CBH outlines auction scheme

Grain group CBH is hoping its new plan to auction shipping capacity will avoid a repeat of the queues of bulk carriers waiting to load grain seen off WA ports earlier this year.

The WA grain storer and handler, caught out by the unprecedented early demand for grain exports in the wake of deregulation of wheat exports, still managed to export record monthly tonnages but traders raised concerns at the interim process that involved extra charges and the inability to plan sales when the booking system was closed until the backlog cleared.

CBH logistics manager Tim Collins, who was meeting traders in Melbourne this week to outline the new allocation system, was confident it would avoid the shipping congestion that resulted from deregulation, an increase in the number of exporters wanting to ship at the same time, rain delays to harvest and inland transport bottlenecks.

He said the auction system, which aimed to ensure shipping allocation was driven by supply and demand without increasing the cost of the grain supply chain for growers or exporters, took into account feedback on the draft auction system CBH released in May.

"While it is a price-based system, the premiums generated are handed back to the trade, making the whole process cost-neutral," Mr Collins said.

Under the proposed plan there will be two processes for allocating capacity, based on two distinct shipping periods - the harvest period from November to January 15 and the period from January 15 to the end of October.

During the harvest period November 1 to January 15, traders can lodge an expression of interest as in the existing system, recognising the uncertainty involved with shipping during harvest.

To secure a shipping slot to ship outside this period, exporters will need to take part in an online auction be run by an independent auctioneer.

Exporters will be able to transfer capacity secured in the auctions via a secondary market but speculative trading will be discouraged.

One of the key changes from the draft version of the system is that net proceeds from the auction are to be returned proportionately to exporters who took part in the auction, rather then the freight pool.

Mr Collins said that rather than bidding on a price level, prices were fixed and bids were made on volume at different price thresholds.

"We are offering core capacity, which is based on the core rail capacity we have available to us."

There would also be ‘surge' capacity available.

Exporters would know the cost of that up-front, enabling them to choose whether they wanted that extra capacity at the additional cost of the road transport.

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