WA grain lobby groups back CBH move to fix ‘supply chain emergency’

WA’s three grain lobby groups have welcomed CBH’s controversial decision to redirect profits from its marketing and trading division in a bid to urgently address the State’s “supply chain emergency”.

The grain marketer and handler last week revealed it expected to hand down a “significant surplus” from its marketing and trading division, CBH Grain, part of which would be transferred to its storage and handling division to fund upgrades across WA’s grains supply chain.

The unprecedented move infuriated some CBH grower members, who will miss out on rebates for the third year in a row as a result.

But the WA Grains Group and the Pastoralists and Graziers Association of WA have since voiced their support for the decision, after WAFarmers also backed the co-operative.

PGA Western Graingrowers committee chair Gary McGill, who farms at Calingiri, told Countryman the investment was urgently needed to fix the “absolutely catastrophic situation” facing WA’s grains supply chain.

“It’s a supply chain emergency, there’s no doubt about it,” he said.

“We recommended to CBH that they ought to do away with the rebate to growers in the interest of allocating an appropriate amount of the profit for investment in the network to overcome this problem, to get their plan going as quickly as possible.”

CBH is rumoured to be expecting a surplus of up to $600 million for its marketing and trading division when it releases its annual report in early December, though it has declined to confirm the rumours.

Historical underinvestment in the WA grains supply chain — by CBH and successive State and Federal governments — was laid bare after CBH received 21.3Mt of last year’s record 24.3Mt harvest.

The co-operative plans to spend $250m on network upgrades each year for at least the next five years to meet the requirements of a growing crop size, an ageing receival network and the demands of a narrowing shipping window to capture maximum value for growers’ grain.

Mr McGill said inefficiencies in the supply chain — which have left CBH with a predicted 3.5 million tonne grain carryover from last harvest — were contributing to the poor returns WA growers were receiving for their grain, with prices about $150 per tonne lower than world parity.

“The other zones have fared a bit better, but the Kwinana Zone — the big producer of wheat in WA — is bleeding badly because of this problem, notwithstanding that there’s a big crop,” he said.

“It would be easy to put the boots into CBH, and people have done it. . . but CBH recognised this issue before harvest last year, and they began planning to mitigate against it.

“They did things to get road up and running in a better fashion. . . and the road performance has worked magnificently all year. And they have been working very hard to try and get the rail performance up.”

WAGG chair and Coorow farmer Alastair Falconer said while he believed it was “a bit extreme” to say the supply chain was in a state of crisis, he backed CBH’s decision.

“It’s a lot more pressing at the moment that CBH sorts out its supply chain infrastructure, because obviously that’s impacting on our price as we speak,” he said.

“Ideally, we would be capturing more of that grain price for ourselves rather than CBH making a profit off of it, but that’s just the way it happened. . . I don’t want to bash CBH.”

Mr Falconer described current grain prices as “disappointing”, adding that it was “making next year look pretty tough” for farmers including himself.

“These are the sort of years where you’ve got to make good money to bolster your balance sheet for the bad years, so the sooner we can fix the supply chain issues, the better it is for everybody,” he said.

“We really didn’t agree with the rebates in the first place, because look at where our infrastructure is now, and how much we’re missing out on the price we should be getting at the moment.”

Mr McGill agreed, saying while he understood the arguments for the rebate system, the PGA viewed it as “a bit of a political gimmick at times”.

“If you’ve accumulated profits, we would rather you either be paying us more for our grain or investing in the network to ensure that we get grain to port,” he said.

“The arguments are quite plausible. . . but I think this problem, this emergency, this catastrophe, is of such importance that it overrides any other consideration.”

WAFarmers grains section president Mark Fowler has also backed CBH, telling Countryman last week that investment in the network would ultimately save growers “a lot more money than the payment of a rebate”.

“These changes to the network are absolutely necessary. . . and it is absolutely essential that this work begins as soon as possible,” he said.

Mr Fowler, who farms at Williams, also praised CBH for slashing its predicted grain carryover from last harvest to less than 3.5Mt, down from what was previously expected to be 5-6Mt.

“It is looking much better than it did a few months ago... and we think those changed circumstances should now be reflected in grain prices,” he said.