While it is one of Australia’s largest grain marketers and supply chain operators, Emerald Grain is using its technology and grower relationships to set itself apart from other players in the industry. Using its tech savvy ethos and lean operation to connect with growers and give them options that the other established players don’t possess.
Speaking with World Grain, David Johnson, chief executive officer of Emerald Grain, said the business had embarked on a transformation in recent years so it could better meet the ever-changing needs of the industry. Before speaking about the transformation, Johnson explained the structure of the business that has offices across key grain growing regions.
“We have three segments of the business,” he explained. “The first is an office in Toowoomba that has a small accumulation and trading team that is responsible for executing Northern New South Wales and Queensland domestic and export container markets. The second segment is the two offices we have in Western Australia and the five people working in them who use their strong grower relationships to accumulate and export grain as well as serve a niche section of the domestic market.
“Finally, our third segment and the core focus is accumulating grain in Victoria and southern New South Wales in order to utilize our storage assets and feed grain through our export port in Melbourne.”
When talking about the current dry season, Johnson said it was a challenging time, particularly as an east coast exporter, as bulk exports have come to a halt and the market shifts its focus to domestic customers.
Johnson said exporters on the east coast were facing a challenge as the market shifts to domestic customers and containers exports, which he said were also slowing down.
“In the dry season, the focus is on servicing domestic customers and keeping our rail assets ticking over and executing container exports to cover costs,” he said. “Last year we were executing the big crop from the previous season and for the first six months of this year we had good export flow, but that is now grinding to a halt.”
Adding that while dry seasons were volatile, they also presented opportunities that Emerald has seized upon. Johnson said while grain flow through the company’s storage assets and port were down, there were trading opportunities as world stocks began to tighten and demand increased.
Established in 2004, Emerald Grain is one of the country’s largest grain marketers and supply chain operations. Within its suite of assets is the Melbourne Port, a share in the Quattro grain terminal in Port Kembla, and 1.5-million-tonne capacity across its Victorian and New South Wales up-country storage and handling facilities.
Johnson said the company was in a privileged position of owning a port and supply chain assets on the east coast. He said that, combined with the company’s Western Australian and Queensland assets, has allowed it to become a stronger supplier to the export market.
“The port gives us a great position in the marketplace and lets us be a bit different from other big players,” Johnson said. “When the export market is occurring in Victoria, we can be a bit more of a niche supplier to our customers and we are very focused on that one port. We have a great deal of control of grain moving there and what we ship.
“That is our strength as an alternative export supplier to the big players, because we account for 90% of the flow through our port and we have a very good line of sight of what is exported.”
Getting the business to where it is today, however, has been a process that has transformed it over the last three years so that it is a leaner operation that is able to handle more grain. Johnson said they’ve worked toward stabilizing the business, noting that a lot of time and effort had been spent on improving IT systems that have allowed the company to run its supply chain in a more efficient way. Johnson said this transformation has been very successful.
“From an IT perspective, we are very unique compared to other grain businesses I have worked in the past,” Johnson said. “We pick the best in breed systems to monitor supply chain stocks and laid Salesforce over the top of our transactional IT systems so that we’re able to create a very transparent and flexible reporting environment and, in the process, make efficiency gains.”
As an example, Johnson said Salesforce is being used to better capture and aggregate data from operational tasks such as routine checks of storage assets. Better data management has facilitated increased automation and process efficiency in the operations. The company can capture data in Salesforce and, through links to underlying transactional systems, has improved the way the business is managed by offering greater transparency of information. Johnson said that using smaller systems overlaid with Salesforce reporting was a better approach than using one all-in-one system that tries to do everything.
This system allows the business to quickly pull out a wide range of data it needs for analysis or to produce customized reports quickly and independently. Emerald also is using its IT systems to provide growers with tools that allow them to see how much grain they have in storage, complete transfers and even sell grain all in real-time. Johnson described these platforms as key to providing growers with service others don’t provide.
“They can contract without talking to anyone, they can transfer grain without talking to anyone and they can get paid the next day in our system,” he said. “We guarantee 48-hour payment but in most cases, they are paid in 24 hours.”
Johnson said adding this speed of payment gave Emerald a leading edge in the industry and growers comfort they will be paid quickly. He also noted that in the past, growers were typically paid 30 days end of week as an industry standard, but this was slowly changing, especially as growers could transfer grain straight away.
“There’s no reason why they can’t be paid straight away in the short term,” he said.
Johnson said a key reason for adopting this fast payment approach was to make doing business with Emerald easy for growers. The ability to view prices, grain stocks and transfer in real-time online meant that the role of merchants on the ground also has changed as they are primarily responsible for gathering local market intelligence and maintaining grower relationships.
“We have 10 people on the ground, four in southern New South Wales and Victoria, three in Western Australia and three in Queensland,” he said. “The merchants also have the ability to see pricing and stocks online, and if the grower needs help they can sell the grain on their behalf. Our systems make it easy and removes the manual paperwork they traditionally had to complete in the past.”
Johnson said the ease of doing business was also something the business looked at for its export customers, but they came with more challenges due to the regulatory requirements associated with export documentation.
“We’re looking at ways to make a more efficient invoicing process for our domestic customers,” Johnson added.
Next great challenge
When talking about Emerald’s priorities for the years ahead, Johnson said a major priority in the next 14 months will be managing the drought. He said the next great challenge was the increasing investment by growers on the east coast in on-farm storage.
Johnson said the business was continually looking at ways they could be more flexible and adaptive to meet the needs of growers who opted to store their grain on farm. He added there was a considerable shift to road receivals at Melbourne Port, noting that when it was built 17 years ago it was designed to receive 95% of grain via rail and 5% by road.
“Last year we took 1.5 million tonnes (at the port),” he said. “We estimate 65% of receivals were made by road with the remainder on rail.”
Emerald Grain is working to improve the port road systems it has in place to better work with growers who opt to deliver to port.
“When trucks or trains don’t turn up on time, the delays can cause problems for growers,” Johnson said. “We are looking at what investments we can make to make receivals more efficient at the port and cut down on delays. This move to greater deliveries at port, however, is both an opportunity and a threat — an opportunity for the port to receive more grain and pay the grower who wants to deliver there and pick up fertilizer, but a threat as less grain flows into our up-country storage. I think growers see on-farm storage as a good investment as it allows them more time to hold grain and wait for opportunities. There is also freight saving at harvest as they don’t need to drive to their local silo and don’t need to pay storage costs once grain is in their silo.
“In the domestic market it provides them more opportunities, but ironically the export market is their cheapest supply chain pathway via an efficient rail site.”
He added that on-farm storage allows the grower to go direct to the consumer, but it is also an investment they need to consider.
When talking about the current season, Johnson described it as one of two halves. In Western Australia, he said, it was in a fantastic position and getting bigger by the day, adding that it will be the primary exporter for the country.
“This season we will be managing our grower base, especially on the east coast where we are very focused on the domestic customer,” he said. “We are actively trying to manage our storage network and supply the domestic consumer, which is going to be the significant task for the market over the next 14 to 15 months.”
Johnson said the market was in an environment now where grain is transshipped from South Australia and Western Australia into Queensland and New South Wales. He expects this to continue into 2019, unless there is significant rainfall or a big sorghum crop.
“Major consumers in Queensland and other parts of eastern Australia are already buying Western Australian grain as a hedge against their requirements in 2019,” Johnson said. “It’s a very dynamic market and everyone is focused on how they can optimally move grain by ship or rail from South Australia and Western Australia or road and rail from Victoria into the deficit areas in New South Wales and Queensland.”