CBH warns of grain competition

Leading grain exporter CBH has issued a sobering warning about the future of WA’s most valuable farming industry in the face of increased competition from the Black Sea and South America.

CBH operations manager David Capper said WA’s competitive advantage in key export markets was being eroded and the State remained a relatively high cost producer of grain.

His warning came with WA on track for a record harvest of more than 17 million tonnes.

Favourable conditions in big grain-producing nations have taken some of the shine off the WA crop forecast and wheat prices on international futures exchanges remain at some of their lowest levels in 10 years.

Mr Capper said the lowest shipping costs in decades had made the world smaller and brought competitors closer to markets on WA’s doorstep.

“In addition to our traditional competitors in North America and Europe, the Black Sea and South America are emerging and starting to have significant impact in Southeast Asian markets,” he said.

“The Black Sea has arisen from its post-Soviet Union slump. It has invested heavily in supply chain and production systems and it is foreshadowed that production out of the Black Sea will grow from 145mt a year today to over 200mt by the end of this decade.

“That growth represents more than Australia’s entire grain production.”

Mr Capper said South America was not as advanced but a looming threat.

He compared the heavy investment in grain supply chains in Brazil and Argentina to what had happened in the iron ore industry in those countries.

Mr Capper said the Black Sea and South America were low-cost producers with excellent production potential and a lot of available land.

“Australia, and in particular WA, in contrast is a high-cost producer and we have a limited supply base,” he said.

Mr Capper stressed that WA agriculture could not prosper through a “race to the bottom to produce low-cost commodities into our traditional markets against these competitors”.

CBH, controlled by about 4200 WA growers, is investing $750 million over the next five years in reshaping its receival, storage and ship-loading network to get grain into markets more efficiently and at a lower cost.

It is also investing in value-adding through expansion of a network of flour mills and construction of a malting plant in Southeast Asia under the Interflour joint venture with Indonesia billionaire Anthony Salim.

CBH is expanding the Eastern States-based oats milling business it purchased for $47 million last year by building processing facilities in Forrestfield.