Export logistics for the Australian. perspective. Australian Grain Exporters Association

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1 Export logistics for the Australian grains industry: A exporters perspective p Australian Grain Exporters Association

2 This can be looked at in different ways!

3 Exports are important to the Australian grains industry with export task complicated by variability '000 to onnes Barley production Canola production Sorghum production Wheat production Barley exports Canola exports Sorghum exports Wheat exports 0

4 Australia s wheat exports (container and bulk) remain strong tonnes 08/09 MY 09/10MYTD Containers Bulk Bulk exports Malaysia tonnes 08/09 MY 09/10MYTD Other Yemen Viet Nam United Arab Emirates Thailand Taiwan Sudan New Zealand Malaysia Kuwait Korea, Republic of Japan Italy Iraq Iran Indonesia India Egypt China Bangladesh

5 Target markets for AGEA members 2008/09 Subcontinent ( 0.6mt) Bangladesh, India, Pakistan, Sri Lanka Middle East ( 2mt) Yemen, Iran, Iraq, UAE, Kuwait, Bahrain, Oman, Qatar, Saudi Arabia, Jordan, Syria) South East Asia ( 5mt) Indonesia, Malaysia, Thailand, Vietnam, Myanmar, Philippines, Singapore, etc North Asia ( 3mt) China, Korea, Taiwan, Japan Africa ( 1.3mt)

6 Active participation from multiple players since 1 July 2008 Glencore 5% 2009 CY Bulk Wheat Exports Share 16 exporters GrainCorp 11% 2010 YTD bulk wheat exports - 15 exporters Bunge 3% Other Other 6% 7% AWB 23% AWB Glencore GrainCorp 27% 6% 10% Emerald 3% ETG 5% CBH 24% Cargill 12% ABB 6% Emerald 6% ETG 11% CBH 20% Viterra 6% Cargill 9% Calculated from shipping stem

7 Export task very different west coast to east coast Western Australia Current 10mt average, 15mt peak crop 90% WA grain destined for export 60% average task by rail Grain Express One port operator Shorter Supply Chains East Coast Current 15mt average Production impacted by drought Highly competitive and domestic market dominates Exports now only around 4mt Road increasing Three port operators

8 What s changed with deregulation Single buyer/seller replaced with multiple buyers/sellers 20+ accredited exporters Multiple exporters requiring access at same time Multiple l export owners drawing from multiple l sites to compile cargoes Market dynamics more visible Evident in shipping demands 2008/09 and 2009/10 Need to be able to respond to market signals more effectively BHCs required to lodge port access undertakings BHCs required to publish terms that are reasonable and benchmarked BHCs now obliged to negotiate and are accountable to the ACCC BHCs cannot change prices and withdraw services at will ACCC has an ongoing role in monitoring BHCs compliance, but port terminal users need to demonstrate anti-competitive behaviour Subject to the recommendations and outcomes from the PC Review

9 2008/09 were we too ambitious 20.9 million tonnes of wheat produced 24 companies accredited to export wheat in bulk 12.3 million tonnes of wheat exported in bulk to 42 countries via 17 accredited exporters (WEA) The top eight exporters shipped 90% of the volume (WEA) Market signals s for early shipping schedule e combined with a rain delayed harvest in WA and drought on east coast saw a bottleneck develop in WA Implications for exporters Delays in shipping resulted in considerable demurrage costs System highlighted lack of flexibility in terms of port operators System highlighted inland transport weaknesses Lack of communication between the port operator and exporters

10 2009/10 - reacted to 2008/09 29 companies accredited to export wheat in bulk (WEA) During the period 1 October 2009 to 28 May 2010 Australia exported 7.58 million tonnes of wheat in bulk to 33 countries (ABARE/ABS) 14 active accredited exporters (WEA) Shipping pace considerably slower than previous year did load rates improve? 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3, ,000 1,000 0 Shipping Stem Pace Aust Jan Feb Mar Apr May Jun Jul 6,000 5, ,000 3,000 2,000 1,000 0 Shipping Stem Pace WA Jan Feb Mar Apr May Jun Jul

11 2009/10 - Implications for exporters Demurrage losses replaced by auction premiums Auction system rules could artificially restricted capacity Requirement to declare supply chain at time of auction restricted development of alternative supply chains Ineffective secondary market and no flexibility to move or trade slots imposed costs on exporters and reduced efficiency i Secondary impact was distortion of market signals A difficult year

12 Overall deregulation has been successful 14.5 m tonnes exported in 2008/09 and 9.2 m in 2009/10 to date (bulk and containers) Container trade has not stopped More buyers and more choice for growers Larger range of marketing options Growers have been paid Expansion in grower advisory services Starting to see Innovation in all sectors of the supply chain.

13 Still some challenges to address in the supply chain Inland grain logistics ACCC access arrangements review in Sept Flexibility for alternative supply chains to operate is critical Likely to see new investment Port logistics Fair and transparent access to port terminal facilities for all Australian wheat exporters critical and necessary for the market to work effectively System needs to provide incentives for the BHCs to increase efficiencies Flexibility critical so exporters are not locked into a set of rules that are not internationally competitive e.g. flexibility to trade slots, determine supply chains, tolerances etc Road/rail Continue to suffer from lack of investment in infrastructure More fragile on east coast Quality Need greater integrity in management of quality from farm to port including guaranteed outturn against quality specifications and/or the ability for exporters to access stock of equivalent quality purchased

14 AGEA moving to issues beyond logistics Actively engaging in market access issues e.g. trade, biosecurity access, MRLS, etc More technical barriers to trade than in the past New pest and disease threats have emerged Consumers are getting more health conscious and countries are looking more closely at pesticide residues and other contaminants Biotechnologies continue to advance Promoting the understanding of global trade and market requirements and delivering market signals Important to ensure alignment of investment by parties that support exports e.g. R&D, variety development, etc Highlighting and promoting solutions to market origin issues e.g. quarantine, MRLS etc Developing value chain linkages (important growers have effective representation)

15 Industry will continue to move to a fully deregulated market Industry likely to continue the transition to a fully commercial integrated and market focused environment in next period (PC review) Ongoing g challenge is to develop effective industry organisation as move to industry based oversight Investment in and solutions to industry good activities will be developed - good progress has been made New linkages will form to bring Governments, industry groups and the commercial industry sector together The value chain needs to build these linkages in order to have effective engagement with each other to continue to move the grain industry forward Need to dri e inno ation and create incenti es to de elop ne prod cts and Need to drive innovation and create incentives to develop new products and services across the value chain

16 Australian Grain Exporters Association Provides leadership, advocacy and the voice for the export sector Supports the development of grain and oilseeds exports in a commercial and contestable environment Provides exporter input into processes and activities that are precompetitive p and support the export sector au