Driving Grower Value
As the grain harvest starts across regional WA, it’s timely to reflect on the challenges our industry has faced over the past 12 months, what we have achieved in that time, and what your co-operative’s plans are to drive value for growers.
Over the past few months, the CBH Board and Management have been discussing the refreshed CBH Strategy with growers and industry groups, and our plans on executing this as fast as possible.
The Strategy will deliver on our purpose to sustainably create and return value to growers and aligns our core business units – Operations, Marketing & Trading, and Fertiliser – around that purpose.
As the crop size continues to grow, one of the key strategic objectives for CBH is to significantly increase the current network capacity to move grain from site to port so we can lift our export capacity. Right now, we are working to hit the first target of 2 million tonnes each month by 2024 and then progressively increase this to 2.5mt and then 3mt each month by 2033, or sooner with the team working hard to hit these targets quicker.
Increasing the capacity of the network is critical to maximising the value of growers’ grain in international markets.
The 2021/22 record harvest brought into focus the limitations of the current capacity of the network, in particular moving grain from site to port. The harvest saw growers deliver 21.3 million tonnes in to CBH - 30 per cent more than the previous record - and for the first time in the co-op’s history, the size of the harvest exceeded the historical capacity of the network. Further pressure was added to the task of transporting grain to port as a result of disruptions from COVID-19 and train driver shortages.
Despite those challenges, our sites and ports received and discharged the grain as effectively and efficiently as possible, with dozens of records broken. Due to the considerable efforts of our front-line teams, as of today, our carry position is less than 3.5 million tonnes.
For the coming 2022/23 harvest, we have released 17.8 million tonnes of shipping capacity.
A record number of traders, including CBH Marketing & Trading, competed for this capacity. This increased number of traders provides growers with choice in who they want to do business with.
While still holding the most significant market share, Marketing & Trading’s shipping capacity has decreased in comparison to prior years. However, the division remains focussed on maximising value for growers and have adopted a more dynamic pricing strategy this harvest, with a view to drive a competitive market and pricing so growers are the beneficiaries.
In line with our Strategy, we are working to increase the performance of the network, particularly rail, and we will add to the capacity as the season progresses and logistical performance allows.
To better support delivering tonnes to port, we are significantly increasing our rail fleet. This will initially result in the acquisition of three train sets to complement the 10 fleets we own, and the three we have leased from Aurizon. More sets will follow. This is progressing well and we will finalise the commercial terms with the locomotive manufacturer within eight weeks.
We are also progressing our rapid rail outloading projects which has received funding from State and Federal Governments through the Agricultural Supply Chain Improvements (ASCI) program.
Construction on at least two of these rapid rail outloading facilities will start in early 2023 and an additional nine rapid rail and siding projects will follow. While we work through the regulatory approvals with State and Federal departments for rail siding extensions, we have acquired long lead items for the outloading facilities, including steel, sleepers, bins and conveyors.
While we have invested more than $1 billion in the network in the past five years, we need to increase our investment in the network to continue improving our logistical capacity and generate value for growers in the long-term.
Similar to other grain traders, CBH Marketing & Trading will deliver a record surplus for FY22. The surplus is driven by unprecedented market conditions including the record harvest, the ongoing Ukraine conflict and international protectionist policies.
In our recent Regional Member Forums, the overwhelming sentiment from growers was that CBH needs to continue investing in the network.
To that end, a portion of the surplus will be reinvested in the network to increase capacity, and the remainder will be retained within Marketing & Trading to strengthen its balance sheet. This is the most tax effective use of the surplus, which also enables growers to consistently capture the value from an improved supply chain into the future.
Investing in the network enables CBH to achieve our ultimate export target of 3 million tonnes each month and unlock the value of WA grain in the first half shipping window when demand is greatest.
We have set ourselves up with well thought out plans and critically we are now working harder than ever to execute these to support the future success of WA growers. Together, these elements will see CBH in a strong position where we can receive and export growers’ crops efficiently and effectively while maximising the value of your grain.
On behalf of CBH, I wish you all a safe and successful harvest.
- Ben Macnamara, CBH Group CEO