Infrastructure: the grain thing

30 Sep, 2014 02:00 AM
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21
 
Infrastructure investment from multinationals indicated a desire to control their own destiny

THERE has been another spate of multinational investments in the grains supply chain.

Over the past fortnight, Bunge has officially opened its Bunbury, Western Australia, port, while powerful American co-operative CHS has made its largest investment in storage, buying an east coast grain storage and packing business.

Japanese agribusiness Sumitomo, through its Australian company Emerald Grain, has purchased successful storage business Ardlink, located at Ardlethan in the northern Riverina.

The purchase means the company now has 16 storages on the east coast, along with the Port of Melbourne. This ranks second for GrainCorp's rivals, with AWB's GrainFlow having 18 sites.

Emerald has said it will spend $3 million in upgrades on the Ardlethan site and lift its capacity to 120,000 tonnes.

Meanwhile CHS has bought a 50 per cent share in Broadbent Grain, which operates in both Queensland and Victoria, with a storage and packing facility at Toowoomba and a 200,000 tonne storage site at Lakaput, in the heart of the emerging grain production zone in Victoria's western district.

Broadbent Grain principal Steve Broadbent said the investment would be mutually beneficial.

"We've built up a good business over the years and this investment from CHS will mean more opportunities for both of us."

He said the name of the business would remain Broadbent Grain.

The west coast story

Meanwhile, in WA, Bunge has officially launched its Bunbury port facility, which will compete against the major bulk handler and port operator in the west, CBH.

Supply chain specialist Luke Fraser said the recent spate of infrastructure investment from multinationals indicated a desire to control their own destiny.

"They are keen to get involved in the supply chain and have their own networks rather than relying on the traditional bulk handlers to move their grain."

Mr Fraser said the industry was in another period of change following deregulation of the wheat industry.

"The pendulum has swung once again. Initially after deregulation, we saw everyone moving away from the major bulk handlers and trying to create their own arbitrage opportunities by storing grain themselves.

"Now I think the industry realise it is not always possible to store all your own grain but they want to use an alternative to the big players, which is where these smaller bulk handlers come into play.

"They will provide competition and may create some small efficiency savings for growers."

Emerald Grain's managing director John Murray said the south-western NSW district was a key growing area for Emerald's grain business.

The Ardlethan upgrade site fits with Emerald's recently announced strategy to team up with logistics and transport business Qube Holdings to move its grain to port.

The grain will eventually go to the proposed Qube port facility at Port Kembla, announced earlier this year.

Earlier this year GrainCorp also announced efficiency upgrades and improvements to its turn-around times within its east coast network, closing or leasing many sites as part of moves to concentrate grain receivals at selected priority sites, a move it says will deliver an extra $5/t to growers.

Quantum shift needed

Initiatives such as GrainCorp's Project Regeneration or the spate of new players providing competition in the storage and transport field may slightly reduce growers costs, but a quantum shift in the storage and logistics space is needed to make big savings, according to a grains supply chain expert.

Luke Fraser, Juturna, said while the solid investment in the supply chain was heartening, there is a need for an overhaul for peak efficiency.

"We're working with a freight network that is essentially drawn up on pre-Federation lines."

Mr Fraser said top of his wishlist would be an inland rail network.

"You see in North America, the real efficiencies come from long-haul transport."

He said the natural obstacle of the Great Dividing Range meant it was difficult to effectively get grain into certain east coast ports.

"If there was an effective national railway in place, you may find it is cheaper to move grain from central NSW to Adelaide, Melbourne or Brisbane, rather than getting it over the mountains."

Mr Fraser said large trains from regional intermodal sites would be the most efficient way of moving grain.

"If you can get big trains going long distances, it is very cost-effective, the main cost is getting a train to a site, so having more grain going on less trains makes sense."

He said he believed the best system would involve having smaller sites with the grain then transported to the regional hubs before going onto export.

