Good morning. I'm Robert Spurway, Managing Director and Chief Executive Officer, and welcome to the GrainCorp Investor Day for 2022. Before I start, we do just want to acknowledge the Gadigal people of the Eora Nation as the traditional custodians of the land on which we meet here in Sydney. We pay our respects to their elders past, present, and emerging. I want to extend a special welcome to our investors, analysts, and bankers here with us today, but also to those of you joining online. This is a hybrid event, and so as well as everyone in the room, I welcome those joining online. Before I get into introducing the GrainCorp team who you'll meet and have the opportunity to talk with this morning, I did just wanna make sure that we look after your safety and wellbeing.
As I said, this is a hybrid event, so if you're feeling unwell, the best advice I can provide is to go home, isolate, and entertain yourself by dialing in online, and that'll keep the rest of us well also. In the very unlikely event of an emergency, there will be an audible alarm and there'll be an address over the public announcement system, telling us what to do in terms of evacuation, and we'll be assisted by hotel staff. The evacuation area is out towards Circular Quay, likely the area that you came into the hotel from. Also, we'll be having lunch and morning tea in the immediate area just outside the room here, and the restrooms are about 50 meters further on straight back towards the other side of the hotel.
If you do have any questions or need anything this morning, either one of the GrainCorp team can help you, or one of the people here at the hotel. We look forward to hosting you this morning and, letting you know about how excited we are about GrainCorp. As I said, my name's Robert Spurway, and it's my pleasure to introduce the team of people that I work with in our executive and those who will also be presenting this morning. I think most of you know Ian Morrison, our Chief Financial Officer. Also with us today, Stephanie Belton, our Head of Corporate Affairs and General Counsel. Stephanie will be talking with us about what we're doing on sustainability, among other things. Jesse Scott, our Chief of Innovation and Growth, is with us here this morning, as is Klaus Pamminger, our Chief Operating Officer.
Cate Hathaway here, our Chief People and Transformation Officer. Joining us on stage this morning, throughout the presentations will be Brad Glass, our General Manager of Oils and Commercial. Sean Barker, our General Manager of Commercial at East Coast. Don Campbell, our General Manager of the International Business. Last but certainly not least, Nigel Lotz, our General Manager of Operations. You will have the opportunity to hear from that team this morning. Also we'll have three question and answer sessions through the morning and the opportunity to talk through morning tea and lunch. As I said, we're excited about GrainCorp. We believe we're exceptionally well-positioned, and we're delivering outstanding results.
We'll share with you the confidence we have, not just in the results we're achieving and our outlook, but the confidence we have in the way we're achieving those and the strategy that's delivering those results. In summary, we're a well-invested business with strategic infrastructure assets. We've got outstanding execution driving record financial results, and you'll hear about the planning and the team effort that goes in behind that this morning. Our strategy not only identifies the areas that we're excited about and where we see opportunity, but it's extraordinarily well-aligned to the macro global trends that we're experiencing. We're in a strong financial position, and that gives us significant options around both returning funds to shareholders and investing in the future growth of the business.
You'll hear many times this morning about the extremely resilient supply chain we operate and how important that is, both strategically and from a results point of view. You'll hear about our positioning and how well-positioned we are for growth and innovation into the future. Just in terms of how we'll work through that, as I touched on, we'll have several question and answer sessions through the morning. We'll also share with you a panel session across the three areas around our global macro trends, Australia and New Zealand business, and our growth and innovation plans and ambitions. That'll be an opportunity to hear in discussion from our team that are busy not just formulating that strategy, but delivering on it. To start with, I'll share with you an introduction and overview of our strategy.
Stephanie will join me shortly to talk about our ambitions in the ESG space and the progress we're making and importantly, the plans that we've set. Ian Morrison will provide an update on the financial position of the business, the outlook, capital management, and cash flows. Now, before we get into the agenda, it is my pleasure to share with you a video of our journey through 2021, our plans for 2022. As well as the material in the video, I think what's incredible is the amazing people that you'll hear from across GrainCorp, most of whom are not here today. They're out and about in our business, running it, keeping it going, and producing the results that we're so proud of.
With that, I'll share with you a video and an opportunity to hear from that amazing group of people across GrainCorp.
GrainCorp entered 2021 with a new vision, purpose, and strategy to partner with growers and deliver value through innovation and expertise. Our people supported our customers through the challenges of COVID-19, labor shortages, and the effects of the La Niña phenomenon. Looking ahead, our strategic priorities for FY 2022 will help us grow the business in a sustainable way and strengthen our connections with the communities in which we live and work.
Delivering a strong result at GrainCorp doesn't stop at the gates of our receival sites. It's a priority that flows through our entire supply chain. Last year, we received over 16 million tons of grain into our network. Our integrated pest management system and quality assurance program ensures we maintain the quality and value of that product. This is key to protecting Australia's reputation as a quality exporter on the international stage. We exported 8 million tons of that valuable Aussie grain to highly competitive and premium markets across the globe. In our oils and processing businesses, we help to make the food you love, from the bakery through to essential infant nutrition with world-class testing facilities and decades of experience in food science. Our accreditations and our commitment to quality allows us to develop new markets for our products and ensures a resilient supply chain in Australia.
GrainCorp is building a sustainable future in agriculture. Our strategic focus on ESG looks at everything we do, from the way we source our key ingredients to the use of renewable energy to reduce our carbon footprint. GrainCorp is actively committed to sustainable products and practices, whether that's through upcycling used cooking oil and turning it into biofuel or supplying certified sustainable canola to domestic and international markets. We're partnering with the communities in which we live and work to support projects and organizations that promote meaningful social, economic, and environmental progress. We're taking an entirely new approach to capturing our progress and sustainability, and we're driven to create new goals as part of our roadmap towards net zero carbon emissions.
By strengthening the core of GrainCorp's services through innovation and new technologies, we're growing solutions for the agricultural industry. six years ago, we embarked on a journey to build digital solutions for growers and customers, starting with an online marketplace, CropConnect. This year, over 12,000 growers transacted more than AUD 4 billion worth of grain on this platform. As one of Australia's largest integrated oil companies, we also operate end-to-end supply chain in oilseed, including the production of edible oil, animal feeds, and right down to the collection of used cooking oil for upcycling into biofuel. We're investing in ag tech companies that put decisions back into the hands of growers and teaming up with renowned science agencies to reduce global methane levels and explore alternative protein products.
Understanding the cyclical economies of agriculture and what growers need to succeed, we will ensure we're investing in the right tools and technologies for our growers, our customers, and the industry.
The world is changing at an unprecedented pace, and being a leader in sustainable and innovative agriculture relies on having an inclusive, diverse, and engaged workforce. That's why we are focused on supporting our people and building the capabilities we need to deliver our strategy. We're creating new pathways for young workers to be part of the GrainCorp team and to complement our industry-leading experience and skills. Listening to our people is vital, and we're expanding our employee survey so that our people can tell us what success means to them. By developing the necessary skills, knowledge, and experience to meet our future needs, we will be perfectly placed to lead the industry through another century of growth. These four key strategic priorities of results, sustainability, strength, and people will form the foundation of how GrainCorp, our customers, and our communities will grow together.
You'll hear those themes come through today repeatedly. I think what's amazing is I joined this industry about just under 30 years ago now on the basis that people would always need to eat, and it's no more true today than it's ever been. The resilience of the food sector places GrainCorp really well. I think if you look at our history and our vision shared in that video to lead sustainable and innovative agriculture through another century of growth, it also complements our purpose around connecting customers and rural communities to deliver value through innovation and experience. One of the things I like about that video is you see the people doing that every day, the capability and the assets and businesses that we operate, and you see that very visually in that video.
Perhaps more importantly, though, it's our opportunity today through that video and the conversations to give you some experience in what our business is doing every day and what we're focused on into the future. We're really excited about the value proposition that we offer. We've got excellent fundamentals in terms of the trends and the position the business is in. We've got outstanding execution and performance. We're not leaving anything to chance. We're making the most of the opportunities that exist. That's giving us a strong balance sheet and the outlook, as you'll see, is extraordinarily positive. This slide in terms of GrainCorp, I like to call from Australia to the world, but it's more than that.
It also connects the assets through our joint venture that we have in Canada, called out in the box in the top center of the page there, and the significant presence that we've got across New Zealand. Rightly so, Australia is core to what we do. Over 160 upcountry receival sites connected to more than seven deep-sea ports across Australia, and connecting more than 10,000 growers with over 350 customers in 50 countries around the world. We've got a team of over 2,000 people that increases significantly through harvest. You'll hear today about our processing business and the 475,000 tons of crush capacity to produce not just oil, but a range of food products emanating from that oil. Strategically, our assets are well located and well-positioned to make those connections across the globe.
If you look at our supply chain, one of the questions I quite often get asked is: how does GrainCorp make money? There's three key income streams in our business. The services that we charge for use of our infrastructure assets, be that storage, movement, export or elevation of grain. We also buy and sell grain and oilseeds and move it through that network of infrastructure assets. Our processing business is manufacturing and producing products that we sell to customers and consumers across Australia, New Zealand, and the world. The way we organize ourselves is our East Coast Australia business that we often refer to as ECA. That's the business that contains more than 160 sites and the seven deep-sea ports. Our oilseeds business represents the largest oilseed crushing facilities in Australasia.
