Australia’s Bottlenecks Open Up Means For Small Lows

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Australia’s Bottlenecks Open Up Means For Small Lows

Bloomberg Bottlenecks at Australia's biggest wheat export terminals have opened up opportunities for innovators who use lines of smaller ships and fleets of trucks to get more supplies into global markets craving grain.

Two consecutive bumper harvests have stretched capacity at the nation's major shipping terminals run by companies such as CBH Group, GrainCorp and Viterra. With another big crop coming later this year, impatient exporters are turning to other ways of getting grain to market.

The world is in need of wheat from Australia, one of the world's top suppliers. In March, prices of essential food soared to a new record in March after Russia sacked Ukraine with exports from the Black Sea region. That helped drive global food inflation to an all-time high, and while wheat prices have come down from their peak, they are still about 30% more expensive than the average cost in the past 10 years.

A flurry of operators have entered the Australian market to provide additional export capacity. Transshipment companies use lighter vessels to ferry grain from shallow ports to larger ships waiting out at sea. Mobile ship-loaders use fleets of trucks to deposit grain on vessels, bypassing the permanent loading facilities run by bulk operators.

People are coming up with ways to make permanent structures more scalable, James Maxwell, senior manager at Australian Crop Forecasters, said. They have really ramped up their exports over the last couple of years and they are a real standout. The share of bulk grain exports shipped by non-bulk handling companies has jumped to 18% so far in the 2021 -- 22 season from just 2% three years ago, according to data from the Melbourne-based consulting firm.

More facilities are needed to be built for the smaller operators to provide a boost to overall export capacity, according to Maxwell by phone. These companies may benefit now when capacity is stretched, but they would have to compete with the scale of the heavyweight bulk handlers in the long-term. He said that it raises questions about the viability of such projects, especially in the years of drought when the country isn't going to have a bumper crop.

The sheer pace of shipments this year continues to put pressure on supply chains. With Australian exports expected to power through until the next harvest, well past the end of the typical shipping season when ports undergo maintenance - that could compound inefficiencies.

When you're running at capacity, the tiniest thing can throw everything out, especially if you're running at capacity for the entire year, Maxwell said.

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