WA’s ability to cope with a 20mt crop requires rail and storage to be state-of-the-art, former CBH chair says
In 2000, CBH had 20 million tonnes of total storage capacity to cater for carry over from previous season’s grain, with an expected average harvest of between six and 12 million tonnes.
Much of the storage capacity was built during the million acres per year new land releases — between 1960 through to 1983, which was the last new land release.
Much of the storage capacity was in need of upgrading and in many cases the sites were too small and not able to provide the segregations now demanded by world markets.
Shortly after I joined the CBH board in 2000, CEO Imre Mencshelyi planned a strategic strategy day based on CBH being able to cater for and handle a 20 million tonne crop by the year 2020.
Not having the same experience as Imre, I was very sceptical of the prediction as the big increases in grain production at the time were coming from more and more sheep acres going into grain production as farmers looked to recover from the collapse of the wool industry.
This was particularly prevalent in the Esperance zone and the South West of the Albany Port Zone.
The year 2003 was a bad harvest when CBH only received 5.2m tonnes.
I was so sure of Imre’s prediction being pie in the sky, I bet him $1000 there was no way it would happen by the year 2020.
I believed he hadn’t taken into consideration to huge amounts of cropping land being lost to salt degradation and the huge increase in blue gum plantations taking more valuable land for wood chips.
I also thought there was no way improvements in plant breeding genetics alone would take CBH’s harvest to 20 million tonnes by 2020.
However, within five years of joining the board and well before Imre departed from CBH in 2009, I was an Imre convert.
I pushed very hard with Imre to convince the board of the need to meet future demands.
It was put to the board that CBH should borrow $400 million to upgrade building mega sites across the state (that’s all it would have cost then) and gain the benefits of handling large crops upfront.
Increased production around 2004 onwards was mainly due to technology — including auto steer, agronomy and huge machinery improvements.
Much of the improvement was driven by the likes of Ray Harrington and others with the introduction of minimum till, press wheels, improved fertilisers, chemical weed control — all coupled with the abundance of agronomists providing advice to growers on how to do it better.
Unfortunately, the board could not be convinced at the time and it was years later in 2016 that the board finally adopted the current Network Strategy Plan.
Unfortunately, the plan is not finished and still has a way to go.
CBH’s total fixed storage is still at 20 million tonnes, with limited ability to carry over grain to the same extent achieved back in 2000.
CBH’s ability to export 20 million tonnes from the ports, which have an export ability of 50 to 70 million tonnes, is limited by a lack of capacity to move grain from up country to port.
There is limited ability to use rail to the extent it was used in the past.
WA’s rail capacity is limited by access to sufficient rail coverage — whether it’s Tier 3 or not — any rail is better than none.
Rail allows CBH to move tonnes of grain with a low carbon footprint and is also up 17 times more efficient than road transport.
When Kwinana Terminal was completed in 1975, it was the largest offshore loan ($72 million) ever in Australia at the time.
Its replacement value is about two billion dollars today.
The terminal is still the biggest and most efficient in the southern hemisphere.
It was paid off in less than 10 years and is essential to our export capacity.
In 2010-11, CBH bought enough trains and wagons to handle the average harvest of 10-12 million tonnes.
No further rolling stock has been purchased.
We are now growing 20 million tonnes and haven’t borrowed a cent when interest rates are the lowest they have been in a lifetime.
CBH’s Network Strategy has come a long way, however this year when growers need it most it still has a long way to go.
The world is currently desperate for grain, prices were at a premium, and the best we have ever seen early in the season when shipping slots were available to world markets.
Now we are seeing prices around $50 below world market prices for the first time I can ever recall.
This will cost growers hundreds of millions of dollars as not all of the 20 million tonne harvest will reach world markets at a premium back to growers who missed out.
Concerned that Imre’s prediction would come sooner than later, I have always put an estimate in the CBH Harvest Estimates competition and called it “Imre’s Objective”.
This was to cover my bet should it ever happen.
Yes, Imre’s prediction has come true one year late and should I win the competition this season it is all yours, Imre.
The former CBH CEO made such an incredible prediction that really has helped drive CBH’s ability to be the leading grain handler in Australia.
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