WA freight advantage a big bonus to Asia

09 Mar, 2005 10:00 PM
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SEBERANG Flour Mills managing director Soon Bin Neoh gave those assembled at last week's Agcon Conference a rare insight into the perception that Asian companies have of trading with Australia.

"We like trading with Australia, so what am I going to do with the other 34 minutes?" he said jokingly.

Mr Bin Neoh, who is based in Penang, said that in general Australian wheat performed better than wheat from other countries, and that Australia, particularly WA, enjoyed a big freight advantage which could exceed 10p of the value of the commodity.

He said Asian companies usually worked on 1-2pc margins and therefore the 10pc freight margin was huge.

He said the freight advantage enjoyed by Australia was maximized with larger ships, such as Panamax vessels, which could carry 55,000t, although Fremantle was the only port in WA that could handle these vessels.

Mr Bin Neoh said it cost US$40,000 a day to hire a Panamax vessel, and WA had a 21-day sailing time advantage over Canada and the US, when transporting to Malaysia.

This equated to a US$12t-$US14t tonne price advantage for wheat.

WA also had a US$3t freight advantage over south eastern Australia to Malaysia.

Mr Bin Neoh said it appeared most Australian growers supported the Australian single wheat export desk, and anticipated it would remain until at least 2009.

He said the advantages of dealing with a single desk were better control of supply and demand, more reliable supplies, better control of varieties, and unnecessary price competition.

The disadvantages were that it did not encourage efficiencies, and buyers could not take advantage of oversupply, which had already led to Australian millers having an unfair advantage over Asian millers.

Another disadvantage of the single desk was that buyers could not meet with producers to discuss special requirements.

Mr Bin Neoh said AWB visited Asian customers about three times a year and had a reasonable understanding of customer requirements.

He said AWB also did a good job of marketing Australian wheat through its seminars and forums, although quality of wheat and technical services had slipped.

There was more foreign matter in Australian wheat, according to Mr Bin Neoh.

He said AWB, his largest supplier of soybean last year, seemed more commercially focused, and could be positioning itself in preparation for deregulation.

"AWB's business focus is changing," he said.

"The fact that AWB has ventures with south east Asian flour mills is a concern, particularly because Australia is the major supplier of hard wheat.

"You have an unfair advantage if you are in flour milling and wheat supply."

He said there were concerns AWB might take advantage of its power to overcharge, which he believed was already starting to happen.

He said Canada had introduced a new hard white wheat which had been performing well in bread and biscuits, although Australian hard white wheat performed better in noodles and steamed bread.

"Generally Australia is business friendly, and do a good job with trading," he said.

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