Article: Poor rail threatens food boom

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Queensland Country Life --> Poor rail threatens food boom

THE disgraceful state of rural railways means grain growers could become uncompetitive and miss out on big profits from the Asian food boom, warns GrainCorp chairman Don Taylor.

The chairman of eastern Australia's biggest grains handler says urgent spending is needed on the railways.

"We don't have any right to benefit from the food boom; we have to earn it," Taylor tells The Australian Financial Review.

"The Canadians want to participate in [the Asian food boom]. The Ukranians are investing and doing things to participate in it.

"We are doing nothing [for rail]. It's just going to pass us by."

A report by the Australian Export Grains Innovation Centre found many of the railways used to transport grain can only handle axle loads of between 16 tonnes and 19 tonnes, compared with 23 tonnes or more in Canada and the United States.

There are endless stories of trains taking up to nine hours to load or ­heading to port half empty because the tracks, mostly laid before the Federation, are not able to sustain the weight of the trains.

Some rail sleepers in Western Australia buckle in temperatures above 35 degrees, often forcing the nation's biggest grain exporter, CBH, to delay transporting grain until the arrival of cooler night-time temperatures.

Instead of farmers getting rich from a food boom and spreading the benefits throughout the economy, growers are worried rising costs associated with decaying infrastructure will eat into thinning profit margins.

Taylor, who is also acting GrainCrop chief executive, is considering new rail investments for GrainCorp's ­infrastructure.

But he needs government to support state-owned infrastructure too.

"There's no point investing if we can't get the government to invest in the rail piece," he says.

Concern over rail infrastructure is echoed by the nation's biggest agricultural foreign investor, Cargill Australia, a subsidiary of America's biggest private company and global agriculture titan Cargill.

Cargill Australia managing director Philippa Purser says rising supply-chain costs are cutting returns to ­farmers at a time when the country should be focused on stimulating production to cash in on soaring food demand from Asian neighbours.

"If demand is growing and we want to participate in that we need to produce more to export more," Purser says.

Cargill is Australia's third-largest grain exporter and has been on an aggressive buying spree in the past few years as it moves to capitalise from growing food demand in Asia.

It owns wheat marketer AWB, the nation's biggest maltster Joe White Maltings, and a half share in the ­country's second-largest beef processor Teys Australia.

Purser says infrastructure is an issue for most exporting nations but Australia has a high-cost supply chain and there is a real risk that benefits from being close to Asia from lower freight costs could soon erode.

"When you think of the full supply-chain cost we are far from the most ­efficient," she says.

"We certainly don't have the lowest cost."

NSW Farmers grains spokesman Dan Cooper says crumbling rail ­infrastructure is the biggest issue confronting the industry.

"There's an opportunity in Asia but that's all it is," Cooper says.

"We could easily miss it. People have their head up their arse if they think Asia needs us. They can turn to the Ukraine or Canada."

Cooper led the charge against Archer Daniels Midland's $3 billion takeover for GrainCorp, which would have delivered $200 million for investment in rail infrastructure and improved efficiencies for farmers.

While most of ADM's promised investment was expected to be ­funnelled towards enhancing ­GrainCorp's infrastructure, it is understood ADM was also considering ­funding investment in government-owned tracks.

Cooper says growers were concerned ADM would pocket the benefits of lower rail costs or move to recoup the cost of its rail investments by lifting charges elsewhere in GrainCorp's substantial supply chain.

"We were concerned that we would get a shafting in the long run," Cooper says.

Improving the tracks is likely to be raised in an agricultural competitiveness white paper being developed by the government.

Cooper says the industry cannot afford to wait.

"We have to act now," he says.

"If we leave it for a review to be finished and worked on – if we leave it for another five years – we will miss the boat completely."

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