AUSTRALIA’S grain supply chain is moving towards new efficiencies in handling and testing set to bring benefits to growers and consumers, and a shift to safely stored grain being classed as an asset its owners can borrow against.
These were among the points made at Grain Trade Australia’s Modernising the Grain Supply Chain Summit held last Wednesday to discuss the path to 2030.
Evolution of commercial practise typically harnesses technology to partner with innovations in handling.
One such example is Riordan Grain Services (RGS), which has been a leader in the use of mobile ship-loaders to fill ship’s holds at the Victorian ports of Geelong and Portland.
RGS general manager Mark Lewis said this was already delivering significant efficiencies for growers who could out-turn grain to specification from their farms.
“In some instances, it went from the header to the ship, which we were doing in January and February this year,” Mr Lewis said.
“The market naturally is evolving towards systems that reduce the amount of handling of grain or commodities.
“It’s vital that as an industry we work towards reducing the amount of times we handle the commodity through to its end destination.”
Mr Lewis said the domestic industry had the same need for quality as export and, as was demonstrated during the recent drought the domestic market is here, year in and year out.
“It’s not just about export.
“The domestic market is a very big part of our business and the grain industry as a whole, and it’s growing.
“Storage standards are applicable for export and domestic.”
Farm packing possible
Since COVID hit early last year, supplies of empty 20-foot containers, and shipping space and services have been problematic for Australian grain exporters.
Specialists at the summit said despite the logistical difficulties and hefty surcharges, the container market has remained an important part of Australia’s export program.
Mr Lewis said efficiencies for the sector could well be found if on-farm container packing was able to supplement services offered by bulk handlers.
“Another work in progress as a business and industry is taking export containers direct to farm and packing them straight back into port.
“It’s probably the next step for the container trade in reducing touch-points within the supply chain.”
Mr Lewis said remote access to data derived from stored grain was likely to be another efficiency driver, as well as a potential boost to farmer earnings.
“You can’t sell what you don’t know you’ve got.”
Mr Lewis said remote access to testing to determine grain quality and quantity would be valuable for grain marketers to achieve the best prices for grain, and they could reward growers accordingly.
“We will reflect that back through the price we’re prepared to pay.
“A big part, and an evolving part, is the technology side of things.”
Mr Lewis said end users were sharpening their focus on quality, identity preservation, and some aspects of sustainability in terms of grain production.
“Increasingly we’re getting asked where that grain came from.
“We’re going to see that trend continuing.”
Mr Lewis said malting barley in particular was one agricultural product where provenance was being rewarded because of what some beer consumers sought.
“That is only growing, and that is largely to do with what they can sell to the consumer.
“That adds value to their business.
“At the end of the day, we will be able to return those back up the supply chain and into the farmer’s pocket, which is what this is all about.”
Tech testing nears
On the export front, Department of Agriculture and Water Resources assistant secretary David Ironside said technological advances meant the industry could think about non-human testing for contaminants.
“I think this could be a game changer,” Mr Ironside said.
He said the transition to test with technology would likely require the running of trials to compare the old versus the new method to assure export customers that technological testing was “as good as, or better than, inspection by a warm-blooded individual”.
“That’s going to be really important and exciting.”
Mr Ironside said Australia would have to walk through any switch to technological testing with its trading partners to ensure confidence in Australia’s export standards was maintained.
“We have to be really careful about how we explain it to other countries.”
National Working Party on Grain Protection chair Gerard McMullen said industry needed to determine and evaluate how grain could be tested reliably with technology to ensure current standards could be met.
“We’ve reached the stage where the industry is mature enough to work together on those calibrations,” Mr McMullen said.
Mr McMullen said grain quality as well as phytosanitary requirements would need to be covered by testing done through technology alone.
Stored grain holds asset potential
Commonwealth Bank of Australia (CBA) head of agri structuring Adam Rowe said CBA was looking at enabling growers to borrow against the value of their stored grain, but risk needed to be managed.
“The ability to extend financing against inventory located in on-farm storages currently within my product suite is limited.
“I see that as a real challenge as to how we can build out opportunities.
“That’s something we really need to look at as an industry and a sector.”
Mr Rowe said banks’ credit departments would always look to the most reliable assets — namely land and farm improvements — to determine how much they could loan to growers.
He said banks needed to consider operational and structural risks on the farm and in the agricultural sector to include stored grain in a farmer’s asset class.
Those risks include the transport of grain from farm to counterparty.
“For me as a banker and ex lawyer, that gives me the chance to look under the bonnet.
“That allows me to structure to build a solution that is much more tailor-made to their requirements.”
He said the upshot may be that growers can borrow at a lower interest rate on grain securely stored on farm rather than within off-farm bulk storages.
“Where we are able to provide value, it is often provided at a lower advance rate than what is stored within the bulk-handling system.”
Mr Rowe said fraud was the “number-one risk” of concern to banks when considering using stored grain as an asset to borrow against.
“We need to make sure we have access to the commodity and where it is…to ensure that in two weeks, months or years we can liquidate positions.”
He said banks needed to be confident that the counterparty could be trusted, and that growers were not short to the trade.
“That’s a real concern for us; it has to be.”
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