1. WA FLC – GRAIN LOGISTICS CHALLENGES 31 October 2013 THA – WA FLC Grain Logistics Challenges1

2. Evolving grain industry logistics dynamics Australian grains logistics patterns have evolved from largely static public sector management to fully commercial models Until mid 1990s, marketing, handling and transport roles were fully separated and supported by regulation Rapid evolution in all states has led to differing systems under which private marketers, handlers and transporters compete WA system has evolved into an integrated rail-focused export conveyor belt, but faces competition on several fronts Government are starting to plan for the foreseeable outcomes on road and rail networks THA – WA FLC Grain Logistics Challenges2

3. Production limits Climate change is compounding natural seasonal variability Yield improvements now incremental only Warmer springtime, lower winter rainfall raises chance of crop failure in north and east Potential for record seasons, but interspersed with poor years THA – WA FLC Grain Logistics Challenges3

4. Production and export volumes THA – WA FLC Grain Logistics Challenges4

5. Rail system limits Competition between road and rail has taken many forms over last 15 years Latest incarnation has CBH rail-based system competing with farm-to-port road systems Rail handles volume well but has difficulty with distance disadvantage, export peaks, summer heat, variable commercial returns Competitors to CBH will exploit some of these THA – WA FLC Grain Logistics Challenges5

6. Grain Express revocation Grain Express provides huge and obvious benefits to CBH members and customers Grain owners can now opt out of Grain Express and manage their own transport ie avoid using CBH trains and trucks (except at 27 major bins) Some large grain traders will use this choice to establish export channels outside the CBH bulk terminal network International traders will absorb local losses in so doing, as part of a global strategy 2013/14 and 2014/15 will be a test of this THA – WA FLC Grain Logistics Challenges6

7. Bunge Supply chain - Bunbury International trader Bunge is investing in a throughput terminal at Bunbury Port Ambitious 1 mtpa target volume from southern Wheatbelt Grain direct from farm by truck and also from CBH bins and private storage Will affect rail volumes on Avon-Albany line Will also bring extra truck traffic onto some roads and highways THA – WA FLC Grain Logistics Challenges7

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9. Chinese supply chain Albany A Chinese agricultural company is buying farms in the Albany zone in partnership with Vicstock Grain Seeking a new export capability via a woodchip conveyor and shed near CBH at Albany Port Road transport will be used – most likely to be sourced from non-rail served eastern area Possible impacts on Chester Pass Road and port environs THA – WA FLC Grain Logistics Challenges9

10. Challenges Scale of success of competitors for CBH cannot be predicted, but they will have some impact in SW Rail volumes have improved under CBH/WATCO deal, but have probably peaked Road use by new chains creates less predictability Some potential for this to be managed through agreements between roads authorities and major exporters – as with CBH Government agencies will need dialogue and information to minimise future adverse impacts of competition on the transport network THA – WA FLC Grain Logistics Challenges10