CBH chairman tips efficiency

02 Oct, 2014 02:00 AM
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Newdegate farmer Wally Newman stepped into the chairman's role in August after serving more than 15 years on the board of the co-operative, taking over the reins from predecessor Neil Wandel.
We need to get those assets working for the growers to lower their supply chains costs
Newdegate farmer Wally Newman stepped into the chairman's role in August after serving more than 15 years on the board of the co-operative, taking over the reins from predecessor Neil Wandel.

CBH'S advantage in competing with multi-national companies keen to get a slice of WA's grain pie is its grower-controlled network according to new CBH chairman Wally Newman.

Mr Newman stepped into the chairman's role in August after serving more than 15 years on the board of the co-operative, taking over the reins from predecessor Neil Wandel.

For Mr Newman, CBH's success and longevity as Australia's largest grain exporter rested on grower ownership and control, and the co-operative's ability to secure the best possible returns back to the farmgate for WA growers.

Mr Newman said his biggest passion was to continue CBH's work to generate new and alternative income flows to enable the lowest cost supply chain possible for WA growers.

"As chairman I hope to continue something that we first started when I first became involved in CBH and that is to generate new income flows through flour mills and the malt facility in Vietnam," Mr Newman said.

"It's about diversifying and also leveraging the balance sheet in order to let the asset work for the growers.

"They have to generate income and that income has to come back to give us the lowest cost supply chain possible.

"They bring in about $12 million each year and once they are paid off they will contribute a considerable rebate and help lower the cost of services.

"We need to get those assets working for the growers to lower their supply chains costs, it is the only way we can make our growers internationally competitive on the world scene because the Americans and Europeans are subsidised hugely."

A third generation farmer from Newdegate, Mr Newman manages an 8000 hectare mixed crop and livestock operation alongside his son Charlie.

The Newman family first settled in Newdegate in 1922 when Harry Newman took up 1000 acres in the area, and the enterprise has grown to span four generations today.

A passionate supporter of the co-operative structure, Mr Newman said the WA grains industry had to utilise the systems and processes that were available, and the co-op was the only structure that could provide sustainable benefits back to its members.

Responding to criticism of cross subsidisation and allegations of agricultural socialism from some sections of the WA grains industry, Mr Newman said he would be open to a change in structure if industry could demonstrate a better system based on facts rather than philosophy.

"We survey every quarter and over 85 per cent of growers are totally committed to the co-op so I can't see it changing," he said.

"I'd suggest that at least 30pc of farmers would not be viable if we lost the co-op as we know it now.

"But as chairman I want to drive it even harder to make it work better and more efficiently.

"There a perception out there that we are a socialist mob and that we are not efficient and we are lazy and not responsible.

"I want to change that attitude.

"We are very responsible, efficient and will drive the very best deal for our members bar none."

Mr Newman said growers could expect to see a number of efficiency gains from the co-operative over the next 12 months and into the future.

"It is about using the network more efficiently, providing better services and the key is getting other income flows to make sure our system is bulletproof to takeover and competition," he said.

"CBH's sole objective is to get the best outcome for the grower, they are our sole beneficiary and there is nobody else that we work for."

Responding to Bunge's recent investment at Bunbury port, which broke the co-operative's longstanding monopoly over bulk grain exports in WA, Mr Newman did not believe the new entrant posed a significant threat.

"Any competition that enters the State will have to buy market share over and above the world price because CBH will put a base in the market," he said.

"I'll be surprised if they achieve what they have set out to achieve, they are going to have to buy market share and earn it.

"They will have to pay higher than the international market for the grain.

"They all come in because they think there is a lot of grain here and they are going to make huge money, but they don't realise the farmers own and control the network.

"And while the farmers own and control the network these international players are not going to control the grain."

Mr Newman said the push from some sections of the WA grains industry to demutualise the co-operative was largely driven by multi-national companies.

"If you go back when they used to load a wagon up here in Newdegate in the early days, they would load 8t on an 6t wagon, leave here at 6am and arrive in Newdegate at midday," he said. "They would go to the post office where multi-nationals were stationed, and they would all put their heads together to drive down the price when there was a surplus of grain.

"And during the 1920s and particularly the 1930s the farmers walked off the land because those major players had such control over the industry so much so that the bag the grain was in was worth more than the grain itself.

"If growers decide to change CBH to a corporate we would very quickly end up back where we were in the 20s and 30s and people would be walking off their land in droves."

Speaking on free market philosophy, Mr Newman said buyers wanted to deal as directly with growers as possible.

"Because as soon as there is someone in that supply chain taking a slice out of the cake then he is not buying it as competitively as he should," he said.

"The buyer needs to get the best possible price back to the grower because he wants the grower to produce even more product.

"If there is middle men in there, the buyer wants to avoid them just as much as we do as growers because we have got to get the best possible price to compete on the world market."

Mr Newman said the biggest challenge facing the co-operative was its need to get the best possible price back to the grower through storage, handling and marketing.

Despite the significant opportunities for WA grain growers, he was sceptical about the Asian century and Australia's role in feeding the world.

"The hype about feeding the world has been around since at least 1965 when I was at agriculture school, so nothing has changed," he said.

"As long as buyers have the money we will be able to supply the grain and really the price for grains is determined by the money that people have to buy it.

"But the people that need it most can't afford to buy it.

"I've got a bet with a former CBH CEO that we will never grow 20 million tonnes of grain in WA in a year.

"He claimed we'd grow 20mt by 2020 and I bet him $1000 10 years ago that it wouldn't happen because the agronomic advances we have made and the amount of land of land lost since then it is highly unlikely, although possible.

