Energy, rail priorities says Cargill’s Penne Kehl

Energy, rail priorities says Cargill’s Penne Kehl


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Cargill Australia's grain and oilseeds general manager Penne Kehl has a chat with grains reporter Gregor Heard.

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Penne Kehl.

Penne Kehl.

Continuing Fairfax Agricultural Media’s series of question and answer sessions, grains industry reporter Gregor Heard caught up with Cargill’s Penne Kehl recently to discuss a number of the major topics in the grains industry.

Rail and rail freight is a major priority for Cargill Australia, according to general manager of its grain and oilseed business Penne Kehl.

Rail and rail freight is a major priority for Cargill Australia, according to general manager of its grain and oilseed business Penne Kehl.

Ms Kehl is the general manager of Cargill Australia’s Grain and Oilseeds business.

Cargill Australia today employs over 520 people in more than 40 locations, focusing on grain and oilseed origination, storage and handling, oilseed and malt barley processing along with other business segments.

On the international stage, Cargill is one of the largest agriculture businesses in the world, with 150,000 employees in 70 countries.

GH: Starting off, a little about yourself, what did you do before taking up this role?

PK: I grew up on a cattle property in the Maranoa region of south-west Queensland, about 500km west of Brisbane.  

This upbringing instilled a passion for the land, for farming, food and sustainability; all combined with a long family history in agriculture, I was destined for a career in agribusiness.

After graduating from the University of Queensland with an Honours degree in Applied Science I was excited to embark on my career with Cargill in Australia as a grain buyer. 

In 1997 I moved to Singapore to trade palm oil and learnt a great deal during a period of unprecedented volatility in the market. 

In 2000 I returned to Melbourne as the manager for Cargill’s cottonseed business and was later promoted to become the merchandising manager for Cargill’s Grain and Oilseed business in Australia. 

I returned to Singapore in 2006 to join Cargill’s Ocean Transportation department trading Panamax cargo ships, I was later appointed Ocean Transport Lead for Asia Pacific. 

Despite enjoying seven years in Singapore, I returned home in 2013 after being appointed general commercial manager for Cargill Australia’s Grain and Oilseed business in Melbourne.  

In 2015 I was very proud to be appointed managing director for Cargill Australia Grain and Oilseed. 

GH: Cargill Australia - it's a diverse business - are you happy with the company footprint at present?

PK: We have an excellent footprint spanning the East Coast, South Australia and Western Australia established through over 50 years in business in Australia.     

We now have grain origination offices across Australia’s grain belt, 22 storage and handling sites down the East Coast and into SA, three crush plants (plus one oil refinery) on the East Coast and six malt plants strategically located across Australia.

Cargill Australia is a marketer of Australian grain and oilseeds to supply our crush plants as well as customers domestically and internationally in the food processing and animal feed industries.  

We also have a 50:50 joint venture – Teys Australia which is one of Australia’s largest beef processing companies.

Additionally, Cargill operates in 70 countries globally and we have employees in all major Australian exporting countries which gives our local businesses unique insight and an ability to work with our international customers.

We are always looking to expand our footprint when the right opportunities arise. 

GH: There have been high profile changes to the portfolio - obviously the sale of Allied Mills - are you moving away from food manufacturing or was that more a one-off, strategic sale?

PK: The sale of Allied Mills was a strategic decision within the broader view of our food manufacturing operations. 

Cargill remains committed to further success across the Australian agricultural and food sector and we have since embraced, and continue to explore, opportunities which will enhance our operations and performance. 

We are now the largest malt producer in Australia, able to supply malt to the domestic market as well as exporting to brewers in Asia-Pacific and Africa. 

We have three crush plants on the east coast and one oil refining plant in NSW which serve some of Australia’s largest food manufacturers.

Cargill also recently established a presence in Australia to sell Cargill cocoa & chocolate products and Cargill starches, sweeteners & texturizing solutions to the domestic market and we continue to serve – and find new ways to serve – some of Australia’s largest food manufacturers and outlets.

