The Australian Grains Industry Conference (AGIC) returned to Melbourne in early August in the midst of one of the country’s most severe droughts that was cutting crop expectations across central and northern New South Wales and Queensland.
Many conversations over the two days inevitably were drawn toward the drought and its impact on east coast Australian growers and 2019 grain stocks.
In this context, Bill Lapp from Advanced Economic Solutions said world wheat prices were lifting due to “reduced wheat sowings, adverse weather in several major export countries and the steady decline in world stocks from record highs a few years ago.”
In an interview with World Grain, Nick Carracher from INTL FCStone said he expected the 2018-19 national wheat crop to come in at 18.77 million tonnes (down from a July estimate of 20.27 million tonnes), barley production at 7.56 million tonnes (down from July’s estimate of 7.7 million tonnes), and canola production coming in at 2.65 million tonnes (down from 2.7 million tonnes in July).
These production numbers will equate to two seasons of declines on the bumper season experienced in 2016-17, which has sparked some concern about supplying the market next year.
Carracher said the severity of the drought had not fully translated to the market, but he was seeing signs it was beginning to lift and reflect a more traditional drought market.
The severity of the drought also was raised by Graham Bradley, chairman of GrainCorp, who said the company was expecting reasonable crop in Victoria and southern New South Wales but little to none from central New South Wales up to Queensland.
Bradley joined newly appointed CBH CEO Jimmy Wilson for a discussion and Q&A session on day two of the meeting. Both discussed the usual topics about the need to invest in supply chain infrastructure, particularly rail, to ensure Australia remained competitive.
Thoughts from CBH, Graincorp leaders
Wilson and Bradley also said they were concerned about the impact political discussions around China were having on Australian trade.
They both shared concerns that negative political rhetoric made about China by Australian government ministers was noted by Chinese trade officials and threatened trade relationships.
Bradley was asked about GrainCorp’s investment in Ukraine, where it has opened a marketing office “to understand what’s happening in the Black Sea.”
“It’s got the highest potential for growth on the planet,” Bradley said.
He added that future investment in supply chain infrastructure was coming in the region and that it would remove bottlenecks, making it even more competitive.
Wilson and Bradley agreed that no further regulation of the supply chain was required, with Wilson saying, “Where there is no market failure, no regulation is required,” and raising concerns that the regulation of ports would be expanded to up-country storage.
He said further regulation would lead to inflexibility in managing grain receivals due to the many quality zones the CBH system has and that it also would disincentivize future investment in the network.
Both speakers echoed comments that the rail network continued to let the industry down as it deteriorated, pushing more grain on to roadways. Wilson said there were CBH receival sites that were once truck in, rail out that are now truck in and out because the rail line had fallen into disrepair and could no longer be used.
Talking about Asian growth and demand for grain, Wilson said the middle class was continuing to grow and diets were changing but that the Black Sea was increasingly competitive. While consumption remains the same, the region could take more.
“They will overcome those bottlenecks and we will see more volume coming out of the region,” Wilson said.
Bradley said the opportunity for growth was to supply the feed, and in particular, poultry industries.
Wilson added that growers were responsive and “shaped their crops in anticipation” of what the market wants. He also said he expected opportunities for growers in the northern Western Australia wheat belt who have a crop to sell into a market with rising demand and lower supply.
When asked about the influence of the customer on the grain industry, Bradley said technology would play a role to relay information from the farm to the customer. He said GrainCorp also was investing in technology to make receivals more efficient, to capture quality information and using new technology like blockchain to provide provenance and security that customers really want.
“We are seeing that in our malt business, particularly North America,” he said. “Craft brewers especially want to know down to the paddock where the grain came from.”
Wilson said traceability and using technology such as blockchain was being closely looked at by CBH.
“We need to have our ear to the ground, so we understand what customers are requiring, what they are prepared to pay and what the yields are; understanding what’s required and what technology is out there,” Wilson said.
