Calls for urgent investment in grains supply chain as Australia’s biggest marketer imposes trading limits

Farmers have called on State and Federal Governments to bolster investment in WA’s grains supply chain, warning CBH’s decision to introduce grain trading limits is a direct result of a lack of shipping capacity as the State harvests a second bumper crop in a row. Growers selling more than 40 tonnes of grain to CBH Group will be limited to trading every three business days in a nationwide first hoped to make accessing highly competitive contracts “more equitable”. Under the new rules — announced last week and put in place on November 28 — growers who access a CBH contract of 40 tonnes or more will be required to wait two business days before being able to contract again. The move comes as farmers scramble to access CBH contracts to sell WA’s mammoth harvest, with the latest industry projections at 23.9 million tonnes — just shy of last year’s record 24.3Mt crop. CBH is one of a record 18 grain traders set to export from the cooperative’s four ports in 2022-23, with demand for CBH contracts surging this year and leaving many frustrated growers missing out. The cooperative’s prices have been sitting about $20-30 above what other traders have been offering for grain, creating what some farmers have labelled a selling frenzy as they try to access CBH contracts. CBH chief marketing and trading officer Jason Craig announced the change last week, saying it would make trading “more equitable” and allow more growers to access CBH contracts. CBH had previously announced a 200t contract limit, which is still in place. In a video posted to CBH’s social media, Mr Craig acknowledged it had been a “challenging year” for farmers trying to access CBH contracts but said the cooperative could not “buy the entire crop”. “It is important to say CBH marketing and trading has been keeping prices closer or near to reflecting international values, and as a result, demand for contracting has been significant,” he said. “(The changes will) assist growers to ensure everyone can get a contract. “The reason for the introduction of this is to ensure we can get a greater spread across all of our members and allow every member access to grower contracts.” Mr Craig told Countryman on Monday that the cooperative’s marketing and trading division recognised the “challenges presented by consecutive record harvests” that “exceed the available shipping capacity of the network”. “Our dynamic pricing strategy was introduced at the beginning of the 2022/23 season and works to implement cooperative-based initiatives that drive value for growers,” he said. “As part of our dynamic pricing strategy, CBH marketing and trading is committed to providing daily prices that reflect the international market throughout harvest and beyond, which has seen us posting prices $30-50 above the competition. “The huge demand for our pricing continues to see some growers unable to contract with us, which we know is frustrating.” Mr Craig said the 200t contract limit had led to 20 per cent more growers successfully contracting with CBH, and revealed plans to open a new deferred sales pool product on December 5 with a focus on 2023-24 market opportunities. CBH’s decision to offer higher prices has split the industry, with some farmers believing it was helpful by putting a spotlight on excessive elevator margins of other traders and putting upwards pressure on grain prices. Grain Producers Australia chair Barry Large flagged some concerns with the decision, saying he “struggled to understand why CBH was manipulating the market” and creating a situation where farmers were fighting for contracts. He said angst over securing contracts and CBH’s unorthodox decision highlighted the need for the Australian Competition and Consumer Commission delving into the grains supply chain. GPA has been calling on the new Labor Government to approve an independent study of the grain supply chain since earlier this year. WAFarmers grain section president Mark Fowler said he believed the lift in the market created some good selling opportunities but the execution via CBH’s LoadNet system had been “very problematic”. He said farmers with better internet speed had better access to CBH’s higher prices, which he labelled an “unfair advantage”. “There is a perception that the same growers are getting all the contracts,” he said. However, he said the fundamental issue forcing CBH to limit its contracts was a lack of shipping capacity. “Nothing will change the fact that CBH does not have sufficient shipping capacity to buy enough tonnes to satisfy grower demand for their contracts or to embed a lasting change in prices,” Mr Fowler said. “That won’t be fixed this year, but with long-term capacity to be reallocated in 2023, we hope CBH is able to secure a big chunk of capacity into the future in a way that does not frighten off other traders. It is a delicate balancing act.” Mr Craig told growers it was difficult for CBH marketing and trading to provide all growers with a contract and to “buy the entire crop”. “By assisting other growers, once you have received a contract and allowing two business days before accessing another one once you have should see an improved spread across WA growers,” he said. “We thank you for your patience during these very challenging times and we look forward to working with you as we will be there contracting with WA growers through harvest and beyond.” Speaking to media last week, Mr Craig said the move was not a “silver bullet” because demand for contracts was “exceeding supply”, and some farmers would “continue to be disappointed”. “The distribution across growers will be greater as a result of this,” he said. WA Grains Group president Alistair Falconer said farmers had been travelling to Perth to use high-speed internet to secure a contract with CBH, taking up valuable time and frustrating those that missed out. “The reason they (CBH) are doing this is because there is not enough grain getting to port to be shipped,” he said. “There is a fear out there that farmers will end up holding some of that carry over (unsold grain), whether that is real or not.” Despite major rain and hail events across the State in the past six weeks, a record-breaking harvest for WA growers remains a possibility after a “near-perfect” season and soft finish. While WA’s November forecast sits at 23.967Mt, experts believe the bin-bursting crop has the potential to surpass last harvest’s 24.3Mt by a “fair margin” if the mild finish and consequently slow start to harvest continues. It comes as Grain Industry Association of Western Australia’s latest report revised figures for WA’s 2022-23 harvest, adding another 800,000 tonnes to its October forecast of 23.147Mt. That total is set to be made up of 12.6Mt of wheat, 6.15Mt of barley, 3.98Mt of canola, 600,000 tonnes of lupins, 565,000 tonnes of oats and 72,000 tonnes of pulses. CBH’s latest harvest report, released on Monday, revealed nearly 7Mt of grain had been delivered to the cooperative with deliveries averaging more than 425,000t of grain per day and more than seven sites setting new daily receival records.