The credible national grain infrastructure reform framework needed from governments

A Juturna Infrastructure market briefing paper - April 2014

Good Instincts

How serial public policy failure lets down growers, investors and the national economy

Why grower concerns over failing Australian grain transport infrastructure are wholly accurate

3Good instincts: A Juturna Infrastructure market briefing paper - April 2014

About the author

Luke Fraser BA (Hons)

UniMelb, M Mgt UNSW

Business School, MAICD is

the principal and founder of

Juturna, a specialist freight

infrastructure market reform

and investment advisory

retained by Infrastructure

Australia and the leading

proponent of commercial road freight

investments. Mr Fraser served for several years

as executive director of Australia’s peak rural

freight industry body, the Australian Livestock

and Rural Transporters Association, as a council

member of the Australian Trucking Association

and briefly as a chief of staff in the Howard

government. He is a regular contributor to

Infrastructure Australia’s Ports Expert Reference

Group and was a committee member of the

2008-09 New South Wales Grain Freight Review.

Mr Fraser is currently a board member of the

Council of Australian Governments Road Reform

Project, representing industry. He is also the

policy author for the Australian Rural Roads

Group.

Juturna’s recent work includes commercial

road access investment projects in the cotton

and grain sectors of north-west New South

Wales and southern Queensland, a national

road condition reporting pilot scheme for

Infrastructure Australia and the Mount Isa -

Townsville 50 Year Freight Infrastructure Plan. In

2013 Juturna completed an independent review

of Tasmania’s entire freight infrastructure sector

- its shortcomings, future demand prospects and

market reform opportunities – a report which

has since had all of its key findings endorsed by

the Australian Productivity Commission’s draft

report into the same subject.

Comments and questions

Mr Luke Fraser

Principal M +61 437 146 274

E luke@juturna.com.au

W www.juturna.com.au

Disclaimer

The views expressed in this paper are those of the author alone and do not necessarily represent those of his clients or other affiliations.

All reasonable attempts have been made to ensure the accuracy of the information contained in this report, but Juturna reserves absolute discretion in updating or amending this document.

2013’s failed multi-billion dollar attempt by global

food giant Archer Daniels Midland (ADM) to

take over the Australian grain handling business

Graincorp (the sale was blocked by the Australian

government) synthesised the concerns of many

Australian grain growers, who produce some of

the highest quality and least-subsidised grains

in the world, but who must watch as outdated

freight infrastructure arrangements add

spiralling costs and questionable competition

arrangements to their grain, once it leaves the

farm gate. Such concerns are magnified when

placed in the context of Australia’s declining

on-farm productivity levels and the rise of

competitor nation farm and freight infrastructure

productivity as a trade advantage.

In 2014, even obvious strategic issues facing

grain freight remain unexamined by the agencies

responsible for road rail and port assets. No

serious national planning of the task takes place.

This failure to act on improving freight – which

represents perhaps around 30% of the total

production costs of grain1 - cripples grower

competitiveness. For example, the unquestioned

ongoing subsidy of costly and entirely

disconnected pre-Federation branch line railways

across the east coast serves only to push

the transport costs of grain up, by atomising

tonnages across too many compromised

east coast sea ports, instead of working

strategically towards a mainline rail network

which serves fewer ports offering greater scale,

mix and competition efficiencies for growers.

Such challenges demand government policy

leadership if markets are to make investment and

operational changes for the better. Yet no such

leadership is in evidence.

About this briefing...

5Good instincts: A Juturna Infrastructure market briefing paper - April 2014

This is the landscape that confronts investors

in Australian grain, as well as growers. With

that in mind, moving on productively from

the damaging Graincorp sale ban of 2013 –

‘reopening Australian agriculture for business’

- requires development of a credible and internally-consistent policy framework for least-economic-cost road, rail and port infrastructure in support of Australia’s east coast grains industry – a national framework to guide stable

asset investments and in turn bring growers and

patient capital investors alike more reliable and

profitable returns.

It is in government’s power to provide such a

framework. Doing so would defuse much tension

between grower and investor by addressing the

common cause of many of their problems.

Without the sense of purpose and plan that

national policy leadership would bring, a great

irony will remain in the grains sector: the market

cost of capital is at historic lows. Global and

domestic investors alike have never been more

interested in making large capital investments in

Australian agriculture, yet freight infrastructure

financing – particularly for equity – is increasingly

seen as ‘just too hard’. Such a value proposition

is something that the many disconnected and

ramshackle local, state and federal government

road, rail and port plans of today – if they can

genuinely be called ‘plans’ at all – cannot deliver

to the market. The bleak alternative to genuine

national policy reform is for investors to continue

trying to make their own unguided investment

decisions on the same outdated, broken and

inefficient grain infrastructure patterns and

systems that exist today. This would condemn

the grain sector to retain all of its present

inefficiencies for another major asset investment

cycle – the world’s best and least-subsidised

grains consigned to further decades of freight

infrastructure stagnation.

Genuine infrastructure reform in grain freight

offers much wider benefits to the nation: A grain

reform framework would help to identify and

solve important structural challenges to road,

rail and port infrastructure. Australia’s freight

task is moving steadily towards a trillion tonne

kilometres of product annually2; national, value-

creating solutions need to start somewhere.

This briefing uses the failed takeover bid of

Graincorp by ADM as a prism through which to

examine this phenomenon. It leaves aside the

bona fides or otherwise of that bid to consider

why the freight infrastructure matters evinced

such divisive and passionate views. It examines

the most significant road, rail and port policy

failures in some depth and closes by advocating

adventurous national transport sector reform

that would complement the general optimism of

Australia’s grain growers.

State of play: Australia’s agribusiness sector not open for business?

The course of Australia’s grains sector has

not run smooth of late: in November 2013

the federal government rejected a proposed

$3.4 billion dollar takeover of the nation’s

largest listed agribusiness, the east coast

grain handler Graincorp Limited, by US-based

multinational food company Archer Daniels

Midland. The Australian government’s well-

reported argument was that the sale would be

‘contrary to the national interest’.

For more than a year after a first bid was

tabled by ADM, government inquiry into the

sale evinced much genuine grower discontent;

the Australian treasurer himself noted in his

eventual decision to bar that sale that:

‘Many industry participants, particularly

growers in eastern Australia, have expressed

concern that the proposed acquisition could

reduce competition and impede growers ability

to access the grain storage, logistics

and distribution network’3.

Other parties spoke of the importance of

ADM bringing significant new investment

to Australia’s ageing, capital-starved east

coast grain supply infrastructure: it had not

been refreshed in decades and in any event

it had never been planned and engineered to

support modern deregulated trading realities.

Still others speculated that grower-

shareholders in Graincorp had been resigned

to suffer transport infrastructure inadequacies

whilst much of the infrastructure was theirs

to own, but uncertainty over the prospect

of what a new owner might do to address

such problems would prove more compelling

motivation than the windfall that a sale to

ADM might bring.

In the period since the ADM bid for Graincorp

was rejected, no view has been advanced

on how the industry might move ahead

post-sale ban in a way that would offer a

value proposition to grower and investor

alike. Graincorp itself has signalled that

failure to secure new capital investment is a

major risk to sector productivity4. The lack

of any thorough and published government

vision for reform of these arrangements will

make prospective capital investors in this

sector increase their risk premia on new

investments, given the risks that the policy

vacuum represents; it will also reaffirm grower

cynicism that smart market-led revitalisation

of the grain supply chain is a very distant

prospect.

There are many different themes tied up in the

ADM-Graincorp takeover saga: resentment over the

transition away from monopoly wheat marketing,

information access concerns, future marketing

challenges and quality control are all

among them.

This briefing only seeks to deal with transport

infrastructure concerns.

The most important question to ask in this regard is

also the simplest: why did the proposed takeover so

anger many Australian growers? Was it emotional

overreaction? Was the Graincorp takeover controversy

a ‘cut and dried’ case of protectionists versus free

marketeers, as some have portrayed it?

Grain investors, politicians and government policy

makers should take the raw emotion around this issue

as an important cue, as real and significant ‘post-farm

gate’ transport productivity challenges do lie at the

heart of the instinctive concerns of many growers

and investors, who have been completely abandoned

through decades of policy failure and neglect in this

field.

Or to put it a little more colourfully, if the farm dog

who rarely barks suddenly cannot stop barking, it is

usually well worth the master going to see what the

problem might be…

The Graincorp – ADM saga: Never mind the result – ask why

the dog barked.

Grower instincts about the inadequacies of

Australia’s east coast grain freight infrastructure

are unfortunately all too accurate.

The road, rail and port assets that underpin the

world’s most productive and least subsidised grain

sector are, in many cases both in the physical

and policy sense, completely unfit for the high-

value, world-leading and deregulated grain export

purpose which they are presumed to serve.

Unfortunately, when such views have been voiced

in the past, they have too often been accompanied

by an overtly protectionist philosophy. This

appears to have led many economists, policy

makers and regulators to dismiss such concerns

out of hand. Yet when stripped back and examined

on their public policy merits, grower observations

about the problems deserve attention: they point

unerringly to abiding structural inadequacies in

Australia’s modern grain transport task that have

remained without any productive government

attention for decades.

The nature of the problem – no sense of purpose for grain infrastructureSuccessive governments – specifically, their

road, rail and port policy makers - have failed

to offer any sense of a system for grain freight.

Most responsibility has fallen to the states

rather than to Australia’s national government;

these governments have done next to nothing

to coordinate their road, rail and port planning

and investment approaches for a stepwise

improvement of the grains sector. This in turn

has retarded the operational efficiency and

reduced the profitability and scale of private

sector investments that can be made.

Even had ADM’s bid for Graincorp proved

successful, the new owners would be greeted

with an investment landscape resistant to truly

productive investment across the supply chain:

Roads

East coast Australian end-destinations for grain

shift markedly in response to global prices and

fluctuations in harvest quality. Such factors

can shift tonnages between feedlots, domestic

mills and export ports at very short notice.

