CBH not afraid of competition: Crane

CBH has been at the helm of storing and transporting WA's crop for almost 80 years, but the State's grain industry is on the cusp of change.

Not only is CBH awaiting the results of whether Grain Express will maintain its monopoly on upcountry to port transport, but the future of Tier 3 rail remains uncertain and news is afoot that grain marketing giant Bunge is investing in the Bunbury Port to circumvent CBH's hold on grain export terminals.

It is also anxious to see the Federal Government pass the Wheat Export Marketing Amendment Bill 2012 without change. This would deliver further deregulation of wheat exports by 2014.

But in the midst of industry change, CBH chief executive Andy Crane is confident the company has a future as a WA grower co-operative - even if it is competing against grain giants like Bunge.

CBH estimates that by 2020 WA growers will be delivering a 20 million-tonne harvest.

Today the company has a maximum theoretical storage of 20 million tonnes, but in fact the up country storage capacity is less when the area lost to stack segregations is considered.

It was an area that Dr Crane conceded CBH would need to work on in the next decade.

"We handled the last 15 million-tonne crop, we put down emergency storage where it made sense," he said.

"We're always balancing the cost benefit analysis of whether emergency storage to handle certain peaks is more cost effective than building long-term storage.

"CBH has got great storage capacity but we need to keep increasing that sensibly.

"Often these areas of overproduction and underproduction move around the State.

"We believe we invest multiples of what other bulk handlers would do across the rest of WA.

"We'd be putting in close to $100 million a year in terms of capital and maintenance into the network - both replacement and new infrastructure."

But Dr Crane forecast that the locations of those investments may change in years to come.

"Along the South Coast we're seeing increased grain production and, particularly at the moment, canola production," he said. "That is demanding more infrastructure and more fixed-roof infrastructure because of the weather. For example, we're making a major investment at Gardiner.

"Whereas at the same time other sites at the back of our network might be getting used less frequently, particularly with the recent volatility of harvests. We're seeing sites there that are getting filled less frequently."

CBH has already spent $120 million on Albany port and plans to spend $50 million on Kwinana over the next three years, but Dr Crane said port capacity was not a constraint. Instead, he said the pathway to port that held up the export of grain.

"Our ports are very efficient, they can out load the crop very capably and very large crops - the problem is feeding the ports," Dr Crane said.

"We've made that investment in rail to feed the ports faster, more reliably. I think if we are realistic, we want to lift the percentage of grain going by rail to port.

"There was a risk of the percentage dropping to 40 per cent or below, we want to get it up to 60 per cent and above. It's varying a lot at present, particularly during the rail transition (to Watco), but we're getting more than 50 per cent and we want to make that much higher."

Although CBH may be committed to keeping grain on rail, the State Government will need to put its hand in its pocket and invest in current and potential rail networks.

"Aside from mining, if you look at agriculture as one of WA's major export industries and resources, this State will always produce a huge export surplus compared to the population that lives here," Dr Crane said.

"The infrastructure to bring that to port is part of investing in the State's viability in the future.

"If we combine that with other mineral finds and exports and in southern WA, as in the Geraldton zone where we've seen wonderful investment in some of the lines to facilitate mining in that area.

"If we get other discoveries across the Wheatbelt and elsewhere then I'm hopeful that will also stimulate further rail investment (in new lines) and we will partner with that wherever possible."

Dr Crane emphasised the company was not afraid of competition, either in grain logistics if CBH's appeal to retain Grain Express' Exclusive Dealing Notification was not successful or through new export entrant Bunge.

"Big players are already buying grain from growers in the CBH network. Each of them will make their decision as to the offer that the growers' system provides them is better than starting afresh with a whole new capital investment," he said.

"(Bunge's Bunbury export capacity) will surplus to true need, but if it provides a lower cost supply chain that will be one element that will justify it.

"But you've got to load multiple vessels throughout a year to a standard quality that an export market requires. That's quite a tough task."

There is little doubt the WA grain industry is evolving - and that CBH is evolving with it.

The co-operative may in time lose its monopoly on the WA grains industry as other players enter the logistics and export game, but Dr Crane said CBH had opportunities to expand.

CBH has already invested further down the supply chain in flour mills and Dr Crane said there was more scope for that in the future.

"There's a wonderful opportunity with the Asian market on our doorstep," he said. "Our domestic market and our growers should be participating in that. We can expand that particular business itself, or in other grain processing on the basis that we can demonstrate a value return to our members."

CBH's marketing arm has already expanded to the east coast, and Dr Crane said the co-operative would consider adding more areas to that section of the business if it demonstrated value to growers.

"We need to tread carefully but we think our products are attractive to growers," Dr Crane said.

"Where it makes absolute sense to that part of the business and expanding that trading business then we'd be interested in (investing in infrastructure) as well. If there is existing infrastructure that makes sense for us to use then we should use it."