Grain Industry Bulk Supply ChainExport Contracts and Documentation – May 2020

Tim Ross - GTA

Contents

Grain Supply Chain Overview

High Level System Differences

Supply Chain Participants

The Bulk Export Process Pre Vessel Arrival On the Berth

The Risks

Industry Framework

The Supply Chain - 24 Bulk Export Terminals

Ports-West & South

1- Geraldton

2- Fremantle

3- Albany

4- Esperance

5- Thevenard

6- Lincoln

7- Lucky Bay

8- Pirie

9- Wallaroo

10- Giles

11- Adelaide (2)

Ports- East

12- Portland

13- Geelong

14- Melbourne

15- Kembla (2)

16- Newcastle (3)

17- Brisbane (2)

18- Gladstone

19- Mackay

20 Bunbury

18mmt

9mmt

1.0 mmt

17mmt

19

1.0 mmt

1.5 mmt

1.0 mmt

Port Capacity ~ 50mmt

Australia's Export Focussed Supply Chain

Mobile Bulk Loaders

Containers Versus Bulk

AEGIC – Australia’s Grain Supply Chains

Container Growth

Competitive freight to reposition boxesLower entry costLower working capital costLogistics at destinationShipping line consolidationSource: ABS

Seaport Terminal Sea Freight to Asia

The Supply Chain - Site and Rail Network

Country Site – Average Distance to Port

Source: AEGIC

Queensland Characteristics Regions

CQ / SQ -Darling Downs Agronomic:

Summer (Sorghum) & Winter CropsPremium Wheats (APH1/APH2 ) Pulses

Transport Infrastructure:Rail – NG track

Aurizon; WatcoRoad - Extensive rural fleet Extensive Farm storage 300km average

Ports/Packers 3 ports / numerous packersOperators GNC & Wilmar (Gavilon)

MarketStrong Domestic Demand – Multiple destinations.

NSW Characteristics Regions

Northern (Liverpool Plains)/Central/Southern Agronomic:

Summer (Sorghum - Nthn) & Winter CropsNthn Premium Wheats (APH1/APH2/Durum) Pulses

Transport Infrastructure:Rail – SG track

Pacific National, SSR, QUBE, FletchersRoad - Extensive rural fleet Extensive Farm storage 500km average

Ports/Packers 2 ports / numerous packersOperators GNC, Quattro, NAT

MarketStrong Domestic Demand – Multiple dest

Grain Storage – Farm

13

Growth Drivers:Harvest Efficiency

Reduced transport costQuick turn aroundAround the clock operationsQuickly deal with “out of spec”

Direct to End User DeliveryContingent on local marketsAllocate handling and warehousing costs to the on-farm investment

Marketing/Price OptimizationA small percentage of On Farm Stored GrainTiming

14

On-farm storage is growing in many shapes and sizes..

15

16

17

Victoria Characteristics Regions

Eastern, Northern, Central, Western (Wimmera, Western District) Agronomic:

Winter CropsHomogenous Wheats, Barley, Canola, Pulses

Transport Infrastructure:Rail – SG & BG track

Pacific National, SSR,Road - Extensive rural fleet Expanding Farm storage 300km average

Ports/Packers ports / numerous packers

Operators GNC, Quattro, NATMarket

Strong Domestic Demand –Multiple Destinations

South Australia Characteristics Regions

Eyre Peninsula, Yorke Peninsula, Mainland – North, SE, Mallee Agronomic:

Winter CropsHomogenous Wheats, Barley, Canola, Pulses

Transport Infrastructure:Rail – SG/BG/NG track

G&W Road - Extensive rural fleet Limited Farm storage 150km average

Ports/Packers 7 ports? / Minimal packersOperators Viterra, Cargill, T-Ports, ADM

MarketMinimal Domestic Demand

WA Characteristics Regions

Geraldton, Kwinana, Albany, Esperance Agronomic:

Winter CropsHomogenous Wheats, Barley, Oats, Canola, Pulses - Lupins

Transport Infrastructure:Rail – SG/NG track

WatcoRoad - Extensive rural fleet where requiredLimited Farm storage 350km average