High productivity road freight is therefore an

essential ingredient for such a dynamic trade.

Yet despite Australia leading the world in truck-

trailer productivity, many roads are too poor

to carry these modern vehicles, while fresh

public finance to upgrade politically-unloved

rural networks is not in evidence. Market-led,

user-pays investments in roads to feedlots, mills

and railheads are not permitted by the nation’s

monopoly provider road agencies, despite this

already being permitted in the mining sector, and

proven in many case studies by Infrastructure

Australia5. This means bigger more productive

trucks are not permitted to make their own

efficient investments to service key sites. In

addition, the failure of wider road reform efforts

to directly price the key interstate highways that

compete with major grain-friendly rail projects

such as Inland Rail means such national rail

aspirations will remain non-commercial, while

trucks will not recover the full cost on and of

their capital on these major highways. These are

first order national inefficiencies in the freight

network with implications beyond grain.

Rail

One hundred and thirteen years after the

Federation of Australia’s British colonies,

the rail system for grain remains the same

pre-Federation system of different gauge

railways made up of many disconnected and

maintenance-intensive branch lines across three

Australian states – Victoria (broad gauge), New

South Wales (standard gauge) and Queensland

(narrow gauge). These rail lines are ‘hard-wired’

to disperse their grains to many different east

coast ports – the railways follow the old colonial

paths of settlement (the Brisbane River Valley;

the Hunter River Valley; the Sydney catchment;

the Illawarra; Port Phillip). In effect these grain

Good instincts: Australia’s east coast grain supply chain is unfit for purpose and has no framework for improvement

9Good instincts: A Juturna Infrastructure market briefing paper - April 2014

rail networks amount to ‘short line railways’ –

modest in size, lightly-engineered and capable

of carrying only modest train lengths. This still

occurs today rather than grain rail freights

being part of a more productive, multi-freight

intensive east coast mainline- such as the big

transcontinental rail networks seen in the US and

Canada.

Rail economics suggests that ‘short line’ rail

only works profitably with high freight densities

and few (preferably one) origin and destination

points. For that reason, maintaining a series of

fundamentally disconnected railways where grain

is usually the only freight available – and only

intermittently, depending on where rain falls - is

in theory economically disastrous for the viability

of these networks and for the efficiency of grain

carried on them. Confirmation of this thesis can

be seen in train operators’ unwillingness to invest

in new dedicated grain locomotives and rolling

stock for grain tasks.

Rail’s inefficiencies for grain are also very much

the result of almost a decade of road reform

inertia, which has yet to establish like-for-like

highway and railway freight charges in those

specific places where road and rail compete

directly with each other for grain and other

traffics - meaning much east coast grain traffic

remains on roads rather than potentially moving

to a more cost-effective mainline inland rail

solution.

Ports As already alluded to, one direct consequence

of Australia not attending to its pre-Federation

grain rail footprint has been that most east

coast grain still moves in relatively small scale

consignments to what appears to be too many

east coast ports, which are the historical termina

of each of these disconnected railways. While

this might have made sense in colonial times,

most of these east coast grain ports now find

themselves cornered in the middle of Australia’s

largest capital cities or in expanding regional

centres: the high values of such locations bring

strong alternative use planning pressures, high

port site development and expansion costs

and compromised rail and road access through

higher urban road congestion; rail curfews can

occur and some grain train operations clash with

higher-priority urban passenger train timetables.

As a low-value commodity, grain suffers in these

places more than most products. Few ports

offer growers any competition in their terminal

infrastructure: the tonnages are too meagre,

the expansion costs to high, the land availability

uncertain.

This situation occurs rather than sending greater

consignments of grain to fewer ports, in places

where the economic prospects for competitive

terminals and bigger stockpile development

are better, where congestion is lighter and

competing land use and rail and road traffics

are less evident. This is the fault of laissez faire

government port planning, which has failed to

give any signals to patient investors about which

ports offer the best opportunity for long-haul

rail to ports, and market awareness of which

ports offer land planning and costs are more

sympathetic to competitive, large-scale bulk

operations in decades to come.

There are other misguided interventions by

government – such as continual road freight

upgrades to highways that compete directly with

the Inland Rail project – which serve to retard

development of a national framework for grain

freight still further.

Stagnation needs to be recognisedHow do national competition policy objectives

impact on the grain freight task and what is the

long-term structural path to align this sector with

a competition-reformed Australian economy,

so that it delivers more to growers, investors

and the nation? Not a single review of grain

infrastructure since the reform of Australia’s

economy through the 1990s has asked this

question, yet it lies at the heart of most

modern grain freight operational inefficiencies,

investment barriers and competition concerns.

By far the greatest challenge in grain freight is

the lack of appetite amongst road, rail and port

bureaucracies for a true ‘least-cost’ framework

for the sector. Instead, atomised public sector

plans – the status quo – continue to deliver poor

and disconnected spending patterns in different

places; a failure to deal with core financing and

11Good instincts: A Juturna Infrastructure market briefing paper - April 2014

planning challenges only reinforces underlying

and inherited inefficiencies. Too often, Australia’s

many-layered transport bureaucracies have

hidden behind claims that these matters are too

complex to deal with in a single framework, or

that simple and robust principles would over-

simplify extremely complex issues.

A serial tendency to over-complicate and resist

strategic reform is a sure sign of bureaucracies in

need of renewal.

Why the problem has greater impact today The grain market structure of earlier times

probably helped to mask the depth of public

sector grain planning failures: ‘single desk’

monopoly grain marketing and the more gentle,

scaled-up logistics arrangements that went

with it – such as quarterly grain marketing

movements from a single grain ‘stack’ – made

freight more manageable on traditional lines.

Also, from the 1960s onwards, grain’s underlying

road, rail and port assets were mostly at the

beginning or middle of their investment cycle.

Such factors have sheltered governments from

inherent failures in cross-border planning and

investment for grains.

The 1990s: infrastructure policy objectives changed, but grain infrastructure never adapted Much existing grain freight infrastructure was

put in place at a time when Australia held

quite different economic policy objectives. In

decades past, most of the infrastructure was

state-owned. Public good and the maintenance

of historical patterns of (white) settlement were

the principal economic policy objectives of the

day, not economic efficiency. The economy-wide

competition policy reforms that dragged Australia

out of economic stagnation in the early 1990s

made economic efficiency the new guiding priority

of infrastructure planning and provision, but grain

infrastructure was never considered as a ‘system’

in this latter context. As a consequence, much of

the transport bureaucracy directly responsible for

these networks – particularly road agencies and

state port authorities – were never restructured to

reflect the new realities. Grain has suffered from

these oversights ever since.

2014: still no government plan for value Today, the move to a dynamic, 365-day a year

trading reality has placed far more obvious new

stresses on the infrastructure and its operational,

planning, investment and competition

inadequacies. But on all the evidence, as

neither state nor federal governments know

what problem they are trying to solve in grain

logistics, the observed case is that they tend to

either do small and isolated things; or most often

do the wrong thing, by reinforcing the legacy

arrangements.

The absence of policy clarity and market guidance

in these matters left the ADM-Graincorp saga

without a much needed ‘landing strip’ of system-

wide structural reforms in grain infrastructure

and operations that all parties could aim towards

– investors, growers and governments alike. In

2014 continued lack of progress on that front will

further damage Australia’s reputation amongst

patient capital investors, at the very time when

such capital has never been cheaper or more

willing to invest in Australian agriculture, and

during a phase when existing grain infrastructure

has reached the end of its useful life-cycle and

major new investments are overdue.

Some viewed the Graincorp takeover as marking

‘battle lines’ between vulnerable grower and

ravenous investor. Yet both parties have much

in common: they both seek a value proposition

in grain logistics and find little on offer. Both

parties are right to question why the nation’s

bureaucracies and regulators have been so

demonstrably negligent in not outlining a vision

for how more efficient grain transport is to

come about on Australia’s east coast and how

the sector’s transport infrastructure is to be

aligned with the nation’s post-competition reform

economy.

Australian farmers see a great gap between the

quality of their own operations – which lead the

world in efficiency and lack of state subsidy – and

‘post-farm gate’ transport inefficiencies, which

often improve extremely slowly, if at all. This

situation is being exacerbated by a measurable

slowing in Australia’s on-farm productivity: as the

grower finds growth harder to come by on farm,

the costs beyond the farm gate loom larger on

the bottom line.

Productivity growth in Australian agriculture

between 1975 and 1999 was up to 4 times higher

than the rest of the Australian economy for

this period, and the Australian farm sector’s

productivity growth grew at twice the rate of a

selection of OECD countries over roughly the

same period6 This occurred even as the terms of

trade for Australian agriculture declined:

Australia: gold standard in farming efficiencyAustralian agriculture is recognised globally for its lack of subsidy:

Source: OECD agriculture producer support estimates 2012

Stalling on-farm productivity and competitor advances: why Australia’s grain freight efficiency matters more now

0.00

OECD Total Agricultural Support Estimate 2012

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2.00

2.50

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4.00

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13Good instincts: A Juturna Infrastructure market briefing paper - April 2014

Source: Nossal, K. and Sheng, Y. (2010), Productivity growth: Trends, drivers and opportunites for

broadacre and dairy industries, Australian Commodities, March Quarter 10.1: 216-230.

But for a variety of reasons (still not fully

understood, but including more drought years,

an ongoing reduction in rural industry research

and development since the 1970s and the end

of economy-wide national competition reforms

in the 1990s) the rate of Australia’s on-farm

productivity growth is slowing:

Indeed, other research suggests on-farm

productivity in Australian might well have

been slowing from as early as 19947. Whatever

the result, there is at least a consensus that,

just as for the rest of the Australian economy,

overall agriculture productivity growth appears

to have been negative for too much of the

time since after 2000 for anyone’s liking8.

