Grain transport the major cost in export supply chain

The major cost associated with export grain supply chains is transport. The cost for growers to move grain from farm to port is around 33 per cent of their total overall grain production cost. And growers have limited control over what is usually their single largest expense.

This information has been verified in a report by the Australian Export Grains Innovation Centre (AEGIC), expected to be released in April 2018.

AEGIC chief economist, Professor Ross Kingwell, says supply chains across Australia have changed significantly over the past five years.

Changes have included a reduction in the number of receivable sites, further evolution of grain transport, changes to port regulation, rainfall zones shifting closer to ports, and other infrastructure changes.

“On average, costs have reduced slightly in recent years, however costs vary depending on magnitude of the grain harvest,” Prof Kingwell said.

“After accounting for these variations, supply chain costs are consistently about 30 to 35 per cent of the total cost of grain production.”

He said total Australian grain supply chain costs were higher than most overseas competitors, except for Canada, yet some supply chain components compared favourably.

“For example, charges for grain transport from up-country receivable to port have decreased 12-13 per cent in real terms,” Prof Kingwell said.

“However, in this example, the reduction is offset somewhat by the fact that, on average, most growers now need to travel further to deliver grain to fewer sites.”

He said more improvements were essential to help preserve Australia’s international competitiveness.

“Further improvements in grain yields, greater investment in infrastructure, improvements in supply chain operations, regulatory reform and a greater intensity of cropping in higher rainfall regions will all help lower the average cost of Australia’s export grain supply chains,” Prof Kingwell said.

“These improvements are essential, especially considering that Australia’s grain export competitors, such as Russia, Ukraine and Argentina, are continuing to drive down their costs through major investments in on-farm and post-farm improvements.”