EXPORT logistics, between farmgate and port, are equivalent to 30 per cent of the production costs of Australian grain producers, according to a report released last week.
Research compiled by the Australian Export Grains Innovation Centre (AEGIC) looked at Australia's bulk grain export supply chain and outlined the costs for producers when exporting through a bulk handler.
Report co-author and AEGIC economist Dr Chris Carter said high logistic costs were threatening to diminish the Australian grain industry's international competitiveness.
"Supply chain costs, from receival site to port, for a wheat producer 200 kilometres from port in western or eastern Australia start at about $60 per tonne," Dr Carter said.
"This equates to about 20-25 per cent of the price of wheat or, for a crop yielding two tonne per hectare, is equivalent to $120-145/ha.
"Bulk handling charges, including receival charges, freight and port fees, make up the vast majority of this cost at $52-65/t and are generally a grain producer's largest single cost item.
"End-point royalties and levies make up the remainder."
As a net exporter of grain, Dr Carter said Australia's costs of production needed to remain internationally competitive for the industry as a whole to be profitable.
"With the supply chain costs equivalent to about 25pc to 30pc of the cost of grain production, it is imperative the industry strives to lower this cost in an ever-increasingly competitive global market," he said.
From a grain producer's perspective, grain supply chain costs depend on several factors, but chiefly the proximity of a receival point to the point of harvest, its distance to port, the mode of grain transport and the grain handling, storage and loading charges throughout this supply chain.
"There are some sound and legitimate reasons for these cost differences as the cost structure in each jurisdiction is influenced by many factors, some unique to that region," the report stated.
"Supply chain costs in Australia for wheat, travelling 200km from farm to port, start at $60-75/t.
"As such, supply chain costs are generally the single largest cost item for a grain producer in a typical year."
According to the report, in a uniform case study comparison for 2013-14, WA had the lowest cost supply chain and Queensland the highest.
While there are significantly different factors influencing supply chain costs between east and west coast grain industries, the report shone a rather positive light on CBH operations and subsequent savings by WA growers.
GrainCorp is quite a different matter, operating in a more competitive environment than CBH and Viterra, with Emerald owning 15 receival sites, rolling stock and one port, and Cargill owning 22 receival sites across New South Wales, South Australia, Victoria and Queensland and rolling stock
The release of the report comes just two months since the Federal Government's surprise decision to block the $3.4 billion takeover of Graincorp, by US firm Archer Daniels Midland.
According to Winthrop Professor of Marketing at the University of WA Tim Mazzarol, one of the biggest issues with the GrainCorp sale was not so much about the near monopoly changing hands, but the consequences that would come as a result.
"The fact is that GrainCorp is a near monopoly, just as there is a near monopoly over here with CBH," he said.
"The main difference is that the GrainCorp model, if it was going to go to ADM, would mean that a foreign owner with a strong track record of 'for profit' motives would be looking at that up-country supply chain, distribution and collection network.
"What a lot of growers over there were really concerned about was the possibility that their silo would be shut down.
"That's already happened in the NSW milk industry."
p To view the report go to http://www.aegic.org.au/media/