Debate puts spotlight on handling efficiencies
At last year’s Australian Grains Industry Conference, the increasing pressure on the industry’s transport and port infrastructure was energetically debated
The production advances that growers have made on-farm need to be matched by more efficient supply chains if the Australian industry is to remain competitive, say those working on the grain handling and shipping side of the industry.
Infrastructure needs and today’s more diversified export scene were debated at the most recent Australian Grains Industry Conference in Melbourne. The conference provided an insight into issues being wrestled with in the off-farm side of the industry, the efficiency of which has a direct bearing on growers’ final returns for their harvests.
The local debate about improving the logistics of moving Australian grain comes as Australia’s wheat exports have passed the 20-million-tonne mark for the first time, reaching almost 25 million tonnes for the 12 months to 30 September 2012.
Changes in Australia’s export arrangements also coincide with the deregulation of Canadian wheat exports, and an international market waiting to assess the implications of that move.
Alison Watkins, CEO and managing director of GrainCorp, spoke of the challenge of moving from working solely through AWB into a partially deregulated environment. “[Graincorp] had one export customer in AWB … it was a fairly straightforward relationship … now we have, I think, 27 accredited exporters. So from a planning point of view you get this explosion of complexity in being able to fulfil their requirements. That’s been a big change for us.”
However, the chairman of the Emerald Group, Alan Winney, argued that “competitive tension” at ports, silos and for rail transport was essential to drive efficiencies and keep Australian traders competitive internationally.
The Emerald Group has grown from its inception in 2004 to become the fifth largest Australian wheat exporter. In March 2012 Emerald spent $120 million on improving its supply chain. Now half-owned by Japanese grain company Sumitomo, Emerald took over the Australian Bulk Alliance port terminal in Melbourne in March 2012, and has bought two new ‘train sets’ with a third on the way.
The need for more rail investment has also been an issue in Western Australia, where CBH announced plans in August to invest $175 million in new trains.
However, the issue of adequate rail infrastructure is not isolated to Australia. Alex Duncan of McDonald and Pelz Global Commodities discussed the challenges of shipping wheat to the port of Vancouver on the south-west coast of Canada. “We have enough capacity going east but the marketplace has shifted to the Pacific coast,” he said.
While most of the changes introduced as part of the deregulation of Australian wheat exports are seen by many in the trade to be a necessary move, international shippers remain critical of Australian shipping contracts, which they say make Australia a less attractive country of origin for customers.
Anthony Diamante, a director and chartering manager of Quadra Commodities (an international agricultural trading and logistics company), said Australia was the only country where the shipper did not receive damages, known as ‘demurrage’, when a cargo was delivered late by the bulk handler. Yet he said the shipper still faced any additional costs arising at the terminal because of the delay, and also potentially had to compensate its customers for contract breaches for late shipment.
Mr Diamante, who previously worked for AWB Ltd, said this made Australia risky for shippers. By comparison, he said ships in the US were often loaded ahead of time, with charter clients paying ‘despatch’ to the suppliers as reward for the early freeing of their schedule.
The annual Australian Grains Industry Conference brings together all sides of the industry in a single forum, made all the more lively as handlers, traders and marketers adjust to deregulation. Nonetheless, there is common ground – the need to keep the Australian industry competitive, and safeguarding the country’s hard-earned status as a quality supplier while working to bring down costs through step changes in efficiency and new investment in infrastructure.
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