CBH’s extra shipping capacity at Geraldton, Albany and Esperance snapped up as global grain prices surge

CBH Group’s surprise offer of an additional 540,000 tonnes of shipping capacity — about 10 ships’ worth — has been snapped up in a matter of hours as global grain prices continue to surge on the back of the Russia-Ukraine conflict. The grain handler released extra capacity at its Geraldton, Albany and Esperance Grain Terminals on March 4, with the additional tonnages set to take its shipping capacity — for the year ending September 30 — to a record 17.4mt. CBH chief executive Ben Macnamara said the move was “directly linked” to improvements in the co-operative’s current and anticipated road and rail transport performance, allowing it to juggle more tonnes to port. It came 10 days after CBH launched a campaign to get farmers behind the wheel to help out transport grain from bins to ports as an innovative way to fulfil the grain handler’s 17mt shipping program — 20 per cent bigger than its 15mt record set in 2020-21 — this year. An email sent to CBH members on February 24 suggested they could subcontract to a road contractor, forward haul or lease their truck to Cropline Haulage, or contract to CBH. Mr Macnamara said the call out attracted more than 25 expressions of interest from growers and, separately, several trucking contractors within a week. “Our focus is (now) on starting to package up work for specific routes and onboarding growers who have registered their interest, to enable them to operate safely and efficiently,” he said. CBH has shipped 6.5mt since the start of its grain marketing year on October 1, which Mr Macnamara said was “in line” with its shipping plan. But limited road and rail capacity have hindered CBH’s ability to plan to ship more than 17mt and stopped WA growers from fully capitalising on grain prices surging due to the Russia-Ukraine war. Some farmers have suggested the supply chain bottlenecks could cost the industry $1 billion in lost income as wheat prices reach 14-year highs. As revealed in Countryman last month, CBH started its shipping year with more than four million tonnes of grain not allocated in shipping stem after the State’s record 23mt harvest. Demand for Australian grain is soaring after the Russia-Ukraine war virtually stopped exports from both countries — which together account for about 30 per cent of the world’s wheat trade — leaving importers scrambling to fill contracts. Concerns are rising that fighting and chaos in the countries would also reduce prospects for harvests during the northern hemisphere summer, which would normally be around July and August. Fears of global grain shortages are well-timed as Australia out-turns its record crop which reached 61.9 million tonnes, including a record 36mt of wheat, 13.7mt of barley and 6.4mt of canola, in 2021-22. CBH head of trading Ben Tiller told the ABARES Outlook 2022 conference on Friday that some buyers were considering forward contracts as far out as the third quarter, with shipping stems full for the first half of the year. “We’re anticipating further demand with the loss of Black Sea volumes in the short to medium term,” Mr Tiller said. “The supply chain here is certainly trying its best to respond.” Russia and Ukraine’s grain exports are particularly important to the Middle East, Africa and, more recently, Australia’s target market of Asia. Mr Tiller said demand for longer-dated contracts could become more pronounced in coming weeks and months, with the global grain industry keeping a close eye on the war. “We may start to see that accelerate as the reality of this massive disruption to the grain supply chains globally takes place,” he said. Mr Macnamara admitted the sharp rise in commodity futures in North America and Europe — with Chicago wheat futures at a 14-year high this week — had not been “fully reflected” in Australia, and said it was in part due to the supply chain challenges. He said buyers from Asia were also “well covered” with Australian and Indian wheat until the middle of the year. “Shipping capacity in Australia, for the first half of the year, is fully committed with sales,” Mr Macnamara said. “The supply chain does not have enough capacity to cover immediate supply shortfalls from Ukraine and Russia to buyers in the Middle East and Africa. “If the conflict is prolonged, restricted exports from the Black Sea will likely see additional demand move to Australia and other origins.” Mr Macnamara said CBH was committed to “adding further capacity” to its shipping stem while “meeting customer commitments for the initial 17mt shipping capacity offered”. “This is a balance of taking on more risks with our shipping execution versus trying to allow WA growers access to the current global values for their grain,” he said.