We produce a range of canola oil and canola meal products for customers across the foods and feed sectors. That brings us to our foods business, which is a leading refiner of edible oils and fats in Australia, and we supply ingredients such as infant formula, bakery mixes, and ingredients for other large-scale manufacturing industries across Australia, New Zealand, and Asia. In our feeds, fats, and oils business, where we procure, ship, and accredit the supply of products like tallow, other vegetable oils, and indeed, through our Auscol business, the upcycling or recycling of used cooking oil. We manufacture feed solutions for farmers across Australia and New Zealand. Through our international business, we complete the cross-border trade, taking product from Australia and elsewhere to customers around the world. We do all of that with a focus on sustainability and more broadly on ESG.
While you'll see that come up in all of the slides today and the themes that we talk about, I thought it would be useful to start with Stephanie Belton just sharing the work that we've done, the global context in which we operate in, and the ambitions that we have for the future. Stephanie, if you'd like to join me here.
Thanks, Robert. As we mentioned in the video, last year, we conducted a review of sustainability and ESG at GrainCorp in order to reshape and refocus our approach to this area of challenge and opportunity. The challenge is clear: The world's food system, effectively our industry, represents one-third of global greenhouse gas emissions. As Jesse will explain a little later, to feed the world's growing population, we must increase current food production by 50% by 2050, the same period during which we all aim to become carbon neutral. Australia plays a key role in feeding the world, exporting two-thirds of the food and fiber we produce, and devoting half of our country's landmass to agriculture and agricultural business. At the same time, our industry represents over 13% of our national GHG emissions, meaning that our industry, like every other, must adapt to the challenge.
The UN Global Compact and its Sustainable Development Goals have emerged as a leading ESG framework, backed by the 193 member states. The goal to end hunger and achieve food security has probably never been more relevant than it is today, following events in Ukraine and the impact on trade flows from the Black Sea region. UN SDG Number two is backed by significant research, policy, and financial investment in global agriculture, focusing specifically on new food sources, reduction of food waste, and on optimizing management of key resources. Don't know quite what's happened to our presentation.
We've got a technical issue at the back there. Get the slides back up. Go back.
There we go. As part of our global and national industry, GrainCorp is well placed to support and lead sustainability in agriculture. As Robert has highlighted, sustainability and innovation are at the core of our business at GrainCorp. From our acquisition and expansion of Auscol over the last 10 years through the creation of our groundbreaking crop production contract designed to protect our business in drought-affected years. GrainCorp has maintained its focus on both the impact and the opportunities of climate change. As part of our enhanced approach to ESG, we are supporting our industry in transitioning to a more sustainable carbon neutral environment, partnering with peers and subject matter experts, supporting change across our supply chains, including end-to-end mapping of Scope 3 emissions, carbon research and pilot programs, and continued expansion of our renewable fuel feedstock capability.
As you will see throughout this morning's presentations, all of our strategic growth areas have strong sustainability themes, whether in ag tech, animal nutrition, alternative protein or agri energy. In summary, at GrainCorp, our history, our vision, our purpose, our strategy, and our plans for growth are all founded on sustainability, and we will continue to present a credible, tangible roadmap to both grow our business and meet our ESG commitments. I'll hand back to Robert, who I think is going to talk about delivering value to shareholders.
Thank you, Stephanie. I think what's exciting about ESG broadly is it's not just something that we believe in, it's not just something that we know we need to do that everyone's working on, but it's something that integrally overlaps with the commercial strategy we have and the opportunity we see, not just for GrainCorp but for the sector. Picking up on what Stephanie shared in terms of what we've already done and what we're doing, a way to think about it is the three pillars in which we operate. Back in 2018, Stephanie's touched on the climate study we did on the right-hand side of the. Sorry, left-hand side of the slide there. That was around understanding what the impact of climate could and would be on our business in the sector.
In response to that, we put in place the crop insurance product to manage volatility. We reduced our fixed cost and variabilized cost to protect shareholders against what was already happening. Importantly, over the last 12 or 24 months, we've made significant progress in the second pillar of setting our own targets and putting in place action plans and developing further action plans to deliver and improve our own performance. Thirdly, if you look at the third pillar, we're looking at opportunities to change the world. Investments in businesses like FutureFeed, development of an agri energy strategy, areas where the impact on the globe can be much greater than what GrainCorp can achieve in itself.
I think if you think about sustainability from that point of view, that's something that all businesses strive for, looking after the existing business, improving the business, and then changing and improving the world. That brings us to our strategic priorities. Last year at the Investor Day, we shared this slide for the first time and demonstrated our commitment to lift return on invested capital. I'm pleased to report we're delivering on that promise and doing what we said we would. Picking up on our vision and purpose, the strategic priorities were deliberately split into two parts, what we call strengthening the core. Lifting those returns, driving existing assets harder, and leveraging the capabilities that we already have. We're doing that well, and I'll share some details and some examples of that in a moment.
We're also, at the same time, making good progress on our targeted growth opportunities, the areas that will diversify and improve the profitability and the quality of GrainCorp into the future. Areas like alternative or plant-based proteins, digital and ag tech, animal nutrition, and additional grower services. This morning, you'll hear about examples of that in addition to those areas showcased in the video. If we look at our existing infrastructure assets, not only have we seen the benefit of two bumper crops in Australia and another one on the way in the ground at the moment, and you can see that in the top left. Grain exports have increased significantly. At our half year, we reported that we've continued to make progress on the diversification of the bulk materials we handle through our ports.
Half on half, they were up from 900,000 tons- 1.3 million tons. That's on top of a big lift in the grain handled, and it shows our commitment and progress around those strategic priorities. Our oilseed crush volumes have increased by 36% since 2019. Not only are we making the most of the great demand and pricing that we're seeing for oil around the globe, we're controlling what we can control to improve our business and deliver exceptional results. We are driving our assets harder, and we are lifting returns. That's evidenced in the performance and the results of the business, up 90% from financial year 2021.
This gives me the opportunity just to remind you that as we came out of three years of severe drought in financial year 2020, the business was still able to produce an underlying EBITDA of AUD 108 million. Since then, we've continued to reduce costs and improve the business so that we're preparing for future drought cycles. We've demonstrated through financial year 2021 and our guidance for 2022 of AUD 590 million-AUD 670 million that this business, when the grain is available, can produce much, much more than the through-the-cycle numbers. Ian and others will talk to that through this morning. That lift in earnings reflects the significant capital investment we've made over recent years, but more importantly, the operating discipline in making sure that we extract the most value from those investments and the assets we have.
We do have a highly efficient supply chain, and the scale of that, as you'll hear from Nigel this morning, gives us optionality and resilience that others can't achieve. We are seeing strong demand for Australian grain and oilseeds, and the back-to-back bumper harvests in Australia support domestic production and indeed consumption. For those of you that joined us at last year's Investor Day, you'll remember a slide that was very similar to this, and in particular, it highlighted our commitment to an additional AUD 40 million in operating initiatives and uplift. It was areas like our international expansion and completion of the Canadian joint venture, core uplift, leveraging our assets and working them harder, and increasingly agri-energy, not just as a driver for current performance, but a strategy for future growth.
That supports the through-the-cycle earnings of AUD 240 million by 2023, 2024, in addition to the point that I've just made that we can deliver much greater than that when we get conditions that are much better than average. When we do get to droughts, years, you'll see that we've done a lot to protect the downside in the business. Our crop production contract will come into play, the variabilization of costs will come into play, and indeed, the inventory and carry that we have in the network will come into play. Overall, we are delivering on our commitments.
We're lifting return on invested capital from a number that we won't spend too much time on because it's nowhere near good enough to a number that we're very proud of in terms of 25.7% in terms of the current cycle. I think what we're demonstrating is through our commitment to not just the current performance, but future performance, we will absolutely make sure that you're invested in a business that can deliver consistent and positive return on invested capital. We've also seen that our peak CapEx was achieved back in 2018 and we've committed to sustaining CapEx levels of between AUD 35 million and AUD 45 million going forward.
Suffice to say, when the opportunity is there for short payback of leveraging our existing network in big crop years, we'll invest that money and get the returns, and Ian will talk about that shortly. Into the future, we expect only a modest uplift in the CapEx cycle to manage those bigger crops, and then comfortable with that AUD 35 million-AUD 45 million in the future. We are maximizing the productivity and the asset performance. Perhaps this slide says it all. It demonstrates the performance that we've achieved and the returns that we've provided to shareholders through delivery of that performance. Today, you'll hear about our confidence in the future as we embed that performance and strengthen and diversify the business for the future.
Just to pick up on the strategic themes, you'll hear today us talk about innovation driving that next phase of growth, the progress that we're making in ag tech and the digital areas. At our half year, we announced our commitment to AUD 10 million a year over the next three years for digital and ag tech. We think that's a very modest amount that gives confidence around how we're investing to drive financial returns, and to reduce risk. We can evidence that in investments we've made in businesses like Hone, and some of the areas that Jesse Scott will talk about later this morning. In alternative proteins, we've partnered with CSIRO and v2food, credible partners that allow, has allowed us to access government and grant funding.
That allows us to develop what will be a sustainable supply chain into the future by making sure that we look at it from an end-to-end perspective and look at the opportunity not just for GrainCorp, but for the sector. We've made progress in our grower services, the pilot with Loam and other areas you'll hear about this morning. Partnering and building value for growers and for GrainCorp. FutureFeed is delivering opportunities to embed Asparagopsis as a way of reducing methane and lifting productivity in the animal nutrition sector. As I touched on before, agri-energy is not just central to our current performance, but increasingly an opportunity for future growth as the demand for biofuels and renewables increases, not just in Australia, but around the world. At that, I'm gonna hand across to Ian Morrison, who'll talk about our capital management and cash flow. Ian?
