When you pass through Western Australia (WA), big tower silos labelled CBH are a common sight.
CBH stands for Co-operative Bulk Handling, which is a grain growers' co-operative that handles, markets and processes grain from across the wheat belt of WA.
CBH was formed in April 1933, under the principle of one person, one vote, regardless of the amount of grain supplied and that principle still applies today.
It has undergone many structural changes since its conception and it assembles most of its grain directly from the combines at harvest.
The disbandment of the Australian Wheat Board removed its single desk trading capacity, so nowadays it primarily functions as an efficient handling and storage facility.
The importance of CBH
Handling all this grain is a huge logistical task. In the early days of our ITLUS tour in January 2020, we met with Andrew Crane, who had been the chief executive of CBH for many years.
He was retired from the group at this stage, but he gave us a rundown on its activities and some other relevant information.
He began by saying that the population of Australia was about 25.5m people, but there were only 2.66m in WA, and over 2m of those lived in and around Perth.
So, the biggest state in the world had only half a million inhabitants, which meant we would not see many people on our travels.
Andrew told us that the cost of becoming a CBH member is AUS$2 (€1.30). However, there are handling charges per tonne, which are averaged across all farms and equate to around $12/t.
In real terms, the cost is much bigger for inland production and lower for areas closer to a port.
The co-op has rationalised in recent years and changed the number and size of its handling units.
The business is costed based on the centre of a region and the distance from the centre of that region to the port.
This model led to lower overall transport and handling costs, to give a slight competitive advantage in a very tough marketplace.
The restructuring reduced the number of CBH grain intakes from 300 to less than 200 in the early 2000s.
Most farmers deliver to either their local CBH facility or port at harvest time.
While the grain is delivered to CBH, the owner retains the right to sell it to whomever they choose. While there is no drying charge, handling and storage charges do apply.
Because the business is heavily based on exports, CBH had invested in flour mills in southeast Asia and Turkey in recent years.
This meant that growers own a longer part of the supply chain, which pushes them closer to the consumer with access to potentially more margin.
For the same reason, it also considered building a malting plant in Vietnam, which is a destination for some of CBH’s malting barley.
These moves have helped co-op margins, but it does not pay dividends to its growers.
Profits are generally reinvested, but the co-op does support its growers by providing a rebate on input costs. The rebate is based on the tonnes delivered and sold through CBH.
Attitudes to residues
With exports being critical for the sector, there was considerable awareness of the changing trade requirements of specific markets.
There was quite a fear among growers that glyphosate would be banned in Europe, because this could have significant implications for residue limits on their canola crop, some of which is exported to the EU.
Japan also continues to decrease its residue limits, adding challenges for Australian growers and exporters.
Speaking about farming in WA, Andrew told us that the state normally produces around 14Mt of grain per annum from around 4,000 rain-fed farms (16.8Mt in 2020/21).
These range in size from 1,000ha to 15,000ha. Rainfall in WA from May to October varies between 225mm and 450mm.
About half the production is wheat (64% in 2020/21), with the remainder made up of barley, canola, oats, lupins and peas.
Grain storage is normally done by CBH in a combination of large tower silos and outdoor silos. Because the harvest comes in hot and dry, grain is all below 12% moisture and the major requirement at harvest is to cool it.
While it is mainly a wheat-producing state, it is interesting that barley yield tends to be higher than wheat and this was very much the case in the most recent crop (see Table 1).
But this is influenced by the timing of rains, high temperatures and late frosts. Also because there is very little other farming in the state, 95% to 97% of the grain produced there must be moved or exported.
Andrew said that Australian production can vary between 29Mt and 57Mt in total per annum, and is heavily influenced by what happens in WA. Wheat production in Australia can vary between 17Mt and 30Mt and barley from 8Mt and 14Mt.
In general, planting takes place from around 26 April, which generally coincides with rain for germination.
However, with farm scale increasing, it has become common for growers to have some crops planted before the rain, to help get through bigger workloads.
The wheat is mainly hauled down to the southwest corner of the state for export.
While the average wheat yield is 2t/ha, some farmers get more than double that, so others must get much less.
The pressures imposed by decreasing rainfall amounts over time have pushed growers to either get bigger or get out.
Andrew said that 12 years ago, there were roughly 12,000 growers in WA, but, by 2019, that figure had fallen to 4,000.
The average farm size in Australia has increased from 1,000ha to 2,600ha in 2019, but this figure was at 4,500ha in WA.
In general, as you move north and east from the southwest corner, the farming systems tend to be dairy, then crops and then sheep in the drier conditions.
Andrew said that changing climate and rainfall patterns have resulted in sheep drifting into the edge of the wheat zones and that crop production had drifted towards the coast to displace dairy. So climate is changing the dynamics of agriculture in WA.
With scale increasing, it was hardly surprising to learn that corporate entities had been interested in producing grain in WA.
However, Andrew commented that very few had succeeded, mainly because they just did not have the empathy with the land that farm owners have. He said that 97% of the land in WA is still worked as family farms.
One corporate model did appear to be working successfully, however. This was largely because it kept the farmer/landowner within the corporate structure.
The business worked in 10,000ha units, usually operated by a team of four to five people.
Andrew told us that the Australian government was considering paying farmers to sequester carbon as well as producing food.
He said that this is significant for CBH, because it has 10 farms of 10,000ha, so quite a potential to sequester carbon and any benefit would be big.