Addendum to the Growers Report 2006 Published on the WEA website 4 April 2007. Will be mailed to 26,500 growers Australia-wide.
Current Issues –Management of 2006-07 Pool –Interaction of Pools and drought Cole Inquiry Tigris debt Monitoring AWB(I) Supply Chain Bags and Container Exports Contents
Grain supply and demand in eastern Australia is resulting in less exportable grain. WA and SA bear the total higher tonne costs of the National Pool. Iraq wheat was re-allocated to the domestic market at higher prices. 2005-06 Pool should have risen by AUD 13-14. Non-AWB(I) exports often compete for the same customer, yet achieve higher prices than AWB(I). There is not always a direct line of sight between a grower contract and a wheat shipment. Key Findings
2006-07 National Pool prices have been in line with world wheat prices. 2006-07 National Pool
Reduction in base fee AWBL reduced base fee by 40% (from AUD 65.1 million to 39.5 million).
Changes to OPI Out-performance–Incentive (OPI) is paid if AWBL exceeds both the WIB and Hurdle Rate. Changes to the OPI: –Increase in Hurdle Rate from USD 5 per tonne to USD 7.50 per tonne; and –Capping of OPI at AUD 2 per tonne or AUD 8 million, whichever is lower. The WEA supports these changes.
Tigris WEA questions why AWBL and AWB(I) entered into an agreement to collect Tigris debt. WEA considers AWBL acted outside its authority under the Services Agreement in inflating contracts. Why did AWB(I) carry forward a proportion of the Tigris commission to 2005-06 Pool?
Supply Chain Investment needed by bulk handling companies. Intermodal inefficiencies include: –Deadtime as a result of the non 24-hour operations of ports and up-country receival sites; –Loading trains below capacity; and –Lack of planning and coordination between parties.
Supply Chain AWB(I)’s view: –The modal interface is not the issue. –Investment by bulk handling companies is overstated. The problem is: –Long-term lack of recurring investment in the supply chain (particularly rail). WEA found contracts should be cost and risk reflective to provide better incentives.
Supply Chain - solutions Possible solutions: –Greater industry cooperation and/or integration; –Sufficient infrastructure investment; and –Pricing innovation.
Storage and handling costs AWBL has constrained the fees charged by other storage and handling companies. AWBL’s gate-keeper role has negotiated lower rail rates in the past 5-7 years.
Price comparison – non-AWB(I) to AWB(I) exports In the Growers Report 2006: –Non-AWB(I) exporters gained better prices for bag and container exports than AWB(I) in some countries. In the Addendum: –The WEA conducted further analysis which reiterated the above finding.
Demurrage If Iraq wheat was not delivered on a Cost Insurance and Freight (CIF) basis, the National Pool would not have incurred demurrage or despatch payments. Extra AUD 10.33 per tonne.
Initial Feedback ABC online says Addendum challenges AWB’s management of grain transport and storage, pricing structures and handling of the Tigris affair. Ian Donges, of AWB: "Certainly, I'm very pleased and comfortable that the report is overall very positive for the performance of AWB International.” VFF president supports finding on rail investment.
Other comments WEA is an essential cog in the gearbox. It seems a very different document to other WEA reports. What is really positive is that now you are reporting under the guise of having an independent voice. It is clear the WEA is illustrating a far greater capacity to assess the performance of AWBI.