Thanks Robert and good morning to everyone here today and on the line. For those who I haven't met, my name's Ian Morrison, and I'm the CFO at GrainCorp, and it's my pleasure to be here this morning. I'm going to give a brief update on capital management and cash flow at GrainCorp. I'll start by recapping our capital management framework. Overall, this remains consistent with recent years and maintains a conservative approach. It has a focus on maintaining minimal core debt, funding sustaining CapEx within a AUD 35 million-AUD 45 million per annum envelope through the cycle, generating free cash flows to pay dividends consistently. As we generate surplus cash flows, we're in a strong position to look at reinvesting in the business in a disciplined manner, while also returning capital to shareholders. We've been able to demonstrate that commitment recently.
Now moving on to our balance sheet position. The key message from this slide is that GrainCorp has a very strong balance sheet. We reported a core cash position of AUD 129 million at our most recent half year balance date of 31st March. As a reminder, core debt is defined as net debt less commodity inventory. The reason we focus on this metric is due to the readily marketable nature of commodity inventory. The majority of the debt facilities we have in place are to fund those commodity inventories, and this means net debt does move up and down with the crop and harvest cycle, as well as with commodity values. Our net debt mainly consists of those seasonal facilities to support grain accumulation, and with the significant volumes and the high prices currently, it does mean our net debt is well above normal.
This is a positive though, as it supports high utilization of our assets and is a key driver of earnings. In addition to the core cash position, we continue to retain the 8.5% stake in United Malt Group, which provides additional balance sheet flexibility. The last point just to add on this slide is that we took the opportunity last year to extend out our term debt through to 2025 at a favorable point in the cycle. In summary, overall, GrainCorp is in a very strong balance sheet position. Now moving on to capital investment. As Robert touched on earlier, GrainCorp has a well invested asset base, with many of our key facilities receiving significant upgrades in recent years. We are now seeing returns from these investments flow through.
That includes strong returns from the increased capital spend in FY 2021, and that was to increase capacity for the large harvest. The majority of the site investments we made in FY21 had a payback of less than 12 months, and in many cases, as short as six months. As we noted at our recent half year, we will be looking to invest in further capacity for the upcoming harvest. Again, we expect those investments to have very short paybacks. Overall, we expect the total sustaining capital for FY 2022 to be no higher than D&A. Despite the current higher capital investment with the opportunity from the large harvest, we do remain committed to the through-the-cycle sustaining CapEx envelope of AUD 35 million-AUD 45 million. We're very comfortable with that level given the capability and quality of our asset base.
On the right-hand side here on the slide, you can see that the depreciation is high relative to the sustaining CapEx, and that peaked back in FY 2018, and we've seen that reduce over the last few years. We do expect to see a temporary increase in D&A in FY 2022 as a result of some of the short-term investment to support the large harvest. That includes short-life assets such as tarpaulins. This will be a short-term increase before we continue to revert to an ongoing trend of reduced D&A. Overall, our approach will continue to be disciplined when it comes to capital investment. Our capital management framework has a strong focus on returns for shareholders, and that starts with reliable dividends.
The strong cash generation capability of the business and the increased quality of earnings, including in drought years, allows us to be a consistent dividend payer, with the optionality to pay special dividends in years with surplus cash flow. As the chart in the middle of this slide shows, we've been able to consistently grow our ordinary dividends in recent years, and that's as confidence has increased in our through-the-cycle earnings. As I just touched on, the recent strong earnings and surplus cash flows allowed the board to recently declare a fully franked special dividend of AUD 0.12 on top of the ordinary dividend of AUD 0.12 to give a total of AUD 0.24 per share. These dividends were also an addition to the share buyback that we announced late last year and commenced recently after our peak funding period.
The buyback is well underway now with almost 50% of the planned buyback now complete. Just to recap on capital management, we've got a strong balance sheet with no core debt. We're confident in the quality of our asset base, and this supports our disciplined approach to capital expenditure and operating within that AUD 35 million-AUD 45 million envelope for sustaining CapEx. We're becoming a consistent and reliable dividend payer with the optionality to pay special dividends or consider buybacks in years with surplus cash flow. The strength of our balance sheet and outlook provides the opportunity for GrainCorp to both invest in the business for growth and also provide strong returns to shareholders. I'll now hand back to Robert to spend more time on our strategy and in particular, the macro trends that are underpinning it.
Thank you, Ian. At this point, thank you, Ian, for that. At this point, I'd like to invite both Jesse Scott, our Chief Innovation and Growth Officer, and Klaus Pamminger, our Chief Operating Officer, to the stage. I've talked through our strategy this morning. I've also touched briefly on growth and innovation and the steps we've taken and the steps we've identified. Now it's an opportunity to step back and look at the macro trends that we've indicated we're so aligned with. I thought a good opportunity here to introduce both Jesse and Klaus, and talk through in conversation style the trends and how we're seeing those develop. So Jesse, I'd like to start with you to give a brief introduction. I think people have met you before, but maybe if you could just provide an introduction.
18 months with GrainCorp now.
Sure. Jesse Scott, Chief Innovation and Growth Officer at GrainCorp. Joined about 18 months ago. Excuse me. My role covers strategy and innovation, the core business, as well as my teams lead those growth themes I'll talk about later on this morning. 18 months with GrainCorp. Previously, I led McKinsey's agriculture practice for Australia and New Zealand, but I am a babe in the woods when it comes to agriculture after marrying into a farming family about 10 years ago. I'm on a very steep learning curve that became steeper in the last 18 months.
Klaus, more like 15 years in our business. Do you wanna provide a bit of an introduction?
Sure. Thank you, Robert. Good morning, everyone. Klaus Pamminger, Chief Operating Officer for GrainCorp. I'm responsible for the operations and commercial activities across our agribusiness and processing businesses. Been at GrainCorp 15 years. It's been an interesting journey but very valuable journey. Prior to that, I have worked for multinational companies both in Australia and in North America. I also happy to share with you, I'm a grain producer, producing grains and oilseeds, so I can bring and enjoy bringing a customer lens to anything and everything we do at GrainCorp.
Thank you, gentlemen. The trends that we'll talk about this morning is that growing demand for food around the globe and what's driving that. Our global supply chain and how resilient it is to the disruptions that we're seeing around the world. Then also decarbonization. We've touched on that this morning, in the presentation that Stephanie made, but it's also a theme. We might start with you, Jesse, just talking about the demand side of things. If I move to the next slide. That one. Growing population, how are we responding to that, and what are we seeing, Jesse?
Perfect. Thank you, Robert. When I think about demand, let's talk a little bit about both the amount of demand and the type or the preference within that demand. From the amount, one of the biggest drivers will be the 2 billion additional people that'll be in the world by 2050. Those 2 billion people, as Stephanie mentioned earlier, will drive almost a 50% increase in food demand over that same period. Maybe if we go to the next slide, it's also where that demand is coming from that's interesting. As you'll see on this next slide here, left-hand side is grains, right-hand side is oils. You can see the world is the gray and Asia is that dotted blue line.
Similarly on the right-hand side, you have the rest of the world is that cluster of different colored lines, but once again the gray is Southeast Asia. Of that demand growth, you know, 500 million people are gonna come from Asia alone, but almost 50% of food consumption spend is gonna come from Asia. Which for GrainCorp works extremely well in how well-positioned we are in that area. Let's talk a bit about the amount, but within that is embedded a strong shift in the preferences to that amount of demand. If we look next, Asia has a major shift towards urbanization. Urbanization. You know, of that 50% of spend increase that's happened in Asia, 80% is from urban areas.
Those top 250 cities in China alone will account for a major proportion, and it's relatively evenly spread. Those kind of second 200 of that is an enormous driver of urban demand. We're also seeing changes in preferences reflected in that. For example, McKinsey Global Institute recently did some work where they were testing consumer preferences across the world. On questions like, Are you willing to pay? Is there a willingness to pay for sustainable packaging? Respondents in China and India had twice the yes response rate compared to North America and Europe, which will drive a different shape of demand coming from the commodities that we service there. I think demand is very strong. What's interesting is what that demand looks like and the preferences embedded inside it.
I think whenever you talk about demand, it's important we talk about supply as well, and strong demand, but also some nuances in the supply side, Klaus.
Sure, Robert. As Jesse has articulated, there's a significant increase in demand. Agriculture or farm production has been able to keep up with that demand with about a 2% increase per annum of wheat production globally. Although, in the last five years, we have experienced some significant disruption to production, mainly in the Northern Hemisphere. Not so much in the Southern Hemisphere, obviously, as we've articulated earlier, the Southern Hemisphere's actually increased its production, especially Australia, in the last two years. What that has resulted in is a significant reduction in what we call the stocks to use ratio, which is the dotted line. That is available stocks to be traded internationally relative to consumption. That is now at a 20-year low at about the 20%, ratio, which is a concern.
That has resulted in increased prices, and on top of that, we've now seen other disruptions beyond the disruption of production. Robert, if you could go to the next slide.
I will. Just before we do, though, I think this is an important slide when you look at that global inventory. It's come from probably three or four decades now of relatively benign geopolitics around the globe. Countries haven't had to worry about building strategic inventories of food to keep populations fed. Now we've seen a reset in that the conflict in the Black Sea, and I know you're gonna talk about that shortly, is adjusting the way countries are thinking about reserves of food. Klaus, it's very likely that those inventories will start to build, and that's gonna put pressure on the demand side for some years to come as that recovers and we see countries like China, for example, already buying up to build inventories and improve food security.