Revitalising strong on-farm productivity growth

will be difficult at best: the Australian Bureau of

50

50

1977-78

Terms of trade

Note: Light blue columns show drought years

Total factor productivity

Financial year ended

1987-88 1997-98 2007-080

0

100

100

150

150

200

200

1955 1975 19951965 1985 20051960 1980 20001970 1990

250

300

2.2%

2.3% -1.7%

350

Ind

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FP

Ind

ex

Broadacre total factor productivity and the agricultural terms of trade

Trend change in TFP for the broadacre agriculture industry, 1952-53 to 2006-07

15Good instincts: A Juturna Infrastructure market briefing paper - April 2014

Agricultural Research Economics and Sciences

(ABARES) has argued that:

Returning to (historically higher on-farm) growth

rates may be more challenging in the future,

and may increasingly depend on new sources of

productivity growth’9.

In the meantime: Australia’s neighbours learn fastOther countries are pursuing their own on-farm

productivity growth off far lower bases, often

by adopting Australia’s world-leading practices.

The scope for the growth of on-farm productivity

in these developing economies remains vast,

and should be of real concern to Australian

agricultural policy makers: in Indonesia, for

example, it has been estimated that shifting to

higher-value crops and adopting more modern

production methods could help that nation’s

cropping sector expand to 310 million tonnes by

2030; it has been further estimated that up to

130 million of these crops could be exports10.

In another indication of huge growth potential

off a low base, only around 4% of Africa’s

agricultural footprint is at present irrigated –

leaving enormous scope for significant crop

productivity gains11. More generally, one estimate

sees the world having nominal access to a

further 450 million hectares of lands suitable for

medium to high-value cultivation12.

While pursuing ongoing productivity gains on-

farm remains wise counsel for Australia, policy

attention is beginning to turn to what happens

to farm products when they leave the farm gate,

as this promises to be a more fertile new source

of significant productivity growth, other things

being equal.

In 2009, a Chinese study of 30 provinces found

that of transport, electricity, telecommunications

and irrigation infrastructure as well as training

and education, it was transport infrastructure –

most notably roads – that would induce the most

substantial impact on farm technical efficiency’13.

No doubt the Chinese government will orient

its future planning more strongly to this end as

it pursues food security and seeks to continue

alleviating rural poverty through farm productivity.

Similarly, the USA is endeavouring to turn

greater attention to transport infrastructure

post-farm gate: the US food sector has been

found to use more infrastructure per dollar of

domestic consumption than other industries

in the United States14; this suggests that the

efficiency gains from shrewd post-farm-gate

transport spending should be amongst the most

productive that a government could make. In

recent times, the US government has allocated

many millions nationwide to dredge key ports

to be ready for the bigger Post-Panamax ship

draughts and beams that will become the

efficient shipping standard once the Panama

Canal is widened by 2014-5 - doubling the

capacity of the canal.

The awakening of on-farm productivity elsewhere

should be a signal to Australia – already the

world’s most productive grower – that new

sources of productivity growth must be found

‘off-farm’, and fast.

Clear problem, much talk, no policy actionStructural and system responses from

government have, on evidence to date, been

entirely lacking. The Australian Senate’s Rural

and Regional Affairs and Transport References

Committee conducted an inquiry into the ADM

takeover of Graincorp in 2013. It received many

strong grower views in this regard. The New

South Wales Farmers Association told that

inquiry:

‘…our members need to see improvements

in competition. We cannot be locked into the

suboptimal bottleneck infrastructure that we

have’.

These improvements are not yet reflected or

even aspired to anywhere in infrastructure

planning and investment policy: this suggests

that Australian agricultural, transport and

infrastructure agencies have not grasped the

importance of post-farm gate logistics, or if they

have, they do not know how to implement a

better solution. There remains no government

planning in this sector worth the title.

17Good instincts: A Juturna Infrastructure market briefing paper - April 2014

Grain road freight is shackled from being more efficient and responsive: no commercial road

investment and access for private gain on public roads has been permitted the grain sector

– despite this being enjoyed in Australia’s mining sector for the past decade

No road asset reporting and no agreed national standards for road provision stifles road

spending efficiency: there is no national condition reporting of Australian roads, so

government has no means of identifying more efficient spending candidates, nor can grain

investors develop business cases for their own preferred commercial freight upgrades

Policy failures: grain and roads

2

1

Were one to ask Graincorp or anyone else in the

Australian grains sector to describe a transport

system for grains which they could influence

through their own efforts, roads would be left

out of the answer. Australia’s roads remain public

monopolies – the last entirely unreconstructed

economic infrastructure monopolies in the

Federation. There is no ability, outside a handful

of urban toll roads and the mining sector, for

the market to influence and invest in more

productive Australian road outcomes.

The wholly taxpayer-funded road infrastructure

on which the modern grains journey begins

– from paddocks and major storage sites

to railheads, mills and ports – remains far

outstripped by the efficiency of Australia’s

modern road freight vehicles, which lead the

world in productivity and innovation. Grain-haul

vehicles could be more productive still on many

routes, but most roads are not in a condition to

allow better access. Little taxpayer funding exists

for such upgrades: vote-rich urban, peri-urban

and inter-capital highway spending dominates a

politicised roads budget.

As a result of being solely reliant on taxpayer

funding and run by monopoly public sector

agencies, Australia’s key grain networks generate

less post-farm gate productivity than they

otherwise might. Local and state governments

make all decisions on vehicle access. These

governments have too little funds, so there is

never much incentive to grant access to larger,

heavier trucks, which would degrade roads more

quickly15.

Commercial road access and investment rights: written into Australian competition law, then ignored completelyThe Australian commercial access to

infrastructure regime, in part IIIA of the

Competition and Consumer Act 2010 – a key part

of Australia’s competition reforms - includes

Australia’s roads expressly as an infrastructure

asset that is legally open to commercial

investment and better vehicle access. This should

mean farmers, truck operators or financiers

would be allowed to pay for the cost of road

upgrades to allow much higher-productivity

vehicles to access the road in question; under

this arrangement, anyone willing to pay the levy

can gain access to the more efficient freight, but

other road users – while they can still access the

public road – cannot get access to the higher

productivity vehicle. If it makes sense to invest

for commercial gains, people will do so.

This same approach is the basis for commercial

rail access in Australia.

Mining enjoys commercial access and investment to roads, so why not agribusiness?Not only are roads mentioned expressly in

national open access legislation16, but parts of

Australia’s mining sector have been enjoying

even simpler road access and investment

arrangements for over a decade: typically,

this involves mines paying the local or state

government a negotiated extra cost in order to

access public roads with larger heavy vehicles

under safe and sustainable conditions. Miners

thereby gain productivity gains with bigger

vehicles, provided they pay for the cost of the

associated road upgrade17.

In other words, none of this is new. Yet grain

traffic is not given this opportunity.

Grain road freight is shackled from being more efficient and responsive: no commercial road

investment and access for private gain on public roads has been permitted the grain sector

– despite this being enjoyed in Australia’s mining sector for the past decade

1

19Good instincts: A Juturna Infrastructure market briefing paper - April 2014

Could some road freight tasks become over 50% cheaper with user pays freight investments?Infrastructure Australia case studies in north-

west NSW with grain carriers, farmers and

local road engineers show that commercial

upgrades to cash-starved grain roads to allow

longer trailer combinations would bring a

net road freight productivity gain to growers

of over 60%18. The resulting road upgrades

– made under user-pays arrangements –

upgraded priority grain arteries so that

product is not delayed for months by wet

roads; in this way, significant grower holding

costs are avoided. Those choosing to pay a

freight surcharge receive cheaper freight on

a larger vehicle. The rest of the community

benefits from a better road.

Despite this promise (and the fact that these

measures are already in place in parts of the

mining sector), such investment mechanisms

have only recently been ruled out entirely as

productive parts of a road reform landscape

by the formal national road reform process

and – remarkably – by Australia’s Productivity

Commission19.

Rail efficiency also suffers when no commercial road investment is allowed…The absence of this crucial commercial

investment facility means that higher

productivity vehicles servicing the key rail

mainline in more efficient ‘hub and spoke’

arrangement remain far from reality for

Australia’s grain task – something that further

undermines the commercial viability of rail.

…but on-farm storage suffers most of all

The absence of commercial road investment

mechanisms also limits the aspirations of on-

farm storage cooperatives of any scale – these

are a fast-growing phenomenon since the

deregulation of the wheat market. ANZ bank has

observed correctly that:

‘Australia should look to increase competition

in the supply chain to facilitate the presence of

additional land transport operators, traders and

handlers and encourage on-farm storage’20

But this aspiration – a means of farmers retaining

more profitability for their risk and effort –

cannot really occur without smart commercial

investments of scale being permitted in the road

freight network that services major on-farm

storages. The lack of commercial investment

models in roads is leaving post-single desk

cooperatives and other privateers high and dry.

It is important to recognise that any investor in

the network – large or small - will face all these

barriers to reshaping a more dynamic road

network. This needs to change.

One other major challenge to doing better

in roads is the lack of even cursory cost and

condition reports on the road network itself,

or measurement from year to year of how it

is or isn’t improving for funds spent. In simple

terms, Australia’s road agencies and local

governments spend over $19 billion from year to

year on roads21 , without bothering to measure

to common standards or service levels, as for

many other assets. This failure to require asset

condition reports falls particularly hard on rural

roads which service the grains sector, and which

cannot receive system-wide planning attention

without such condition reports.

At the same time, rural local governments

cannot debt-fund their road requirements but

do not have access to sufficient own-source

revenue streams (parking, property development

revenues) which might help improve their

degraded networks. In their lack of asset

reporting and commercial investment structures,

roads remain the ‘odd man out’ in Australia’s

economic infrastructure.

