rates because if it doesn't, grain will leak out and all the services we currently put in place for growers will start to decline because they're all based on volume and working as a collective grower group."

Aurizon's contract with CBH to transport the State's annual harvest wasn't re-negotiated in 2011 after CBH announced plans to invest in its own rolling stock and awarded its own freight contract to the US company, Watco Rail.

When Farm Weekly asked Aurizon how the transport of WA grain would change and whether it would provide new competition for CBH in the grain rail freight space, a company spokesperson provided a statement:

"Aurizon welcomed the court appeal decision saying it had finally delivered a fair and free transport and logistics market for the WA grain industry," the statement said.

"We always believed the original ACCC decision in October 2011 was the right one and it had listened to the marketers, transport companies and the growers of WA.

"Aurizon is disappointed the ACT's appeal process dragged the process out significantly and that impacted our business.

"We have been looking at the decision in detail since it was released as part of our consideration of opportunities in the national grain market."

The ACCC presented its notice to revoke CBH's exclusive dealing notification for Grain Express in June 2011.

The ACT then concluded CBH's notified conduct substantially lessened competition for the supply of grain transport services in WA and that any benefits in CBH controlling all grain movements, didn't outweigh the public detriment resulting from the substantial lessening of competition.

The ACT formally released its reasons for revoking the Grain Express exclusive dealing notification on April 24, 2013.

In its findings it said the new transport environment would more than likely allow growers to observe prices that reflected the true costs of delivering grain to specific receival sites and of growing grain in specific areas.

It also said CBH's monopoly impaired the ability of other grain traders to compete fairly in the market.

Brookfield Rail also declined to comment on the revoking of CBH's Grain Express exclusive dealing.

p To read the Australian Competition Tribunal's full list of reasons for revoking Grain Express visit www.judgments.fedcourt.gov.au/judgments/Judgments/tribunals/acompt/2013/2013acompt0003.

Growers can also contact CBH's grower service centre on 1800 199 083 for more information.