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East coast supply chain collaborates in time of need

22 March 2018

Dry winter cropping conditions in New South Wales and Queensland threatened the stability of the domestic wheat market during 2017/18.

However, a collaborative approach adopted by marketers, logistic operators and interstate bulk handlers covered the shortfalls and boosted domestic industry confidence.

“The further north you went, the drier it was, with some areas receiving less than 5mm of rain for the spring month of September,” David Wood, Glencore Agriculture’s Domestic Trader, said.

“The Darling Downs region was the most affected but there is a large grain deficit across most of Queensland and Northern New South Wales which occupies most of the domestic market.”

More than 80 per cent of Australia’s livestock population is located in the eastern states, requiring approximately 10mmt of feed grain per year. While the sector is normally self-sufficient, dry years can disrupt traditional grain flows.

Similarly, more than 50 per cent of Australia’s milling wheat demand is centred in New South Wales, which is normally self-supplied to the tune of about 1.2 to 1.5mmt.

David said stock had been drawn from further south to cover the shortfalls, with a larger reliance on road transport to move the grain.

“Northern price relativity has meant the supply arc is working further south into New South Wales and, where truck configurations allow, into northeast Victoria.

“We have a strong accumulation footprint across the country accompanied with a busy road logistics program.

“Managing stocks and having strong relationships with transport companies allows us to best allocate stock movements to where it is needed most.

“Improvements in truck technology and a focus on road route mass management has meant larger truck configurations can move more freely along the east coast which increases efficiencies.”

David said pressure would remain throughout the year following global developments in sorghum which were likely to see Australia’s sorghum crop exported rather than used domestically.

“Sorghum has rallied recently following a dry January and the Chinese government announcing it would undertake an anti-dumping investigation into US sorghum,” he said.

“This has tightened the spread relative to wheat, pricing its way out of the domestic livestock ration.”

Wider call for help
As conditions worsened on the East Coast last year, South Australian bulk handler Viterra had also been primed as a potential supplier.

“While it wasn’t needed in the end, the South Australian option provides some domestic security,” Viterra’s Commercial Relations and Quality Manager, Andrew Hannon, said.

“If the market demand is there, Viterra can reorient its storage and rail assets to the eastern states rather than its South Australian ports.

“From the client point of view, it depends on the price at the site and the costs to execute to the destination market. We look to facilitate grain to the market whether it is domestic in SA, export through our SA ports or interstate.

“The market seems to have resolved the need for the minute, but we will be ready if that situation changes.”