The unreformed road agency sector – a cautionary tale?Through the poor outcomes seen daily on

their rural and regional roads, Australians

have a chance to glimpse what might

have happened to the rest of their

telecommunications, water, energy and

railways assets had competition reforms not

taken place in the 1990s to encourage private

investment in these assets: many roads are

in poor condition and getting worse; nobody

in industry or the community has an ability

to influence the road spending pattern, short

of exhaustive and expensive lobbying; roads

are not maintained to any clear and agreed

standards, leaving rural and remote roads in

particular to languish as the construction cost

of expensive big highways increases at rates

far above CPI; around $19 billion in taxpayer

funds per year is now allocated to roads on

a flimsy basis, in which political influence

on spending patterns remains strong; no

asset condition reports are sought or kept

nationally for the condition of Australia’s

roads, much less made public, making analysis

of government spending performance and the

development of measurable road standards

impossible.

No road asset reporting and no agreed national standards for road provision stifles road

spending efficiency: there is no national condition reporting of Australian roads, so

government has no means of identifying more efficient spending candidates, nor can grain

investors develop business cases for their own preferred commercial freight upgrades

2

21Good instincts: A Juturna Infrastructure market briefing paper - April 2014

Infrastructure Australia’s recent judgement on

this state of affairs is damning:

‘Even supporters of the system find it

increasingly difficult to defend. Unlike almost all

other infrastructure and government services,

road spending comes with no expectation of

efficiency. There is not any evidence to show

that we are making the best decisions. This is

unlike any other critical function in the country.

In education, there are literacy tests, in defence,

performance reviews, in rail, on-time running.

In roads there is purely a photo-op of a fresh

piece of bitumen. Somehow it has been deemed

appropriate to spend $19 billion on something,

but never feel the need to measure the results’22

This lack of transparency about what roads are

worth and how much it would cost to upgrade

them to accept more efficient freights in key

places also makes it impossible for grain growers,

consignors and financiers to start considering

the cost-benefit of making their own targeted

investments in key parts of the road network for

grains.

Practical solutions are at hand…To prove that it could be done, in January

2014, Infrastructure Australia published a full

condition audit of almost 2% of Australia’s

road network, produced by the key grain

and cotton growing local governments of

north-west New South Wales and southern

Queensland.

Despite bureaucratic scepticism, these local

councils produced condition reports on every

kilometre of their roads in less than three

months, to Australian and international road

asset management standards, at no additional

cost to their budgets. Such information –

which could be reproduced nationwide on

a regular basis and could also be linked to

funding based on the achievement of basic

road standards - is therefore readily available,

but not yet used by governments to drive any

road spending and planning efficiency.

In the meantime, farmers must rely on a

diminishing pool of taxpayer funds to pursue

their road upgrades. In turn, Australian rail

investors cannot accelerate high-productivity

commercial road freight connections to their

railheads to reduce rail costs. In the years ahead,

grain growers also face the prospect of higher

and higher road user charges being required

just to keep pace with the $19 billion-plus annual

spending arrangements.

Infrastructure Australia has argued that road

reform is the most significant infrastructure

reform in Australia because this asset class is

the worst managed in the country23, but there

is little evidence this has been grasped by those

responsible. Certainly, as was the case with all

other pre-reform monopoly government utilities,

road agencies have shown little interest in

genuinely reforming themselves.

Not surprisingly, roads are the part of the grain

freight task that is the most dominated by the

public sector, which controls all planning and

funding, yet where productive policy is least in

evidence. A credible grains policy framework for

roads that involves more efficient spending and

potential commercial investment is a matter that

government alone can lead on.

23Good instincts: A Juturna Infrastructure market briefing paper - April 2014

There is no stated national planning and investment objective for what grain on rail should

deliver: east coast grain rail remains a series of degraded and disconnected 19th century

branch line operations which are hard-wired to disperse grains into too many ports.

This ‘system’ is ignored by rail investors for its sub-economic nature and subsidised by

taxpayers as a proxy. Ongoing government and market investment in such arrangements

are likely to reinforce national inefficiencies in grain movements and directly undermine

the prospect of mainline rail-to-port solutions, like those seen in Canadian grain logistics.

The east coast grain rail ‘system’ continues to push most grain the ‘wrong way’ in terms of

a least-cost freight path: that is, the majority of grain tonnage is railed to the busiest and

often most expensive city ports, where grains are not the dominant freight and compete

unfavourably with coal and passenger rail, urban congestion, operational restrictions and

higher terminal and rail development costs, instead of railing north or south to bulk ports

with better future prospects for scale, mix and competitive efficiencies in grain.

No government planning priority on the relative future amenity of different ports to mainline

east coast rail operations only reinforces inefficient grain movement patterns on old branch

lines: governments are failing to send the investment market any clear development signals

about scaled port investments that will support a least-cost mainline rail solution.

Continued government funding of major heavy vehicle upgrades to highways that run

parallel to mainline rail, combined with a lack of reference pricing for full cost recovery

from heavy vehicles on these specific intercapital east coast routes, continues to sterilise

a market for commercial mainline rail investments that would benefit grains, such as the

Inland Rail project.

Policy failures: grain and rail

1

2

3

4

Australia’s rail sector has been through

significant market reforms in the past two

decades. The planning and investment

arrangements for rail today are out of all

recognition from the monopoly public sector

rail providers of previous decades. Operational

productivity has risen markedly since these

reforms. Yet in the past twenty years, there

has yet to be a national framework agreed

and implemented for rail as it relates to the

grains sector. Instead, growers and investors

have continued to experience underdeveloped

and ageing legacy branch line infrastructure

without questioning whether there are not better

solutions for the long term.

In effect, Australia’s grain on rail network

amounts to a series of disparate and outdated

branch lines, on different rail gauges, which all

service different local ports – much as they did

before Australia’s colonies federated in 1901.

The failure to think long-term and collegiately

- as a Federation - has been exacerbated by old

parochialisms: it is state governments rather

than the Australian government which have

most control over east coast grain freight

infrastructure:

‘Overall, no coherent vision or policy yet exists

for rail at either Commonwealth or State

level – either in its own right, or as an integral

component of wider policies covering freight

transport and logistics…Regional lines in

Australia, in particular grain lines, have suffered

from the policy vacuum and from a generally

‘hands-off’ attitude by state governments’24.

Inaction has bred grower and investor frustration, but not productive answersGrain growers and consignors live this failure of

infrastructure planning on a daily basis. Investors

in the supply chain receive little to no returns for

their freight investments, while growers see little

efficiency in the status quo.

In the absence of government being frank about

the long term challenges and realities of grain

freight infrastructure, as discussed above, many

growers look nostalgically to a better past: in

2006 many Victorian growers saw the answer as

government takeover of the grain branch lines:

‘It is clear that the government’s vision for the

performance of the privatised track owner in

maintaining the asset or making it available for

third party operators has not been fulfilled. The

simplest resolution to this long standing issue

would appear to be the re-acquisition of the track

by the government’25.

Such solutions would have the taxpayers

of Australia subsidise the grain sector’s

fundamentally non-commercial, disconnected

19th century rail assets. This is indeed more or

less the current approach to such lines in most

states: the New South Wales Independent Pricing

and Regulatory Tribunal’s 2012 report into that

state’s grain railways found that:

There is no stated national planning and investment objective for what grain on rail should

deliver: east coast grain rail remains a series of degraded and disconnected 19th century

branch line operations which are hard-wired to disperse grains into too many ports.

This ‘system’ is ignored by rail investors for its sub-economic nature and subsidised by

taxpayers as a proxy. Ongoing government and market investment in such arrangements

are likely to reinforce national inefficiencies in grain movements and directly undermine

the prospect of mainline rail-to-port solutions, like those seen in Canadian grain logistics.

1

25Good instincts: A Juturna Infrastructure market briefing paper - April 2014

‘The (NSW) grain line network is old, and

many parts of it have fallen below a standard

considered fit for the purpose of transporting

grain. Currently, the government funds over

95% of ongoing maintenance costs… at current

levels of usage and access prices, rail users

contribute less to maintenance costs than the

value of benefits they gain privately from using

the network’26.

Presumably, these matters are well understood

by the public sector, yet no bureaucracy has

yet felt compelled to speculate on a better

alternative.

To understand the real prospects of branch lines, look at the locos…Where governments cannot speak clearly

about their intentions for branch lines,

markets will. One only need examine the

commercial locomotive and rolling stock

fleets that service much of eastern Australia’s

grain task to see what faith the market places

in the viability of this part of the supply

chain: the aged Class 48 locomotives that

service the New South Wales grain branch

lines (locomotives first built in the 1950s)

were undoubtedly depreciated to a nominal

value long ago by their present owners; very

little new expenditure is apparent on such

locomotives and few new wagons exist for the

grain task: today’s east coast grain wagons

are often pensioned-off and ‘rebirthed’ coal

hoppers.

In this way, the rail freight market itself is

offering very clear signals to Australia’s east

coast governments about the viability of the

current east coast grain branch line network.

Yet on all the evidence, these market signals

are being ignored by the public sector.

In theory: what would ‘better’ look like?A more efficient, system-wide approach to

east coast railing of export grain – one that

helps grain ports and grain rail to become

more viable together - is not hard to describe

in theory. Following well-established economic

principles of ‘least-cost financial and economic

pathways’ for grain would involve:

� bringing the grain from farms and initial

storage points to a core mainline as

reliably and inexpensively as possible;

� taking that grain on a (north-south)

mainline that does not lose significant

efficiency by competing for scarce space

with (eastbound) coal, passenger and

other rail traffic congestion; and

� railing these (north-south) tonnages

to fewer ports for far more efficient

operations – places where expanded grain

stockpiling, access and operations are

least challenged and where more terminal

competition can be encouraged due to the

larger scale of operations.

The required discussion revolves around why

a comprehensive and efficient open access

commercial grain supply chain can’t be planned

and delivered. Capital markets seem to have

noticed this problem: ANZ noted in 2012 that:

‘Significant underinvestment in some areas of

infrastructure, particularly in Australia’s east

coast railways for grain, also needs urgent

attention as they have become major growth

constraints’27.

