FACT SHEET

Australia’s grain supply chains Costs, risks and opportunities AEGIC analysed ’s grain supply chain costs and compared them with Canada, Ukraine, Russia and Argentina.

Since 2014, there have been major Australia needs to continue to reform investments in Australia’s grain its export grain supply chains to supply chains, yet costs have only remain competitive in an increasingly slightly decreased or remained stable. challenging global grain market. Significant supply chain cost A dual strategy of placing downward differences occur between the states. pressure on the unit cost of grain Australia’s supply chain and grain production, which includes supply production costs are high compared chain costs, while ensuring grain to those of emerging competitors, meets market requirements, is likely which limits the geographical reach of to produce enduring benefits for the Australia’s grain exports. The whole industry. challenge from these competitors, which include Ukraine, Russia and Argentina, is unlikely to dissipate. Significant investments are underway Full report available at in these countries that will further aegic.org.au challenge the Australian industry.

This fact sheet is an abridged summary. Please refer to full report for details and context. More detail available in the full report at Key findings aegic.org.au

Costs stable Location Eastern states complexity The real costs to users of most export grain Grain production at low-yielding locations Compared with WA and SA, grain supply chains have remained stable or distant from port are likely to become transport in NSW, Vic and Qld is complex. slightly decreased since 2014. increasingly expensive relative to high- Infrastructure planning and supply chain yielding locations near to port. investment on the east coast is challenging. Costlier than most Australia’s grain supply chain costs are Farm storage Business transparency higher than its competitors, except for Increased farm storage capacity, particularly Greater transparency in business Canada. Transport and port charges are in eastern Australia, is changing the demand performance reporting will build generally the biggest supply chain costs. for upcountry commercial storage of grain. trust in the main companies providing supply chain services. Regulation Grain quality Regulation of grain exports has reduced As grain storage options and pathways to Costs can be reduced flexibility and imposed additional costs. markets increase, the Australian industry Reducing Australia’s supply chain costs needs to consider how to best ensure is feasible through coordinated Code of conduct stewardship obligations for grain quality are infrastructure investments and emerging Moving to a voluntary code of conduct may understood, accepted and maintained. innovations. provide Australian supply chains with the flexibility to meet future challenges from Containerised exports Costs need to be reduced low-cost wheat exporters such as the Black About 10 per cent of Australia’s export Low-cost grain suppliers, such as the Black Sea and Argentina. wheat is in containers, with about half Sea and Argentina, are undertaking major exported from Victoria. investments in their supply chains and it is Long-term freight planning essential Australia acts to reduce its supply Coordinated long-term planning for Excess port capacity chain costs to face this challenge. high-capacity freight corridors to avoid There is a surplus of capacity at some conflict with urban development will be eastern Australian ports. an important ongoing requirement.

Comparison of total wheat supply chain costs, assuming grain is delivered to 120 commercial upcountry storage and outurned after three months 100

Note: Some assumptions have been made. 80 For details, see full report. In particular, GTA location differentials, which do not necessarily accurately reflect freight costs, have been used to 60 estimate freight charges for NSW, Vic and Qld. ($/t) 40

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Port charges Port charges (Estimated) Freight to Port (Estimated)

Freight to Port (Actual) Hyden – Albany Ouyen – Geelong Kukerin – Bunbury Horsham – Geelong

Storage for three months Wickepin – Kwinana Emerald – Gladstone Narrabri – Newcastle Lake Bolac – Geelong Ardrossan – Port Giles – Port Ardrossan Dalby West – Dalby West Roma West – Brisbane West Roma Mingenew – Geraldton

Up country receival and shrinkage Deniliquin – Goolgowi – Port Kembla Goolgowi – Port Pinnaroo – Outer Harbor Pinnaroo Grass Patch – Esperance Grass Patch Warramboo – Port Lincoln – Port Warramboo

Freight: Farm to up-country – Outer Harbor Roseworthy State research and biosecurity levies End point royalties GRDC levy 60km 75km 85km 105km 160km 190km 220km 240km 260km 270km 280km 300km 365km 400km 437km 440km 510km 590km Recommendations

These recommendations identify important areas of reform that are likely to produce enduring benefits.

Ensure least-cost grain paths are developed Ensure there are sufficient incentives for R&D and maintained. investment to improve the cost-efficiency of First: better coordinate road regulation, planning and investment in supply chains. roads to facilitate effective planning and investment by grain supply Technological improvements that lead to productivity chain owners and operators. improvements and reduced supply chain costs will increase the Second: Vigilance needs to be maintained over least-cost grain competitiveness of Australian supply chains. Whether existing pathways to prevent encroachment of incompatible urban providers of supply chain services have sufficient incentives to development leading to future conflict and contest over land use. commit funds to R&D that may yield valuable outcomes requires The cost of failure over this issue, at all levels of government, could further examination. be high in real terms for growers and users of the supply chains.

