Investors flock to supply chain

25 Mar, 2015 01:00 AM
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11
 
Grain originators are increasingly looking to control their own destiny through supply chain assets

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.

FarmOnline
Gregor Heard

Gregor Heard

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

READER COMMENTS

Jock Munro
25/03/2015 6:21:44 AM

So I suppose this means that Australian growers who once marketed their own wheat crop with great success, should now clap their hands with glee that the foreign merchants are positioning themselves for an even stronger hold in the market place. Third world rhetoric.
Fat Spider
25/03/2015 9:46:32 AM

Jock, apologies if I have misread this, and I could be way off base, I am starting to get the sense that you are not a fan of deregulation. Gradually, over the course of the past 500 or so pro-single desk posts you have made, I have detected (in some cases, needing to read between the lines) just a hint of remorse over the deregulation of wheat marketing. My only concern is that, based on a quick, back of the envelope calculation, in between scanning the rural press for articles on wheat which you can comment on, you may not have time left over for sleeping or eating.
Jock Munro
25/03/2015 10:26:05 AM

Thank you Fat Spider for your kind words and concern for my health. Did you see where Twiggy Forrest is calling for an Australian iron ore single desk?
John Smith
25/03/2015 10:48:10 AM

Or farmers could clap their hands at much needed investment in the sector with the bonus of CHOICE and COMPETITION. I highly suggest you read this presentation from AGIC Singapore. http://www.ausgrainsconf.com/site s/default/files/files/Morison.pdf
Cam
25/03/2015 12:12:14 PM

Yes Jock and what was his reasons for that? Self interest I would think.
hayseed
25/03/2015 3:46:47 PM

@Cam.. More like self preservation. I'd say..
Rob Moore
25/03/2015 4:11:15 PM

I for one am sick of working my guts out to make processors and middle men and my so called "industry spokesmen and reps" fat at the retail trough. Jock - my PPP plan is the single desk (should say online portal) that creates competition BUT doesn't have the baggage of the old domestic v export angst. The floor price for wool was another single portal that worked brilliantly till it was corrupted thru greed $8.70 a kg was a "ceiling " price - so it was wrecked from within by dimwits in charge! Why wouldn't we all be bitter?
Jock Munro
26/03/2015 6:38:46 AM

John Smith, The AGIC conference is an exercise in merchant spin and a celebration of deregulation and their control of the Australian grains industry due to the treachery of our political urban elite. Growers are now thousands of weak sellers and the industry is little more than a merchant's picnic.
John Smith
27/03/2015 11:13:31 AM

I guess you've been to a whole heap then Jock?
Jock Munro
27/03/2015 3:59:43 PM

It is a traders' show John Smith-are you eligible?
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