Battle for the future of CBH gathers pace


Joyce joins in as grains transport and logistics operator faces powerful rival in revamp and listing push

Battle for the future of CBH gathers pace
Barnaby Joyce has entered the debate on CBH’s future.

 

Western Australian-based grains logistics enterprise Co-operative Bulk Handling Group (CBH) has issued a stout defence of its present structure as the battle for farmers’ hearts and minds heats up.

The move comes soon after rival agribusiness GrainCorp put its name to an effort to turn CBH into a listed entity with new management and warnings from eastern state farming elements and federal National Party leader and agriculture minister Barnaby Joyce and the longer-term loss power and income such a move might entail.

Joyce was quoted in The Australian newspaper as saying farmers who ditched such co-operative models had to live with any negative consequences if they sold out for short-term gain.

The CBH Group issued Western Australian growers with a 2016 Grower Value Statements this week, "showing storage and handling fees remain advantageous compared to equivalent services on the east coast".

The statement provides each grower with an individual view of the value that their co-operative has generated for them in the past 12 months through rebates, storage and handling fees, freight and quality optimisation.

CBH Group CEO Dr Andy Crane insists WA growers are about $14.50 per tonne better off using the co-operative’s storage and handling services than those in the rest of Australia.

"The total storage and handling savings for 2015/16 reach $195 million when benchmarked against the rates of all major storage and handling providers in Australia," Crane says.

"When comparing transport costs, WA growers using the CBH network pay a total of $85 million less than their counterparts in eastern Australia.

"In addition to these savings CBH also provides a rebate to growers, which is deducted from their storage and handling fees."

For the 2015-16 harvest, that rebate total reached more than $14 million, according to CBH.

"In the last three years CBH has returned $85 million to WA growers through rebates," Crane says.

"It’s great to be able to take step back once a year and analyse the current landscape to make sure that CBH is stacking up well against its counterparts.

"These results indicate that the business is not just matching other providers but offering millions of dollars in annual savings to WA growers.

"In an industry where margins are tight, grower control of their own supply chain is critical. We have a sole focus on the grower to lower the costs of the supply chain, improve service and generate rebates.

"We are proud to be able to generate value for growers and return that through the co-operative. Every part of our supply chain must be as efficient as possible and continually searching for improvement.

"We will keep working to reduce costs and pass those savings back to growers in low fees, good service or rebates,"

For its part, Australian Grains Champion (AGC) is dangling $1 billion in front of CBH members following moves to raise the profile of the corporatisation effort last month.

"Farmers can use these valuable funds to expand farms, pay down debt, facilitate farm succession, implement innovation or fund on-farm or off-farm investment," AGC grower director Clancy Michael says.

AGC has called on the CBH board to enter into the ‘process agreement’ by March 18 to prepare for the proposal to be put to a CBH member vote.

It says the strategy is to work towards: optimising capital investment; capturing opportunities from vertical integration; increasing grain origination; maximising supply chain efficiency; and improving grower alignment.

Other features include:

  • total storage and handling, transport and port fee increases capped at CPI for five years
  • ‘grower advisory council’ to be elevated to a ‘grower council’ with responsibility to make recommendations to the AGC board
  • a ‘future farming fund’ to support community activities, innovation and to support risk mitigation or other grower-driven initiatives to future-proof farming.

Last week, the push was given added momentum with the weight of GrainCorp’s $300 million supporting it with a view to taking 20 per cent once CBH is listed.

 "Our proposed investment is a good strategic fit for GrainCorp, bearing in mind CBH’s complementary assets and capabilities," GrainCorp MD and CEO Mark Palmquist says.

"CBH is an excellent business with a strong position in Australian agriculture.

"GrainCorp is also a significant Australian agribusiness and, if we can support the growth of Australian agriculture, then we feel a responsibility to participate.

"We believe we offer significant value to CBH through our experience as a listed agribusiness, our complementary operations and grain processing capabilities.

"Our participation in this proposal potentially gives us an opportunity to contribute to CBH’s growth and success in a meaningful way in the future."

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