CBH to release network strategy plans

The series of chairman and chief executive officer meetings in the coming months will reveal plans on a network-wide basis and at a local level, including sites set to close in the next five years.

CBH operations general manager David Capper admitted communication on the network's future had been "ad hoc" and needed to improve, but said three years of work so far had committed to refining it for the future.

"In 2013 the board was really clear with us that the supply chain cost for growers was from paddock to port so if we were going to decrease supply chain costs it had to be across that whole spectrum," he said.

"We took all of those costs and optimised that to find the best balance and now we're going about finding how we execute that.

"That's not something that's going to occur overnight, but we've got to plan effectively to develop the new network over a five-year period and then phase out the old network over a longer period of time.

"Part of rationalisation is about reducing costs, there's no doubt about that, but we can run a site very efficiently as long as we know we're not going to be investing money.

"That's how we can afford these sites to continue on until the end of their life.

"It's on a per-tonne basis that we can be efficient, just as long as we're not trying to extend the life for an uneconomic volume of grain.

"We don't have to turn things off overnight as long as we commit to not develop the site and communicate this to growers and say we think this site has this much life left then we can close it and ensure growers are aware throughout the process."

CBH took feedback and shared network plans with growers in pre-harvest meetings last year.

Mr Capper said this information had been used to develop the final strategy that would be communicated to growers next month.

While he was unable to give site specific information on future closures to Farm Weekly, he said growers would hear further on the future of their local sites in March and April.

However, he did detail site upgrades in the pipeline for 2016 which were identified as priority future sites.

This includes Lake King, Chadwick, Kalannie, Bodallin and Mirambeena.

These announcements form the first initiatives of a $150 million annual investment into the network over five years.

Construction of the new Albany zone site at Mirambeena started last year and once ready for this harvest, Mr Capper said it would help with grower receivals but also in getting more tonnes to port.

He outlined plans for a train to be shared between the Geraldton and Albany zones to make tonnes to port a reality, while also taking the pressure off the Albany Terminal, which does not have the capacity to deal with grower deliveries.

"Albany was our most constrained port, followed by Kwinana, and Mirambeena will go a long way to fixing this problem," Mr Capper said.

"The first stage of Mirambeena is 140,000 tonnes but it has the chance to grow pretty rapidly."

The works at Lake King, Chadwick, Kalannie and Bodallin focus on capacity building and the ability to cope with multiple grain segregations.

"At Lake King we had a harvest receival constraint there where we didn't have enough grids to take all the segregations and it was under storage pressure," he said.

"We put two new bulkheads in and added new grids so we can provide growers with a better harvest service.

"Kalannie was always on the plan to be developed, but this year was a huge crop and we pulled that plan forward as we know we want more storage at Kalannie and we need it now."

Criticism of CBH being slow to consolidate its network and pass on cost savings to growers in an environment of increased competition has plagued the co-operative, but reached boiling point in recent weeks.

Last month it was revealed growers fed up with CBH's structure had formed the Australian Grains Champion group to submit a corporatisation bid to the co-operative's board.

After this information becoming public, former chairman Neil Wandel attacked the board for its inaction and lack of direction - statements which were rejected by chairman Wally Newman.

Mr Capper said he disagreed with the inaction claims, but conceded communication with growers did need to improve, as did information about the future of individual sites.

"A fair criticism is we haven't been clear about individual sites, what their future is, and how growers are going to be able to interact with the network but to say we've done nothing for the past five years, I strongly refute that," he said.

"The impetus is on us to communicate and say we're going to give you as much time as you possibly can to make a change, but we have to be cognisant the more time we have to forecast forward the less accurate we can be.

"What we say now about the future may not be 100 per cent foolproof but that's our best estimate and it gives growers something to plan towards.

"From our tonnes-to-port perspective we've gone from 12 million capacity in 2008-2009 to 13.5mt in 2013-2014 to 16.5mt today. The target is 18mt by 2018 and we're nearly there.

"We haven't sat still."

Mr Capper outlined 100 of the nearly 200 CBH sites took over 92pc of the grain this season, and 27 sites opened once or less in the past five years.

He said this was a natural network consolidation and the lesser used sites had the potential to be closed at the end of their operating life as it was unlikely any money would be invested in them.

"We've got to be conscious as the environment changes to reassess the model," Mr Capper said.

"We're confident those 100 sites are where our focus should be.

"As long as there's sufficient volume to justify the operation of the site, and you can safely manage the site without spending money on it, it can continue to operate, if we have to go and spend money on it that can't be justified by the tonnes going in there, that's when it is inefficient.

"As long as we communicate to growers that is the case, we will operate when the volume is there."

Mr Capper said it was not an exact science which was causing some of the frustration coming through.

He acknowledged another frustration was the fees for different sites and belief some sites were compensating for others.

This had led to some discussion of differential pricing of the network, however he ruled out this option.

"We have looked at differential pricing and it is another tool, or a different way of consolidating the network," he said.

"The way that we've chosen today is to do communication and leadership and say we know what the efficient outcome of the network is, we want to tell you upfront and transition the network to that.

"We want to give you time to transition because neither the network or you are ready for that change today.

"Differential pricing is going out and reflecting the costs of the network today which growers will respond to immediately if they can and the network might not be ready for it.

"In theory you would get the same outcome, we are going through leadership and communication and transitioning the efficient network with growers being prepared to transition over a period of time."

Similarly, focus in recent years has been on freight costs and some areas either paying less or more than they should.

But Mr Capper said this was not the case and the network's freight costs had been transitioning to cost-reflective pricing for several years and this would continue to occur.

CBH will communicate details of the chairman and CEO meetings closer to March and April and encourages all growers to attend, provide feedback and participate in the discussion.