As Robert mentioned, conflict in the Black Sea, and we're all aware of what that conflict looks like today. Russia and Ukraine put together account for 45 million tons of global wheat sales. It's even larger when you allow for other products that Russia and Ukraine produce and export. It's 80 million tons, which includes wheat, barley, corn, and canola. A very important region for global trade. As Robert said, there are concerns about availability and building of inventories, and we've seen other exporters, maybe India, Indonesia, actually putting restrictions on their exports, tightening the available supply of commodities to the world, and that potentially is resulting in a food crisis, specifically in North Africa.
Not only are we seeing good fundamentals around the demand, supply, and balance creating opportunities for the sector and for GrainCorp, but we are seeing supply chains come under significant pressure. Klaus, you know, talk about what we're seeing around the world. We'll get to how GrainCorp's responding to that. Having a supply, demand, and balance is good for business to start with, but you also need to be able to access that opportunity.
Not only is there challenges to the disruption we've seen due to the Black Sea crisis, we, agriculture, supply chains, have had the challenges of COVID just like many other supply chains. We have had to respond on a global perspective to increasing cost of transportation on the back of surging oil and gas prices, the disruption of the Black Sea shipping traffic. Not only is there a disruption on the land base, but also you can't actually charter ships to go into the Black Sea or they're limited, resulting in elevated shipping and freight costs globally. We, in Australia, but also globally, are experiencing significant labor tightness or labor shortages due to COVID and also, restrictions in movement of labor from countries to countries or even across borders.
Labor tightness is definitely an issue, and that's not just an Australian issue, it's a global issue. Once again, it manifests itself very much in transportation, so I'm talking about truck drivers or train operators. On the back of all those high increases in energy prices specifically, but also tightness for supply, agriculture input costs have increased significantly as well. Disrupting the producer and grower, not just because of cost, 'cause they've gone up significantly, but also the available supply at an appropriate time when it's required.
I think, you know, if you were to bring those themes together, you can certainly see the likelihood is that commodity prices are likely to remain firm for some time, given demand's outstripping supply, global inventories need to be rebuilt, and we're dealing with disrupted supply chains that add in cost. I guess that cost, side of things, particularly, in ocean freight, as you say, is actually a competitive advantage to us and to Australia, given our proximity to markets.
Robert, that's a very valid point. Australia actually has an advantage to the point that we're closer to our customer base. As Jesse has explained, our customer base for Australia is very much around Asia, Southeast Asia, North Asia, and maybe parts of the Middle East. Given our geographic location relative to the customer, our ocean freight absolute might have gone up, but relative is actually more competitive compared to some of Australia's competitors. That could be the Black Sea, if grain was available from the Black Sea. It actually plays in the favor of Australian agricultural exports.
Again, that builds on where the diets are changing most, the population's growing most. Australia's making the most of that opportunity, but also more competitive in a higher fuel cost and transport cost environment. Resilience in our supply chains proving critical, not just in ours, but in global supply chains, Klaus.
We have proven, GrainCorp have proven that we can be resilient, we are agile, and we've had to be because of 2.5 years of COVID disruptions and the significant increase in demand for Australian products due to disruptions in the Northern Hemisphere. What's really important for a customer and us is to make sure we have visibility of the end-to-end supply chain. That is, how we can operate from the producer through to the end customer. Make sure we adaptable, we adapt, we're agile, and we have a scalable supply chain here in Australia. But also, as might have been articulated earlier by Robert, in Canada. We have a supply chain out of Canada as well, making sure we connect producers, growers, direct to consumers. That's really important.
What's become even more important, as Robert alluded to earlier, was security of supply, or in other words, inventory. Where is that inventory? How do we make sure as a consumer globally, I have access to the inventory and I have enough inventory for more customers? Supply chains are being disrupted, supply chain planning is taking longer and longer. Supply chains are getting longer. Because of certain disruption, maybe the supply that you're used to as a consumer or processor or customer globally, that might not be available. Therefore, the supply chains are getting longer. That means we have to have a longer planning horizon because of those disruptions, number one. Number two, access to labor is really important.
You have heard earlier that we employ some 3,000+ casuals at harvest time, and we're planning for that now to make sure, although the crop's only just gone in the ground, we need to start planning for harvest again and also making sure that we've got appropriate resources for transportation. All of that means we need to be really clear and make sure we've got the appropriate risk management processes in place to manage those variabilities and demands, and very much focused on cost control in our supply chain and value chains.
Later this morning after the break, Nigel Lotz and Sean Barker, in particular, will talk about what we're doing in our East Coast business, specifically on some of those areas. I think this is an important slide, Klaus, because on the left we've got kind of the design parameters that give us resilience in GrainCorp. The fact that we have got scale, the fact that we can optimize inventory and do those sorts of things. Then on the right-hand side, a column is the operations and the tactics that we'll talk about later this morning. That access to labor, that planning ahead. Risk management process is important in any business. Importantly, cost management in an inflationary environment, something that we do every day and you'll hear about later this morning.
I now wanna transition to the third macro theme, and that's the role that agriculture plays in a transition to a low carbon economy. There's some obvious areas that are direct opportunity, but some that are less direct, but still a maybe an even larger opportunity, Jesse.
Absolutely. Agriculture accounts for about 13% of global greenhouse gases, which obviously is already an area of enormous pressure and likely to continue in the future. It is also, as Robert said, an opportunity for our growers and our graziers there. Through methane reduction, land management practices, input practices around especially fertilizer, methane management, there is a way for our growers to access increased revenue and diverse revenue streams there. When I think about GrainCorp's role in this space, it's twofold. I think one is about helping our growers and our graziers navigate the right pathway through sustainability.
I was at a dinner that we hosted in Albury recently, where we sat with 30 growers there, and we had many conversations, and one of the themes that came across quite strongly was almost a proliferation of people who were knocking on their doors to help. 12 different carbon companies who wanted to offer them something, agronomists offering them land management practices, sustainable feeds companies who had the next kinda fix for methane. There's something about how can GrainCorp help find the right solutions that do two things, that both take a step forward in terms of sustainability or also take a step forward in terms of the yield or the productivity of their farms.
Examples like FutureFeed, which we'll talk about this afternoon, help with the productivity of the cow as well as methane reduction or Loam Bio, which helps with yield improvement of the crops as well as carbon sequestration is great. GrainCorp has a role in navigating this field. I think GrainCorp has a second role in terms of accessing the premiums. We've already talked about things like ISCC. How do we connect our growers or our graziers to get the premiums they deserve for taking up or being early adopters of some of these positive practices? While there is pressure to reduce the greenhouse gas emissions of ag, there's enormous opportunities for our growers and our graziers. I think GrainCorp is leaning in heavily in our core and our growth themes.
As we move through the agenda today, we'll talk more specifically about exactly, as you say, Jesse, some of the initiatives. It's not just about reducing carbon in ag, it's the broader opportunity and the growth in renewable fuels.
Mm-hmm.
Perhaps talk to us about the role that agriculture can play in that, because it's not something that people necessarily think about when they think about renewables.
Absolutely. Renewable fuels, which is simply the use of kind of plants to produce diesel or sustainable aviation fuel, rather than fossil fuels. Renewable fuels are on this enormous growth trajectory. In the next three years alone, I think North America's gonna add 150% capacity, and where is that feedstock gonna come from? The feedstock for renewable fuels is either coming from oilseeds, tallow, or used cooking oil. GrainCorp already plays heavily in all of those feedstock and extremely kinda well positioned. Over the next not only three years, but frankly, probably decades, that this will help both provide an additional demand, but underpin the prices that we have seen to an extent. I think renewable fuels is an opportunity for GrainCorp, and we're already probably the leading integrated player in Australia in the space.
If you look across those three themes of the growing demand for food, we've talked about what's driving that. The global supply and supply chain disruptions and the themes that many companies and countries are having to manage, and decarbonization. We can now start to see the way GrainCorp is responding, and indeed, the way GrainCorp is well-placed and well-positioned, to respond and even benefit from many of these trends. I'm gonna invite Don Campbell up shortly to talk about our international business and how not just supply from Australia, but our multi-origin, strategy will help satisfy that demand. We've started to talk about supply chain resilience, and we'll come back to that after the break in terms of what we're doing day to day to make sure that we're well-placed, to be better than the competition when it comes to supply chain resilience.
As Jesse's just talked about, decarbonization is not just an opportunity and a challenge for the industry. It's an opportunity for broader involvement in areas like agri energy and renewable fuels. Don Campbell, if you'd like to join us on stage and just make a couple of introductory remarks around your background and the business, and then get into GrainCorp International.
Thank you, Robert, and good morning to you all. Don Campbell, GM of International. I manage the international vertical, whose purpose is to generate the channel to export customers globally. We also manage vessel and container operations or traffic and the documentation or the execution process around those activities. My background, born and raised in Queensland. State of Origin Sunday night over in WA. Don't miss it. We're gonna win it. Sorry, cheap shot. Sugarcane, beef cattle, traded more than 35 years in cross-border trading, and worked through both multinational Western and non-Western cultures. Experience in cotton, veg oils. In the last decade, in grains and oilseeds. Okay, let's get on with this. Let's firstly look at our footprint in terms of where we trade.
The graphic on screen identifies our primary customer and supplier regions of focus. Our largest trade flow is the cargo going from Australia to Asia, where we have our largest dedicated supply chain assets and to a customer whose preference is for Australian grain. We do have customers that trade outside of the highlighted regions. However, our efforts logically concentrate on those customers who are consistently engaged with our own supply chain assets. In terms of what we trade, the volumes highlighted measure the 10 year average export and import programs of wheat, barley, and canola, and these are the commodities that our supply chains most frequently export. We do trade other commodities where we have an edge. For example, corn from Ukraine into Asia, and organic grain and oilseeds for human and animal consumption into the United Kingdom.
