WITH Victoria's annual grain exports falling short of its six-million-tonne capability by nearly half, a former Emerald Logistics head has warned the state's overcapacity will affect industry's ability to fill bulk exports.
At the 2015 Agribusiness Outlook Australia Forum in Melbourne, Emerald Logistics' former general manager of strategy and business development Murray de Jong said there was an overcapacity challenge, with Victorian grain exporters Emerald Logistics and GrainCorp not able to fill their infrastructure capacity.
Mr de Jong's comments were in light of new player Bunge Australia announcing its entrance to the state market with plans to build a new bulk grain export terminal at the port of Geelong.
"Overcapacity inefficiencies and higher costs is due to the fact we have assets we want to utilise more, but we can't, so we need to pay for that low utilisation - that is the challenge we have as an industry," Mr de Jong said.
"There is a whole (debate) about competition and whether there should be regulation or not.
"When there is capacity of six million tonnes across the existing ports in Melbourne, Geelong and Portland yet there is only an average of bulk exports around three million tonnes there is a significant amount of overcapacity."
His talk was focused on explaining the company's application to be exempt - along with GrainCorp - from the Australian Competition and Consumer Commission's (ACCC) Port Terminal Access (Bulk Wheat) Code of Conduct.
The ACCC is expected to announce its final determination in the coming days.
Mr de Jong used his speech to defend current competition between the two main players and encouraged rationalisation of the three ports.
He said this would reduce supply chain costs from the estimated $70/t, or 30 per cent cost of production, and make the state more competitive internationally.
"When a grower is making his choice he can choose (to sell) to an exporter or domestic consumer or he can choose to go to someone who will package grain into a container, so while he has a lot of choice the current regulation is only targeting bulk exports - there is inconsistency there from a regulatory point of view," Mr de Jong said.
The ACCC's mandatory code of conduct on bulk grain exports, introduced last September, has tightened regulations on trade negotiations including "not to discriminate or hinder access in the provision of export services".
"This is where it gets touchy," Mr de Jong said.
"If someone does more volume, you want to give them a volume discount; if someone wants to be flexible as to when they will take product, then you want to give them more capacity.
"All of these commercial considerations start becoming more difficult as a commercial discussion when this regulation is in place.
"An effective form of regulation would be up-country rather than at port.
"The competitive disadvantage or advantage starts at the receival point so giving people equal access to receival sites would be more efficient and a better way to regulate rather than at port."
He said rationalisation needed to come from improving current ports rather than building new sites - a reference to Bunge Australia's reported $20 million Geelong Port development.
Bunge, one of the world's biggest grain traders, proposed terminal plans to export about 450,000t of grain each year.
Despite the overcapacity in the market, Mr de Jong said he believed Bunge Industries entered the Australian market due to the ACCC bulk exports regulations affecting its power to negotiate and secure trade.
"If you are Bunge (Industries) and operating in the Australia market, how do you guarantee you can get competitive access to export capacity over period?" he said.
"You can either go into a long-term agreement with a counter party or you can do it yourself.
"At the time when Bunge made the decision to build their terminal in Western Australia and now the terminal in Geelong, the current ACCC regime was in place and they wanted the capacity, in my view, to control the supply chain, the capacity to ship when they wanted to ship and the capacity to not have to negotiate, because they couldn't anyway - that was a key driver around their decision."
