CBH says grain rail glitches likely again in 2010

Despite changes to Western Australia's export grain logistics system, major glitches are likely again in efforts later this year to haul a potentially big harvest of winter grain to port for export, according to a senior logistics manager.

 

"Let's be frank," said Colin Tutt, general manager of grain operations at Cooperative Bulk Handling Ltd., which operates a grain logistics monopoly in the state. "Our rail system is no longer up the task in its present state."

 

Rail, especially during a short period of intense demand, can't deliver the volumes to port from upcountry storage sites that the industry wants, Tutt told a grain logistics conference in Perth Thursday.

 

CBH, which doesn't own rail operations along with rail and track owners and operators, and the state government are developing strategies to increase rail capacity to meet exporters' demand, he said.

 

"The jury is still out as to whether this can be delivered," Tutt said. "There is a growing view that Western Australia's transport pipeline can't match the shipping requirements of a deregulated marketplace."

 

Bulk wheat exports from Australia were deregulated from July 1, 2008, with a long-term export monopoly operated by AWB Ltd. dumped in favor a system of accrediting multiple bulk exporters, of which there are now more than 20, including some of the world's biggest grain traders.

 

The state's grain export system suddenly changed to a demand-driven system from production- driven arrangements, Tutt said.

 

This change resulted in a huge increase in demand for export wheat logistics early this year, which was compounded by a rain-delayed harvest, but the transport system wasn't able to cope with the extra demand because of poor rail track conditions, poor rail performance and CBH not matching the logistics system capacity with demand, he said.

 

As a result, long queues of vessels waiting to load grain formed off Western Australia's four grain ports where CBH operates export terminals.

 

Exporters booked vessels for a total of three million tonnes of grain for loading for export in March, but CBH was able to load only 1.55 million tonnes, he said.

 

This resulted in some vessels waiting weeks to load, heavy demurrage penalties for exporters and queries from importing nations about the reliability of Australia as a wheat exporter.

 

CBH has already made some changes for the next harvest, and plans to maximize exports during the harvest period to "compensate for the poor rail performance that we expect again this coming year," and a new booking system for vessels has been introduced, Tutt said.

 

Considerable effort will be put into hauling grain by road, but there isn't enough road capacity now to meet demand, he added.

 

"If we aren't able to match supply to demand, customers will seek other supply chains to manage their risk," he said of the risk in this situation to CBH, currently Australia's biggest grain company.

 

In the last crop year ended March 31, CBH received more than 12 million tonnes of grain into its network, which includes almost 200 upcountry storage sites, with nearly all this grain available for export.

 

The grower-owned cooperative's current forecast is for receivals later this year from the new crop to be in the upper end of an eight million-11 million tonnes range.