Case Study: CBH Group

Western-style diets power WA grain exports to Southeast Asia

CBH Group

ASEAN nations are vital markets for Western Australia farmers. Southeast Asia's growing middle classes are hungry for wheat-based products, spurring grain exports from Western Australia of up to $1 billion per year. Today, Southeast Asia consumes 30 to 35 per cent of all grain exports from Western Australia.

Western Australia's grain exports are spearheaded by Perth-based co-operative, the CBH Group (CBH). Founded in 1933 and owned by 4,100 grain-grower businesses, CBH is Australia's largest grain-exporting company. CBH accumulates approximately 50 per cent of the Western Australian crop and 15 per cent of the South Australian crop each year, and its wheat, barley and other grains fetch $2 to 3 billion on international markets.

According to General Manager Marketing and Trading, Jason Craig, vibrant economies in Southeast Asia are taking an increasing share of CBH grain. He reports that Asia's share of Western Australia grain exports has risen from 60 per cent to 80 per cent in 10 years, and attributes rising demand to structural changes in the market.

'As incomes rise, wheat consumption accelerates because diets change to include snacks and bakery goods,' says Craig. 'This change is leading to wheat consumption across Southeast Asia rising five to seven per cent per year.'

'Given Western Australia exports almost 90 per cent of grain grown in the state, and our proximity to the region, we view Southeast Asia as being our domestic market — and this market is increasing in size,' he adds.

CBH says partnerships between DFAT and Austrade play a critical role in helping to keep big markets open for Australian growers. Free Trade Agreements (FTAs) lock in low tariff rates and provide Australian farmers access on preferential terms.

'Australia's FTAs give us confidence that fast-growing markets will stay open,' he says. 'Confidence is critical to our 4,100 members, encouraging them to invest in their own farms. It's also critical to our own plans. We recently announced a $750 million investment in storage and grain-handling facilities to improve the efficiency of our supply chain; this in turn, will help us grow exports to Southeast Asia.'

Craig believes the next big export opportunity for Australian farmers is Myanmar with a population of 53 million. With the World Bank estimating growth at over seven per cent for the next three years, Craig expects consumption patterns to follow the trends that CBH has already observed in other Southeast Asia nations.

To underwrite grain exports, CBH has also made direct investments in grain-processing plants in Southeast Asia. In 2005, CBH launched a 50:50 joint venture with Indonesian food conglomerate, Salim Group. Called Interflour, the Singapore-based company owns and operates 10 flour mills including in Indonesia, Malaysia and Vietnam.

'Interflour has proved a success, and it provides a reliable outlet for Australia's wheat exporters,' says Craig. 'While Interflour can choose to purchase grain from around the world, the venture sources 60 to 70 per cent of its wheat from Australia.'

Interflour is also diversifying. In 2017, the company opened a US$70 million malting plant in Cai Mep, near Ho Chi Minh City, to supply Vietnam's drinks industry. With an initial capacity of 110,000 tonnes per year, the plant will directly connect Western Australia's barley growers to the fastest-growing beer market in Asia.