AUSTRALIA'S barley industry will need major supply chain investments, as well as ongoing improvement of its farm practices to keep up with its market competitors.
Australian Export Grains Innovation Centre (AEGIC) chief economist professor Ross Kingwell told the Australian Barley Technical Symposium in Perth last week that major investments in the supply chains of competitor nations were squeezing the global barley market.
"Our barley industry faces challenges from lower cost origins, so our grain supply chains must serve the interests of local and export customers and growers needs and must be cost-efficient and fit-for-purpose," professor Kingwell said.
"Otherwise grain revenues and the reach of our grain exports will be unnecessarily limited."
With about 70 per cent of Australia's barley exported, supply chain costs directly affect our farmers as they crucially determine the farmgate price.
While farmers can't easily influence the export price they receive for their barley, professor Kingwell said they could influence their farm costs of production and, to a lesser extent, the supply chain costs that were involved in producing and moving barley.
AEGIC continues to examine the nature of supply chain costs throughout Australia and its competitor nations and professor Kingwell said their research showed Australia was facing intense direct and indirect competition.
"An example of indirect competition is when there is a market that is being squeezed and so a competitor moves to some other market," professor Kingwell said.
"Internationally there is a lot of grain that is moving into Asia and South East Asia, so we are facing a lot of direct competition and a lot of indirect competition with grain that would normally be sold in other markets.
"In wheat, if you go back to 2013, we had a 50pc market share in South East Asia and last year we were down to 23pc, so we are really feeling the winds of competition in South East Asia and that's coming from Ukraine, Russia and Argentina."
Professor Kingwell highlighted some of the major investments competitor nations were undertaking in their supply chains, including the Canadian government announcing a $10.1b investment in its transport infrastructure.
"Competitor nations being strongly supported by governments heavily investing in their supply chains is going to be an ongoing challenge for Australia," he said.
"A new export terminal on the port of Vancouver that services Asia and South East Asia with its rail loop system is also going to reduce the train cycle time by 40pc, so this means they will be able to get trains in and out with huge efficiency.
"In the Ukraine, the government is investing in the upgrade of 2000 kilometres of public roads and they are purchasing new train sets.
"In Argentina, a huge investment based on Chinese finance is underway on a railway line that will handle a record number of grains - three times the volume compared to last year."
Competitor nations are also investing in improvements to their on-farm practices, with professor Kingwell pointing to Argentina as an example of a country that was investing a lot in state-of-the-art technology, for example, using carbon fibre technology to produce lightweight boomsprayers.
Not all doom and gloom, he said there had been some wins in Australia's grain supply chains, congratulating the CBH Group on driving down costs and passing on some of these savings back to farmers.
"They implemented a cost saving drive that's made it possible to give back to growers and that rebate is based on marketing prowess as well as making sure the actual operations of storage and handling were as least costly as possible," professor Kingwell said.
However he said another ongoing challenge for Australia's barley production and supply chains was climate change.
"Often the rainfall is moving in a southerly and coastal direction and that is changing the fundamental environment in which crop production is taking place, which represents a huge challenge to the future of crop production in some regions," he said.
Large variations in grain production is posing a significant challenge for Australia's barley industry, particularly in the Eastern States.
"The grain storage and handling game is based on grain volumes and if you get good grain volumes you can drive down your unit costs," professor Kingwell said.
"But if you don't, you have these fixed assets that are sitting there, needing to be maintained with very little throughput and they are expensive assets to build and operate.
"The lesser volatility in WA is really important because it helps protect the investments in our supply chain."
