IN SPITE of the difficulties of moving grain upcountry to export, Australia’s massive sea freight advantage to south-east Asian markets will play a large role in allowing Australian wheat exporters to remain competitive into these critical markets, according to a Rabobank analyst.
Graydon Chong, senior commodity analyst with Rabobank Australia, said the push by grain marketers to invest in port infrastructure showed what their priorities were.
“It is all about having the export capacity, to be able to get the product out when you want it.”
In spite of nominal overcapacity at port, there have recently been new or planned port developments in NSW, Victoria and Western Australia, with talks under way in South Australia.
This is primarily due to exporters wanting to be able to access the lucrative ‘front half’ market in the first six months of the year, when Australian grain is in demand as northern hemisphere supply dries up.
Mr Chong said grain originators were increasingly looking to control their own destiny through supply chain assets.
“Increasingly, the big exporters also have some form of supply chain assets.”
In terms of the cost of getting grain to port, Mr Chong said there were improvements that could be made, but cautioned against comparing Australia’s freight system against that in places such as Canada.
“They’ve got a system geared to moving grain a long distance, primarily from the Prairies to their west coast, whereas in our case, the grain is generally moving 200-300km to port.
“At these medium distances, road freight can stack up as a viable option.
However, he said investment in rail would benefit the industry.
“We have recently seen the Victorian government invest in upgrades to their rail network which will make getting grain from the north-west to port easier, and that can only be a good thing.”
Mr Chong said although there was some investment in upcountry storage, he felt marketers would increasingly embrace on-farm storage.
“It gives them a means to access grain without necessarily having to make the investment in storage.
“Growers can also benefit, they will be able to access the blending and arbitrage opportunities currently in the hands of grain handlers."
US-based Rabobank commodity analyst Sterling Liddell has been touring regional Australia over the past fortnight with Mr Chong.
Mr Liddell said in the US, more than 640 million bushels can be stored, and more than 55pc of that storage is on-farm. Rail transportation prices have also spiked because of ageing and under capacity of infrastructure.