Ports/Packers 5 ports / Minimal packersOperators CBH, Bunge

MarketMinimal Domestic Demand

Contents

Grain Supply Chain Overview

High Level System Differences

Supply Chain Participants

The Bulk Export Process Pre Vessel Arrival On the Berth

The Risks

Excess Capacity exists on East Coast

AEGIC – Australia’s Grain Supply Chains

Rationalisation is Occurring - Excess Capacity

AEGIC – Australia’s Grain Supply Chains

Contents

Grain Supply Chain Overview

High Level System Differences

Supply Chain Participants

The Bulk Export Process Pre Vessel Arrival On the Berth

The Risks

Rural Supply Chain Participant Sector Discussion & Trends

Grower Brokers/Trade counterparties

• Provide accumulation capacity, market intelligence & liquidity

Grain receival and storage

• Point of sale and grain testing/segregation/husbandry• Increase capacity in the farm storage sector

Road transport • Rural based fleets• Increased share of the grain freight task in EC

Rail transport – Above Rail

• Decreasing capability in all regions• More closure of regional branch lines• Management of fixed cost risk is and issue

Rail transport – Below Rail

• Complex government and private sector arrangements• Increased closure of regional branch lines• Management of fixed cost risk is an issue

Supply Chain Management Systems

• Inventory management and logistical coordination capability is essential – glue to hold this all together.

Port Supply Chain Participants Sector

Port Terminal Services • Key Supply Chain Assets – access is critical to execute export contracts

• Greater use of low-cost mobile ship loaders

Port Authorities/Owners

• Multiple different ownership arrangements – privatisation• Manage protocols around vessel arrival – Pilotage & Tugs • Port asset management – wharfs/berths/channels etc

Stevedores • Responsible for the oversight of the vessel loading• Work in conjunction with the Terminal operator and the vessel captain

Agents – Ship Owners/ Charterers / Shippers

• Agents represent their clients interests in all aspects of the vessel arrival, survey, berthing, loading and loading delays

Ship Owners • Companies that provide bulk vessels to the trade.

• Consolidation of the shipping industry is underway

Ship Broker • Provides a service between Charterers and Ship Owners

Shipper (Charterer on occasions)

• Cargo owner and on occasions will mange the vessel through a time charter

Contents

Grain Supply Chain Overview

High Level System Differences

Supply Chain Participants

The Bulk Export Process Pre Vessel Arrival On the Berth

The Risks

To be able to export in bulk fromAustralia a shipper needs todetermine its trading strategy

Physical/PaperExport/DomesticBulk Export / ContainersState and Port/sGrains and customer demand

Strategy will drive accumulationand sales and lead to supply chainactivity including:

Which assets do I want access to andwhen? Timing is a critical aspect.

Accessing Services – Contracts

Once the strategy is clear the supply chain contracts and relationships must be established

What is Capacity Capacity per Day Discussion

Country Loading • Sites x Tonnes per Day • 10 sites @ 600tpd = 6k mt

Transport Capacity • Capacity to match country loading and discharge

Port Discharge • Commencement time• Slot booking / available hours • Tonnes per Hour capability

Port Storage for accumulation

• Access and Allocation for a high proportion of the cargo is ideal to pre-accumulate.

Nominal Elevation Capacity

• Portland 35k for 15 days = 2300 TPD [Rated at 1400 TPH]

Loading 6k Tonnes

Transport 3.5k

Port Discharge 10k

Port Storage No pre -

accumulation

Potential List of Contracts Sector

Port Terminal Services • Key Supply Chain Assets – access is critical to execute export contracts

• Greater use of low-cost mobile ship loaders

Country Storage & Handling Agreement

• Multiple different ownership arrangements – privatisation• Manage protocols around vessel arrival – Pilotage & Tugs • Port asset management – wharfs/berths/channels etc

Rail / Road Freight • Responsible for the oversight of the vessel loading• Work in conjunction with the Terminal operator and the vessel captain

GrainCorp Port Terminal Services Example:ACCC exempt Ports:

Newcastle , Geelong, Brisbane & Port KemblaAll others strict Port Protocols apply

Category A Port Terminals - Port Kembla, GeelongCategory B Port Terminals - FI, CarringtonCategory C Port Terminals - MacKay, Gladstone, Portland

GrainCorp Port Terminal Services GrainCorp Port Terminal Services KeyTerms:

Assigned Load Date - QueueBooked Elevation Capacity - TonnesBooking Fee – Non refundable fee - $Confirmed Elevation Period – ShippingWindowElevation Capacity – Tonnes per CEPElevation Period – Half a calendar monthETA – Vessel arrivalNominated Elevation Capacity

Long and Short Term AgreementsShort term Agreement user can access 40% ormore of nominated Elevation CapacityLong Term arrangements

3 Shipping year based on 30k or 50k mt per monthfor 3 / 5 or 10 months

GrainCorp Port Terminal Services – The Process

GrainCorp Port Terminal Services Process:Shipping year commences on 1 Oct.Indicative Elevation Capacity is set by 31 Dec for 3 years – 12 month lead timeCustomers must commit to Long Term CapacityGrainCorp assess Long Term Nominations and consult/assign capacity – LongTerm Allocated Capacity (Booking Fees apply)Shipping Stem is opened End of June – Long Term Allocated Capacity must beconverted into Elevation Capacity via Cargo Nomination ApplicationCNA

Port & Elevation Period (15 days )TonnageBooking Fee applies

GrainCorp – Pre Vessel Arrival

GrainCorp Port Terminal Services Process:Estimated Time of Arrival - 21 to 42 Day with arrival in the Elevation PeriodETA to contain:

ETAGrain / GradesVessel name [Check it fits]One Port or Two

Post receipt of the ETA GNC will provide an Assigned Load Date (based on ETAdate/time of receipt)

First come first served

Stem is Updated – (Updated…NNnnnnnnnn)Vessel Nomination – Confirmation of Vessel and details [Make sure it fits]

NameLength, depth, max air draft etcLast 3 cargoesMarine and PEOM pre-load survey information

Vessel changes are monitored - impact to Stem is monitored

Contents

Grain Supply Chain Overview

High Level System Differences

Supply Chain Participants

The Bulk Export Process Pre Vessel Arrival On the Berth

The Risks

GrainCorp – Vessel Arrival

Vessel arrives – AnchorsVessel Survey –

Marine – fit for voyage;DAWE – fit for cargo

Notice of Readiness is given – Time counts towards the Shipper forDemurrage and Despatch calculationVessel Authority to Load is provided to the BHCVessel is called to Berth and commences LoadingVessel Completes loading and time stops counting for Demurrageand Despatch CalculationBill of Lading and all related export documents are completedCounterparties exchange payments/Service Providers compensated

High Level Vessel Process

Commit – Sale / Slot / Vessel /Accumulation

Vessel ETA -Transport /Purchase

Orders

Market Analysis Contracts &

Relationships

Pre-Berth Prepare Cargo & Vessel

Market and Supply Chain Strategy

Berthed & Loading

Complete Contracts and Docs Process

Vessel Sails – Money exchanged

Contents

Grain Supply Chain Overview

High Level System Differences

Supply Chain Participants

The Bulk Export Process Pre Vessel Arrival On the Berth

The Risks

Major Risk Discussion Sector What can go Wrong

Grower Brokers/Trade counterparties

• Inability to meet contract obligations

Other Shippers • Knock on impacts from prior vessels can be catastrophic

Grain receival and storage

• Inability to deliver service/grain quality• Breakdown• Admix / Insects / fumigation issues• Inventory gaps – quantity and/or quality• Port storage access

Road / Rail transport • Does not deliver promised capacity for various reasons

Supply Chain Management Systems

• Inventory management and logistical coordination capability is lacking and key activity is missed or is delayed.

Vessel • Fails Survey or other contamination issues

• Demurrage blow-out

Vessel Support • Failure to manage shippers position – cost/time and increased risk

Questions..?

Surety

Reliability

ReputationConfidence

Customer Value

Tonnes Transacted