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READER COMMENTS

Jock Munro
30/09/2014 5:04:00 AM

With the mega merchants building their own supply chains Australian wheat will never regain its quality reputation and the relative value of our grain will continue to fall. Who do the mega merchants who source grain for their end user customers from across the globe support when there is a glut of wheat? Do they put US growers interests before those of Australian producers ? The transfer of the wheat crop by Rudd and the Liberals from Australian growers to the mega merchants was an act of pure treachery and ignorance.
Australian Wheat Bribes
30/09/2014 6:28:03 AM

One thing is for sure,now the Desk is history, Aussie wheat growers will never: 1. Be forced to pay interest on loans used to pay themselves for their own grain again, 2. Be forced to top up executive salaries out of pools, 3. Be forced to top up shareholder dividends by illegally dipping into wheat pools, The shackles are off & the future looks bright if you embrace the marketing opprtunities at your feet.
tim from oakey
30/09/2014 7:12:08 AM

If this new Aussie deregulated wheat market is so good based on the US and EU models, why has it never worked in USA & EU? In those countries it is such a failure that their Governments have always given trillion dollars of subsidies to their farming families via a range of mechanisms which include straight out farm payments, free comprehensive crop insurance, guaranteed minimum prices via Government loans, export promotions funding, and so on. It can only be traders or myopic locals who are too blind to look around and see what is about to bankrupt them.
Rational observer
30/09/2014 11:25:25 AM

Jock - stick to the facts please. The Government did not force you and your grain grower colleagues to sell your ownership of the supply chain to the 'mega merchants'. The naïve dash for cash by grain growers is now producing the entirely predictable outcome so it is a bit rich to continue blaming the Government.
PayAttention
30/09/2014 11:44:12 AM

I am very glad the single desk is gone, but your points 1 and 2 are incorrect "AWB". That just means we see lower bids. The good news is that I am no longer forced to accept any price offered - we can (and should) sell to the highest bidder.
GFA
30/09/2014 12:43:23 PM

A few people do not realize Aussie farmers are not only competing with each other to lower our prices now. We are also competing with foreign Governments (taxpayers) in USA and EU who subsidize their producers resulting in market corruption, for which we pay dearly, via "below true market prices". The middlemen traders do not care and simply seek to increase their size and market dominance so as to reap the largest possible margin out the weakest players. Surprise, surprise, that is us, without the SD. The gung ho locals who do not see that are blind fools heading for the cliff soon.
Philip Downie
30/09/2014 12:45:32 PM

AWB if there were things being done that were "illegal" why weren't they charged? All 3 of your points are incorrect but that is not the point, the facts don't fit your agenda.
leon
30/09/2014 1:05:19 PM

If Wheat Briber was a farmer and interested in facts Philip Downie, he/she would not be pushing such ridiculous unsubstantiated nonsense. Even PA is arguing with Wheat Bribers claims.
john from tamworth
30/09/2014 1:17:13 PM

Well Philip there is no question that AWB was engaged in illegal activities by paying over $300million in bribes to Saddam via "trucking fees".This was uncovered by Volcker and Cole.The Cole commission recommended charges against 12 employees of AWB for breach of Commonwealth and state laws.To refresh your memory Cole was a NSW supreme court judge and no lightweight.The AFP investigation was closed down prematurely and was never funded properly.The LNP government of the day walked away from the whole scandal as fast as their feet would carry them.The Nationals still can't work it out.
wtf
30/09/2014 1:33:39 PM

funny how u dereg mob take the moral high ground. Why don't u take the moral high ground against your own govt who was an ally in the exclusion of Iraq from the SWIFT network (Society for Worldwide Inter Financial Trading) which effectively meant they had no way of paying for their food. Imagine if your govt took your wallet away from you and u could no longer pay for food? ex CIA Iraq analyst and whistleblower Susan Lindover, says between 1.7-2.1 million Iraqi children died because of that. Where is your moral position now?
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