Farmers back inquiry as state government points to need for efficiency
The South Australian government sees the prospect of bulk grain logistics efficiencies as justifying its probe into export supply chain costs.
With agribusiness Viterra dominating the state export services landscape, it is accepted in transport circles that it is the main focus of the Essential Services Commission of SA (ESCOSA) inquiry, though it is not named as such by the state government or farmers.
“This is an important review for the South Australian grain industry and it will complement the other efforts we have been making to improve productivity,” a government spokesperson tells ATN when asked what aspect of road and rail transport was of particular concern.
“It is important the industry is as sustainable and efficient as possible, to keep costs down to farmers throughout the supply chain.
“We know transport is a major cost to primary producers, which is why our Government has embarked on a program of initiatives and works which have already saved the agricultural industry more than $50 million in transport costs.
“This review is aimed at giving the grain sector confidence and enabling the industry to identify any areas where efficiencies in South Australia’s bulk grain export supply chain could be realised.”
Grain Producers SA (GPSA) says the inquiry is a key element of its policy on storage and handling competition.
“The inquiry has been commissioned by Treasurer Tom Koutsantonis, with support of transport minister Stephen Mullighan, and we acknowledge their foresight in acting to investigate what is one of the largest, if not the largest, costs in grain production in this state,” GPSA CEO Darren Arney says.
“For the 2016-17 harvest, ‘free on board’ [FOB] costs are estimated to be about $50 per tonne.
“FOB costs include a number of charges, such as receival fees, monthly carry charges and vessel loading fees.
“Freight from upcountry delivery points are in addition to the FOB costs and are also a significant deduction to the farm-gate prices that grain growers receive.
“These are costs which are mostly outside of growers’ control.
“Good grain production managers can make smart decisions about how to become more profitable by controlling on-farm costs, such as machinery upgrades or the cost of sowing a crop.
“But receival, storage and handling and port terminal costs cannot be sent back any further – growers are paying the full cost.
“ESCOSA reviewing supply chain costs was also raised as a recommendation of the multi-partisan Select Committee of the Grain Handling Industry, which delivered its report in 2012.”
Viterra operates six main bulk grain port terminals out of eight in the state and these operations are overseen by the Australian Competition and Consumer Commission (ACCC) but not variable pricing at inland silos.
South Australia’s grain crop is worth more than $4 billion to the state economy – more than a quarter of the state’s gross food revenue, the government observes of its importance.
More than 12,000 people are directly employed in the grain industry in production as well as indirectly in supporting the grain industry such as the storage and handling sector, farm advisors, chemical fertiliser resellers, agricultural aviation and fuel suppliers.
For its part, Viterra plays a very straight bat.
“We are working closely with ESCOSA to provide insight into how our supply chain adds value for South Australian growers, meets the needs of international customers and operates in a competitive global market place,” a spokesperson says.
“Viterra scaled its business to handle a record 2016/17 crop for South Australian growers. In the last two years we have added over 1 million tonnes of extra storage to our network.
“So far this season we’ve shipped more than 4 million tonnes of grain out of SA on behalf of 11 different exporters to 21 different countries in Asia, Middle East, Europe and Africa. From December to March, 3.2 million tonnes of grain was shipped – the largest four months in a row on record.
“We have a full shipping schedule for the coming months and have strong demand for shipping in future years.”