WA FLC – GRAIN LOGISTICS CHALLENGES

1. WA FLC – GRAIN LOGISTICS CHALLENGES 31 October 2013 THA – WA FLC Grain Logistics Challenges

2. Evolving grain industry logistics dynamics • Australian grains logistics patterns have evolved from largely static public sector management to fully commercial models • Until mid 1990s, marketing, handling and transport roles were fully separated and supported by regulation • Rapid evolution in all states has led to differing systems under which private marketers, handlers and transporters compete • WA system has evolved into an integrated rail-focused export conveyor belt, but faces competition on several fronts • Government are starting to plan for the foreseeable outcomes on road and rail networks THA – WA FLC Grain Logistics Challenges

3. Production limits • Climate change is compounding natural seasonal variability • Yield improvements now incremental only • Warmer springtime, lower winter rainfall raises chance of crop failure in north and east • Potential for record seasons, but interspersed with poor years THA – WA FLC Grain Logistics Challenges

4. Production and export volumes THA – WA FLC Grain Logistics Challenges

5. Rail system limits • Competition between road and rail has taken many forms over last 15 years • Latest incarnation has CBH rail-based system competing with farm-to-port road systems • Rail handles volume well but has difficulty with distance disadvantage, export peaks, summer heat, variable commercial returns • Competitors to CBH will exploit some of these THA – WA FLC Grain Logistics Challenges

6. Grain Express revocation • Grain Express provides huge and obvious benefits to CBH members and customers • Grain owners can now opt out of Grain Express and manage their own transport ie avoid using CBH trains and trucks (except at 27 major bins) • Some large grain traders will use this choice to establish export channels outside the CBH bulk terminal network • International traders will absorb local losses in so doing, as part of a global strategy • 2013/14 and 2014/15 will be a test of this THA – WA FLC Grain Logistics Challenges

7. Bunge Supply chain - Bunbury • International trader Bunge is investing in a throughput terminal at Bunbury Port • Ambitious 1 mtpa target volume from southern Wheatbelt • Grain direct from farm by truck and also from CBH bins and private storage • Will affect rail volumes on Avon-Albany line • Will also bring extra truck traffic onto some roads and highways THA – WA FLC Grain Logistics Challenges

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9. Chinese supply chain Albany • A Chinese agricultural company is buying farms in the Albany zone in partnership with Vicstock Grain • Seeking a new export capability via a woodchip conveyor and shed near CBH at Albany Port • Road transport will be used – most likely to be sourced from non-rail served eastern area • Possible impacts on Chester Pass Road and port environs THA – WA FLC Grain Logistics Challenges

10. Challenges • Scale of success of competitors for CBH cannot be predicted, but they will have some impact in SW • Rail volumes have improved under CBH/WATCO deal, but have probably peaked • Road use by new chains creates less predictability • Some potential for this to be managed through agreements between roads authorities and major exporters – as with CBH • Government agencies will need dialogue and information to minimise future adverse impacts of competition on the transport network THA – WA FLC Grain Logistics Challenges