"You would have to see a perfect season, we have land degradation, and even with GM there are no real dramatic increases in the amount of grain you can produce off a hectare of land.

"Most of the production has come from fertilisers and agronomics associated with growing grain such as minimum tillage, not from plant breeding.

"Most of the production since CBH has been in existence has come from pasture and grazing country which is now highly productive grain producing country.

"What was previously only cattle country around areas such as Mt Barker and Esperance has now become three to four tonne grain growing land."

Looking to harvest, Mr Newman said 2014 had been exceptionally good in Newdegate following a good break to the season and consistent rainfall since.

"I have been saying for two months it can only get worse in Newdegate because it has never been this good," he said.

"Every time we come home we have more rain and it keeps getting better."

Mr Newman said 2013 had been the best year ever seen in the history of Newdegate, and was expecting a drought this year based on previous weather history.

"We have never had successive good years, but at this stage it looks as though it could be better than last year," he said.

"I'm not going to say no to it, but it's not in the bag yet.

"I do feel for growers in areas that don't have a lot of grain because Newdegate has been there many times before."

Mr Newman has won CBH's annual grain estimates competition more than any other participant, winning four times in the last 15 years, with estimates based on Newdegate's yield potential.

"I base it on Newdegate because we are the average we are never the best or the worst," he said.

"If Newdegate has an average year its 10mt, if better than average around 12m/t and if it's really good it's around 14m/t.

"My calculations could be out the window this year but I'm betting it will be around 14m/t."

FarmWeekly
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READER COMMENTS

CBH needs direction
2/10/2014 7:22:12 AM, on Farm Weekly

Good on ya Wally. Once the Kwinana zone monopoly is broken I wonder if you will be singing the same hym? The board is bereft of any rational economic understanding and thinks by continuing to run a distorted network it will somehow protect CBH and garner loyalty. Heck, they wouldn't even know what goes on down at Gayfer House. Andy Crane and his cabul of aparakicts own CBH not the growers. SOLUTION - Float CBH, give the growers their rightful equity before this mad mob erodes any sceric of value and put some professionals in charge.
VC
2/10/2014 8:47:07 AM, on Farm Weekly

Couldn't agree more with " CBH needs directions" comments. This correspondent is right on the money. The Board is totally dysfunctional. Corporatize CBH urgently and give farmers the freedom they deserve. If CBH is as good as they claim in their propaganda a corporate model will keep farmers with them.
Gerry Atric
2/10/2014 12:09:00 PM, on Farm Weekly

Must need your eyes tested, if 85% of members are saying they want to stay a co-op, how can management float it?
CBH Shareholder
2/10/2014 4:27:58 PM, on Farm Weekly

Growers should be asking why Wally needs five different delivery titles (5 shares) if he doesn't expect it to end up corporatised?
torobrook
2/10/2014 5:01:58 PM, on Farm Weekly

There is not a shred of evidence that 85% want the co-op.Just CBH shrill and desperate propaganda claims.Lets test it properly. The Board to present to shareholders a corporate listing proposal reflecting todays circumstances ie 4300 shareholders , estimated value $4b ,formula to recognize history of throughput for share allocation( say 10 years). This was the process 14 years ago. I bet todays shareholders will deliver a 75% vote when they see the benefit to their balance sheets. This ideologically hidebound Board knows this and wont accept the challenge preferring to offer trinkets of $4.50.
Consolidated
3/10/2014 6:08:11 AM, on Farm Weekly

Well CBH shareholder Wally probably thinks with a degree of dellusion that so long as the current attrition rate continues, his 5 CBH shares will increase in value when corporatisation occurs or if an aggressive takeover offer his the table. On paper $4 bill between 2000 shares is much more attractive than between 4300. Of couse what Wally fails to understand is that leakage to the competition is going to devalue the company and potentially serve a solvency test to the coop as growers jump ship to lower costs with the competition.
Wake up
3/10/2014 5:18:40 PM, on Farm Weekly

Appears as in the past we have a small greedy "I'm alright Jack" element who want to be the generation who cash in on the previous four generations hard toil at the expense of future generations denying them the benefits they have enjoyed in low cost storage and handling services. Tipping their geographic location is both "safe" and close to port. Shame so many of these great "thinkers" don't stand for consideration by their peers for a Director's position. Wake up to yourselves, we have a great business here, embrace it, and value it.
Yourtime
4/10/2014 9:46:46 AM, on Farm Weekly

"Wake up" comments about greedy 'Im alright Jack" element is as he quotes full of great thinkers who can foresee the folly of CBH Board and how the company is devaluing each day. CBH is under seige by competitors. CBH Board can't see how the supporters alway's vote with the cheapest price and take that option the store and haul grain. I bet that is not CBH. CBH is a business going down.
drowning in debt
6/10/2014 6:37:18 AM, on Farm Weekly

wake up says 'embrace it (CBH) and value it'. dont talk to me about valueing a coop that has never valued its shareholders more than $2 mate. it is no consolation to those with debt problems that CBH has a great business cos those guys are wakin up to the fact that it is CBHs right to extract their pound of flesh from every ton that is contributing to the debt problem of its members. disgusting!!!
boris
6/10/2014 7:11:26 AM, on Farm Weekly

The release of the 2014 freight rates shows how distorted the network is. If you are close to Port and on the efficient Standard guage line, then you pay about 10c per tonne per kilometre. If you are out in the black hole on the narrow guage with a transfer to the Standard you pay about 7c per tonne per kilometre. Once competition comes in the Kwinana zone and true freight rates are charged on the Standard guage growers will be at least $5-00 per tonne better off bypassing CBH. CBH is about to collaspse under the weight of socialized control. Popcorn anyone??

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