In terms of how we trade, most of our flow is configured for export in bulk via vessel. However, some specialty products, for where the customer scale or logistics are the limitation, we do make trade in containers. From a people perspective, we have marketing teams highlighted in China, Vietnam, Thailand, and India, and these are supported by trading hubs in Australia, Canada, Singapore, United Kingdom, and Ukraine. Considering for a moment the layout or the footprint strategy, specifically our supply chain structure. In Eastern Australia and Western Canada, we own and operate supply chain assets, connecting directly to the grower and managing the product through that supply chain all the way to the customer. In all other regions, we use an asset-light model where we utilize third-party logistics, and connect, in all cases, directly to the customer.
Our strategy is designed to strengthen relationships with customers who are meaningful for the supply chain assets that we own and operate, to increase trade in products where we have a robust experience, and to increase our earnings outside the Australian hub. Okay, looking further at the Canadian assets, our supply chain operation in Western Canada comprises two key partnerships. Firstly, GrainsConnect Canada, we refer to it as GCC. It's a joint venture between GrainCorp and Zen-Noh Grain Corporation, who is a major Japanese agricultural cooperative. Incorporated in 2015, GCC has built four high-capacity grain terminals, two located in Saskatchewan and two located in the province of Alberta, highlighted as blue dots on the screen in front of you. These facilities are built to maximize the supply chain efficiency. Each contains a continuous rail loop track.
It enables the loading of rail cars in the most extreme temperature conditions that only Canada seems to manufacture every year. These loops can support up to 140 continuous car loads, which is about approximately 14,000 tons of grain per train consist. The framework allows a cycle time and a load and outturn time of a train to best practice standard in Canada today. The second partnership to highlight is the Fraser Grain Terminal. We refer to it as FGT, and it's marked in red on the map. FGT is a joint venture between GCC and Parrish and Heimbecker, who we will refer to as P&H. P&H is a family-owned Canadian agribusiness founded more than 100 years ago, containing grain and oilseed trading and supply chain assets, flour and milling and feed mills across Canada.
FGT is a grain export facility located in Surrey of British Columbia. The facility is configured to export a range of grains, oilseeds, and pulses. It's capable of loading up to 3.5 million tons of bulk cargo and 0.5 million tons of container packed cargo annually. The position of FGT is south of Vancouver, so it enables the rail to bypass the congestion that happens often in the north aspects of Vancouver, and it allows us to maximize rail unloading and cycle times. This forthcoming season is the first time that both GCC and FGT will be operating at full capacity. In Canada to date, the farmer is wrapping up their seeding for this coming season. The weather conditions have improved dramatically over the last two to three weeks, and we're looking forward to a return to more normal seasons.
Thanks, Robert.
Thank you, Don. The Fraser Grain Terminal is one of the opportunity that we have today, as I said, visually through pictures and videos, is to share the breadth and scale of our business. This picture here, Don described as a gateway to the Pacific. It is our now completed terminal just outside of Vancouver. At this point, we're heading into a break just before 10:30 A.M. As I said, there's three question and answer opportunities through the morning, and this is the first one. I'd just like Ian Morrison and Stephanie Belton to also join us on stage. What I do ask is just conscious that we have an online audience as well. If you do have a question, make yourself known.
We'll get a microphone to you so that the audience online can hear your question. If you could be so kind just to introduce yourself as well. The other point is, as I said, with three question sessions, we have still got a bit to run in the agenda. While we'll take any questions, if there is a question that's specific to areas that we plan to cover after the break, I'll get Luke Thrum to note that question down, and we'll come back to it if we haven't answered it in the next session. Try to keep your questions on the material we've covered this morning, the introduction to GrainCorp, the breadth of our operations, our strategy and the global trends, and our initial response to those global trends.
For those of you online, there is a chat function where you're able to enter in a question. In that event, Luke Thrum, who's sitting in the front row here, will articulate your question and we'll go from there. Luke, are there any questions online at this point?
Not at the moment, no.
No questions online. Any questions in the room down here. Zoe? Thank you.
Thank you. Richard Barwick from CLSA. I've got several questions, so maybe I might not get them all done now, but.
We'll start with one and see if.
Start with one.
Someone else has got one, Richard, then we'll come back to you.
Well, I'll try and pick my best one. This is for you, Ian. Thinking through the AUD 440 million EBITDA uplift, I know that's a, it's a reiteration, we've been talking about it for some time. You talked, I think on one of the slides, you had sort of three areas, but you've never been particularly clear about where that 40 million is coming from, how it's being allocated. It would be interesting to hear how that might be split or how you anticipate that being split across the two divisions, across agribusiness and processing. Part of that question is when we think about the AUD 240 million through the cycle EBITDA, again, how do you think about that across the two main divisions?
Sure. Thanks for the question, Richard. Now, given you've directed at Ian, I'll get Ian to answer it. But I would say, look, absolutely we intend to be, and we have been transparent about where it came from. We did that in last year's update, and we are well on track towards delivery of that. Ian, do you wanna answer Richard's question around where it sits and some of the specific examples?
Yeah, sure. I can do that, Richard. Thanks for the question. On the AUD 40 million, last year, we articulated that AUD 15 million of it related to our international business and the main portion of that, so that's in the agribusiness segment, and the main portion of that was from our GrainsConnect joint venture, which Don spoke about before. The Canadian joint venture has been drought affected in the last couple of years, and also the supply chain was only completed with the completion of Fraser Grain Terminal in January this year. As conditions return to normal, we expect to see that contribution from GrainsConnect come through. Pleasingly, what we have seen so far with the asset base in Canada is it's achieving in fact better than business case volumes and capacity.
We're very confident in what that business will be able to deliver once the volumes return to Canada.
That's the AUD 15 million initially, then the other AUD 25 million was related to about half and half across agribusiness and processing. It was a range of opportunities in there. One of the ones we've called out more specifically in the update today is agri-energy. That's businesses like Auscol and some of the contributions from our ability to supply some of our products into the renewable fuels space. The challenge in being able to articulate exact details on amounts is, as we're clearly demonstrating at the moment, we're delivering earnings well above that through the cycle, and being able to articulate how much is coming from each individual initiative is more difficult. But we are very confident in the overall delivery of that AUD 40 million and within the timeframe we set out. Hopefully that answers the question, Richard.
You know, I think a few other areas in there, bulk materials we referred to this morning, that's a part of it. We've seen growth in that, even in addition to the huge uplift that we've seen in grain volumes. Then there's also a range of operating initiatives across the network around taking cost out and improving the optimization and planning. After the break, Nigel will touch on some of those things, including the advanced analytics program that we're running that will embed some of those planning improvements. We're not going to disclose all the specific details of every project because there's many of them. What we can say is that we're absolutely confident that we'll deliver the full AUD 40 million, and possibly even a little more, and particularly in the international business.
I think we touched on the fact last year that it was assumed that that business was kind of at breakeven and the upside was from a breakeven point. As it happened, that business was actually slightly below breakeven. So the gap or the opportunity is slightly greater, and as Ian has said, full confidence in that business delivering to its full capability. I think, Ian, the other sort of part of that question is how you think about the through the cycle number, and it's not necessarily an average across a 10-year period. It's set on an average year and average set of conditions. Do you just wanna reiterate how we think about through the cycle?
Yeah, no, it's a good point, Robert. When we introduced the through-the-cycle concept at last year's Investor Day, that is based on a set of assumptions where you've got, you know, normal carry in and carry out on an average harvest size. As we've seen over recent years, it's rare to see that average season, and you do see over, let's say, a 10-year period, a range of drought years, large years, and maybe one or two average years. I think what we've been able to demonstrate in the last two or three years is that we've done a good job of protecting the downside in the drought years through reduction of fixed costs, through the crop production contract, through managing that fixed variable split. I think that allows investors to be comfortable that the downside is very well protected.
As we're seeing in the current environment, when conditions are good, the scale of our operations, our ability to adapt and flex up and down means we can achieve much greater earnings than those average earnings in large crop years. You know, one of the ways we're articulating that is you shouldn't only think about GrainCorp over a ten-year period as ten average years because we know that it's very unlikely you will see ten average years.
Now, it's difficult to articulate exactly what that means, but I think you can see from the earnings in the last, you know, two or three years that 10 years with variable production cycles, we believe we're better positioned to respond to that than other businesses because of our scale and our adaptability, and that means it can provide a strength of earnings that can be better than that average season.
Thank you Ian. A question over the back right-hand side from where I'm sitting. Thanks Zoe. Richard, I'm conscious you've got other questions, so we'll come back to you once everyone else gets a chance.
Apoorv Sehgal from UBS Research. Probably a question for Ian again. There was a slide up before showing global wheat stock-to-use ratios at 20-year lows, and obviously compounded with the Black Sea disruption in the last six months as well. I guess those supply-demand dynamics have taken a bit of a step change in just the last six months. To what extent is that incorporated in your thinking around that AUD 240 million through the cycle number, given that number was done sort of this time last year, but things have changed a bit since then?
Yeah. It is a good question, Apoorv. That AUD 2.40 was certainly before we were seeing those conditions, and it was on the basis of what we see in average conditions. I guess the hard part in terms of answering the question for the next few years is how long does that imbalance stay in place, and what does that do to margins for supply chains? You know, if you do see a protracted imbalance of supply demand globally and conditions in our key regions, particularly East Coast Australia, continue to see good supply and production, then absolutely the opportunity to leverage good margins through that supply demand imbalance leaves us really well positioned.
