SYDNEY,(Reuters) - Australia's wheat farmers are
likely to build more private silos to store grain in their bid
for greater pricing power, industry experts said, a move that
would protect them from disputed grading practices that have led
to a government inquiry.
Australia wheat exports, typically the world's fourth
largest, are dominated by three grain handlers -- GrainCorp Ltd
, Canada's Viterra and CBH Group -- which own
most of its 20 grain export ports and also storage facilities.
A lack of on-farm storage leaves farmers vulnerable because
they cannot wait long after harvest to deliver grain without
suffering quality losses.
"On-farm storage will give wheat growers more control over
where and when farmers sell their grain," said Peter Botta, a
Melbourne-based consultant to the grain industry.
Some farmers have resorted to storing grain under plastic
sheeting on their farms.
"The trend is to go to on-farm permanent storage to have a
better negotiation at the farm-gate," said Lance Whitfield,
marketing manager for grain storage supplier, Nelson Silos.
More permanent on-farm storage would mirror a system in
Canada, the world's second largest wheat exporter, where farmers
keep grain in silos before sales.
An advantage of on-farm storage is growers can time crop
sales to get the best prices, said Wade Sobkowich, executive
director of the Winnipeg-based Western Grain Elevators
"And it allows the system to move product to customers for
current sales, not for sales that may be made at some point in
the future. It definitely allows the system to be more
efficient," said Sobkowich.
In Australia, the lack of on-farm storage has only really
emerged as a serious problem for growers since liberalisation of
the wheat-export industry in 2008. Previously, farmers delivered
to a monopoly export agency which guaranteed them a floor price.
Since the dismantling of the export monopoly, farmers must
negotiate with grain handlers and traders to get the best price.
"There is no real competition (in Australia) as the key bulk
handlers own the ports and book up space at their ports, making
it tougher for other exporters to get shipping space," Botta
The move to more permanent on-farm grain storage has been
foreshadowed in submissions to a government inquiry into grain
handling. A parliamentary committee is scheduled to report its
findings in November.
A farmer in South Australia state, Robert Walsh, in a recent
submission to Australian government inquiry, accused Viterra of
engaging in unfair pricing.
"Viterra intended to profit from visual classification by
giving the grower the lowest possible grade and gaining an
upgrading at port," Walsh said in his submission.
Viterra referred Reuters to its recent submission to a
parliamentary inquiry in which the company said it was
addressing quality classification issues ahead of the next
harvest and acquiring additional machines to assess grades.
GrainCorp said in its submission to the same inquiry that
there had been no evidence of grain handlers restricting access
on commercial terms to its storage, handling or port facilities.
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