CBH handled a bumper crop no doubt. It was aided by great weather and relatively constant quality parameters. The new varieties on offer also make segregation constaints on capacity much less of an issue these days. 70% of the States wheat crop is now Mace and it is a smart wheat, with few quality issues in any given season. Poor malting premiums at harvest also saw many cockies delivering malt barley to feed barley stacks just to keep the headers rolling. Canola is a breeze to handle and its tonnage is growing.
But we pay the highest storage and handling costs in the world for a reliable annually exporting grains producer. CBH is inefficient at out-turn. It takes them 2 months to take in a crop like 13/14 and they won't get rid of it all by next harvest.
The cross subsidisation inherent within the co-op system is making it easy for the competition to now aggressively pursue plans to steal market share. More dangerously to CBH they will steal the most profitable tonnes close to port and the most reliably produced. If they're not careful, all CBH will be left with is the eastern Wheatbelt to handle in time.
As a shareholder with equity in CBH which cannot be touched, it is sad to see such equity effectively fritter away in the sun. CBH are aggressively chasing opportunities outside the WA supply chain and this will eventually leave them in a weaker position to deal with the threats posed on them by competition.
Unless they corporatise they will be poorly capitalised to deal with competitive threats, they will struggle to give growers a reason to remain loyal, and they will be far less resiliant to survive and thrive any run of poor seasons. CBH is sailing at the high water mark currentl from a value perspective.
The SA farmer may have had to wait a bit at harvest but at least he has had a payout on his equity in the old ABB. For those farmers that held their shares until the final Glencore bid came in for Viterra they have achieved a very handsome hedge on any costs that may have come from corporatisation. Any higher costs will be solved in time by competition just as NSW is starting to see now. New market entrants arriving but unfortunately the building of new infrastructure takes time.
I'll give CBH 5 years before they will be served a solvency test if they don't corporatise, thats assuming good weather.
