Australia’s Grain Harvest Exposed Issues With Grain Ports

Owing to favourable climatic conditions and high global prices, Australian farmers are expected to earn a record amount from agricultural exports this financial year.

Australia is one of the largest Wheat Exporters in the world that will produce another huge crop this season, which is set to boost agricultural export earnings of the country by almost 50% from a decade ago thanks to the favourable weather conditions and high global prices after accounting for inflation but has exposed issues with regulation of Grain ports.

The Australian Competition and Consumer Commission (ACCC) in consultation with the bulk grain export industry, had shown that groups that represented growers and exporters, generally support regulation of bulk grain supply chains but port terminal operators generally do not. Grain exporters, however, are concerned about the perceived lack of transparency in the way port operators allocate capacity to them.

Impact Of Bulk Wheat Code Of Conduct

The Port Terminal Access(Bulk Wheat) Code of Conduct intends to ensure that bulk wheat exporters have fair and transparent access to port terminal services.

Australia’s grain merchant and port exporter, Cooperative Bulk Handling (CBH), saw all slots of its available spare capacity for Western-Australia’s ports (2022-23)(October-September) filled within minutes of opening up in June. A document released by CBH on the capacity allocation dated 1st May '22 reported, CBH ports have a total capacity of 16.2 million Metric Tonnes(MT) across 4 ports of Kwinana,Esperance, Albany and Geraldton for the 2022-23 season. Of this,10.3 million MT of capacity was allocated to CBH internally and other exporters through long term agreements leaving a spare capacity of 5.9 million MT available for grain marketers and exporters to book.

CBH released its spare capacity of the Western Australian ports for 2022-23 to be booked on first-in first-serve basis on 30thJune’22 at a time when port logistics was expected to be tight, with market participants expecting more than 20 million MT of exportable wheat surplus including those from Western-Australia.

Port capacity is seen as a bottleneck for global grain trade during good harvest years in Western-Australia. Local storage facilities and CBH are struggling to deal with the size of the harvest and associated logistics for shipping. This resulted in a greater number of bulk carriers calling at Grain ports for shipments. This also led to difficulties in obtaining accredited grain surveyors to assist with hold condition surveys and draft surveys. Correspondents recommend giving as much notice as possible concerning costs associated with surveyors travelling to the ports, necessary surveys for grain cargos and the short period between the time that the vessel is fixed and its estimated time of arrival at the particular port.

According to ACCC deputy chair, Mick keogh, "In recent years we have seen an increase in the number of port terminal service providers, a higher percentage of non-wheat grain bulk exports and at some ports, an increased market share of grain shipments by exporters associated with

companies that operate the port terminal facilities." "While the grain industry has mixed views about the effectiveness of the current code, it's clear it isn’t working optimally and a review is needed." "The ACCC is specially mindful of the regulatory burden the code imposes on new port terminals."

Substitutes For Smaller Exporters

Capacity constraints at established port facilities forced them to seek access at new ones or rely on mobile ship loaders. Mobile loader operations are not perfect substitutes for fixed loader operations and don’t have much use except in high-demand years when capacity at larger facilities is constrained.

Conclusion

The ACCC believes that the government and industry would benefit from a detailed review of the code that considers whether the current regulatory approach is fit for purpose and the changes required. Port terminal service providers reportedly told the ACCC that they experienced an unprecedented demand for capacity, consistent with the record year for bulk grain exports.

Preparing the latest bulk grain ports monitoring reports as part of the commission's stated monitoring role, the ACCC said it consulted with the industry about access of port terminal capacity, transparency of shipping data, the impact of the bulk wheat code of conduct and the ability of businesses to access stored grain and transport it to ports.

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