However, the efficient answer for rail is unlikely

to be blind investment across an existing rail

network that is of questionable value to the

21st century grains task. A first step lies in

appreciating what an efficient grain commodity

rail system might look like, drawing on the best

international examples.

When compared to the grain haul rail systems

employed by other modern global grain

exporters, such as Canada, the shortcomings of

Australian government decision-making in post-

farm gate infrastructure become obvious.

The east coast Australian grains task hardly

exhibits many economy of scale features – east

coast grain today is moved to 13 different ports

(ie excluding Western Australia and Tasmania

ports28), overwhelmingly across separate rail

corridors already congested with coal and

passenger trains.

Even though Canada and Australia often export

a comparable tonnage of grains, Canada gains

greater export efficiency by bringing the

overwhelming majority of export grain from

its central grain growing regions via a trans-

continental mainline railway; it rails the majority

of this grain in long trains to just a few large

scale ports on its east and west coasts.

Canada’s grain on rail task is itself not without

its own capacity, competition and efficiency

challenges29, but one challenge it does appear to

have solved is inherent scale in its rail and port

grain operations.

The charts opposite show the market shares of

Canadian and Australian grain ports. The big

shares enjoyed by the major mainline Canadian

rail destinations such as the port of Vancouver

help serious heavy rail companies to service

fewer places with bigger tonnages, more

profitably.

The Canada comparison

27Good instincts: A Juturna Infrastructure market briefing paper - April 2014

By contrast, the market share of Australian ports paints a sad picture for would-be rail and port

investors: there is no obvious port of scale to pursue greater tonnages at less cost:

Source: Ports Australia data FY 11-12 supplemented with Port of Geelong data (excl. Tasmanian ports)

Although it operates on different regulatory and ownership models in other senses, Canada’s rail and

port arrangements for grain can help to shed light on the sub-scale nature of Australia’s rail and port

sector when it comes to east coast grain movements.

Canada grain export million tonnes by port 2011-12Source: Canadian Grain Commission 2011-12 (*excl. Prairie and Ontario Elevators);

Australia grain export million tonnes by port 2011-12

Fremantle 12%

Melbourne 10%

Kembla 9%

Adelaide 9%

Geraldton 8%

Lincoln 8%

Geelong 8%

Brisbane 6%

Albany 5%

Esperance 5%

Newcastle 5%

Sydney 3%

Giles 3%

Portland 3%

Wallaroo 3%

Thevenard 1%

Mackay 1%

Gladstone 1%

Vancouver 53%

Prince Rupert 17%

Quebec 8%

Baie Comeau 5%

Trois Rivieres 4%

Montreal 3%

Thunder Bay 2.5%

Port Cartier 1.75%

Churchill 1.75%

Sorel 1%

Goderich 1%

Sarnia 1%

Halifax 0.85%

Prescott 0.15%

29Good instincts: A Juturna Infrastructure market briefing paper - April 2014

An alternative arrangement for Australia’s east

coast rail for grains - and for many other freights

- would be to replicate the sort of productive

Class-1 rail network to larger-scaled export ports

which Canada enjoys. To drive scale economies

at port and freight densities on rail, the Inland

Rail would most likely need to run to fewer, larger

ports – thereby retaining some competitive

tension, but offering greater rail tonnages

to give port owners encouragement to make

investments of greater efficient scale and mix.

This sort of systems approach for efficient

mainline grain logistics is a long way from the

present situation – a fact that many in the grain

sector appreciate, to their cost.

The perennial ‘bridesmaid project’The Inland Rail has been shelved and rerouted

by successive federal bureaucracies. At times

even the concept itself – a common gauge

mainline railway linking eastern seaboard

states and thereby the nation - has been at

risk: as late as 1999, the Queensland transport

agency entered serious discussions with

the federal transport department to build

a narrow gauge Queensland rail extension

to link Narrabri in New South Wales with

the Port of Brisbane using Queensland’s

obsolete narrow gauge track. Fortunately

this proposal was finally rejected, but the

incident nearly unravelled 100 years of effort

to resolve Australia’s break of gauge problems,

and served to underline how little store is

actually placed in Inland Rail by the nation’s

bureaucracies.

Since this time, the Inland Rail has languished

as successive governments have diverted

limited rail funds to the east-coast port

rail networks – in very many cases these

ports are direct competitors for Inland Rail

freights. In the meantime, multi-billion dollar

heavy vehicle spending on direct competitor

highways to the Inland Rail – the Pacific,

Hume and Newell Highways – continues apace,

making Inland Rail an ever-less competitive

investment proposition.

Inland Rail: a ‘scaled-up’ freight solution for grains’ future?

All east coast grains ports – Brisbane, Newcastle,

Botany, Kembla and Melbourne – are challenging

destinations for grain railing. This is because

each of these ports have railways which are

always very busy with other traffic, such as

minerals (such as coal at Newcastle – the world’s

largest coal export port) and/or passenger trains

(Botany, Kembla and Melbourne). Such ‘high-

competition’ ports further disadvantage grains

by being in major cities, which brings significant

urban congestion (Melbourne, Sydney and

Brisbane) – all of which leads to higher operating

costs at these ports. The higher value of port

real estate in major cities (Melbourne, Brisbane,

Sydney) exacerbates the situation for grain; in

some cases, the higher unit value of other port

trades, such as containers, means stockpile space

for grains can be very limited.

Together, these factors make the spasmodic

railing of grain eastwards a difficult and costly

process. In almost all cases, grain’s persistence

in travelling to high-value, space-constrained

eastern ports has meant mostly sole operator

terminal arrangements, with no competitive

tension in such places to assist growers and a

corresponding pressure placed on third parties to

enter complex, costly and overly-litigious access

regimes.

The fact that almost 10 million tonnes of grain

travelled through these busy urban east coast

ports in 2011-1230 is a triumph of logistics over

very challenging circumstances. Perhaps it is

also a triumph over long-run common sense.

Notwithstanding the significant sunk investments

on the east coast by many freight forwarders, for

as long as Australia’s east coast grain industry

persists in dispersing its harvest tonnage to too

many high-competition ports on largely separate

rail routes, instead of investing in a long-distance

mainline railway to fewer dry bulk ports of more

scale, efficiency, competition and development

potential, the status quo inefficiencies in rail look

set to remain.

Given relative advances in the on-farm

productivity of emerging grain export nations,

the costs to Australian farmers and investors of

persisting with such grain export arrangements

look set to become much more significant as

time progresses.

This situation - or at least its symptoms - appears

to be understood to Graincorp too: it told the

Productivity Commission in 2009 that:

What has impacted on the efficiency of the supply

chain more than anything is the availability of rail

capability across the east coast’31.

The east coast grain rail ‘system’ continues to push most grain the ‘wrong way’ in terms of

a least-cost freight path: that is, the majority of grain tonnage is railed to the busiest and

often most expensive city ports, where grains are not the dominant freight and compete

unfavourably with coal and passenger rail, urban congestion, operational restrictions and

higher terminal and rail development costs, instead of railing north or south to bulk ports

with better future prospects for scale, mix and competitive efficiencies in grain.

2

31Good instincts: A Juturna Infrastructure market briefing paper - April 2014

Ports remain a ‘poor cousin’ in grain system

planning: for the first 110 years since Federation,

Australia did not even possess a coordinated

process for ensuring that key ports were

protected from competing land uses and given

economic development certainty for the longer

term: only in 2011 did Australia’s governments

agree to a National Ports Strategy; even now

in 2014, these matters remain in their infancy

in many jurisdictions: most state planning

arrangements still tacitly promote the long-term

accretion of commodity handling in Australia’s

most congested and expensive ports.

Better land-side commercial access to ports: all too hard?

One important agreement which Australia’s

political leaders signed up to with the National Ports Strategy – namely, that all jurisdictions

would trial commercial road and rail access

models to their main ports – was quickly

abandoned altogether by risk-averse transport

agencies.

Such government failures impact lower-

value freight tasks like grain exports most of

all: commercial rail investors are offered no

planning and land use insights at state and local

government levels for prospective corridors that

might - in the long run - offer less congested

grain movements that would reduce the cost of

railing grains.

Without better national planning, the sort of

efficient long-haul rail corridors to large scale

grain port terminals seen in Canada probably

remain only a dream in Australia. For the same

reasons, nationally-significant grain logistics

initiatives such as the Inland Rail remain very

high-risk commercial investment projects.

No government planning priority on the relative future amenity of different ports to

mainline east coast rail operations only reinforces inefficient grain movement patterns

on old branch lines: governments are failing to send the investment market any clear

development signals about scaled port investments that will support a least-cost mainline

rail solution.

3

The promise of Inland Rail - a commercial

mainline railway linking the east coast - becomes

a more distant proposition with each new heavy

vehicle investment that road agencies make on

those trucking routes that compete directly with

rail. Such upgrades are priority programs for

road agencies.

This sort of practice is antithetical to any credible

economic policy for a least-cost financial and

economic system of grain movements. In that

sense, it is probably the most compelling proof

that Australia’s transport bureaucracies have no

plan for efficient freight whatsoever.

For as long as government agencies continue to

build heavy vehicle upgrades on roads that run

parallel to or otherwise compete directly with rail

freight, Australia is unlikely to see commercial

investment in inland mainline rail and the value

of its below rail assets will be marked down

accordingly.

Even more importantly, governments have

not established full cost recovery truck access

charges for the highways which compete with

Inland Rail, so as to make the genuine economic

price of road and rail on these routes clearer to

all investors and freight customers.

The Newell Highway: the road that stops the Inland Rail? The Newell Highway stretches the length of

central-western New South Wales between

the small towns of Boggabri in the north,

on the Queensland border, and Tocumwal

in the south, on the Victorian border. The

Newell is one of Australia’s busier interstate

linehaul trucking routes, including agricultural

commodities. In this sense the Newell is a

more or less direct substitute - and a fatal

patronage risk - to any commercial Inland Rail

investment.

