CBH in $1b network shake-up

CBH plans to spend $1 billion over the next five years to reshape its vast but ageing grain receival, storage and handling network in WA.

Its board of directors and senior management are about to begin a 90-meeting blitz of the bush to consult growers about the future of the network, which covers the grain-growing belt from north of Geraldton to east of Esperance.

The giant co-operative, controlled by 4200 grower members, said the $1 billion investment was needed to keep the WA supply chain internationally competitive.

It appears inevitable that scores of CBH’s 198 receival sites dotted through the Wheatbelt will close as part of rationalisation over the next five to 15 years.

CBH figures show 110 sites receive just 12 per cent of the grain harvest. Its annual maintenance bill on storage and other infrastructure across the network has gone from $43 million to $93 million over three years.

Operations manager David Capper said CBH would listen to growers before making any firm decisions on modernising and increasing the capacity of the network.

Mr Capper said CBH wanted to “improve our ability to receive the crop off the farm, to keep headers turning, to protect the value of the standing crop and to segregate the crop to maximise value”.

“We also want to be able to turn that crop around and move it to port when the market is in greatest demand, which for the WA crop is in the first half of year, and do all that at an internationally competitive price,” he said.

CBH will fund the investment of $200 million a year to the end of 2020 from retained earnings, future earnings and by taking on some long-term debt.

It expects to invest heavily in increasing throughput capacity at harvest. A big chunk of the money will be spent on upgrades and replacement of storage infrastructure.

“A lot of our assets are ageing and a big component of our storage was built through the 60s, 70s and 80s,” Mr Capper said.

“There is a significant need to reinvest in that storage to give it a new lease of life. In some cases there is a decision point ... do we spend money on a major maintenance project here or do we replace it with more efficient storage?”

In considering the future of sites, CBH will weigh up the cost of getting grain from farms to the site, the running cost, the maintenance cost and the cost of transferring the grain to port.

“In the terms of the up-country supply chain, those are the four key costs we have to balance and, at end of the day, the grower pays all four of those,” Mr Capper said.

“We have got about 110 sites receiving 12 per cent of the crop and that is fine at the moment, but as the storages on those sites comes to the end of its useful life over the next five, 10, 15 years, we are going to have to make some decisions.

“Do we reinvest on those 110 sites to continue to receive 12 per cent of the crop or do we consolidate and replace that storage with more modern storage?”

CBH plans to build capacity over the next few years to get 2.2 million tonnes of grain a month to port in the period of peak overseas demand.

It plans to boost the volumes growers deliver direct to its port terminals at Geraldton, Kwinana, Albany and Esperance.

The future of how the bulk of the grain is carted to port is tied up in tense negotiations with Brookfield Rail on a long-term access deal.

CBH said it would consider adding to its fleet of locomotives and wagons if the rail issue was resolved. Its other option is to shift more tonnes to the road using trucking contractors.