Australia’s grain supply pipeline needs significant investment to overcome problems exporters face in getting grain to customers, an industry representative said March 3.
Mike Chaseling, a deputy chairman of grain trading firm Emerald Group, said exporters had encountered major difficulties because of a lack of transport capacity.
Multiple exporters are jostling with each other to fill orders from Australia’s first harvest since deregulation ended a monopoly over exports held by AWB Ltd., the former Australian Wheat Board, since the Second World War.
“There have been really significant teething problems, some we will get over and some more embedded,” said Chaseling, speaking on the sidelines of the Australian Bureau of Agricultural & Resources Economics (ABARE) annual outlook conference.
ABARE forecast Australia’s wheat exports will surge 44 per cent to 14.68 million tonnes in 2009/10, as production recovers after years of drought and stocks return to more normal levels
Chaseling said the problems could damage Australia’s grain export trade if overseas buyers decided they could not rely on shipments from Australia.
Already flour millers in South Korea and Indonesia have expressed concerns, with Indonesia saying it could import less Australian wheat than previously planned because of the delays.
“There’s no doubt that it is hurting as if you are an international buyer and you come to me wanting to buy wheat, I need to say to you I can sell it to you but I can’t guarantee to you when I’m going to make that delivery,” Chaseling said.
He said in Western Australia, the country’s top exporting state, bulk handler CBH Group had underestimated the amount of grain that traders wanted shipped, leading to long delays and additional costs as ships waited to be loaded.
CBH, which operates most of Western Australia’s grain handling capacity, had the capacity to move 795,000 tonnes a month through its system but demand had been much higher.
The bulk handler is boosting its capacity to move grain to port to close to one million tonnes a month by adding extra trucks to its haulage fleet.
“It does go a long way to addressing the issues but it doesn’t get over all of them including the extra costs that are involved,” said Chaseling.
In February, CBH closed its shipping stem, preventing exporters from nominating ships until it cleared the backlog that had resulted in more than 70 vessels waiting to load grain, according to Chaseling.
On the east coast, Chaseling said the grain rail freight system had “all but collapsed” as rail operators reduced grain capacity in favour of more lucrative coal freight.
“East coast grain exports are moving at absolutely a snail’s pace and exports generally across the industry for wheat are lot lower than they should be,” he said.
Bulk handler GrainCorp Ltd. handles the majority of the grain exported on the east coast but Chaseling said there was little transparency to the system of allocating capacity to exporters.
“There’s two issues on the east coast – one is transparency and the other is the lack of rail infrastructure where there’s problems with lack of investment in tracks and not enough rolling stock to get the job done,” he said.