There can be no question that the Newell

Highway is a vital asset for the connectedness

of rural communities, local freight needs and

tourists in caravans, but should it form the

core east coast commodity movement system

at the expense of Inland Rail?

This is the question which, self-evidently,

transport agencies and governments have

not asked. Even in 2014, the New South Wales

transport agency has plans which would see

further heavy vehicle upgrades occurring on

the Newell Highway at Inland Rail’s expense.

More ironically still, a March 2014 Inland Rail

forum opened by Australia’s transport minister

in Moree, a grain-growing centre on the Newell

Highway, included a federal government

update on Newell Highway truck bypass

developments. That is, town bypasses to make

the interstate road freight task more efficient

at Inland Rail’s expense were announced at an

Inland Rail symposium.

Continued government funding of major heavy vehicle upgrades to highways that run

parallel to mainline rail, combined with a lack of reference pricing for full cost recovery

from heavy vehicles on these specific inter-capital east coast routes, continues to sterilise

a market for commercial mainline rail investments that would benefit grains, such as the

Inland Rail project.

4

Such examples underline the troubling lack of

understanding amongst government transport

policy makers to the nature of system-

wide freight infrastructure planning and its

commercial development imperatives.

Such policy ignorance in turn builds snares

for politicians, who are unfairly blamed by the

public for problems which should be resolved

by better policy, but which aren’t.

Cheaper freight needs clearer freight pricingUnder a strict competitive neutrality approach

to maximise the efficiency of road and rail

freight to growers and investors, the Newell

Highway would be given a specific access

truck charge by governments; this would

ensure that heavy road freight on the Newell

pays an appropriate element of capital and

operating cost for maintaining this road

freight network; such a charge would very

likely encourage investors in an Inland Rail

development. In return for direct highway

charges heavy vehicles should receive

guaranteed service levels and better truck

access. But this remains a distant prospect

– no access charges for specific highways

have as yet been developed; this is despite

the formal national road reform process now

entering its eighth year of deliberations.

In the meantime, the next best step towards a

viable Inland Rail network – if that is indeed a

genuine objective of governments – would be

to make hard decisions about the future of the

Newell Highway as an increasingly amenable

heavy road freight corridor, rather than as

simply a well-maintained regional highway

for local freight and passenger vehicle

connectedness.

The unpalatable economic reality is perhaps

that Australia cannot have both productive

inland road freight highway and productive

inland rail freight railway. It is certainly

a reality understood by any prospective

commercial investors in Class 1 heavy railways,

who recognise the enormous risk posed by

relentless freight upgrades on the Newell to

any viable Inland Rail investment.

35Good instincts: A Juturna Infrastructure market briefing paper - April 2014

No long-term government land use and planning signals for the most prospective grain port

expansions significantly reduces the chances of seeing investment in large-scale grain ports

with access to competitive terminals.

Australia’s ports remain only a primitive offering to the investment market, with

significant but hidden downside risks to land-side access and investment.

Lack of terminal competition for grains - in part a symptom of grains being sent to the ‘wrong’

ports - forces port access seekers back to dealing with Australia’s overly litigious open access

system.

Policy failures: grain and ports

1

2

3

The policy failings that still beset Australia’s

ports – the dominant physical assets in the

supply chain - still represent another major

hurdle to greater farming profitability and to

higher road and rail investor returns for grain

trade.

In this, ports, the state agencies still responsible

for many of them and regulatory and economic

reform advisers such as the Productivity

Commission, the National Competition Council

and the Australian Competition and Consumer

Commission have presided over almost two

decades of failing to do anything credible to drive

better port planning and investment outcomes

for either farmers or infrastructure investors.

In simple terms, the pursuit of greater scale in

ports requires sympathetic government planning

in order to attract patient capital investment of

scale. Long planning envelopes from government

can provide certainty and a clear program of

land release around key sites can encourage

investments – including by competing terminal

operators, to promote access competition at

grain ports of scale. In most cases for east coast

grain terminals, this has not occurred. In the case

of many east coast ports such as Sydney and

Melbourne, port land is expensive, and therefore

often not very affordable for grain logistics uses

in any event; in other cases, clear land release

plans for port-related land use have been absent.

This makes life especially hard for low-value

commodities such as grain.

No long-term government land use and planning signals for the most prospective grain

port expansions significantly reduces the chances of seeing investment in large-scale

grain ports with access to competitive terminals.

1

37Good instincts: A Juturna Infrastructure market briefing paper - April 2014

Port Metro Vancouver on Canada’s west coast

is Canada’s largest grains export port. Sensible

long-term government planning combined with

natural advantages has built scale and mix

efficiencies for the bulk trade at this port and

this has encouraged terminal competition and

future investment certainty – thereby lessening

access regulation headaches. In the years ahead

the efficiency brought about by these planning

efforts is likely to see Vancouver compete

increasingly not only for Canadian grains, but for

much US grain exports as well.

The high-value mainline rail and port relationship

for Vancouver is symbiotic: the port’s successive

expansions arrangements breed competition

and scale of service: there are now 6 different

grain loading terminals available to growers

at Vancouver (Alliance Grain; Viterra; Cargill;

Neptune Bulk Terminals; Pacific Elevators;

Richardson International32). In turn, the

economies of scale and mix on offer for grain at

this port and certainty around port development

capacity make it profitable for no less than 3

major railways to come to the port (Burlington

Northern Santa Fe; Canadian Pacific; Canadian

National). Train lengths have increased steadily

in recent years. In contrast, Australia’s east coast

grain ports can rarely accommodate grain train

lengths over 650 metres.

Australia has no comparable ‘port of scale’

for its east coast grain exports: there is not

yet any planning and land use signal from any

government in Australia that would encourage

a Vancouver-style outcome. This greatly lessens

the likelihood of commercial investors risking a

major investment in an Inland Rail development

across eastern Australia.

Even basic facts about Australia’s ports are

not readily available to would-be investors: no

national government report identifies ports

by value of goods moved33; no national report

identifies the shipping depths of all commercial

ports and any restrictions on further depth

development. In government terms, ports remain

a matter for their owners, rather than assets

which benefit from long-term land use and

development planning. Investors and growers

alike suffer from this neglect.

Port Metro Vancouver: how grain freight scale, mix and competition efficiencies can follow when governments offer leadership in port planning.

Over the two decades since Australia embarked

on competition reform of its economy, ports

– despite being one of the most thoroughly

commercial asset classes - have largely escaped

genuine reform.

Some ports have been sold to private operators,

yet new owner/operators have been offered

no certainty of access and investment into

the roads or rail lines which service the port,

or for the future maintenance of competitive

shipping channel depths beyond the wharves.

Ports in Australia therefore continue to be sold

primitively, as isolated assets, despite the fact

that many of the big cost pressures they face lie

outside of the owner/operator’s control34.

The Productivity Commission – Australia’s

economic reform adviser - has failed to signal

that ports are a problem; an extremely meek

review of port operational arrangements in the

1990s35 did nothing to consider access issues, or

the prospect of port investors having the ability

to make complementary investments upstream

and downstream of the wharves. Australia’s

primary economic regulator, the Australian

Competition and Consumer Commission – has

been similarly silent on the control, planning

and expansion barriers facing ports that wish

to achieve greater scale and cross supply chain

efficiencies, although a recent ACCC media

statement about container ports did at least

advocate the need for further reform in ports36.

Australia’s ports remain only a primitive offering to the investment market, with

significant but hidden downside risks to land-side access and investment.

2

39Good instincts: A Juturna Infrastructure market briefing paper - April 2014

Australian ports don’t make much money, so why isn’t reform a priority?On the evidence of their recent low returns on equity by international standards, port efficiency should

also be of real concern to investors and farmers alike. Quite recent statistics suggests that Australia’s

ports are overall a poor investment proposition:

Australian ports versus the world – could preventing whole of freight supply chain investment be harming individual port asset performance in Australia?

Average Average global Average all ports Australian ports (1) comparator ports (2)

Total debt/shareholder’s equity 58.9% 166.4% 109.1%

Total debt/total assets 21.2% 25.6% 23.3%

Return on assets 2.1% 5.2% 3.5%

EBIT return on assets 5.0% 7.5% 6.2%

Return on equity 3.6% 9.2% 6.2%

Interest coverage ratio 7.30 7.31 7.30

Debt coverage 0.60 1.45 1.00

Revenue/total assets 0.20 0.23 0.21

Current ratio 2.59 2.00 2.32

Quick ratio 2.19 1.53 1.88

These returns should serve as a spur to consider

alternative investment models that would allow

owners or renters of ports to invest in and

control more of their upstream and downstream

productivity and investment risk.

Parts of the whole problem are glimpsed on a

regular basis, but seemingly, nobody joins the

dots: the Victorian Switchpoint: Review of Rail Infrastructure (‘The Fischer Review’) identified

the grain logistics problem clearly enough:

‘The changes occurring in the grain industry

through new super-sites and closure or reduced

use of smaller, limited service storage silos

are part of a trend towards rationalisation of

the grain handling system. This has a critical

influence over the shape of the sustainable

intrastate rail network as rail services to ports

are concentrated on fewer sites for increased rail

efficiencies and greater economies of scale at the

grain terminals’37.

No government since has asked how this

insight might be extended to a national port,

rail and road review of the sector’s transport

infrastructure. Grain freight’s history is one

of opportunities for clear thinking ignored,

repeatedly.

