Agribusiness

Grain supply chain costs under scrutiny in South Australia

Grain Central, April 26, 2017

THE South Australian government has set in motion an inquiry into the supply chain costs of handling bulk grain in the state.

Grain Producers SA (GPSA) has welcomed the government’s decision to instruct the Essential Services Commission of SA (ESCOSA) to review bulk grain supply chain costs in the state on behalf of grain producers.

The purpose of the inquiry – initiated last month – is to determine the “reasonableness of the costs underpinning the South Australian bulk grain supply chain”, including the costs over the past 10 years and providing options to address any inefficiencies identified.

GPSA CEO Darren Arney said the inquiry into SA bulk grain supply chain costs was great news for growers and a key element of GPSA’s policy on storage and handling competition.

He said the inquiry’s terms of reference would ensure it was a detailed and thorough review, covering components of supply chain costs, their efficiency and cost recovery, harvest trends over the past decade, and working collaboratively across a number of government departments.

“The inquiry has been commissioned by Treasurer Tom Koutsantonis, with support of Transport Minister Stephen Mullighan, and we acknowledge their foresight in acting to investigate what is one of the largest, if not the largest, costs in grain production in this state,” Mr Arney said.

“For the 2016-17 harvest, Free on Board (FOB) costs are estimated to be about $50 per tonne. FOB costs include a number of charges, such as receival fees, monthly carry charges and vessel loading fees. Freight from upcountry delivery points are in addition to the FOB costs and are also a significant deduction to the farm-gate prices that grain growers receive.

“These are a cost which are mostly outside of growers’ control. Good grain production managers can make smart decisions about how to become more profitable by controlling on-farm costs, such as machinery upgrades or the cost of sowing a crop. But receival, storage and handling and port terminal costs cannot be sent back any further – growers are paying the full cost.

“ESCOSA reviewing supply chain costs was also raised as a recommendation of the multi-partisan Select Committee of the Grain Handling Industry, which delivered its report in 2012.”

Under the terms of reference, the Commission must undertake the inquiry in two parts:

  • In part 1 the Commission is to inquire into the South Australian bulk grain export supply chain costs over the past 10 years, and
  • In part 2, should the Commission find areas where bulk grain supply chain costs are identified as inefficient, options should be provided for addressing those inefficiencies.

The Commission must submit a draft report on part 1 of the inquiry to the Treasurer no later than six months from the commencement of the Inquiry, and provide a final report on part 1 and, if required, part 2 of the inquiry no later than nine months from the commencement of the inquiry.
The Commission will be contacting stakeholders to commence consultation on the inquiry and also invites all interested parties to make a submission, which should be received prior to 12 May 2017. Public consultation on the Commission’s draft report will also occur in the second half of 2017.

The key objectives of the inquiry are to:

– Provide transparency in regards to bulk grain export supply chain costs in SA.

– Determine areas where future efficiencies may be achieved, and

– Review the appropriateness of mechanisms used for funding road and rail components of the bulk grain export supply chain costs.

Submissions close on May 12. More information on the inquiry is available on the ESCOSA website http://www.escosa.sa.gov.au/

Source: Grain Producers SA

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