GrainCorp closures stir silo stress

16 Jul, 2014 04:00 AM
Comments
13
 
It's a whole new concept for a lot of growers who've lived near smaller GrainCorp sites

FARMERS left stranded by GrainCorp's closure of more than 70 small, ageing or remote grain receival sites are starting to panic about how they will cope with the extra time and cost involved in delivering a big harvest to alternative storage points.

Silo manufacturers have reported a surge of fresh inquiry about on-farm storage construction options following GrainCorp's decision last month, particularly from some parts of Central West NSW and the southern grain belt previously serviced by numerous smaller silos.

Concerns are compounded by the increasing prospect of a bumper harvest in rainfall-blessed parts of NSW south of Dubbo, potentially resulting in a rush of big deliveries and long turnaround times at receival sites which have escaped closure.

"It's a whole new concept for a lot of growers who've lived near smaller GrainCorp sites," said silo supplier Ashley Webster at Cowra-based Geronimo Farm Equipment.

"The last thing they've really had to think about was trucking grain 30 or 50 kilometres or keeping it on-farm because they don't have the time or trucks to deliver their crop at the same speed it's being stripped.

"Quite a few guys have rung up in a panic, worried about what sort of options they should consider and what it might cost to build extra storage on-farm.

"When you start adding up the extra carting costs and labour time involved, plus truck registration fees and so on, paddock storage begins to make good sense, depending on how much grain you grow.

"When you're only making a $50 an acre margin from wheat these days it doesn't take much for that figure to get whittled away by everybody else in the system charging for freight, storage, etc."

At Forbes HE Silos director Steven Morrison confirmed "enquiry levels cranked up" as soon as GrainCorp began holding meetings around the Central West, but any decision to spend up to $130,000 on a well-sealed 1000-tonne farm storage generally took a couple of months to work through.

GrainCorp's move to cut its own operating costs with its "Project Regeneration" had been something of a wake up call to some producers who now had to re-think the economics of what they grew, what equipment they required and how they handled their harvest.

HE Silos builds storages from 4.4t to 20,000t, but many inquiries to its Forbes and Gunnedah sites had lately focused on 1000t to 3000t capacity silos, suggesting a lot of farmers wanted to hold big quantities on-farm and avoid delivering much of their crop to GrainCorp or other bulk handlers.

GrainCorp officials confirmed to recent grower meetings it expected to lose about 10 per cent of its traditional grain receival volumes to farm storages or rival grain traders and storage groups.

Some closed silos may be leased or sold to private operators.

GrainCorp managers told farmer meetings that any small operator who felt they could use a site profitably could get in touch with the company.

Peak Hill district farmer Ian Westcott, "Inglenook", who traditionally delivered to nearby Mickibri silo said he understood GrainCorp's business decision and the competition and network costs the company faced in the rapidly changing grain market.

However, he doubted if the nearest remaining sites in his region would cope with the extra volumes delivered from afar, especially at Peak Hill - the State's oldest silo site - which needed much faster delivery capabilities, not than just a doubling of storage capacity.

Although reluctant to truck his grain at least 30 kilometres instead of delivering next door to the now-closed Trajere silo, Eugowra farmer Alan Noble "Sunnyside" said buying extra farm silo capacity was "not an option" at this point.

"I've already got more than 20 silos and we don't need to spend money on more," he said.

"But if we can't deliver to a GrainCorp site, or another trader, in time we'll have to dump the grain on the ground and cover it while we keep stripping.

"Time is critical at harvest and contractors don't want to wait for trucks.

"There could be a lot of interest in short-term storage options like silo bags or putting grain in temporary stacks, but I'm not sure a many farmers have yet realised the sort of stress this harvest might bring."

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FarmOnline
Andrew Marshall

Andrew Marshall

is the national agribusiness writer for Fairfax Agricultural Media
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READER COMMENTS

Jock Munro
16/07/2014 7:06:18 AM

East Coast grain growers have no equity in the market place-the industry is firmly in the hands of the merchants and any decisions made will be in their interests.
Deregul8
16/07/2014 8:14:46 AM

The hard work of the Ag Socs bears fruit. Misery shared widely. Without investment from foreigners, our costs will continue to rise so we are forced to make storage and handling investments ourselves to still yield a higher cost paradigm. We have spare capital for a few things but not maintaining the world's most expensive storage and handling networks. Three cheers for the Ag Socs. You really thought that one out eh?
Bushie Bill
16/07/2014 9:26:07 AM

How many of those growers now disaffected opposed the recent Graincorp takeover? Reap what you sow, so to speak.
mark2
16/07/2014 9:33:26 AM

What makes you think, D8, that silo closures were not part of the plan had Graincorp been flogged off? Us "agsocs" could see all of this coming as a result of deregulation. The only way these networks remain viable is throughput and the day we lost the SD was the final nail for the handling network. Duplication and loss of Quality control was what we were trying to avoid, apart from loss of ownership. It's a bit like the argument over rental vs home ownership, its hard to quantify the real value of the latter but you know its there.
Bushie Bill
16/07/2014 5:10:15 PM

There are many learned, experienced and qualified people who can tell you that you are wrong on many counts, mark2, including the Governor of the Reserve Bank.
Rational observer
16/07/2014 8:01:48 PM

Jock, as growers you used to own these assets but presumably out of short-sighted greed you cashed in your ownership. Bit hard to now complain that the new owner is doing what any rationale owner would do with an 'asset' that is not providing a commercial return. Not all is lost however - if you feel strongly enough do what our grandparents did and put up the cash to buy these sites back and get them into 'cooperative' ownership. I will watch with interest to see how you and your brethren respond to what was an entirely predictable outcome - other than just complain.
mark
17/07/2014 8:05:42 PM

Silo closures are about 10 years overdue. As farmers we drive our cropping productivity higher each year. Businesses we deal with must keep up or they become obsolete.
Mendezey
18/07/2014 11:29:44 AM

Agree with Rational Observer, for forward thinking growers who are willing to invest in their own industry there is opportunities to take back control from multinationals, similar to the US model of grain co-ops or by increasing on farm storage. Growers also now get the choice on who markets their grain and pay on merit rather than be dictated who makes the decisions with our grain like back on the single desk.
Bushie Bill
22/07/2014 9:58:19 AM

mark, that is why we need someone like ADM in the picture.
Bushie Bill
22/07/2014 10:02:28 AM

Why are the Neanderthals impervious to the inescapable logic of posters (and presumably operators) such as Rational observer and Mendezey? The industry has no future until the Neanderthals are relegated to the garbage bin of history.
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