Price will govern Bunge's grower support

06 Feb, 2015 01:00 AM
Comments
6
 
It gives us (growers) options, that’s the important thing.

PRICE and convenience are the main factors expected to determine whether Great Southern grain growers will deliver to Bunge's new storage facilities proposed at Arthur River and near Kukerin.

Farm Weekly journalist MAL GILL spoke to several growers this week for their views on Bunge's proposal to establish a 200,000 tonne storage facility on Coalfields Highway just west of Albany Highway, Arthur River, and another 150,000t storage on the Dumbleyung-Lake Grace Road between Dumbleyung and Kukerin.

Both sites, which are at the planning approvals stage of development, would feed Bunge's export terminal at Bunbury port via the Coalfields Highway using medium combination trucks.

While none of the growers contacted said they had any issue with the CBH Group or the service provided by its network of local bins, they welcomed the competition in the marketplace and the delivery options that may open up for them with the Bunge storages.

However, they were more cautious about stating whether they were likely to switch allegiances and deliver the bulk of their next harvest to Bunge.

Price was seen as the prime factor determining whether the new storages would be widely and regularly patronised.

The consensus of opinion was that a $5 a tonne premium would be enough to sway some growers across to Bunge.

Some, however, expressed concerns about the impact on the long-term viability of some older, smaller CBH storages within the catchment area proposed for the Bunge facilities.

Concerns were also raised by farmers about the increased truck traffic on Coalfields Highway the Bunge sites will generate and the potential for them to take grain off-rail at a critical time when the future of Tier 3 grain lines was yet to be decided and CBH's long-term access to higher volume Tier 1 and 2 lines was still being negotiated.

BUNGE’S move to build a storage site within 15 kilometres of his property was welcomed by Jason Smith, Clearview farm, Dumbleyung.

“I have absolutely no issues with CBH and I think the CBH system is world class, but I think the big thing to come from this (proposed Bunge storage facility) is competition in the local area,” Mr Smith said.

“We don’t have much competition in the bush so this will be a good thing.

“It gives us (growers) options, that’s the important thing.”

Mr Smith said he delivered his last harvest to CBH receival sites at Dumbleyung, Kukerin and Dudinin – the Dudinin site putting him into the CBH Kwinana zone which usually paid a little more than the Albany zone but with the price advantage offset by increased transport cost.

He said that if the Bunge site was operating by next harvest he would weigh up the options and consider delivering to it.

“A lot of people are giving them (Bunge) a pretty good rap,” Mr Smith said.

“I would certainly have a look at it, but I have to stress I don’t have a problem with CBH.”

IF Bunge offers a price incentive Scott Crosby, Nyabing, said he would use its proposed receival site between Dumbleyung and Kukerin.

“The price has to be right, but $5 (a tonne) will move people,” Mr Crosby said.

“For me it’s only about another 30 kilometres further than CBH (at Nyabing) and 30 kilometres is nothing.

“But I do like using CBH because it’s practical and it’s cost-effective, so the (Bunge) price would have to be right.”

While he thought “competition is a good thing”, Mr Crosby said in the longer term, he believed farmers would have to “think pretty carefully” about whether they dealt with Bunge or stayed with CBH.

“They’re (Bunge) a multi-national and they’re doing it (grain accumulation and export via Bunbury port) for the dollars,” he said.

“They will be looking to cherry-pick the key spots.”

There was a possibility the proposed Bunge storages could have a detrimental impact over time on grain volumes and therefore the cost structures within the CBH Albany zone, he said.

“It could take 10 years, but the long-term affect may be that if they (Bunge) take a million tonnes out of the (CBH) zone, with the impact on the economies of scale that would have, it might drive costs up and we end up no better off,” Mr Crosby said.

Another issue was taking grain off rail and putting it onto road, with both proposed sites having potential to take grain that is currently railed by CBH to Albany or Kwinana, and to put it in trucks on Coalfields Highway to Bunbury, he said.

WITH his Willingvale property close to the local Woodanilling CBH depot on the Albany line, Kim Wilhelm can still see times when he could use a proposed Bunge site at Arthur River.

“Early in the season Woodanilling (CBH) was closed on Sundays and we had to take a load to Cranbrook and two loads (of canola) to Narrakine which was about a 200 kilometre round trip,” Mr Wilhelm said.

“The Woodanilling bin also filled early and we had to cart to Broomehill.

“Broomehill is almost as far as Arthur River, If I’m pushed for time and the local bin is closed then I’d possibly use the Bunge site at Arthur River.

“Price may also make a difference.

“But I’m reasonably happy with CBH and I’m not real fussed about using them (new Bunge sites).”

However, Mr Wilhelm welcomed the competition that the new sites were expected to bring.

“At last we will get benchmark price for the Albany zone,” he said.

However, he said the downside of increased competition was more truck traffic expected on the Coalfields Highway.

“It’s (Coalfields Highway) a bloody nightmare at the moment, they won’t be happy (with the projected 160 extra truck movements a day to port the Bunge receival sites are expected to generate during peak harvest) in Collie,” Mr Wilhelm said.

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Mal Gill

Mal Gill

is wool and dairy writer for Farm Weekly
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READER COMMENTS

Deregul8
6/02/2015 8:03:41 AM, on Farm Weekly

With no reason to remain loyal, Great Southern farmers will send their trucks past the local CBH bin in drove chasing the more competitive prices and charges offered by Bunge. Only a matter of time and similar options will be open to farmers in the Kwinana zone and this is when it will hurt CBH most. 7mmt up for grabs. CBH's break-even is around 9mmt.
MC
6/02/2015 10:45:56 AM, on Farm Weekly

D8 - think you need to read between the lines in this article. Tell us - do you farm on a Tier 1 or 2 line. As much as all this extra competition is lovely I can't help but worry about the extra trucks on the roads. Clearly it doesn't bother you morally. Your comments always amaze me. You want to destroy CBH and have absolutely no regard for the consequences. You clearly have a lot of time on your hands to think about all this.
Kanzi
6/02/2015 11:40:00 AM, on Farm Weekly

So does Bunge offer crop optimisation? Can I sell to other buyers if I store with Bunge? Will my freight costs be lower than with CBH? Will I get a refund if they make a profit? Sounds to me like the same few want CBH sold, so that a few can cash in on what was built by a whole lot of people in the past. If you want to sell it, pay them according to their tonnes delivered! That would deflate the balloon of those wanting to sell in a hurry.
X Ag Socialist
6/02/2015 12:56:43 PM, on Farm Weekly

Your right Kanzi, D8's tonnes divided into the total tonnes CBH has received over the last 85 years, that would come to let's say 10X dollars. Now deduct what it would cost to handle his grain over the years and then send D8 a invoice for the sum owed to CBH.
damian
6/02/2015 1:14:56 PM, on Farm Weekly

MC, you need to have a look at the CBH mode of operation. They have been transporting huge tonnages of grain by road in recent years from rail points on tier 1 and 2 lines. Tier 3 only receives about 8% of the crop. It is a furphy that new exporters are putting all of the extra trucks on the road.
Gerry Atric
6/02/2015 3:58:31 PM, on Farm Weekly

Ever been to a CBH AGM, D8? Break even is 6mmt, although will be interesting to see the response if Bunge are the only buyer in their own sites vs multiple at CBH. And another reference to Kwinana competition with no facts to back it up.......

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