Supply chain costs under microscope

Supply chain costs under microscope

Cropping
AEGIC chief economist Professor Ross Kingwell says supply chains across Australia have changed significantly across the past five years including a reduction in the number of receival sites, further evolution of grain transport, changes to port regulation and other infrastructure changes.

AEGIC chief economist Professor Ross Kingwell says supply chains across Australia have changed significantly across the past five years including a reduction in the number of receival sites, further evolution of grain transport, changes to port regulation and other infrastructure changes.

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THE costs associated with most Australian export grain supply chains have remained stable or slightly reduced over the last several years, according to Australian Export Grains Innovation Centre analysis.

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THE costs associated with most Australian export grain supply chains have remained stable or slightly reduced over the last several years, according to Australian Export Grains Innovation Centre analysis.

Ahead of the release of a new report scheduled for release in April 2018, AEGIC analysts are presenting preliminary findings at GRDC research updates across the country.

AEGIC chief economist Professor Ross Kingwell said supply chains across Australia had changed significantly across the past five years.

Changes have included a reduction in the number of receival sites, further evolution of grain transport, changes to port regulation and other infrastructure changes.

“On average, costs have reduced slightly in recent years, however costs vary depending on magnitude of the grain harvest,” Prof Kingwell said.

“After accounting for these variations, supply chain costs are consistently about 30 per cent to 35pc of the total cost of grain production.

“Total Australian grain supply chain costs are higher than most of our competitors, except for Canada, yet some components of our supply chains compare favourably. For example, charges for grain transport from upcountry receival to port have decreased 12-13pc in real terms. However, in this example, the reduction is offset somewhat by the fact that, on average, most growers now need to travel further to deliver grain to fewer receival sites.”

Professor Kingwell said further improvements to Australia’s supply chains were essential to help preserve the international competitiveness of Australian grain exports.

“Further improvements in grain yields, greater investment in infrastructure, improvements in supply chain operations, regulatory reform and a greater intensity of cropping in higher rainfall regions will all help lower the average cost of Australia’s export grain supply chains,” he said.

“These improvements are essential, especially considering that Australia’s grain export competitors, such as Russia, Ukraine and Argentina, are continuing to drive down their costs through major investments in on-farm and post-farm improvements.”

Preliminary findings summary:

  • Australia’s export grain supply chains have changed significantly over the past five years. Overall costliness has remained generally stable or decreased slightly in real terms in some areas. For example, the rebates offered by CBH to its grower members over the last two years has lowered the effective cost of supply chain services to those members.
  • The supply chain costs of Russia, Ukraine and Argentina are likely to decrease further, placing more pressure on Australia.
  • Unlike some of Australia’s competitors, cost transparency is often lacking in key parts of the supply chain. More formal monitoring of supply chain costs may be required.
  • There are emerging opportunities to further lower the costliness of Australia’s grain supply chains.
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