Newman warns beware on corporatisation

27 Jan, 2016 01:00 AM
CBH chairman Wally Newman is warning WA growers
The juicy carrot might look good on the outside to be an attractive proposal
CBH chairman Wally Newman is warning WA growers "buyer beware" as debate continues surrounding a coporatisation bid of the co-operative which could include a pay out for grower shareholders but possibly lead to higher costs in the long run.

"BUYER beware" is the message CBH chairman Wally Newman is sending to growers in the wake of a rumoured bid to turn the co-operative into a corporate entity.

"There's no free lunches in this world," he said.

"You can't expect someone to outlay capital for CBH and not expect a return.

"The juicy carrot might look good on the outside to be an attractive proposal, but you need the full equation over the long-term.

"How much are we giving up for that carrot?"

Mr Newman sent a letter to the co-operative's 4200 grower members last week addressing the emergence of Australian Grains Champion (AGC), a group formed by some WA growers that is said to be forming a corporatisation concept for consideration by CBH growers.

In this letter Mr Newman outlines that the board has no details of any proposal from AGC, but welcomes the opportunity to consider any proposals.

He asks growers not to lose sight of "what your co-operative has been able to achieve by being the sole owners of a supply chain that is now the largest grain handler and marketer in Australia and returns all that value directly back to you, the growers".

Speaking to Farm Weekly, Mr Newman likened a corporate entity in WA having control over the grain supply chain as not being dissimilar to Brookfield Rail's monopoly over rail in WA.

"It's a good example of a monopoly owning a vital part of the supply chain where they can charge five times what the east coast are charging for the same service," he said.

"It's a really good example of what can happen if someone externally controls that supply chain and you no longer have the option to elect your directors.

"It's like selling your farm and leasing it back, you no longer own or control it."

Mr Newman said through a co-operative structure, CBH was investing hundreds of millions of dollars into supply chain upkeep annually, whereas WA growers could see the rail chain deteriorating under a corporate structure which was not responsible to users as grower shareholders.

Much of the criticism of CBH in its co-operative structure and surrounding the AGC debate has centred on CBH not adjusting quickly enough to competition in the marketplace, particularly as fellow grain handler Bunge bolsters its up-country supply chain.

One of the methods highlighted as a cost-saving mechanism for CBH while simultaneously putting money into grower bank accounts is the optimisation of the grain supply chain from paddock to port.

Mr Newman said following consultation with growers and feedback travelling between the board and growers at pre-harvest meetings last year, changes would begin to the supply chain in the coming months and continue for the next five years.

"Competition is really good, it makes us really work on how we can do it better," he said.

"We are looking at how we can get more tonnes to port to meet the market needs in the prime times.

"The network is about putting more value in growers' pockets at the end of the day, it's about getting grain to port faster than ever before with quicker turnarounds and when they do deliver they can deliver everything to one key local site.

"There could be up to $6 a tonne in savings by implementing a new network.

"We know that 80 per cent of the grain flow goes through 92 primary sites so we're only talking about 20pc of the grain that's going though 107 sites.

"It's about getting them to be more efficient so that we're not carrying all that cost of maintenance and employment for those sites.

"It's about doing it smarter, quicker and better and hitting the markets faster and keeping our growers internationally competitive."

Despite clear indications the network would become smaller under the new strategy, Mr Newman said sites would not be closed indefinitely, but kept for use in peak seasons and labelled "non-active" outside of these times.

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28/01/2016 4:18:30 PM, on Farm Weekly

Would the floaters ( lets sell the business) care to tell us how much they believe CBH is worth and how this will be split up between the Co-op members and will they hold their shares or sell them? What dividend would they expect from their investment. How many of these have still got their Wesfarmers shares? How much control have they got now. Is there any farmer elected board members. Brookfield are a public company intent on screwing the farmers on Rail access rates. Be careful what you wish for. Companies float to raise capital, what major capital improvements will lower handling costs.
drowning in debt
29/01/2016 6:12:49 AM, on Farm Weekly

what will lower costs?? how about stop wasting money on gwn tv ads, full page newspaper ads, spending on out of catchment infrastructure, massive hedge losses , buying trains you can't use??? starting a fertilizer war that will use s+h charges fat to discount, discounting s+h charges in bunge catchment, .... just a few that come to mind
soon to retire
29/01/2016 7:07:05 AM, on Farm Weekly

It's worth more than $2 that's for sure!!!!!!
31/01/2016 8:20:51 PM, on Farm Weekly

Whilst not in favour of a corporate CBH the current model is lacking and we need a new generation co-op structure where voting rights reflect tonnage delivered ( and not 5 shareholdings!) Board tenure and the network strategy need overhauling ASAP. Unfortunately the regionally based election process is not delivering the skill set or ability for Directors to act for the overall entity rather than their own backyard
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