MELBOURNE, AUSTRALIA – After initially scheduling a hybrid conference with delegates meeting in Melbourne or logging in virtually, the COVID-19 pandemic moved the annual Australian Grain Industry Conference (AGIC) to an entirely virtual format.
Under the “Reconnect — Reignite — Revitalize” theme, the conference brought the industry together with a series of presentations, chat rooms, and a networking meeting hub. Against the backdrop of the usual forecasts and market insights, the theme of sustainability emerged as a critical topic of discussion, and to a lesser extent, the pandemic’s impact on labor.
Fortunately, the Australian grains industry has weathered recent droughts, with record tonnes pouring into storage bins across the country during the 2020 harvest and another bumper crop expected this year with good conditions across Australia’s grain growing regions.
Once again, the CEO forum was held and this year featured GrainCorp CEO Robert Spurway, who joined the company in March 2020, and Bob Rogers from Allied Pinnacle. The conversation began with a discussion on the respective businesses.
Spurway said that when he joined GrainCorp, the conversation was primarily on food security and whether Australia could feed itself following the drought and poor harvest season in 2019. He noted that this shifted with the bumper crop in 2020, and the conversation is now about the opportunity the large volumes moving through its network presents the company.
Acknowledging that 2021 should bring another bumper crop, Spurway said the company was investing in an additional 1 million tonnes of storage ahead of the harvest. He said the company also was planning processes to keep staff and growers safe from COVID-19 with the facilitation of contactless receivals. He added that GrainCorp was focused on maintaining grain quality (particularly pertinent given the 2020 mouse plague) and looking at diversification opportunities so the company can “survive the tough times and thrive during the bumper crops.”
Rogers heads up the primarily domestic-focused business of Allied Pinnacle that produces retail and industrial baked foods with brands such as Allied Mills in its stable. When asked about the challenges the company is currently experiencing, he pointed to cost pressures likely due to COVID-19 and its influence on international freight rates. He also said there was difficulty accessing containers and that fewer ships were going from north to south, putting significant pressure on cost and lead times for getting products in and out.
Rogers also discussed consumers’ push for sustainability in food, which led the company to work with growers to implement sustainable practices to meet this demand. He also said they were spelling out the health benefits of wheat as part of their sustainability program.
At GrainCorp, Spurway outlined the short-term economic imbalances caused by COVID-19, like the dynamic experienced in container exports and access to labor across domestic and international borders, as an area of concern. He added that the company was focused on turning challenges into opportunities, for example, with more drought-tolerant crops, innovation, and technology. Spurway said GrainCorp saw benefits in digital and ag technology that allowed it to do things in a more resilient and sustainable way.
In terms of Australia’s souring relationship with China, Spurway pointed out that GrainCorp had not diversified its customer base from 30 to 50 international customers in recent years because of any particular trade tension. He also said he was optimistic about the future of Australian exports, given global population continues to grow, driving demand for food.
Interestingly, Rogers emphasized the impact sustainability is having on his business and consumer expectations, which can flow on to growers, handlers and exporters.
“We are getting more and more enquiries and interest from our customers around what our sustainable strategy is and what it rates within our organization,” Rogers said.
An initiative of Allied Pinnacle is to reduce waste and handle it differently, such as in its flour mills where waste is converted to stockfeed. He said the company’s workforce keenly followed sustainability and treated the issue seriously.
On the first day of the conference, Sean Barker from GrainCorp, Kurt Wilkinson from Fletchers International Exports and Shaun Mooney from Port of Melbourne spoke of the challenges and opportunities in play with the Australian supply chain.
Opening the discussion was the impact of COVID-19 on the supply chain, which has seen much of Australia in and out of lockdown throughout 2021. All speakers noted the pandemic had impacted their organizations — namely, access to labor and the influence of changed consumer spending.
Barker, general manager of domestic and commercial at GrainCorp, said bulk exports were largely untouched by COVID-19, but he noted freight rates have tripled since the pandemic began. One area of concern for the bulk handler was labor and the company’s inability to move experienced staff across sites over harvest as they would typically because of health restrictions.
