A SPAT between grain growers and Brookfield Rail, which leases its rail to CBH, has been at the crux of discussions about future contracts.
Farmers concerned that their grain may not safely reach port are trying to lock down a long-term agreement for efficient transport on rail on a long-term, sustainable basis without extra costs involved.
Brookfield Rail chief executive Paul Larsen said he was in the middle of negotiations with CBH that would allow grain to continue to be carried on rail while the longer term access agreement was negotiated between the parties.
He said the company wanted to focus on the long-term future of rail in WA and the need for a safe, efficient and sustainable network that would no longer be required to rely on government handouts for its maintenance and operations.
“For many years, Brookfield Rail has not received sufficient revenue from CBH to maintain and operate the 2400km of dedicated grain lines, let alone to invest capital to improve and sustain them,” Mr Larsen said.
He said the situation had arisen because rail was competing with trucks, which did not pay the true costs of their usage of the road compared to rail costs.
To level the playing field, the government had to provide assistance to ensure grain stays on rail.
Mr Larsen said this was unlikely to occur in the future, which meant users of the rail system would have to pay more.
Until the most recent interim deal, Brookfield Rail received between $1.8m and $4.5m in access fees a month, which Mr Larsen said was the equivalent of about $6.50 a tonne of grain.
This cost to CBH was a relatively small portion of the overall supply chain costs that growers paid to get their crop to market, and represented 2.5 per cent of the ultimate market value of the grain.
Only 55 to 60 per cent, on average, of each year’s grain harvest travels by rail to port, with the remainder moved by road. The rail network has the capacity and capability to do more.
CBH spokeswoman Nikki Wilson-Smith said farmers were concerned they were paying more for transport than in other states and wanted to avoid increases in costs with tight economic margins at the moment.
“I’m not confident they will adopt the rail offer if the costs are too high for farmers as the margins are so tight,” she said.
If CBH commits to move more grain by rail, transporting grain by rail will become more commercially viable than transporting by road.
The broader and long term agreement with rail grain transport is due to be re-negotiated by December.
Mr Larsen said Brookfield and CBH were working towards this and had been for two years.
“We are committed to reaching an agreement by that date, however in doing so we will not compromise on the safety and efficiency of the rail network,” he said.
“We will not resile from the fact that access fees must increase to cover the basic costs of maintaining safe and efficient operations on our tracks for the long term, including re-opening the Tier 3 lines CBH has sought.
“The increase we are proposing is well within the parameters set under the Railways Code 2000.”
Mr Larsen said they would continue to discuss the best way to achieve this at the negotiating table with CBH over the coming weeks.
“Ultimately, we are committed to getting more grain on rail and we are ready to do a deal that meets the long term needs of CBH, their growers and our communities,” he said.