I think, Apoorv, one of the ways to think about it is as difficult as it is to predict long-term commodity prices. We can point to the trends that influence those prices. We do that when we talk about the variables in our guidance and outlook, for example. Two of those key variables are the size of the Australian crop and the demand we see around the world. I think, given the themes we've talked about this morning, you can see both of those factors are going in our favor. Certainly the outlook for the next crop, and we'll talk about that after the break, is very positive in Australia from a supply side point of view. The rest of the world likely remains disrupted for at least two or three years.
Some of the more pessimistic views on the Black Sea is it could be disrupted with insurgency, you know, for close to a decade. It is likely that there'll be disruption to supply for a protracted period. When you look at this slide that you referred to, here, up on the screen, slide 33, and the fact that global inventories are low, that's another demand driver as they recover. You know, I'd say that the drivers all point to a protracted period of demand outstripping supply. That's good for demand for Australian grain, and it's good for supply chain operators like us that need to get that grain from Australia to where it's needed around the world. Over the back here. Thanks, Zoe.
Yeah, can you just talk to your market share of Australian grain for export versus domestic use? You know, obviously, GrainCorp's at its best with full utilization, you know, all the way through your ports into export markets. Is there an opportunity in good seasons where you can take more of that share or swing more of the product that comes through your terminals through export? Can you just talk to that?
I can. It might be a comment for both Klaus and Ian to talk about as well. It does vary, and the reason it varies is it depends on the size of the crop and where it is. I'll just make some opening remarks. Certainly, with the inventory that we're carrying in our network, we've flagged in our guidance that's likely to be a carryout between 5.5 million tons-6.5 million tons in our network. That'll be replicated across the industry. There'll be a lot of on-farm storage and other networks that are full, which in effect means that the domestic task for next year is already satisfied with grain that's in inventory.
It's likely to see a greater portion of production going to exports over the next 12 months, as that new harvest comes through. Klaus, maybe if you talk about it in terms of the way we look at share of grain received but also grain exported and what drives that.
Sure, Robert, but I'm also cognizant that, Sean Barker will actually cover some of that.
Yep.
If you think it in big picture for the east coast of Australia, this year's crop production was, give or take, 30 million tons, of which 11 million tons-12 million tons gets consumed domestically, and therefore depends, as Robert has articulated, what is the carry in relative to the carryout. Our task this year and the prior year is give or take 19, 18, 19, 20 million tons. It comes down to how well the supply chain can function, because as we've articulated, there's very, very strong demand for Australian grain, and Australian grain is very competitive globally.
I think, Klaus, you make a good point. We will come back to that after the break because Sean does talk about export capacity, the fact that the export supply chain's running at 2.5x normal. I think we'll pick up a lot of that question after the break. Ian, any closing remarks from you on that point?
Probably the only thing to add is in terms of what happens with the exportable surpluses, some of it will have to go to carry just because supply chains are working at full capacity. In essence, market share is much more about, you know, how much you can get through the supply chain in the current season. I think we've been able to respond pretty well in relation to just the supply chain resilience to maximize that throughput and really get as much of the grain out in the current environment as possible.
Thanks. Luke, any questions coming through online?
Yeah. There's a couple.
Thanks, Zoe.
Zoe? This question's from James Ferrier from Wilsons. He asks, there's been talk of imports of European grain into the east coast of Canada. Is this reflective of current seasonal production or more of a structural trend? And if it's the latter, what are the implications for GCC?
It's certainly not structural. It's more a response to current conditions. Who would believe we've exported barley shipments for malting from Australia to Canada? That's creating opportunities for Australia. Don, you might like to make some comments around what we're seeing go on in that space and the current drought or the recent drought in Canada and how that's driving global trade.
Thank you, Robert. As Robert mentioned, it's just a temporary position given the drought in Canada. Our asset GCC is located in western Canada, not eastern. This is the major and the bulk of the export program from Canada to the world. It will have little influence on our activities there.
Thanks, Luke. Next question.
From David Pobucky from Macquarie. He's got a few questions. I might just start with the first. FY 2022 guidance reaffirmed, what are the drivers to get to the upper or lower end over the next few months?
Good question for Ian to answer.
Yeah, we had a half year update just about a month ago, and the drivers we called out there will be the same today. Part of it will be how the season develops in terms of the production and supply from the East Coast. Those supply side drivers in terms of pressuring capacity and supply chains and growers looking to clear out grain for another harvest. That will be one factor, and the other one will be the continuation of demand side and drivers, whether that be ongoing disruption or ongoing conditions in the Northern Hemisphere that mean supply could be lower than typical. Those will be the major drivers that see strong margins continue into the fourth quarter this year and also into next year.
I think we're just coming into that period now where we're starting to sell into the fourth quarter, and we'll get a view as to where that's at. The macro drivers around production in Australia and demand around the world, as we flagged, have continued to move in our favor. I think we'll give David one more question, given that one was pretty straightforward, Luke.
Okay. There's 3 more. I'll just choose which one. Okay, for the Ukraine disruption, do we have any view on how long we think that could persist?
It's a really good question, and we'll just make a couple of comments about Ukraine. First and foremost, a humanitarian crisis for the people of Ukraine. As we've touched on this morning, increasingly a humanitarian crisis for those populations that rely on Black Sea wheat, and particularly those populations that can least afford the disruption across North Africa. The other thing is, if you look at our business in Ukraine, while I don't think anyone necessarily foresaw the conflict coming, the advice, you know, right up through February and conflict broke out on February 24, was that these sorts of things have occurred every year and, you know, may or may not happen. As we came through January and early February, GrainCorp was listening to what everyone else was hearing.
Given the priority we had on the Australian program, we had the opportunity to reduce our financial exposure in Ukraine. We understood what our cash burn rate was there to look after the very small number of people, the 15 Ukrainian nationals that we employ, and also to reduce our inventory exposure. As we said, at the half year, we've got no forward financial exposure to Ukraine in that respect. It did mean that when hostilities broke out, we were able to focus on one thing and one thing only, and that was the safety of our team in Ukraine. I'm pleased to report they remain safe. Don, you're in touch with them, if not every day, certainly every week.
I took the opportunity to meet with a number of our team who we've relocated out of the Ukraine into our UK trading office. In terms of the specific question around how long it will go for, I think very difficult to predict other than our best estimate. What we've been saying is that there will be disruption for at least two or three years, and I'll put some logic as to why that is. First of all, the harvest that's going or the crop that's in the ground in Ukraine at the moment is significantly reduced through the impact of war. A lot of the grain in Ukraine also comes from eastern areas that are under conflict and control of Russian forces. But also infrastructure has been severely damaged.
Road, rail and port infrastructure, even in the event that peace breaks out, will take some time to recover. You know, I think if you'd listen to any commentator across Europe or the world in grain or food or energy markets generally, it's very easy to see disruption for at least the next two or three years. As I touched on earlier, it could well be longer than that. Hopefully that answers the question. Back to the room. I know Richard's got another question, but anyone else in the room with a question? Richard, have you still got another question, or we covered it? Yeah.
Sure.
Should be relatively straightforward, I think. Another one, sorry, back to you, Ian. You obviously talked about the ROIC and how that's improved in the last couple of years. I'd just be keen to sort of marry that up with the through the cycle guidance. Where you'd be seeing ROIC balance. I guess coupled with that question, you did talk a little bit in detail about the depreciation profile and what you thought that would look like. Can you be a bit more specific in terms of what that would look like? Is there a through the cycle D&A you can even talk to, or will it continue to come down?
I'll start with the D&A one. We'll see a slight increase this year, and you can probably see that from the first half profile of D&A before we'd expect to see a continued downward trend. That's just off the back of the sustaining CapEx being lower than D&A. The reason for the slight increase at the moment is an increased spend on basically the current opportunity from the large harvest with some shorter life capital. Tarpaulins are depreciated over between two and three years. Those assets essentially are shorter life, so that has a temporary impact on D&A. We don't have a specific through the cycle D&A because we do expect the profile to continue to trend downwards over time. Then your first question, remind me what that one was.
ROIC.
Right. We haven't put a specific target out on ROIC, but when we talked about it at last year's Investor Day, first area has to be that we're above the cost of capital and aiming for certainly double-digit ROIC from an ongoing basis. Secondly, from new investments, it has to be that it can drive up our overall ROIC. Looking at it from that perspective. That's also why we have a focus on a number of the aspects outside of just the core business. One of the items we announced last year was targeting AUD 50 million of release of capital from essentially underutilized assets from the network of sites and assets that we don't really use within the network today.
We've progressed that pretty well, and we've achieved AUD 27 million of cash.
So far against that target of 50, that will continue to be a focus as well. Those aspects are all part of that drive towards that improved ROIC on an ongoing basis.
Thanks, Richard. Luke, any one more question online?
I have a question from John Campbell from Jefferies. In this very volatile environment with grain prices around 20-year highs and supply chain constraints all over the world, how are you viewing risk management in your trading and marketing activities, and can you share any specific concerns we have?
Okay, it's a really good question, and we've got a really mature risk management process in the business. First of all, some fundamentals. We don't expose ourselves to positions in the market. Whenever we buy grain, we back it up with a back-to-back sale, or the purchase of a futures or hedge product to protect us. Klaus, you might like to talk about, though, the way we manage that on a day-to-day and week-to-week basis, in terms of the business and the confidence we have in being able to manage that volatility. I think bearing in mind that it's been volatile now for over a year, and our results speak for themselves in terms of our ability to navigate that environment.
