Supply chain access - The key to maximising marketing potential
26/10/2021
One of the most common questions that CBH’s pools manager, Paul Smith gets asked by growers and consultants is, “Why do CBH still offer pools when everyone else has stopped?”
For Paul, the answer is simple: value.
CBH’s purpose is to create and return value to growers, and a grain pool is the perfect vehicle for achieving this purpose. CBH’s pool results over time prove that value creation is consistently occurring within the pool and is being distributed to its participants.
While every season is different, there are various levers that CBH can exercise within the pool to maximise value capture for participants.
When grain is sold for cash, the grower’s involvement ends at the transaction. Meanwhile, the grain merchant can leverage their relationships and the supply chain to extract further value out of that grain before it reaches the end customer.
When you sell to the CBH pool, you have access to the entire length of the supply chain, presenting multiple opportunities to create, extract or retain value along the supply chain.
By selling grain direct to the end-user, the pool takes on the role of the merchant in managing all supply chain activities to facilitate the physical movement of grain from the CBH system to the end-user destination.
Whilst this can be a risky and challenging role to play, it also provides plenty of opportunity for the CBH pool to maximise the potential value of the grain.
For example, the pool can leverage the size and scale of CBH’s position as the largest exporter out of WA, providing maximum flexibility to capture opportunities as they arise, or minimise the impact of supply-chain issues.
The pool also gains access to premium end-user markets in which to sell its grain, maximising value creation potential.
CBH’s position and involvement in the supply chain provides great insight and allows informed decisions on the pools strategy. This is on the back of extensive customer networks and strong relationships with international grain trading contacts.
In addition to their strong relationships, CBH’s investment into analytics and modelling tools supports optimised decision-making to achieve the best outcomes for the pool.
CBH’s focus on efficient execution of their export cargos, minimising delays on execution and payments, all reduce supply chain costs which represents value retention back to the pool.
While these are only some examples of how value can be leveraged from the supply chain, the common aspect is that they are generally only accessible to the grain merchant who moves grain out of the CBH system on to the export end-user.
This means that growers typically don’t have access to participate in this part of the market, unless they are a CBH pool participant.
According to Paul, this season, a unique circumstance is arising which may see the potential value of accessing the supply chain magnified even further.
Global physical goods markets are currently wound up in a spin of increasing prices, driven by supply chain challenges and production concerns in key commodity origination areas.
As a result, end users are competing aggressively to secure supplies of goods, which is seeing international values remain well supported.
“The issue at play here is that those values are only achievable to the extent that local merchants can utilise their access to the shipping stem to load vessels to send to destination markets.”
“With a large crop coming in, there’s a possibility that there will be grain in excess of the capacity of the supply chain to export, resulting in a surplus of grain which will not be desirable for merchants to own at elevated prices.
“With the amount of forward grain contracts already sold by growers, traders likely have their requirements covered for the next few months, which doesn’t bode particularly well for aggressive competition for ownership.
“Therefore, having direct access to the end-user market, via the CBH Pool, could potentially deliver material benefit to growers this season compared to the local cash market values on offer.
“Obviously whilst the current market situation is seeing that dynamic playing out as expected, there is no telling how long it may last and what events may unfold over time.
“However right now, probably more than any other season in recent history, the ingredients exist for a unique value proposition being delivered via the pool, so if growers want to be involved in that end-user market capturing the supply chain benefits, the only way to do so is with CBH Pools,” said Paul.
To find out more about CBH pools, visit: www.cbh.com.au/pools
For Paul, the answer is simple: value.
CBH’s purpose is to create and return value to growers, and a grain pool is the perfect vehicle for achieving this purpose. CBH’s pool results over time prove that value creation is consistently occurring within the pool and is being distributed to its participants.
How is this value captured?
While every season is different, there are various levers that CBH can exercise within the pool to maximise value capture for participants.
When grain is sold for cash, the grower’s involvement ends at the transaction. Meanwhile, the grain merchant can leverage their relationships and the supply chain to extract further value out of that grain before it reaches the end customer.
When you sell to the CBH pool, you have access to the entire length of the supply chain, presenting multiple opportunities to create, extract or retain value along the supply chain.
By selling grain direct to the end-user, the pool takes on the role of the merchant in managing all supply chain activities to facilitate the physical movement of grain from the CBH system to the end-user destination.
Whilst this can be a risky and challenging role to play, it also provides plenty of opportunity for the CBH pool to maximise the potential value of the grain.
For example, the pool can leverage the size and scale of CBH’s position as the largest exporter out of WA, providing maximum flexibility to capture opportunities as they arise, or minimise the impact of supply-chain issues.
The pool also gains access to premium end-user markets in which to sell its grain, maximising value creation potential.
CBH’s position and involvement in the supply chain provides great insight and allows informed decisions on the pools strategy. This is on the back of extensive customer networks and strong relationships with international grain trading contacts.
In addition to their strong relationships, CBH’s investment into analytics and modelling tools supports optimised decision-making to achieve the best outcomes for the pool.
CBH’s focus on efficient execution of their export cargos, minimising delays on execution and payments, all reduce supply chain costs which represents value retention back to the pool.
While these are only some examples of how value can be leveraged from the supply chain, the common aspect is that they are generally only accessible to the grain merchant who moves grain out of the CBH system on to the export end-user.
This means that growers typically don’t have access to participate in this part of the market, unless they are a CBH pool participant.
According to Paul, this season, a unique circumstance is arising which may see the potential value of accessing the supply chain magnified even further.
Global physical goods markets are currently wound up in a spin of increasing prices, driven by supply chain challenges and production concerns in key commodity origination areas.
As a result, end users are competing aggressively to secure supplies of goods, which is seeing international values remain well supported.
“The issue at play here is that those values are only achievable to the extent that local merchants can utilise their access to the shipping stem to load vessels to send to destination markets.”
“With a large crop coming in, there’s a possibility that there will be grain in excess of the capacity of the supply chain to export, resulting in a surplus of grain which will not be desirable for merchants to own at elevated prices.
“With the amount of forward grain contracts already sold by growers, traders likely have their requirements covered for the next few months, which doesn’t bode particularly well for aggressive competition for ownership.
“Therefore, having direct access to the end-user market, via the CBH Pool, could potentially deliver material benefit to growers this season compared to the local cash market values on offer.
“Obviously whilst the current market situation is seeing that dynamic playing out as expected, there is no telling how long it may last and what events may unfold over time.
“However right now, probably more than any other season in recent history, the ingredients exist for a unique value proposition being delivered via the pool, so if growers want to be involved in that end-user market capturing the supply chain benefits, the only way to do so is with CBH Pools,” said Paul.
To find out more about CBH pools, visit: www.cbh.com.au/pools