Competition in storage and handling

Oct 28, 2016

The issue

The lack of competition in South Australian grain storage and handling is consistently identified in member surveys as the number one issue for grain producers.

Analysis by GPSA has found that storage and handling fees, port loading fees and other bulk handling costs have increased from $23.77 a tonne in 2006-07 to $42.88/t in 2014-15 – an 80 percent increase. These costs are paid by farmers directly to grain storage and handlers.

The Australian Export Grains Innovation Centre quotes that for a 200 kilometre round trip, there are $72 per tonne of supply chain costs.

AEGIC analysis found the cost of getting grain from farm to port is 30 percent of the cost of production – the single largest cost item for a grain producer in an average year.

The disclosure of the profits and supply chain efficiencies of bulk handlers is limited. While supply chain costs represent a significant cost to growers, the costs are deducted from their final payments and so they do not have the same level of scrutiny as other costs in a grain growing business.

 

GPSA’s position

Reducing supply chain costs will significantly add to growers’ profitability, as well as the state’s economy.

The strategy to deliver a better deal to growers has already been identified but not yet acted on in recommendations made by the South Australian Government’s Grain Handling Select Committee.

The committee tabled its report in September 2012. One of its key recommendations was that the Essential Services Commission of South Australia should review the supply chain to set the basis for pricing and access to storage and bulk handling facilities that would meet the requirements of a competitive deregulated export market.

This type of regulation is likely to be the cheapest way to lower grain handling costs and would be no different to what takes place in the electricity or gas sectors, already monitored by ESCOSA.

Read the Grain Handling Select Committee Report


All policy points