Bulk handlers issue warning

21 Mar, 2013 01:00 AM

BULK handlers have warned grower groups lobbying for the release of more market information to be careful what they wish for, saying providing too much stocks information would be a negative for the production sector.

The warning comes as the Code Development Advisory Committee (CDAC), created by government to assist in developing the new mandatory code of conduct for port operators, hands back its recommendations to government.

Farmer groups have been calling for bulk handling networks to release increased information on what grain they have in their network, saying the current system provides an unfair advantage to the marketing arms of the bulk handlers.

Nigel Hart, general manager of storage and logistics at GrainCorp said farmers needed to think carefully about what they wanted the market to have access to.

“It’s not commercially in growers interests to have all the information in terms of how much grain Australia has and what grade it is, it will allow the market to take a position there which would not be good for prices overall,” Mr Hart said.

His comments were backed up by Ultima grower and Grain Trade Australia board member Geoff Nalder.

“If we disclose the info on stocks, the buyers will know more themselves and in a multi-origin accumulation system it might well work against us,” Mr Nalder said.

Mr Hart said the current voluntary system, where GrainCorp provided basic receivals information by port zone over the harvest period was all the market needed.

“People have their own networks, and there’s plenty of brokers and advisers out there to help you get a handle on what is happening,” Mr Hart said.

Under the proposed mandatory code of conduct for port operators and bulk handlers, more information will have to be released.

Mr Hart said GrainCorp’s major gripe with was the fact it would be locked into releasing information, while competitors, such as small bulk handlers or farmers storing grain on-farm would not be subject to the same rules.

“We’d estimate we’d only be taking about 55 per cent of east coast grain, but we would be the only ones reporting.”

He proposed a system where growers registered and all their receivals were linked in.

“Set up a company, called it Grower Storage Information Services or whatever and have all receivals linked in, if you think the information is valuable to you, this would be a way of ensuring growers had access to market info without the trade also taking advantage.”

Grain Producers Australia chairman Andrew Weidemann said principles being developed by the CDAC for port reporting included better real time access to quality data and releases on stocks information by grade, weekly during harvest and monthly during the rest of the year.

“We’ve probably ended up with way more than we needed, but that is what happens when you bring politics into an industry problem,” Mr Weidemann said.

Mr Hart said fears about GrainCorp leveraging its bulk handling and port assets to boost its marketing arm were unfounded.

“We’ve got the take or pay rail deal, so there’s a strong commercial need to get the tonnes through both through the rail network and the ports,” Mr Hart said.

“I clearly disagree with Andrew’s concept that perhaps we shouldn’t be in marketing, we only own about 20pc of the grain in our network, and there’s 50 other buyers buying regularly in our network, so there’s plenty of competition there.”

He said the past two big production years had placed significant stress on the shipping stem, but said in more average years, it would be easier to book port spots.

“At around five million tonnes of exports out of the east coast, which we think is more representative of a normal year, there will be plenty of space in our port networks, not to mention competition from other port terminals, such as the Port of Melbourne or the new facilities in Newcastle and Brisbane," Mr Hart said.

“We’ve been hearing about decreasing competition due to industry consolidation, but I believe there is still very healthy competition.”

Mr Hart said rather than worrying about port capacity, the industry needed to invest more in the supply chain.

He said GrainCorp had been decisive in terms of investing in capital-intensive heavy assets such as train sets.

“Many companies are happy being asset light and trade capacity on a spot basis, relying on others to have the capital risk, which is fine, but there has to be some trade off," he said.

“We’ve invested in our 300 sites and between 14 and 20 trains, it’s a big investment and there needs to be some advantages.

“Other companies can get access to our network, but it's our investment and we don’t think they should get all the advantages we do.”

Rob Nelson, of the Clear Grain Exchange, questioned whether investment in ports by traders such as Glencore and Olam, when there is generally adequately capacity in existing facilities, marked a changing dynamic in the Australian industry.

Mr Hart said it was due to the business models they were used to.

