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CARRY-OVER grain from the 2010-11 harvest, added to another large crop looming on the horizon this season, is set to test the grain logistics supply chain on Australia’s east coast.
WA bulk grain handler CBH is forecasting a crop of about 12 million tonnes to 13/mt following a strong start to the season.
On the east coast, GrainCorp is predicting 18.5/mt to 19/mt; about 4/mt or 5/mt less than last year’s harvest which was devastated by late season flooding and storms.
WA is looking at its best return since CBH handled 12.6/mt in 2008-09 which will be welcomed after last year’s meagre return of about 6/mt.
GrainCorp group general manager of storage and logistics, Nigel Hart, said last year’s harvest provided a double challenge for grain handling and storage due to the large volume of weather damaged grain.
He said it tested grain storage capacity while segregation numbers were doubled to suit various marketing demands for excess feed grain, caused by severe late season flooding.
But he said the “massive” export year operated relatively smoothly, with about 7.5/mt of grain exported in bulk, 2/mt exported in containers and 4.5/mt to 5/mt sold into the domestic market.
Mr Hart said GrainCorp was pleased by its overall capacity to outturn a record crop and to do so, with less rail resources and road resources than the last big crops experienced in 2000-01 and 1996-97.
He said more carry-over grain is expected in 2011-12 than in previous seasons but GrainCorp is now working out a program to find additional storage in areas where carryover grain is anticipated.
Carry-over feed wheat and barely, is currently being stored in the GrainCorp system but also with Cargill, while significant volumes are also being held on-farm.
Some sources are estimating the carry-over at 5/mt currently but the Emerald Group says it is more likely to be closer to 2/mt.
VFF grains president, Andrew Weidemann, said there were few problems selling last harvest’s carry over grain but the logistics system was struggling to “physically move grain” through to port and onto ships for export.
He said with another huge crop expected this year - one of the biggest ever - it would place east coast handling systems under even more pressure.
GrainCorp is currently forecasting the east coast crop at 18.5/mt to 19/mt and says it is already building additional storage across its networks in southern NSW and Victoria.
Mr Hart acknowledged there may be some concerns about a potential logistics squeeze.
But he said while carry-over stocks would be higher than in the past seasons, the volume was forecast to be 4/mt to 5/mt less than last year’s total.
“The two factors will more than counterbalance quite easily, no one is predicting as big a crop as last year,” he said.
Mr Hart said GrainCorp received about 55 percent of the east coast crop.
He said the system had an estimated 40/mt of storage capacity, while growers also store large volumes of grain on-farm.
“There is oodles of storage at a macro level,” he said.
“Last year we created about 1/mt of temporary storage at harvest where we needed to.
“We are in the business of storing grain, so we are interested in creating capacity to store that grain.
“But if we need more segregations it will put further pressure on the system, especially if we have a difficult harvest like last year with weather damaged grain.”
Emerald Group General Manager East Coast Region, Rob Proud, said 2/mt of feed wheat and barley could potentially be carried into this year’s program, testing the system’s capacity to export grain.
Mr Proud said the carry-over grain had been difficult to shift since last harvest, due to marketing and logistics issues.
He said Australian growers had a reputation for producing quality wheat but selling feed grains was a new challenge.
“It’s been a challenging market for everyone with the volume of feed wheat from last harvest,” he said.
“Competing with Black Sea region countries like Ukraine and Russia has also been challenging as those countries are producers of lower quality grains.
“So we’ve competed more with them in the last few months than we ever have before.
“If we have a good crop again - which we are looking at nationally with the best in WA for three or four years and the east coast looks above average - the logistics system will definitely be tested and storage capacity.”
Mr Proud said any strain on logistics would create issues with getting grain to market and competing.
“Road and rail transport will come under pressure and there may be flow on costs that could hurt the grower, particularly,” he said.
“The pressure points will be storing the grain somewhere then getting it onto the train and to ports on time - that will be critical.”
Mr Proud said the WA crop could reach 14/mt with a “sensational finish” but was more likely to be 12/mt to 13/mt.
Grain Producers Australia Chairman, Peter Mailler, said southern Australia was looking at producing a large crop, while WA was a little patchy but mostly had good grain producing areas.
But he said the north west of NSW and south west QLD was again, “doing it a bit tougher”.
“Sadly, a lot of growers are struggling in those areas,” he said.
Mr Mailler said notable carry-over stocks existed from last season but the east coast grain logistics system faced a number of general underlying issues.
He said there were issues with handling grain segregations, lack of transparency in grain stock information and the capacity to arbitrage grain effectively, to benefit growers.
He said logistics was “a bit of a mess”.
“We have not quite sorted out what happened last year,” he said.
“Anything can happen between now and harvest.
“But if we start running into problems with crop quality and produce a lot more feed grain, it will then be a problem of what you do with it and where do you put it, while ensuring we capture any premiums on offer for better quality grain.”
Mr Proud said grain prices had experienced a slight rebound due to increased global demand in the past week.
He said APW was being sold for about $300/t in WA but on the east coast, it was fetching about $270/t to $280/t.
He said feed wheat was currently returning a $60/t discount on the price of APW, while barley was selling for $225/t on the east coast and $257/t in WA.
On Monday, Emerald was quoting canola $565/t for east coast sellers and $597/t in WA.
WA farmer, Leon Bradley, said WA was looking at its best season in over a decade, with the Geraldton zone tipping about 3/mt - a record return.
He said other areas of the State were looking at either slightly below average or above average returns.
“They say a big season keeps getting bigger – we should be OK unless we get frost,” he said.
The Grain Industry Association of Australia's latest crop report said 6,978,500 hectares of crop had been planted in WA this season with the most wheat (2,235,000ha) planted in the Kwinana zone.
The Kwinana zone is also tipped to be the biggest producer of wheat this season with an estimated 3,353,000 tonnes.
WA is also tipped to double its wheat production from 4,584,000 in 2010/11 to 8,052 in the 2011/12 season.
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