Australia’s grain supply chains: costs, risks and opportunities
- By: "Farm Tender" News
- Cattle News
- Nov 01, 2018
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Australia needs to continue to reform its export grain supply chains to remain competitive in an increasingly challenging global grain market, according to a new report from the Australian Export Grains Innovation Centre (AEGIC).
The report, Australia’s grain supply chains: costs, risks and opportunities, found that despite major investments to improve efficiency in Australian supply chains since 2014, costs to users have only slightly decreased or remained stable.
AEGIC Chief Economist Professor Ross Kingwell said the costs of Australia’s supply chains and grain production were high in comparison to most competitors (except Canada, where costs were higher due to long transport distances).
“Supply chain costs are consistently 30-35% of the total cost of grain production in Australia and this percentage is similar across competitor countries,” he said.
“Even so, these competitors – such as Ukraine, Russia and Argentina – are benefiting from lower labour costs and increased economics of scale due to large production increases.
“In Australia, overall supply chain costs have either fallen slightly or stayed steady. It is important to note there are differences between Australian states.
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“Decreases in the costs of some components of supply chains, for example freight, have been offset by increases in the cost of others, such as ports. The creation of new port facilities has created more flexibility for exporters.”
Prof Kingwell said action should be taken to ensure Australian grain stays competitive.
“Australian grain needs to remain attractive to international buyers, therefore it needs to remain affordable and be fit for purpose with the characteristics required or desired by end-users,” he said.
“Australia’s grain industry will increasingly need to concentrate on exporting to premium-paying nearby markets and delivering high quality wheat with characteristics not easily or cheaply replicated by competitors.”
The challenge from low-cost producers such as Ukraine, Russia and Argentina is unlikely to dissipate, according to Prof Kingwell.
“Significant investments are underway in these countries that will further challenge the competitiveness of the Australian industry,” he said.
“AEGIC’s report identifies important areas of reform that are likely to produce enduring benefits for Australia’s grain supply chains.”
AEGIC’s recommendations (see report or fact sheet for full version)
* Ensure least-cost grain paths are developed and maintained by enhancing planning and investment in roads and preventing future conflict with urban development.
* Align grain breeding, classification, assessment and grain production to support the export of Australian wheat to differentiated, premium markets and meet customer requirements.
* Ensure there are sufficient incentives for supply chain operators to commit to R&D investment to improve the cost-efficiency of supply chains.
* Supply chain owners should consider making the basis of component charges more transparent to increase confidence in supply chains.
Download the full report here
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