(1) Australian ports analysed were: Melbourne, Port Kembla, Newcastle, Townsville, Fremantle, Bunbury, Tasports, Port Hedland (NB: 5 of these 8 ports include grain export facilities)

(2) International ports analysed for comparative purposes were: Singapore, DP World ports, Lyttelton, Auckland, Sydney, Toronto, Vancouver

Source: Infrastructure Australia/Deloitte Review of Port Balance Sheet Capacity Draft Report (2012) p. 11

Access regimes for Australian ports – allowing

third parties access to key facilities on fair and

open commercial terms – remains an area of

competition law where access disputes can

only be resolved through extremely costly and

time consuming litigation. In the case of the

now famous Pilbara rail access dispute between

mining companies, the litigation is going into

its eighth year, having cost millions of dollars in

legal fees to all parties without yet producing a

definitive result.

The overly litigious nature of Australia’s port

access regime should be of concern to farmers

and investors alike. No less a figure than a lead

architect of Australia’s access regimes paints a

bleak picture of current arrangements:

‘To me the (access) regime is set up in a way…

that there is no doubt that the system facilitates

the delay and frustration and difficulties that deal

with it... the Americans are absolutely appalled

at the time-wasting that goes on in Australian

courts and I’m told by many, many Americans

that they won’t bring deals to Australia to be

assessed in the competition area because we just

take too bloody long – excuse the expression’38.

The simpler alternative to messy access regime

reform is to inject competitive tension at ports,

by encouraging development of competing

grain terminals where grain is the dominant

freight or where land values and land release

can encourage multiple operators; in this

way, the grain supply chain can set itself up

around competitive ports of scale and mix

efficiencies. This will be challenging of course,

as it foreshadows port losers as well as winners,

but if governments, investors and producers

have lowering the cost of grain freight as their

main goal, competitive terminals forms a logical

part of any comprehensive grain infrastructure

framework.

Can’t the market solve these problems without the government? The problem of differing objectives in the sectorIt might be argued that it is not within the

remit of governments to plan for grain ports of

national scale and that this can be established by

market forces alone. Indeed, some recent grain

infrastructure development at east coast ports

such as Newcastle is impressive39. The problem

appears to lie in what objectives one sets for

Australia’s grain freight: different objectives

require different depths of leadership and

certainty of government.

If the prime objective is for one east coast

port to out-compete all others in grain freight,

then market effort and investment alone might

suffice (although the upstream inefficiencies on

all of the ageing and disconnected east coast

rail corridors would make even this objective

ambitious).

Lack of terminal competition for grains - in part a symptom of grains being sent to the

‘wrong’ ports - forces port access seekers back to dealing with Australia’s overly litigious

open access system.

3

41Good instincts: A Juturna Infrastructure market briefing paper - April 2014

If on the other hand the simple goal is to

lower transport cost inputs to grain growers, investors and buyers, then a more holistic

solution – one which considers the long-term

efficiencies in mainline rail for grain, and what

this might require in terms of stable and future-

proofed ports, is an area in which Australia’s

governments need to be clear and consistent

with the grains sector. Governments need not

‘command-plan’ port infrastructure, but they do

at least need to offer investors certainty about

the long term options.

Can I invest with certainty in the grain supply chain? A checklist of investor access and investment roadblocks by Australian governments:

Barrier to trade

Port ownership or long-term lease

Connecting high-productivity rail investment

Connecting high productivity road

investment

Connecting high productivity shipping

channel investment

Ability to invest in market solution

Patchy, many ports remain GOC

Usually unavailable as single investment,

even with 3rd party access

No: roads government monopolies - costly/

lengthy ‘trials’ are only option

No legal right granted as part of port owner/

lessor entitlement, subject to separate

government processes, sometimes separate

government agency

Failed commercial road freight investment trials: road agencies prove incapable of (and unwilling to deliver) market-led solutionsIn 2008, Australia’s Prime Minister and Premiers

tasked road agencies with trialling commercial

approaches to roads, where the farmer or

truck operator could nominate road upgrades

or access for bigger trucks and receive better

freight access in return for a fair additional user

fee.

Truck operators and road freight customers

nationwide applied. Two road agencies

abandoned the trials before they had begun,

stating (amongst other things) that the

information about the road conditions was

too hard to assemble. Only two trials were

completed. One was to allow a meat processor to

move marginally heavier truck weights from its

processing facility in central NSW to its railhead

– a distance of just 750 metres. That project took

years, not months to establish – at considerable

cost to the would-be customer.

An independent review of these failed trials

found that road agencies did not favour this

market-led approach to road freight investment:

one road agency commented that ‘if hundreds

of vehicles and multiple operators were

participants, this system would be a far too

onerous administrative burden’ and ‘it would lead

to messy, ad hoc networks arising’40.

Following precedents in rail and other utilities, a

more market-driven commercial freight model

demands considerable structural reform of

large monopoly road agencies. It also needs

to welcome private investment in grain freight

solutions, where it makes commercial sense, in

order to ‘top-up’ taxpayer spending – yet these

things are not yet conceded by the public sector,

which has full control over the shape and pace of

any reforms.

Trucking grain harvest management schemes: the ‘save now, pay later’ strategyIn the absence of real road investment reform,

government offers growers additional weights

on grain trucks (typically, an extra 5-10% of

maximum legal weights). These measures are

popular with growers, but such schemes only

accelerate road failure without generating any

new funds to pay for this. The result is that

local governments are forced to levy higher

rates in future years to pay for roads that fall

apart sooner, or impose future weight limits on

prematurely broken roads.

Grain branch line reviews: ‘kicking the can down the road’Governments regularly deal with the

inadequacies of grain branch lines and grower

and investor discontent by holding ‘reviews’ of

these branch line networks.

The NSW Grain Freight Review of 2009 took a

typical approach: as noted since by that state’s

rail regulator, it recommended that:

‘most of the lines be stabilised at a minimum ‘fit

for purpose’ standard through a non-recoverable

NSW government grant, contingent on industry

investment in other supply chain improvements’.

Such reviews suffer from insufficiently broad

remits: the 2009 review was another report

which in effect left efficient grain on rail in no-

man’s land: no national plan for a move to shift

more rail to a commercial mainline service, such

as through Inland Rail, no detailed plan to pursue

Poor excuses: today’s proxies for real grain transport reform:

43Good instincts: A Juturna Infrastructure market briefing paper - April 2014

serious road freight pricing and abandon costly

substitute highway infrastructure upgrades that

crowd out a commercial Inland Rail solution.

Other reports have advocated for reinvestment

in the same old obsolete colonial rail networks

while blithely assuming that wider system

efficiencies will flow as a matter of course – that

somebody else will fix the wider problems. The

Switchpoint review of Victorian freight rail (‘The

Fischer report’, 2007) advocated for the state’s

mostly broad gauge colonial rail to be divided

into ‘Platinum’, ‘Gold’, ‘Silver’ and ‘Bronze’ line

classes – with all but Bronze class to be given

increased taxpayer funding. For the ‘Silver’ lines

– being most of Victoria’s remaining operational

grain branch lines (ie the equivalent of NSW Class

4 and 5 lines) - the report advocated increased

government funding conditional on wider market

efficiencies – efficiencies that were a distant

prospect then and which have not substantially

occurred since:

‘high priority lines to be rehabilitated to original

track classification conditional on grain industry

collaboration and commitment to improve overall

supply chain efficiency to support rail. This

should be done by establishment of a sustainable

fleet of rolling stock; further centralisation and

upgrading of silos and port facilities with longer

sidings, fast train loading, fast truck turnaround

and extended operating hours’41.

Public-sector-driven planning still dominates the Inland Rail project The Inland Rail is commercial infrastructure of

national significance to the efficiency of a future

east coast grain network. Yet this project remains

locked in a public-sector led process, with

government wrongly assuming that they must

lead in the funding, planning and development

of how and where the Inland Rail would develop,

rather than allowing private investors and

growers as well as other prospective freight

customers to lead the process.

This attitude and approach - leavened by

intermittent ‘industry consultation’ - endures

in 2014, with a government-dominated

Implementation Group being provided with

taxpayer funds to decide on such matters,

despite acknowledged international best practice

being clear that commercial rail projects like

the Inland Rail should always be developed as

straight commercial investment decisions:

‘The market and technical challenges and

(international) policy experience imply that the

policy aims for rail freight…are best provided by

the private sector. Success in winning market

share depends on the sustained commercial

focus and agility of a private company to confront

and prevail against a highly-decentralised,

competitive and entrepreneurial road haulage

industry’42.

Continual improvement in government policy outcomes are not in evidence – is it time for a peer review?The Organisation for Economic Cooperation and

Development’s International Transport Forum –

of which Australia is a member - made the point

earlier in 2014 that when it comes to effective

transport infrastructure reform:

‘Policy cannot be well-formulated without

improved techniques for planning and

regulations’43.

The OECD made this observation in its peer

review of Mexico’s rail freight sector. Perhaps a

first step to challenging the status quo would

be to invite a similar international peer review

to be conducted on Australia’s east-coast grain

infrastructure sector?

A catalyst for improvement is required if

Australia’s continued response to the grain task

challenge ahead is merely to subsidise failed

and expensive branch lines, reject commercial

investment models in better road freight, make

taxpayer investments in roads which directly

sterilise productive grain mainlines and offer no

market-led planning and regulatory certainty to

truly national scale rail and port investments for

grains.

Reform leadership from growers and investors is vitalMarket reform will not work well without market

leadership. In this sense, a political will for

national reforms to post-farm gate infrastructure

must be matched by agribusiness and its

boardrooms being prepared to look beyond the

aspects of their business over which they have

direct control, and enter the frustrating field of

public policy reform for the betterment of the

sector.

Market-based reforms imply winners and losers,

but the process of reform is something all in

industry and the investment community can

influence for the better; without market-led

insight, ‘efficient government reform’ remains

a contradiction in terms. Other countries seem

more willing to recognise this fact: the giant

Burlington Northern Santa Fe Railway in North

America noted recently that:

‘Transportation professionals need to do a

better job of educating politicians, legislators

and shippers on transportation networks…they

need to help define transportation networks

of the future and they need to help define a

better process for allocating federal and state

transportation money’44.

