World Grain - February 2014 - 34

FEATURE: an intervieW WitH andy crane

cussion," he said. "We have a key role
going forward and it's vital that governments from around the world understand the value of what we do."
Indeed, he believes that in the years
ahead the ability of Australia's grain
growers to remain competitive in international markets will become increasingly determined by supply chain costs.
"Global prices are fixed, so competitiveness depends on the cost of getting to market," he said. "As a country
we're up against some very competitive
origins into Asia and the Indian Ocean
Rim. The fight will be won by a low
cost efficient supply chain, and I think
the best way of ensuring that will be
through supply chains designed for the
benefit of growers. The fact that we have
been here for 80 years is not an accident.
Cooperatives are proving a sustainable
business model. We've got grower loyalty of over 80%, because growers realize that selling their cooperative will
not enhance the long-term profitability
of growing grain in Western Australia."
Although Crane is bullish on CBH's
model, he is also a strong supporter of
Australian agriculture in general. He be-

lieves the country's exporters retain their
natural freight advantage over competitors into Southeast Asia and the Middle
East, a key factor as ocean freight rates
look set to fluctuate within a higher
band in 2014 and 2015 than in recent
years. However, this freight advantage
will not be enough to shelter Australia's
growers from competitive pressures.
Argentinean exporters, for example, are
now exploring ways to reduce shipping
costs generating economies of scale
and recently exported around 100,000
tonnes on one "mini-Capesize" vessel.
"There will be a huge increase in demand for grains from Asia, but that is
no guarantee of survival for Australian
grains," said Crane. "We have a freight
advantage, we traditionally compete
well on quality and consistency, and we
produce grain with low moisture and
devoid of mycotoxins, but we also have
higher input costs and lower yields. So
it's all the more important that we make
the most of the supply chain benefits to
remain competitive. That's one of the
challenges if we are to continue benefiting from this dramatic growth on our
doorstep as we see more competition

from the Black Sea and Argentina."
CBH already exports grain to more
than 30 markets and was Australia's
largest exporter in 2012-13 with some
5.56 million tonnes shipped overseas.
The 2013-14 season is now set to break
the record of 15 million tonnes of grain
harvested in Western Australia, while
total exports from Australia in the season are forecast to reach 18.6 million
tonnes, according to the Australian
Bureau of Agricultural and Resource
Economics and Science.
"The growing season in 2013 was
mixed with a long dry period in the
middle of the season and strong rains
throughout ripening," said Crane.
"There is good volume and strong demand from China, Southeast Asia and
the Middle East, so we're expecting a
good year."
Michael King, a freelance journalist and editor,
has been writing about shipping, transport and
commodities for more than a decade. Currently
based in Indonesia, he can be reached at:
Michael@borderline.eu.com.
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How a cooperative ownership model fits with a growing international presence
The cooperative model of value generation for CBH Group's
grower owners also extends to the company's overseas business,
according to CEO Andy Crane.
"Any investment outside of Western Australia has to provide a
financial return that benefits our grower owners," he said. "Investing in the value chain supports our core business and helps
keep storage and handling fees low in Western Australia."
CBH expects demand from Asia for wheat to grow by some
11 million tonnes in the next five years, and this demand surge
is seeing the world's marketing companies jostling for position to
capitalize. For its part, earlier this year CBH opened a new U.S.
office in Portland, Oregon, in the center of the Pacific Northwest
growing region, to bolster its multi-origin trading platform.
The new U.S. office was part of CBH's marketing and trading business expansion plan which also saw the company last
year become the first Australian trading company to gain accreditation from the Japanese Ministry of Agriculture, Forestry
and Fisheries (MAFF) to import wheat directly into Japan, allowing participation in the MAFF wheat tender process. This
will allow CBH to trade wheat from the U.S. directly through
the MAFF tender system.
"The U.S. office gives us better oversight on another important
34

origin for grain and gives our customers guaranteed security of
supply when other origins apart from Australia are needed," said
Crane. "We don't have plans for more offices overseas at the moment, but that may change."
The new U.S. office complements other CBH representative offices near to buyers in Hong Kong and Japan as well as enhancing
the company's need to feed grains into its Interflour business.
The seven mills operated in Southeast Asia and Turkey by Interflour, in which CBH owns a 50% stake, are growing with or
ahead of the market, according to Crane, and are, like the other
non-Western Australian assets in CBH's portfolio, operated for
the benefit of Western Australian growers.
Not only do they provide a market for exports managed by CBH
and insight into the needs of buyers, they also generate returns
that can then be reinvested back into the Interflour business, into
infrastructure or to offer rebates on storage and handling fees
for growers.
Crane said the flour milling business was continuing to grow
and might be further expanded with more mills in the future
- in the addition to a facility in Turkey in 2012 that was the
most recent acquisition - although no deals are planned in
the short-term.
February 2014 / World Grain / www.World-Grain.com

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World Grain - February 2014

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