Align wheat breeding, classification, assessment Supply chain owners should consider making the and handling to support the export of Australian basis of component charges clearer, to increase wheat to differentiated, premium markets. confidence in supply chains and improve Wheat exports from Australia and domestic marketing of wheat perceptions of fairness. are likely to involve greater segregation, especially as on-farm Greater transparency regarding the basis of component charges – storage increases. Hence, it is vital that all stakeholders including infrastructure use and efficiencies – could become a point (breeders, varietal classifiers and grain handlers) have incentives of competitive advantage and a pathway to lessened regulation that align to deliver the types of Australian wheat most preferred and associated costs. Information can be provided to an in differentiated, premium markets. independent third party to maintain commercial sensitivity.

Estimated supply chain costs ($/t) in Australia and other wheat export competitors, 2013–17 Source: AEGIC and GRDC

2013 2014 2015-16 2016 2017

Costs ($/t) Australia Canada Australia Ukraine Russia Australia Argentina Australia

Cartage farm-site 8.9 (12%) a 10.7 (10%) 8.9 (11%) 4.3 (8%) 3.5 (6%) 7.8 (9%) 2.9 (5%) 7.8 (11%)

Upcountry handling 11.9 (16%) 15.2 (14%) 14.4 (17%) 7.7 (14%) 9.2 (16%) 18.4 (22%) 13.2 (21%) 10.4 (15%)

Storage 6.8 (9%) 17.7 (16%) 8.9 (11%) 2.9 (5%) 5.1 (9%) 9.0 (11%) 1.4 (2%) 5.0 (7%)

Transport upcountry 21.6 (29%) 46.8 (44%) 27.8 (33%) 13.3 (23%) 15.5 (28%) 26.7 (32%) 29.5 (47%) 23.6 (33%) to port

Port charges 21.2 (29%) 13.9 (13%) 21 (25%) 23.8 (42%) 22.4 (40%) 19.9 (24%) 15.5 (25%) 21.7 (30%)

Levies and check-offs 2.9 (4%) 3.0 (3%) 2.8 (3%) 4.9 (9%) 0.10 (<1%) 2.8 (3%) nd 2.8 (4%)

Total supply chain cost 73.3 107.3 83.8 56.9 55.8 84.6 62.5 71.3

Production cost nd 139.1 157.1 133.0 121.1 148.3 140.0 148.8

Supply chain proportion nd 0.44 0.35 0.30 0.32 0.36 0.31 0.32

a Figures in brackets are the cost item as a proportion of the total supply chain cost. nd — no data Australian grain export infrastructure

The main grain export infrastructure in Australia (2018) Wilmar/ Cargill QLD GrainCorp Other showing ports that are fully regulated or exempt from parts Gavalon GrainFlow 3–6 of the port terminal access code of conduct. Port terminals 3 1 0 0 Source: GTA, company websites, estimates from industry experts Annual terminal c 3.2 1 0 0 apacity (mmt)

b WA CBH Bunge Receival sites 23 0 4 5 Warehouse 5 0 1 1 Port terminals 4 1 storage capacity Annual terminal 19 0.5 capacity (mmt) Receival sites 102 a 2 Warehouse 15 0.45 storage capacity

MACKAY GrainCorp

GLADSTONE FULLY REGULATED Brisbane GrainCorp EXEMPT GrainCorp Brisbane Queensland Bulk  INNER HARBOUR Viterra Terminals GERALDTON OUTER HARBOUR NEWCASTLE CBH Viterra GrainCorp WALLAROO Viterra KWINANA NEWCASTLE CBH THEVENARD Viterra AGRI Terminal BUNBURY PORT LINCOLN Viterra NEWCASTLE ESPERANCE Qube Holdings Ltd BUNGE CBH PORT GILES Viterra ALBANY CBH INNER HARBOUR Semaphore MELBOURNE PORT KEMBLA Emerald Grain INNER HARBOUR Linx GrainCorp PORTLAND PORT KEMBLA Linx/Cargill/ Graincorp SA Viterra Other GrainFlow Quattro GEELONG Port terminals 5 1 1 Graincorp Annual terminal GEELONG 7 0.25 0.22 capacity (mmt) Riordan Receival sites 103 4 3 Warehouse 11 1 0.5 storage capacity

Cargill Cargill/ Emerald VIC GrainCorp GrainFlow Viterra Other Cofco/ Grain Glencore/ NSW GrainCorp Emerald Other CBH/AGRI Grain/ Port terminals 2 0 1 0 1 Quattro Annual terminal 5.2 0 2 0 0.15 Port terminals 2 1 1 1 capacity (mmt) Annual terminal b 6.2 2.5 1.5 1 Receival sites 44 4 7 3 14 capacity (mmt) Warehouse 4 3 2 1 2 Receival sites 91 b 11 2 40 storage capacity Warehouse 10 4 2 45 storage capacity Notes: a Does not include an additional 76 surges sites. b Does not include currently non-operational sites, some of which would be capable of reinstatement to grain receival and storage status if required.

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