Comment: Imre put smart money on 20m storage needed by 2020

Comment: Imre put smart money on 20m storage needed by 2020

Cropping News
Wally Newman, Newdegate farmer and Former CBH chairman

Wally Newman, Newdegate farmer and Former CBH chairman

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Shortly after I joined the CBH board in 2000, chief executive officer Imre Mencshelyi planned a strategic strategy based on CBH being able to cater for and handle a 20mt crop by 2020.

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IN 2000 CBH had 20 million tonnes of total storage capacity to cater for carry over from the previous season's grain with an expected average harvest of between six and 12mt.

Much of the storage capacity was built during the million acres per year of new land releases between 1960 and 1983, being the last new land release.

Much of the storage capacity was in need of upgrading and in many cases the sites were too small and not able to provide the segregations now demanded by world markets.

Shortly after I joined the CBH board in 2000, chief executive officer Imre Mencshelyi planned a strategic strategy based on CBH being able to cater for and handle a 20mt crop by 2020.

Not having the experience as Imre, I was very sceptical of the prediction as the big increases in grain production at the time were coming from more and more sheep acres going into grain production as farmers looked to recover from the collapse of the wool industry, particularly in the Esperance zone and the south west of the Albany zone.

2003 was a bad harvest when CBH only received 5.2mt.

I was so sure of Imre's prediction being pie in the sky, I bet him $1000 there was no way it would happen by 2020 as he hadn't taken into consideration the huge amounts of cropping land being lost to salt degradation and the huge increase in blue gum plantations taking more valuable land for wood chips.

Plus there was no way improvements in plant breeding genetics alone would take CBH's harvest to 20mt by 2020.

However, within five years of joining the board and well before Imre departed from CBH in 2009, I was an Imre convert and pushed very hard with him to convince the board of the need to meet future demands.

It was put to the board that CBH should borrow $400 million to upgrade by building mega sites across the State (that's all it would have cost then) and gain the benefits of handling large crops upfront.

Increased production from 2004 onwards was mainly due to technology, auto steer, agronomy and huge machinery improvements, much of it driven by the likes of Ray Harrington and others with the introduction of minimum till, press wheels, improved fertilisers, chemical weed control and an abundance of agronomists providing advice to growers on how to do it better.

Unfortunately the board could not be convinced at the time and it was years later, in 2016, that the board finally adopted the current Network Strategy.

Unfortunately the plan is not finished and still has a way to go, total fixed storage is still at 20mt with limited ability for carry over grain to the same extent achieved back in 2000.

Exporting 20mt from the ports which have an export ability of 50-70mt is limited by a lack of capacity to move grain from up country to port.

While the ability to use rail to the extent it was in the past is limited by access to sufficient rail coverage whether its Tier Three or any rail is better than none to move tonnes of grain with a low carbon footprint and up to 17 times more efficient than road transport.

When Kwinana Terminal was completed in 1975 it was the largest offshore loan, at $72m, ever in Australia at the time (the replacement value is about $2 billion today).

The terminal is still the biggest and most efficient in the southern hemisphere.

It was paid off in less than 10 years and is essential to our export capacity.

In 2010/11 CBH bought enough trains and wagons to handle the average harvest of 10-12mt.

No further rolling stock has been purchased.

We are now growing 20mt and haven't borrowed a cent when interest rates are the lowest they have been in a lifetime.

The Network Strategy has come a long way, however this year when growers need it most, it still has a long way to go.

The world is desperate for grain, prices were at a premium, and the best we have ever seen was early in the season when shipping slots were available to world markets.

Now we are seeing prices about $50 below world market prices for the first time I can ever recall.

This will cost growers hundreds of millions of dollars as not all the 20mt will reach world markets at a premium back to growers who missed out.

Concerned that Imre's prediction would come sooner than later I have always put an estimate in the CBH Harvest Estimates competition and called it 'Imre's Objective' to cover my bet should it ever happen.

And yes, it is now one year late and should I win the competition this season, it is all yours Imre, for such an incredible prediction that's helped drive CBH's ability to be the leading grain handler in Australia.

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