“Australia is a unique market in that it is the only major exporter that has an open access system," he said.

“Most countries have proprietary supply chains where the exporter operates a closed loop system.”

Gregor Heard

Gregor Heard

is the national grains writer for Fairfax Agricultural Media
Date: Newest first | Oldest first


21/03/2013 3:26:58 AM

I can understand Graincorp's point of view. However, growers delivering to a centralised bulk storage depot from whichever company, have willingly relinquished their right to keep this information private, as distinct from keeping grain on their own farms. Hence at all bulk commercial storage facilities, all buyers and traders should have equal access to stocks on hand information (this is not sensative information) and thus Graincorp's private trading arm should line up with the rest of the free market and determine their own pricing and risk strategies.
21/03/2013 5:33:29 AM

Of course Graincorp says it will be bad for growers. Mr Hart's patronising and idiotic comments are farcical because for every scenario he paints a potential downside in grain price if there is too much of a particular grain there is an equal and opposite argument for an upside when there is not enough of a particular grain. At the moment only bulk handling companies have any confidence about stocks positions and they don't give growers the benefit of that stocks intelligence. Growers are being screwed by bulk handlers and this stocks information is essential to even things up.
21/03/2013 5:51:04 AM

Releasing grain stocks could well be confusing because Traders growers and endusers all hold stock in the handling system so how are buyers to know the extent of unsold stock? Moreover Graincorp and other handlers are subject to privacy regulations as to how much information can be disclosed. Many growers have the misconception that grain is priced domestically when in fact it is priced internationally with the exception in drought when supply is short. The current system isn't broke so why fix it.
21/03/2013 6:09:28 AM

The benefit large players like GC get from their inside information and preferential access within their own system is more than clear. How is it they dominate so completely the accumulation in their own sites? Nigel has a point - bulk handling companies make the investment and they seek a commercial advantage through this investment. Frankly though this issue disclosing information to the market being bad for growers is a joke. Markets require open information to be efficient. Why do we have disclosure rules on the ASX for example? GC get the advantage they claim not to get - hands down!
21/03/2013 7:18:06 AM

"People have their own networks, and there’s plenty of brokers and advisers out there to help you get a handle on what is happening,” Mr Hart said. So do the buyers, and their information systems are far superior to what farmers have access to! Open up the information and let farmers actively market their crop. Growers are the only ones sitting in the dark!!
interested Party
21/03/2013 7:36:56 AM

What do the ACCC think about Grain Corp's trading arm having access to grower delivery details? This almost smacks of insider trading so how can everyone be on a level playing field? Over in the west CBH's trading arm don't have access to grower delivery information so why should it be different here?
drowning in debt
21/03/2013 8:55:53 AM

As a west coast farmer I reckon we need to see on-farm stocks so east coast farmers are at no advantage to WA growers. You can thank Mailer at GPA for surrendering your right to keep stocks secret.
21/03/2013 5:56:38 PM

The problem is that stocks information is not secret. It is known only too well by the bulk handling companies and they use to their own good effect. All that GPA asked for and won is that all traders and growers have access to the same level of stocks information needed to provide a fair and competitive market. I think we should thank Mailler at GPA for forcing the bulk handlers to surrender their control of stocks information and break down their internal secret deals.
Jock Munro
22/03/2013 4:40:00 AM

TheTraders/merchant /bulk handlers have been given ownership of the wheat industry through the abolition of the National Pool by the Rudd Government and the Liberal party. They have an obligation to the shareholders to maximise this advantage. The disadvantage that growers are now under will not be righted until we have some type of legislated arrangement that protects their interests.
drowning in debt
22/03/2013 8:31:20 AM

yes floating but in Mailer bringing the issue to the table, you can now be sure that all east coast growers will ALSO BE COMPELLED to release their on farm stocks data. the argument is simple. WA growers also need 'complete' aussie stocks data to make informed marketing decisions so that include what you blokes have squirrelled away. remember cbh is our grower owned storage. you cant have your cake and eat it too
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