Finishing their discussion, Bradley said GrainCorp would need to communicate effectively with growers in central, northern New South Wales and Queensland who are unlikely to produce a crop or have lower volumes to ensure what is received is done so efficiently. He added the company also wanted to inform them of markets, so they could make sound sale decisions.
Panel discusses blockchain technology
Against the usual background of grey and navy suits, a panel of t-shirt-clad speakers spoke of challenging traditional thinking. Making up the panel was Michael Pryor (Rocket Seeder), Graham Turley (Institutional Australia ANZ), Emma Weston (AgriDigital) and Caile Ditterich (Block Grain Australia).
The panel brought together two businesses using blockchain technology to shape and change the way grain is traded and to provide information on traceability. In addition, investment funder Institutional Australia ANZ and Rocket Seeder, an industry not-for-profit organization providing support for food and agricultural entrepreneurs, discussed what technology and trends were emerging.
Weston spoke about her business and its focus in ensuring the physical commodity remains connected to the digital assets that are managed in the AgriDigital platform. She also was concerned about liquidity and providing the opportunity for farmers, smaller traders and operators to have the finance they need to operate.
Ditterich said Block Grain Australia had a similar business as AgriDigital, but its focus was providing a platform to share grain information so they could provide traceability and connect the grower with brokers, and customers.
If there was a subtle theme at this year’s conference, it was disruption. From CBH’s Wilson, whose background is in resources, to GrainCorp’s Bradley, who has only limited history with agriculture, the status quo is changing.
The panel’s discussion acknowledged while the supply chain challenges remained, there was little emphasis on the telecommunication network that services the remote areas grain storage and handling operates.
Weston spoke about the need to consider investment not just in the physical supply chain (silos, rail, ports) but also the non-physical telecommunication infrastructure to improve efficiency.
“We are concerned about the ability for rural and regional Australia to leverage the benefits of agtech and complementary technologies,” she said. “We need to ensure that everyone can access the benefits of digitization.
“If we could be more organized as an industry, we could more efficiently launch new digital technologies rather than put pressure on limited telecommunications infrastructure. We can also use platform approaches to remove the need for replicated datasets and expensive and time-consuming reconciliation of data held across the industry.”
While discussing data and the opportunity it presents in providing information for the customer and other stakeholders, such as banks, the security of the information also was raised with Block Grain Australia and AgriDigital both saying the design and build of the platforms were significant in securing information.
Ditterich explained the spread-out nature of blockchain, which is not held in a central database, was a significant way to protect the information as it was very difficult for a hacker to access and change information.
“By not storing it in a central database and creating a platform with many users, like supply chain operators and growers, it is not run by any one person and so is secure and doesn’t get shut down,” Ditterich said.
In conclusion, the panel agreed there was significant benefit for the industry in creating a more efficient network and connecting with the customer by tapping into the data that was available.
This benefit would be achieved by resolving communication challenges and improving financial pathways, as well as the enthusiasm of everyone across the grain supply chain (growers to end-users) to embrace new technology.
In an interview with World Grain, Ditterich said after talking with growers and industry stakeholders he picked up on their strong desire to connect.
“Over the last five years farms have grown exponentially, and as growers get bigger they want more control,” Ditterich said. “Technology allows them to have this greater control and to become masters of their own destiny.”
He said Block Grain was a platform that gave growers the connection to either follow the traditional harvest to silo route or those who want to connect with a grower. The platform provides data on grain quality, and the amount and location that customers and brokers want.
Ditterich also commented on the need for greater competition at ports because of the prohibitive cost for growers to get their grain to export markets.
“Ports are dominated by the same operators, but more growers want to access these ports themselves and can’t because of the lack of competition,” he said. “With more operators, the laws of supply and demand will kick in and bring costs down.”
Despite the difficult season, over 800 delegates attended the conference, which Pat O’Shannassy, CEO of Grain Trade Australia, said was a little higher than average.