Supply-chain challenge as global demand climbs (Part 2)

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Grain Handling

Read Part 1 of this article here

As another harvest was being completed, Ground Cover spoke to GrainCorp CEO Alison Watkins for a glimpse of challenges and opportunities that traders and marketers face today

When surveying the changing grains industry landscape, GrainCorp CEO Alison Watkins’s main focus is her company’s side of the farmgate – the supply chain from harvest receival to delivery to international buyers. This side of the industry has its own new challenges and opportunities since deregulated trading began in 2008.

Ms Watkins says that for companies such as GrainCorp, which is both a handler and a marketer, the issues are two-fold.

A photo of Alison Watkins

GrainCorp CEO Alison Watkins: Opportunity, long term, hinges on increased production with a competitive supply chain.

PHOTO: Brad Collis

“As a marketer it is critical that we vastly improve our understanding of the needs of our consumers – the millers, maltsters and edible-oil processors, and the grain specifications that are important to them.

“As a handler, the challenge is to reduce supply-chain costs, which can easily be a third of the cost of getting a tonne of grain to its export destination. Reducing these costs is essential from a competitive position and also for growers, because supply-chain costs are reflected in their final return.”

She warns against any complacency about the freight advantage that Australia enjoys for the growing markets in Asia – it can be as little as $10 a tonne. “If your supply chain is not highly efficient you lose that advantage very quickly.”

Ms Watkins says that since deregulation, buyers of Australian grain are also having to adjust. Instead of dealing with one supplier who understood their needs almost intuitively, they are now faced with a spread of suppliers.

“The challenge today for Australian marketers is to replicate, and even improve on, that historic relationship.”

She says one way to improve is to take advantage of new technology. “The tests for different attributes for different breads, or noodles or specialty doughs, have improved considerably and we need to take advantage of this technology to meet, precisely, our customers’ needs. At GrainCorp we have built a test mill and a test bakery to make sure that a boatload of grain being sent to a buyer will perform exactly as specified.”

Just like growers, Ms Watkins says one of the main traits being sought by millers is yield – in their case, more flour per tonne of grain.

While questions have been asked at recent industry forums about the adequacy of Australian grains marketing, particularly in Asia, Ms Watkins is upbeat about the future and is keen to remind everyone that Australian wheat holds a unique position among international suppliers. “We have a strong reputation for our ability to produce very white, high-protein, low-moisture-content grain. This type of wheat performs very well for flour millers who might otherwise use a Canadian red wheat. But they get a lesser yield from Canadian red wheat because it typically has a higher moisture content, plus more effort is needed in the milling process to ensure the red husk doesn’t affect the flour colour.

“Overall, the range of grades produced in Australia allows us to compete in both the low-cost, high-volume markets, and the high-value niche markets.”

She adds that it is this wide market scope that puts even more pressure on her side of the industry to keep lifting supply-chain efficiencies so that production and delivery to end consumers of both bulk and niche grains are not hindered.

This brings in logistics and other issues surrounding freight. Road transport has become the main method of moving grain from country receival sites to ports, although Ms Watkins argues that rail is still the most efficient way to move grain over longer distances.

A photo of a railway track leading between two silos

Grain handlers say new investment in publicly owned rail infrastructure holds the key to the competitiveness of Australia’s grains supply chain.

PHOTO: Brad Collis

“It is much more efficient to have 18 trains, which would fill an average-size ship, than the equivalent 900 trucks … in other words, 18 trains in and out of the ports versus 900 truck movements.

“Realistically, we’ll never go back to the days where almost all of the harvest was transported by rail, but we do need to maximise the rail assets that we have; such as being able to use larger trains with bigger wagons. However, many railway lines, which are owned by governments, can’t carry the payloads required. So there is a need for companies like us to work with governments to facilitate the investment needed to allow rail to be the efficient, cost-effective freight option that is needed.

“Put simply, if, as an industry, we don’t invest in our rail networks we will lose the competitive advantage needed to hold our international position.”

Part of the overall supply-chain scenario these days is also the increase in on-farm storage, which has caused some quality headaches.

“We understand it gives growers the ability to better handle the harvest surge; to get grain off and into storage as fast as possible,” Ms Watkins says.

“Harvester capacity has been growing and, increasingly, receival sites are experiencing bottlenecks because of the sheer volume of grain coming off simultaneously.

“We are investing in faster receival equipment, but it remains logical for growers to want to store on-farm to either avoid bottlenecks by bringing their grain into the system later, or to market their own grain from the farm.

“The challenge, however, is to recognise that grain storage that preserves quality and grade is a whole new skill to learn. It is a big commitment and responsibility for growers who decide to store on-farm. It is not a decision to be taken lightly because it’s an expensive lesson to learn if you get it wrong.” 

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