Barker said the developing pandemic alongside a bumper harvest in 2020 meant the company had to adopt processes and technology to allow growers contact-less delivery into the network.
“A lot of our challenges today aren’t technology based, but it can play a role in helping,” Barker said. “GrainCorp sees its biggest efficiency gains are in process gains through simplifying down. Technology needs to fit within the existing infrastructure and work hand in hand to get the most benefit from it.”
Mooney from the Port of Melbourne said labor access was creating bottlenecks as fewer truck drivers could access the port, coupled with congestion due to the 14% increase in volume compared to the previous year.
Driving this increase is the diversion of consumer spending on services to goods, seeing more products being shipped from China to meet this demand.
“Consumers aren’t able to spend money on services, or restaurants, travel, etc.,” Mooney said. “People are putting the money they would have spent on this or travel into consumer goods, which are taking up containers.”
Mooney added that it wasn’t only impacting the Australian market but is being experienced globally, citing an example of a freight rate on a key Asia to US West Coast route that increased 1.7 times in just a week.
On the container side, Wilkinson from Fletchers International, an integrated meat processor and exporter, said the additional consumer demand for goods had dried up a resource that typically was plentiful. Wilkinson said shipping lines were sending containers back empty to China rather than make them available to exporters.
With this struggle to get access to containers and space on vessels, Wilkinson said freight rates had tripled, if not quadrupled, in the last 12 months. However, the challenges associated with the access to containers and freight rates were being saved by the production in the Northern Hemisphere, which Wilkinson pointed out wasn’t going “gang-busters,” enabling them to pass on the higher freight costs. He said that if production in the Northern Hemisphere increased, they could not pass on the costs and would be at a disadvantage.
Wilkinson said shipping lines were using exemptions to facilitate trade, but they were open for exploitation, and it was putting businesses like Fletchers “in a corner.” This additional volume is causing congestion at the port, which is only exacerbated by the labor impacts the pandemic is having with fewer truck drivers able to service the port.
When the discussion shifted to the country’s grain rail network, the transition from drought to a bumper harvest created some issues getting the rail fleet and drivers to drive them. Barker said the company successfully managed the situation but acknowledged it takes more time to train a person to drive a train, noting the industry had some work to do in training new drivers.
Wilkinson shared his insight from a container perspective and the challenges of moving containers via rail to port. He outlined the issues experienced pulling containers into Sydney’s busy network, including derailments, a passenger rail network, network access management, and stevedores without the cushion available to bulk terminals to shuffle back an hour or two to unload.
Wilkinson said it was challenging to take up more rolling stock, as was available in the last 12 months, because they could not access extra port windows. He added that investment was being undertaken to improve the congested Sydney key-line, but it also required some strategic thinking.
While discussing rail, the speakers were asked about the in-land rail project that will link Melbourne and Brisbane ports via 1,700 kilometers of rail through regional Victoria, New South Wales and Queensland. It’s a project that has been discussed at previous AGIC’s and represents considerable investment and improvement to the rail network. Both Mooney and Barker said the improvements to the rail network would help exporters but pointed out some concerns with connectivity at either end — the ports in Melbourne and Brisbane. Barker said GrainCorp was working with the government on the connectivity issues at the ports to ensure they have as good of access as they do today.
Wrapping up the discussion, speakers were asked about on-farm storage, particularly pertinent given the mouse plague experienced last harvest. Barker acknowledged that on-farm storage had a role in helping growers manage their business, but there was some quality issue with temporary storage, such as silo bags that had mice issues.
Jane Wardle from West Australian bulk handler CBH spoke about consumer trends in sustainability, providing some interesting insights. Chemical residue requirements and traceability were the most crucial sustainability factors.
Wardle said the commissioned online and phone survey asked customers worldwide for their opinions on sustainability. Of those who responded, 80% said sustainability was valued and 30% said they may pay a premium for it.
Overwhelmingly, they nominated chemical residue-free (91%) as the highest priority, followed by traceability (69%) and nutrition (68%). Wardle said the customer differentiated between organic and chemical residue-free.
Wardle said CBH believes it can become a leader in sustainably sourced grain. It has been working with external groups to fully understand the total carbon footprint of end-to-end grain production.