Sure, Robert. Some people might recall, some analysts might recall, going back in time, we've had a bad experience in 2018, I recall, where we incurred some trading losses, first time in 10 years. Some very valuable lessons have come out of that, and we've reviewed our risk management framework, processes, and procedures. We actually have now an independent risk assessment unit valuing our open positions against VAR and global volatility. As Robert-
Sorry, VAR being value at risk in terms of that abbreviation.
Correct. As Robert said, we very much focus on driving volume through our supply chain. That's the focus in making returns on assets employed, that being our infrastructure. At times, when the producer wants to sell, it's not necessarily when the consumer wants to buy. Therefore, we have to enter into a timing mismatch, which then gets managed via futures or options positions, as Robert has articulated. We, as the executive, meet on a weekly basis with senior managers, general managers, Don, Sean, and others, to assess the risk and also our position. It's highly transparent. It's valued every day to understand our exposures. Our risk management processes, procedures, and policy are much more mature than they were some four or five years ago.
I think I'd just add that it's fully embedded in the business with oversight from the board risk and audit and risk committee, the executive committee that Klaus touched on, and then the processes that run every minute of every day as we run things through. I think, as I said right at the start, the key thing there to look at is the fact that we've been operating in a very volatile world, and our results speak for themselves in terms of our ability to navigate that. Any final questions online, Luke?
No.
Any final questions in the room? If not, we are on time to go for a break. Bearing in mind that we do have people joining us online, if we could be back here for 11 o'clock in just under 30 minutes' time, that'd be great. Look forward to talking to you, those of you in the room, through the break. Thanks, everyone.
How are you? I'm doing great. I have you back for a few. I just love the idea when I see you in my head. That's why I walk down memory lane, 'cause it's the only place that I have you again. You tell me all your bad jokes. I laugh.
I woke up this morning, could not see the light. My coffee was black, made my skin look so white. Fainted a smile to myself in the mirror, mm-mm. Ran to the bus that was already gone. I know that someday I won't take the strain. Come to my rescue, I'm losing my mind. I know that somehow this whole thing's in vain. Come to my rescue tonight. How come we all play without knowing the rules? Why don't we just quit and stop acting like fools? Little time and my heart is getting old, mm-mm. My TV's gone crazy, there's nowhere to hide. I know that someday I won't take the strain. Come to my rescue, I'm losing my mind. I hate that somehow this whole thing's in vain. Come to my rescue tonight. I know that someday I won't take the strain.
Come to my rescue, I'm losing my mind. I hate that somehow this whole thing's in vain. Come to my rescue tonight. I know that someday I won't take the strain. Come to my rescue, I'm losing my mind. I hate that somehow this whole thing's in vain. Come to my rescue tonight. I know that somehow this whole thing's in vain. Come to my rescue tonight.
Thank everyone in the room and those online. I'd now like to ask Sean Barker, Nigel Lotz, and Brad Glass to join me here on stage. As we get into a deeper dive on GrainCorp Australia and New Zealand. But just to recap, through the course of the morning, we've gone through some of the larger mega trends shaping the industry and the opportunities for food and agriculture and for GrainCorp. We've heard from Don Campbell about our international business and how we've intentionally diversified both our supply but also our demand in terms of the number of countries and customers we trade with. That will allow us to be more resilient in terms of supplying customers year-round. In this session, we want to understand and share with you a little more what we're doing in Australia and New Zealand.
The businesses that comprise of East Coast Australia, ECA, as I said before, Feeds, Fats and Oils, and our Processing and Oils Processing business. We'll talk through how these businesses have evolved, and what we've done to undertake improvement in these businesses and set them up for the future, the changing markets and the opportunities that are ahead. Across all of our business units, we're confident in the foundations we've got, and we're confident in the outlook for the businesses, not just to survive, but to thrive and excel across these categories. Before we start and get into that discussion, I might just get a quick introduction from Sean, Nigel, and Brad in this order, in terms of what you do in the business and your background. Starting with you, Sean Barker.
Thanks, Robert. Sean Barker, GM of Commercial. I look after the commercial activities in the ECA business, as Robert described that. I've been with GrainCorp for just over 15 years, 25 years in commercial roles across ag, overall.
Nigel Lotz, GM for operations across the grains and processing businesses. I've been with GrainCorp now for nearly 10 years. Prior to that, in a number of agribusiness and supply chain roles, including Visy Pulp & Paper.
Good morning. Brad Glass. Been with GrainCorp just on three years. I look after basically the businesses where we process, we value add. That includes our feeds, our oils, our foods businesses, and originally from a farm in northern Victoria.
Right. We'll talk about the East Coast business now, and I think the context I'd like to provide around that is we often, based here in Australia, end up thinking about the short term, the month to month, the year -to -year activity that's going on. Whereas GrainCorp and agriculture generally is fundamentally a business you should look at through the long term and fundamentally stronger when you look at the trends. Sean, if we look at the East Coast business in Australia, we can clearly see the standout performance at the moment, the fact that we're making the most of the opportunity and, we're delivering exceptional results. Can you talk us through how we're setting up for the future and, why it looks strong in the longer term?
Yeah. Thanks, Robert. I think as we go through that, we might look at some of the production factors sitting behind that for the East Coast. We've spoken a lot today about the last two years, and those record productions that we've had of just over 30 million tons on our winter grains overall. Looking at that chart and what those two years look like, if we go back to the other big years of 2016, 2017 and 2010, 2011, as we see on the chart, those big crops are significantly higher than we've had in the past. We've seen those back to back, which is really pleasing to see. Another factor on this chart, this is looking on the left-hand side there.
If we look back to the drought periods of 2006- 2008 and 2018 - 2020, two like for like periods in terms of drought. We produced over 4 million tons more in the drought of 2018 - 2020 than we did back in the 2006- 2008 period of droughts. Overall, our farmers are adapting their practices. We're seeing those yield increases coming through. The chart on the right-hand side, we're seeing that growth of 2.3% per year compounded growth on that from production overall. How are farmers doing that? Well, we thought rather than us sit up here and tell you, we've got a video now of a third generation farmer, Charles Edmonston, down in Ballarat.
He's gonna step us through pretty quickly what's happening on his farm and stepping through why we're seeing some of those yield increases.
We'll go to the video.
Hi, I'm Charles Edmonston, a farmer at Edmonston. We currently grow wheat, canola and faba beans.
The thing that makes me passionate about farming is being able to feed the world. It's just a great thing to wake up every day and know that you're helping the sustainability of our future generations. In the last 10 years, we've changed our approach to farming with the aid of science and technology. We've relied heavily on up-to-date chemicals that allow us to increase yield and technology with variable rate, and grid sampling has aided us to individualize paddocks and maximize performance. The biggest changes we're seeing across the industry is plant breeding, such as drought-proof wheat, for example, and changing tool adaptability with weather conditions. These changes have given us a very positive effect in yield, particularly on wheat, for example.
Growing a variety that we used to grow 10 years ago versus now, we're seeing an increase from 2.5 ton- 3 ton comfortably, and I predict that that'll only go further. GrainCorp's helped in a lot of ways, but particularly the ease of being able to deliver to port and the terminal. It's only an hour and a half from us, and I've always accepted its quick turnaround time. The best thing for me individually is being able to sit back after harvest when the dust has settled and look at all the markets and have several buyers all hunting for the same product and being able to get a better price through the aid of GrainCorp, having it at port. In the next 10 years, we'll be heavily reliant on technology and science even further.
I think we need to trust the technology that's coming on the market and trust the science that's coming forth, and that'll increase our yield once again.
I think the story Charles tells there is pretty common across Australia. We do have some of the most innovative farmers in the world, when you look at what we're doing, especially in water use efficiency, the uptake of technology and what we're doing. We have a lot of confidence, you know, in that yield and how that will take us forward as a business. If we think back and remembering the chart that we had there before, what's that mean short term? We've spoken on the prospects of a third crop coming from that. ABARES recently produced their first forecast for the 2023 year. On winter crops, that was 24.2 million tonnes. That's their largest first forecast in June that we've ever had. That's reflective of the positive conditions.
Robert's touched on it there before. Good soil moisture profile looking forward, and that optimism we've spoken about for that crop. We look at the Bureau of Meteorology. Their three-month forecast is out. For anyone looking at that, just go to their ag services area, three-month forward view. They're showing a greater than 80% chance of above medium rainfall between July and October this year. We get a lot of confidence from that, and we're definitely planning towards that for the season ahead. If we take those good conditions, we look at that, we'll apply those back to sort of what's happening now, particularly in the export area. I know there's some questions around that.
Overall, the really good supply of grain that we've had has been really good for the export supply chains. Going back two years ago in drought, obviously we were not exporting grain. To go from that to record production, and as we've seen, the supply chains have had to go from pretty low utilizations to, as Robert said, to over 2.5x an average task in a matter of time. As an industry, we've done very well on that overall, but we've definitely the supply of grains maxed out that capacity from that. When you think through that, what is the constraint in terms of how we're getting grain out at the moment? It is transport from that point of view, so it is the road, it is the rail.
Klaus mentioned it in his talk there earlier around some of the constraints around labor. You know, that's compounding it as well in just terms of the number of truck drivers, number of train drivers. Transport is limiting how much grain we can get from upcountry through our ports overall. In a recent analysis by Rabobank, for those out there, they put the total East Coast supply chain capacity at 19 million tonnes. That's a theoretical capacity. The recent AEGIC report put out, I think, a maximum exports we've ever got to is 17 million tonnes as the East Coast from that.
