Co-authors of a new report from the Australian Export Grains Innovation Centre (from left) Professor Ross Kingwell, Tamara Stretch and Dr Chris Carter.
PHOTO: Tracy Routledge, AEGIC
It is hoped that a study of supply-chain costs will provide the necessary data for industry action on improving trading efficiencies and reducing the impost on growers’ incomes.
The study forms the basis of a paper – The cost of Australia’s bulk grain export supply chains – produced by the Australian Export Grains Innovation Centre (AEGIC), based in Western Australia.
The paper’s authors, Professor Ross Kingwell, Tamara Stretch and Dr Chris Carter, hope the data will facilitate talks between growers, traders and bulk handlers.
Supply-chain costs (such as freight and bulk handling) are the largest single cost paid by a grain grower. Costs vary between states and between traders, but overall the cost of moving one tonne of grain from farm to ship is about three times the cost of moving a tonne of iron ore from mine to ship.
Dr Carter, AEGIC’s economist, says the paper contains no recommendations, just the data required for the industry to have an informed debate.
The authors’ research shows that supply-chain costs for wheat travelling 200 kilometres from farm to port are between $60 and $75/t.
There are considerable cost differences between regions, with Queensland having the highest costs and WA the lowest.
Dr Carter says there are some explainable reasons for the differences: “WA and South Australia have an export focus and this makes it possible to streamline freight, storage and ship loading,” he says.
“In eastern states, a larger proportion of the crop is used locally and growers have the option of holding grain on-farm in the hope of achieving better prices.”
The report found there are 55 million tonnes of bulk-grain-storage capacity throughout Australia, enough to store 18 months’ average production.
As with much broadacre agriculture, capital equipment such as grain stores and headers are unused for much of the year. He says it is difficult to see how this can be avoided.
“The infrastructure is in demand all at once, while for much of the year the capacity is idle,” Dr Carter notes. “One problem is the short window of export marketing opportunity from February to June when there is a limited supply of grain from the northern hemisphere.”
However, the paper says that some bulk handling charges, such as for dust and shrinkage, are not transparent and need more explanation for growers.
“AEGIC’s role is to raise the issue and to supply data for discussion,” he says.
The paper says the relative roles of rail and road transport also need further study.
In some cases, investment by mining companies has resulted in improvements to the rail network. Elsewhere rail services have been neglected.
“We need a full costing model to elicit the viability of rail lines,” Dr Carter says. “Commercial costs are not the same as economic costs.”
For example, he notes that transferring more bulk grain from rail to roads might save state governments money, but imposes extra costs on local governments.
And while Australia has a shipping advantage to South-East Asia, this is not the case for northern Asian countries such as China, Japan and South Korea. In these major new markets Ukraine in particular is emerging as a serious competitor.
As a result of considerable investment by major traders in Ukraine, the country is now said to be able to deliver grain to Malaysia for less than grain shipped from WA.
AEGIC is planning further supply-chain studies in cooperation with Canadian traders.
Dr Chris Carter, AEGIC,
08 9368 3749,
The report can be downloaded at: www.aegic.org.au/programs/gppf.aspx
News in brief
Canola label change notice
GRDC Project Code
Overseas, West, North