NSW growers developing east coast co-op

25 Jan, 2016 11:54 AM
Comments
3
 
What we have to offer a grower is hopefully the ability to reduce their supply chain costs

JUST 18 months after CBH shelved plans to invest in an east coast supply chain, a group of NSW growers have formed their own co-operative.

Grower Co formed in November and has five foundation members who are focused on a membership drive.

The group, led by Moree grower Tim Grellman as chairman, wants to reduce freight costs to the Port of Newcastle by partnering with the owner of an existing supply chain.

They have been helped by former CBH grain operations manager Max Johnson, who was instrumental in CBH's 2014 bid to enter the NSW market before it was canned.

Mr Johnson left the co-operative to form new venture Global Supply Chain Consultancy with another former CBH stalwart, Colin Tutt.

Mr Grellman said the fragmented local market meant growers exporting grain were hit with higher costs than their WA counterparts.

He said the co-operative model had the potential to reduce the impact of these costs and was being supported by the Port of Newcastle and the Australian Rail Track Corporation.

Mr Grellman confirmed Grower Co was in talks with the owner of an existing supply chain to gain preferential access, but was unable to disclose any further information.

"What we have to offer a grower is hopefully the ability to reduce their supply chain costs," he said.

"Freight from farm gate to port works out to be on average about 30 per cent of the cost of producing a tonne of grain, which is quite substantial.

"If we can reduce that cost by 20-40pc that is a big saving to growers.

"That's what our selling point is, it's very simple, but what we need to do is get a lot of grower members to be able to do that otherwise it's not going to work."

Grower Co membership comes at a cost of $2000 and entitles the member to 2000 shares in the co-operative.

Joining Mr Grellman as the foundation members are Stuart Tighe, Lisa Orchin, Charles Brett and Phil Christie, along with non-member appointed director Mark Johnson.

When CBH was investigating its involvement in the East Coast it planned to invest in trains and wagons to move grain from Narrabri, Moree and Burren Junction to the port.

It invested $5 million into its Newcastle Agri Terminal (NAT), which it still owns and has reported it is in talks to offload this asset.

The CBH board eventually decided not to proceed with the project, citing increased competitor activity in the region as the reason for abandoning its plans.

Mr Grellman said Grower Co is very different to the picture envisaged by CBH when it was considering entering the east coast market but the concept was the same - gaining efficiencies in the supply chain.

"Our supply chain costs are quite expensive compared to WA supply chain costs on a per kilometre basis and the reason is that there's a lot of competing operators, we've suffered through droughts and also we have a fairly substantial domestic market," he said.

"The domestic market always fill their bins first and then the export market comes after that and because of this only small amounts of grain go through the port.

"The losses that are made in those years by operators really have to be recouped somehow so they add to a supply chain cost.

"What we wanted to do as growers is try and force the issue and make one supply chain more reliable."

Mr Grellman said it could cost him about $47/t in freight to send grain from Moree to Newcastle, while it would cost WA growers about $25/t freight over a similar distance.

"Obviously it can be done, so why don't we do it over here?" he said.

Mr Grellman said it was early days for the new co-operative, but local growers could expect to see and hear more of Grower Co as efforts to sign on members increased in the coming months.

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READER COMMENTS

grainman
25/01/2016 1:18:52 PM, on Farm Weekly

Interesting group of growers. They want to move grain every year from Narrabri to Newcastle. Sounds to me like a take or pay agreement? If they can guarantee consistent tonnes every year, I’d like to be their logistics provider. What happens when grain moves north? Or Narrabri area doesn’t produce any grain?
Vic
25/01/2016 5:15:05 PM, on Farm Weekly

I'm interested to know who is taking the risk of the fixed costs of wagon and loco lease + all the other associated costs involved in running trains. the reason why this hasn't worked is that the train operators need to cover their risk via take or pay agreements with the trade. I hope the grower coop understand how expensive it can be having a train set sit idle in the highly like scenario that Newcastle grain is over export parity. Nsw is a net shipper to qld and Vic domestic mkts in most years; a $10 saving on inland frt for export is nothing compared to Domestic prem that Aus end users pay
Jock Munro
28/01/2016 12:58:30 PM, on Farm Weekly

I wonder if the growers that have set up this co op were single desk supporters,an co operative arrangement that was the envy of the world?!

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