GH: Onto the sector most familiar to Fairfax Ag Media readers – the grains business - what are the trends you are seeing here? Do you have a preference to move towards a more North American-style closed loop system supply chain system, and could you potential ramp up your storage and handling GrainFlow business to do this?

PK: No – we firmly believe our GrainFlow storage and handling business and Australian grain growers benefit from strong competition at our S&H sites where competitors can post prices and store their grain.

Regarding trends, we have witnessed a large uptake of on farm storage, especially on the east coast), consolidation in farming operations across the wheat belt and farmers increasingly adopting new technology like drones, precision farming and data management tools to increase yields and profitability.

Demand for high-quality, safe food is increasing throughout Asia, and the opportunities surrounding Australian agriculture have never been greater. 

By 2030, the Asian middle class will number 3 billion, providing a great opportunity for Australian exports.

GH: How is Cargill adapting to the regionalisation of the Aussie industry? Local factors are creating increasingly large regional premiums and discounts?

PK: Our focus is on what we can control, manage and influence. 

We are constantly reviewing our business and costs to ensure we have the right products to market which assist Australian farmers in managing their risk, selling their commodities and improving their farm gate returns.

GH: Onto the industry more broadly. What does the industry need to do better? Is logistics still the major obstacle to increasing efficiency?

Firstly, let’s take a look at transport logistics.

PK: Australia’s freight costs remain extremely high compared to our international competitors. 

As an industry we need to lower supply chain costs to compete with emerging competitors like the Black Sea. 

In recent times we have seen some encouraging signs of commitment by the Federal Government and a number of State Governments to invest in rail infrastructure, however we need more investment in rail to increase utilisation and reduce costs. 

Upgrades to the rail network to increase tonnage/speed limits and new or longer rail passing loops will go a long way towards improving network utilisation and reducing freight costs for farmers.

GH: And how about energy, which is a major factor in your processing businesses.

PK: Australia’s high manufacturing and employment costs are making it very difficult for Australian manufacturers to remain globally competitive.

Australia needs bipartisan government commitment to tackle the current energy crisis to achieve security of supply and ensure Australia’s manufacturing industry remains competitive. 

In a global marketplace, Australia cannot stand on its own. The Australian market alone is too small – our population is roughly the size of a city like Shanghai.

The uncertainty of supply and dramatic forecast increases in gas and electricity costs is impacting our international competitiveness and places uncertainty over any future expansion of our business operations in Australia.

GH: Onto another hot topic, one that is an issue in agriculture across the globe – aggregation. Do you see the current structure of Aussie industry - with a Big 4 group of buyers, a class of medium sized buyers and local grain businesses remaining the same or is further consolidation likely? What about on the global scale - where we see Glencore coming after one of the ‘ABCD’ businesses in Bunge?

  • Editors note: The ABCD of grain companies refers to giants Archer Daniels Midland (ADM), Bunge, Cargill and Louis Dreyfus.

PK: Currently Australia has a very competitive landscape regarding grain companies.  We are fortunate to have a mix of large, medium and small grain companies serving Australian grain farmers.  

On the international front, the notion of ABCD dominating the industry is a little out of date. Globally there are a significant number of grain companies in a very competitive landscape, especially in the Asia Pacific region with the emergence of COFCO, Glencore’s increasing presence in the agriculture space and a number of large Japanese trading companies as major players.  There are also a number of large cooperatives who are very active in the international grain market like CBH in Australia, CHS in the US and the French InVivo.   

GH: Back to the farmer level. What have you guys identified as trends within cropping rotations here in Australia? Will the move towards more oilseeds and pulses, higher value crops, at the expense of cereals continue or is it simply a case of reacting to cyclical trends in pricing?

PK: Crops like wheat, barley and canola will continue to dominate production, however production of crops like chickpeas and lentils will be driven by price and crop rotation.

With new varieties in barley and canola we will continue to see growers make decisions based not only on commodity price but also with consideration to crop rotation and weed control.

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