Given the demonstrably poor track record of

Australian bureaucracies in leading the effort

on these challenges, new alliances across the

Australian freight, grower and investment

sectors to guide a national framework appear to

be a faster route to a better place.

45Good instincts: A Juturna Infrastructure market briefing paper - April 2014

Adventure and optimism are the ingredients

in shortest supply in Australia’s grain sector

transport infrastructure landscape. Governments

and industry must find these qualities quickly

and harness them, if anything like a credible and

internally-consistent framework for Australian

grain transport infrastructure is to emerge.

There are many reasons why Australian grain

has competitive advantages. One is the near-

dauntless optimism of the Australian growing

community: harnessed to the right government

reform framework, much can be achieved

with such enthusiasm and goodwill. Growers

themselves are well aware of the real challenges

ahead:

‘We are confronted with a deteriorating road and

rail situation and (hopefully we are) confronting

an ever-expanding grain transport task…so yes,

the solution is money. The solution is a futuristic

view and faith in the grains industry and until

there is the political will to back the belief of the

farmers, I despair somewhat of the solution, to be

quite honest’45.

This note of despair is an indictment on

successive state and federal Australian

governments: they have failed to complement

- through good plans and investment reforms -

what any behavioural economist would recognise

immediately as the ‘strong optimism bias’ of

grain growers.

‘Reopening agriculture for business’ post-

Graincorp-ADM will require governments to

listen to grower and investor concerns alike and

confront the one thing that always proves most

intransigent in the policy debate: government

bureaucracies themselves, which too often see

change and structural reinvention as a threat,

to be ignored where practicable or strung out in

endless government committee processes and

complexities, where unavoidable.

Is there truly an appetite for the reforms

needed? Time will tell. If it is to occur, the grains

sector sorely needs all parties to bring a spirit

of adventure to their efforts; as one architect of

Australia’s world-leading competition reforms

has noted:

‘To my way of thinking one of the great problems

of our country is that we’re afraid of tackling

serious problems properly and adventurously and

getting to the heart of an issue’46.

‘Adventure and optimism’

1. Australian Export Grains Innovation Centre The Cost of Australia’s Bulk Grain Export Supply Chains: An Information Paper (2014)

2. In 2006-07 Australia’s domestic freight task was already estimated at 514 billion tonne/kilometres. See Bureau of Infrastructure, Transport and Regional Economics Research Report 123 Truck Productivity: sources, trends and future prospects (2011) p. xiii

3. Australian Treasury transcript of Treasurer’s media announcement in relation to the proposed ADM takeover 29 November (2013)

4. See comments by the Graincorp chairman reported by ABC Australia March (2014): http://www.abc.net.au/news/2014-03-09/grain-handler-graincorp-reveals-downsides-of-failed-takeover/5301528

5. See for example Office of the Infrastructure Coordinator Submission to the Productivity Commission into Public Infrastructure (2013)

6. Mullen J and Crean J Productivity growth in Australian agriculture: trends, sources, performance Research report Australian Farm Institute (2007)

7. Sheng, Y, Mullen J, Zhao S Has growth in productivity in Australian broadacre agriculture slowed? ABARES conference paper 10.1 presented to the 54th conference of the Australian Agricultural and Resource Economics Society Adelaide, ABARES (2010)

8. Mullen J, Tester M, Goddard M, Goss K, Carberry P, Keating B and Bellotti B Assessing the Opportunities for Achieving Future Productivity Growth in Australia Agriculture Research Report of the Australian Farm Institute (2012) Op Cit p.20

9. Deards B, Mobsby D, Thompson N and Dahl A, Australian Grains Outlook for 2013-14 and industry productivity ABARES research paper (2013) p. 18

10. Obermann R, Dobbs R, Budiman A, Thompson F, Rosse M The Archipelago Economy: Unleashing Indonesia’s Potential McKinsey Global Institute (2012) pp. 44-45

11. Pinstrup-Andersen, P Contemporary Food Policy Challenges and Opportunities: A Political Economy Perspective Contributed paper for the 56th Australian Agricultural and Resource Economics Society annual conference, Fremantle WA (2012)

12. Byerlee, D Exploring sustainable solutions for increasing global food supplies: report of a workshop Committee On Food Security for All as a Sustainability Challenge, Science and Technology for Sustainability Program, Policy and Global Affairs, National Research Council of the National Academies, Washington DC The National Academies Press (2011)

13. Li, Z and Liu, X The effects of rural infrastructure development on agricultural production technical efficiency: evidence from the data of the second National Agricultural Census of China Contributed paper for the International Association of Agricultural Economists conference Beijing, China, (2009)

14. Brown, Dennis, Faquir Bagi, Chin Lee, Constance Newman and Richard Ree Pacific Food System Outlook 04-05: United States Pacific Economic Cooperation Council (2005)

15. ‘Road agencies cannot be certain of receiving adequate funding of road expenditure from general revenues. In response, road agencies and local governments often regulate road access by heavy vehicles to contain road maintenance and replacement costs. Such blunt mechanisms have the potential to significantly constrain freight transport productivity’ Productivity Commission Inquiry into Road and Rail Infrastructure Pricing (2006) Final Report p. 347

16. The Australian third-party (commercial) access regime, in part IIIA of the Competition and Consumer Act (2010), provides for the declaration of “services” and (in s 44S and other provisions) for third-party access to declared ‘services’. Such ‘services’ expressly include the use of a road, noting paragraph (b) of the definition of that word in s 44B: ‘service’ means a service provided by means of a facility and includes… the use of an infrastructure facility such as a road or railway line;

17. See discussion of deed-based commercial mine access to and investment in public roads for the South Australian mining sector in Infrastructure Australia COAG Road Freight Incremental Pricing Trials: prospects for a more commercial focus in road reform Juturna (2011) pp.18-19

18. Infrastructure Australia National Road Asset Reporting Pilot Juturna Infrastructure and participating local governments (2014) see Part Five: Commercial road access case studies)

Endnotes

47Good instincts: A Juturna Infrastructure market briefing paper - April 2014

19. See COAG Heavy Vehicle Charging and Investment Reform Project submission to the Productivity Commission Review of the National Access Regime, January (2014).

20. ANZ Greener Pastures: The Global Soft Commodity Opportunity for Australia and New Zealand ANZ INSIGHT Issue 3, October (2012) p. 60

21. Bureau of infrastructure, Transport and Regional Economics Infrastructure Investment Macromonitor Information Sheet 52 p. 4 Public Road Expenditure, Construction and Maintenance 2012-13 and including private road tolls

22. Excerpt from a speech by Australia’s Infrastructure Coordinator, Mr Michael Deegan, delivered in Bingara NSW to launch The Bingara Accord for Rural Roads, Australia Day, 26 January (2014).Full text at: http://www.infrastructureaustralia.gov.au/publications/files/The_Bingara_Accord_1_Speech.pdf

23. Infrastructure Australia State of Play in Australia’s Economic Infrastructure (2013)

24. John Hearsch Consulting Rail Productivity Information Paper commissioned by the National Transport Commission (2008)

25. Grains Australia Single Vision: Victorian Grain Freight Infrastructure Stakeholder Views Analysis (2006) p. 10

26. Independent Pricing and Regulatory Tribunal Review of Access Pricing on the NSW Grain Line Network (2012)

27. ANZ Greener Pastures: The Global Soft Commodity Opportunity for Australia and New Zealand ANZ INSIGHT Issue 3, October 2012 p. 64 ‘Policy discussions vital to lead change’ (2012)

28. Ports Australia statistics for grains exported by port, (2011-12)

29. See The Economist Prairie Pile Up 5 March 2014 for a summary of Canada’s latest capacity challenges in confronting a record 2013 harvest: http://www.economist.com/node/21598414/print

30. Ibid

31. Productivity Commission Inquiry into Wheat Export Marketing Arrangements (2009) Transcript of public hearings p. 211

32. Research based on the author’s discussions with Port Metro Vancouver’s administration (2014).

33. The Australian Government’s Waterline statistical report on major Australian ports only measures tonnages and TEU as port throughput metrics.Most of the bulk ports in Australia relevant to grain are not tracked by this report in any event.

34. For more detail on this challenge see The Game Has Changed But Not Yet The Rules Juturna briefing paper N0. 1 (2013) www.juturna.com.au/publications

35. Industry Commission Port Authority Services and Activities Report No. 31 (1993)

36. http://www.accc.gov.au/media-release/accc-identifies-reform-priorities-to-support-competition-at-australia%E2%80%99s-growing-container-ports

37. Victorian Department of Infrastructure Switchpoint: Victorian Rail Freight Network Review (‘The Fischer Review’) (2007) p. 33

38. Productivity Commission Inquiry into Wheat Export Marketing Arrangements (2009) Transcript of public hearings – evidence of Professor Bob Baxt AO p. 115

39. http://www.theland.com.au/news/agriculture/cropping/general-news/newcastles-new-grain-port-offers-opportunities/2689159.aspx

40. GHD COAG Road Reform Review of Incremental Pricing Trials report (2011)

41. Victorian Department of Infrastructure Switchpoint: Victorian Rail Freight Network Review (‘The Fischer Review’) (2007)

42. Organisation for Economic Cooperation and Development’s International Transport Forum: Peer Review of Railway Freight Development in Mexico February 2014 p. 10 ‘Freight policy principles for rail’

43. Ibid p. 26

44. Vann Cunningham, Assistant Vice-President Economic Development, BNSF Railway, Inland Ports and High Capacity, Asset-Intensive Transportation Networks (presentation) (2012)

45. Productivity Commission Inquiry into Wheat Export Marketing Arrangements (2009) Transcript of public hearings – evidence of Mr Derek Clauson p. 100

46. Productivity Commission Inquiry into Wheat Export Marketing Arrangements (2009) Transcript of public hearings – evidence of Professor Bob Baxt AO p. 109

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