Growers mull freight future

A three-year fight to maintain Grain Express’ monopoly over up-country transport has ended in defeat for WA grower-owned co-operative CBH.

Last week, the Australian Competition and Consumer Commission (ACCC) rejected CBH’s assertions the centralised system was in the best interest of WA growers and revoked the Exclusive Dealing Notification.

CBH has until July 20 to appeal, but the co-operative warned that growers, on the whole, had the most to lose.

Barring a successful appeal, from May 1 next year growers and marketers will be able to choose how their grain is transported to port.

The move paves the way for ousted rail provider ARG — its contract to cart grain for CBH is set to end in May — to compete against CBH’s new provider, Watco, for grain freight.

ARG, a subsidiary of QR National, had been a staunch supporter of Grain Express until its 10-year contract with CBH was not renewed.

QR National Freight chief executive Ken Lewsey said the ACCC’s decision was a great outcome for WA’s grain transportation industry.

“This decision will ensure that QR National Freight’s experience of the local grain network can continue to service WA growers and agricultural industry, ” he said.

Mr Lewsey would not say how many trains ARG would be running next grain season or whether they would operate across all zones.

He simply stated ARG was “rigorously pursuing the opportunities that open up”.

But CBH was less impressed with the ACCC’s decision, describing it as a disappointment.

CBH chief executive Andy Crane said grain marketers might be the only winners in the situation and painted a picture of a logistical nightmare in which CBH would have to open sites several times for individual buyers to retrieve their grain.

“We’ve made a case that the protection for Grain Express is not to protect CBH or pricing, it’s to protect the consolidation of the task run for the grower’s benefit by growers, ” Dr Crane said.

“We’ll work hard to minimise that damage for our growers and be compliant with the decision, but we believe it’s a worse net outcome for growers.

“While there may be some individual advantage for the particular marketer in securing a lower transport rate at certain times of the year, the knock-on costs we believe as a whole will be greater to growers and their system.”

Dr Crane said it remained to be seen whether marketers would be willing to post prices at every receival point.

“Grain Express provided a secure way for marketers to accumulate grain over multiple sites and in multiple zones and be able to bring their grain to port in single train loads of equivalent quality, ” he said.

“What growers got was full competition from all marketers at all sites, and what marketers got was ease of consolidation and a single, low-cost transport charge. The concerns are… that some of that will be at threat.”

CBH claimed although the ACCC’s decision would not affect its deal with Watco or plans to roll out its quality optimisation system for wheat deliveries, a firm plan on how the co-operative would handle grain freight logistics next season was not yet in place.

Dr Crane said CBH was considering whether to appeal the decision.

Throughout the ACCC submissions process, several marketers, including Louis Dreyfus and Elders Toepfer Grain, spoke out against the logistics system.

Glencore Grain State manager Rob Haddrill said the company was not anti-Grain Express but was “being forced to use its limited other potential options outside of Grain Express”.

He said that Glencore might look to move its own grain.

“It’s an option because we do that on the east coast, but if it works out that Grain Express is still the most efficient and economical way to move grain, then we’ll continue to use it.”

North Meckering grower Rob Beard said next season he would look into whether alternatives to Grain Express stacked up.

“It gives me a chance to be free to choose whether to use alternative transport services or just continue to use CBH’s services for going to port, ” he said.

“Getting rid of that monopoly could be of benefit to a lot of farmers.

“I’m sure having the competition will give us a clearer indication of the true transport costs from various regions across the State.

“CBH has that capacity to out-turn grain and it has done in the past to a number of grain traders, whether it be direct to farmers or millers.

“There will be limitations, but I’m sure grain traders will be made fully aware of those.”

But growers remained divided over whether axing Grain Express would lead to better freight rates.

Nyabing grower Scott Crosby described the ACCC’s decision as a win for multinational companies over Australian companies and said it would make marketing grain more complex.

“It could push up costs of getting grain to port and multinational companies might now be able to make more money from grain in terms of shipping, ” he said.

“It’s going to make marketing grain harder because you’ll have to look into freight rates as well.

“The system wasn’t broke, so why are we fixing it? Our storage and freight rates were already far better than those of the eastern states.”