Record marketing and trading result won’t translate into rebates: CBH Group

CBH Group has flagged a record surplus for the year to September 30 on the back of a bumper harvest, with its chair saying hauls greater than 20 million tonnes could become “the norm” by the end of the decade.

However, the grain trading giant will forego rebates for its farmer members for a third year in row to instead turbocharge investment into the State’s lagging grains supply chain.

In an email to grower members on Monday, the cooperative juggernaut said it expected to hand down a record surplus in its marketing and trading division after last year’s 24.3Mt harvest coincided with high grain prices.

CBH also plans to retain some marketing and trading surplus to provide equity to buy WA’s growing crop, which is forecast to be more than 20 million tonnes this year for the second time in a row and also in history.

The cooperative’s chair Simon Stead said the recent record harvest — where growers delivered 21.3Mt to CBH — was “likely to be the norm by 2033”.

“With the highs and lows of good and bad seasons, this could increase to a peak of between 28-30Mt,” he said in the email.

“We want to ensure we are ready for this task.

“It is why we have set a goal of being able to achieve a peak export capacity of 3 million tonnes by 2033 and being able to out-turn 70 per cent of the crop in the front half of the year where it will generate higher value for growers.”

It is the third year CBH has withheld rebate payments to its 3700 grower members after suspending the cash payments in 2020 for the first time in nine years, opting to instead retain surplus cash to bulwark its business.

The decision to do so again reflects a rocky past year which included a $17 million demurrage bill in 2020-21 after it was unable to get grain to port quickly due to supply chain interruptions.

CBH is also expected to this week slug growers with increased freight rates at harvest, which kicked off with the first delivery last week.

Mr Stead acknowledged CBH’s export capacity had been “under pressure this year” and said it had decided to forgo grower rebates to reinvest into the business — particuarly into the supply chain.

About 60 per cent of WA’s annual harvest is moved to port by rail each year but the State’s ageing rail network has been buckling under the pressure of the record 24.3Mt harvest.

CBH has been under fire for failing to move enough grain to port, with fears last year’s demurrage bill could be repeated when the company hands down its results in December.

“Our export capability has been under pressure this year given the significant uplift in the size of the crop, combined with rising cost pressures and rail driver shortages stemming from COVID-19 and a highly competitive labour market,” Mr Stead said.

“Despite these challenges, in a year which has severely disrupted supply chains around the world, CBH has continued to break receival, out-turn and shipping records over the year, while working closely with our international customers, and distributing record payments to growers.”

CBH has been spruiking its new Path to 2033 Strategy this year, with hopes to be able to export three million tonnes of grain per month by 2033. It also wants to be able to market about 50 per cent of the State’s crop to international markets.

CBH’s other divisions, operations, and investments were also mentioned in the grower email but CBH declined to comment on whether either would record a surplus this year.

It revealed any surplus cashflow from operations would also be reinvested into the network, to sustain assets and build infrastructure, while Interflour Group and Blue Lake Milling were reported to have “performed strongly”.

Any earnings from those two businesses will be retained to “support capital requirements” and not return a dividend.