Oversupply in the grain storage market could lead to increased competition. Photo: Shutterstock
Oliver Probert – Sydney
January 20, 2016
Excess up-country storage will increase competition and promote change in the Australian grains sector, according to a new report from market analyst Rabobank.
In what he described as ‘The Next Hunger Games’, Rabobank senior analyst Graydon Chong said some players could lose out as an inefficient supply chain challenges the productivity and global competitiveness of the Australian grain sector.
Challenges have arisen from the overcapacity of the Australian up-country grain storage network and increasing investment in competing supply chains in the Australian grains industry, according to Chong’s report.
“The sharp increase in competition for grain is putting emphasis on the importance of infrastructure owners – both commercial and growers – to balance long-term certainty and short-term returns,” he said.
“Faced with the risk of asset underutilisation, identifying opportunities to create partnerships along the supply chain will be crucial to success for storage owners across Australia.
“Mutually beneficial partnerships can create multiple benefits for Australian grain supply chain participants, such as increased asset utilisation and market power, time and energy savings, or price premiums.”
One “winning strategy,” according to Chong, is creating partnerships in the supply chain through shared value agreements.
“With partnerships already forming along the supply chain – both vertically and horizontally – these relationships will likely determine the relative winners and losers,” he added.