The exportable surplus we're looking at from that great supply, the exportable surplus is our supply of grains, our carry in plus our production, less domestic demand, at around 24 million tons on that overall. That's what's driving the market at the moment, just that huge supplies, maximizing the transport that we have available to get that grain to a port, and that's where our focus is ensuring for the industry that we can run our supply chain at maximum capacity to that transport, making sure we get the exports out for where we sit today.
I think a couple of points in that, Sean, starting with that export capacity, and it picks up on a question before the break. Really what you're saying is there's excess capacity in the ports, but really where the constraint is getting the grain from upcountry down to the ports.
Yeah. Yes, that's exactly right. In terms of berthing space, our ports, you know, there's plenty of capacity there for that. Just to put it into context, road transport, at the moment, road rates are double where they were two years ago. That's the industry doing everything to make sure we turn on all those transport options available to the industry.
Before we move on to the next slide, I think talking about that cost is a really important aspect of the resilience of GrainCorp because when we talk about the intrinsic value of grain, there's a slide in the appendix that reminds you of that concept we launched last year.
Buyers and sellers of grain recognize the quality, the location, and the timing of that grain, and that's reflected in either what we buy the grain for or what we sell it in. Although we're seeing higher costs, as Klaus talked about earlier, that's actually a competitive advantage for Australia when it comes to an ocean freight point of view. From a domestic point of view, it's not that we have to pass on those prices. They're automatically picked up in the way grain's priced. GrainCorp's an incredibly resilient model when it comes to an inflationary environment. We're not having to pass on those costs. They flow through automatically.
That's correct. With the demand drivers spoken about earlier, just underpins that.
Yeah
that point, Robert.
I also just wanna go back to the prior slide we had, if we could just bring that up again because I've said before, this is one of my favorite non-performance slides, where we talk about grain. The reason for that is Sean's spoken about the improvement that we heard from Charles as a grower in terms of yields, and we saw firsthand what that means and what drought-resilient seed varieties mean in terms of the uplift from the last or the previous drought to the last drought, and then the uplift on average. We're in a supply environment that's increasing by 2.3% on a compound annual basis per year. I think that's a great place to be.
While often, as I said, we get hung up on the short-term volatility, you know, yes, that's an issue, but GrainCorp's taken care of that by the crop insurance product that we've got, the variabilization of costs, the reduction of costs that, you know, you heard from Sean about, you'll hear from Nigel about. Really you can look at the longer term trend, and I think that's really positive, and you can see that on that right-hand side of the page there. As we move forward, you know, Nigel, we've you know, talked about the supply environment. We've talked about the opportunity that exists for export at the moment.
Perhaps you could talk us through what we're doing to transform our supply chain, to improve it, to take cost out, and to optimize it. Not sure my clicker's working. If we could go.
That one.
That's the one. If we could just go through to the design and layout of our integrated supply chain, connecting those 160 sites to port, and then what we're doing about it.
Yeah. Thanks, Robert. Yeah, for those that don't know our network, it's got certainly a very strategic footprint from Central Queensland, Mt McLaren, our most northern site, down to our southernmost port at Portland. There's around 160 sites that we've got operating and 7 ports. They're very well located in terms of the seasonality that we get, in terms of taking the benefits of a good season, a bad season across the East Coast. But in terms of their capability, that's the key thing. Hugely capable. Our country assets can load a train at up to 1,600 tons per hour. Our port-based assets can load a boat at up to 5,000 tons per hour instantaneous.
That combined with our permanent storage facilities, which is the silos versus a traditional bunker, which you see a blue tarp of. Those have been out and about. That gives us some redundancy, particularly in the years like this, where there's a lot of weather disruptions. It helps aid the reliability and efficiency of our program. Just to culminate or to support how well the network's going this year, we're delivering nearly 1 million or executing nearly 1 million tons per month at the moment with all the supply chain disruptions in quality. That just highlights the capability of our network. In terms of the intrinsic value of grain, good to see you touched on that, Robert. We are in a very good position to maximize the value from this. Time, location, and quality drive the value of grain.
With the bumper seasons we've got and this huge exportable surplus, we're in a very good position to monetize the grower's grain. In terms of investment, it's been a big program of works, particularly since 2014, where we've been focusing on a number of different areas. I thought I'd just touch on a few. Particularly this year with the big export program, the investment in the rail loading infrastructure that we've done up country is underpinning our export program. If you look at the numbers we're delivering compared to the 2016-2017 year, that big increment or the delta is because of the rail loading facilities up country.
Examples of some sites where we've invested are the likes of the Cunningar in Southern New South Wales, the Coonamble in Northern New South Wales, a Trangie, and a Quandialla. All these are high capacity rail loaders that can reach that 1,600 tons per hour. In terms of the additional storage program, it's even though we've got 20 million tons of storage across East Coast Australia, it's not always in the position that we want it. Sean touched on the carry that we're going to have. The challenge we've got is actually identifying where this carry is gonna limit the next harvest intake to keep the supply chain going. The program last year was very successful. We built over 1 million metric tons of capacity, and this year is our goal, an ambitious goal, to build another 2 million tons of metric capacity.
We look at where the constraint points are, where the opportunity is, and then build this storage. One notable in the projects last year, Coonamble, which is in Northern New South Wales, we built 260,000 additional tons of storage. That in itself makes it a super site. Coupled with the storage it already had, it's now 750,000 tons storage capability, which is the largest storage site on East Coast Australia. In terms of our mobile assets, that's a huge area where we've got to invest in. The importance of that is in terms of the customer experience for the grower, in terms of site turnaround, and also our ability to intake the grain at harvest time. There's no other industry where if you don't take the grain this day, it passes you by.
We need to have capable assets that can maximize the receivable capability. A lot of work is going into here, particularly in the change in the seasons. The video from Charles touched on seed technology. Seed technology and the changes in seasons and their variability is condensing the East Coast harvest. It used to just naturally cascade down the East Coast and all the gear and the headers and everything could move. Now it's being condensed, throw in some weather disruptions like last year, and this instantaneous capacity is really, really critical in our mobile fleet. We've invested heavily over the last six years, and again, we're doing that this year. In terms of our digital assets, this is what sets us apart from the rest of the other networks. There's a number of areas we've been investing in.
I thought I'd just touch on three specific there. FastWeigh is an internally focused data capture quality measuring solution. We capture at harvest time load by load, harvest quality data, and build the profiles up by each of the stacks. This is very important, and it's actually auditable to the actual sampler doing that work. We then do cross-referencing with our laboratories at the ports. CropConnect, this is internally and externally focused. Externally, it's basically providing a digital marketplace for our growers to monetize their grain with the open network of competitors that participate in it. Internally, it has saved a huge administrative burden of complex contract administration. In terms of the last one there, Croptimiser. This, again, is an externally focused value add to the grower.
This is another reason why the grower uses this. Simply put, it uses the data from the capture of FastWeigh to, for a grower to where they've got above average loads and a load that may be below average, it brings that value up. This blending essentially digitally, and we give the value back to the grower. Growers used to do this themselves in their own busy harvest time. Some still do, but this just aids and it's part of the value add for a grower in terms of the service offering to come to our network.
I think, Nigel, not only is that bringing financial benefit to the grower and to GrainCorp, but it is part of that customer and grower focus around maintaining and improving our share, and the sorts of things that you heard Charles talk about in terms of what excites him about working with GrainCorp.
Yeah.
You've talked quite a lot about the data and having that quality data, ton by ton, every load in, every load that we hold and carry in our network, gives us the opportunity to use that data in advanced analytics and data analytics models.
Yeah, absolutely. Once you've got good data, then you can start to use it. For us now, we're heading to that next phase, and we're investing heavily with the advanced analytics. With good data, then you can start optimizing the network. The benefits of that is, one, optimizing to do more with less, getting standard systems and processes, and then the subsequent cost savings that will follow.
I think just before we move to the right-hand side of the page on some of the operating initiatives which are around the capability of our team and the people that Nigel and others lead. If you look at the capacity investments we made because of the bumper crops that we're dealing with, we've looked to get fairly short paybacks on those investments. I think last year we were looking at sort of a trigger of less than a year payback.
That's it.
Most of them came out at about a six-month payback. Although we're investing in the network, and as Ian said, that's within the boundary of roughly depreciation and amortization in the group, so we're not increasing that over time. We are getting excellent paybacks for that investment and most importantly, meeting growers' expectations, being able to service them and improve service levels. Nigel, on the right-hand side of the page, you've got some initiatives there that the team are driving on how we get better every day.
Yeah, we do. A number of different initiatives there, and we'll just go through a few. Important any CapEx program is to dovetail or couple it with operating initiatives to ensure that it's implemented or operationalized. Otherwise, the CapEx itself won't drive the efficiencies. There's a number of different things we're working on, and we're touching on this through the cycle, and it's been very topical. The first point there is very critical to us. With our network, we talked about the flex sites. We've got a strong agility within our network to flex on or flex off according to the season. It's important to capture the opportunity in a big year to flex up and capture that grain opportunity to keep the supply chain going through our international customers.
Importantly, in a low year to flex it back down to our core and manage our costs through the cycle is very important. To be able to do that also, you need a core team. A big focus has actually been recruiting and building the core capabilities of our teams in the country. Our recruitment programs have been about incentivizing to get the core areas such as Walgett, which any of you know that it's quite challenging from a remote and regional point of view, but we need people to be out there to connect with the growers and to be, you know, to be the face of our business. It's very important. In terms of other programs that we're doing, we've got a lot of moving parts that wear out. We need a preventative maintenance program.
Our new approach through the cycle is very, very important to us. Previously in lean years, maintenance used to get dropped in terms of cost saving, and that just leaves you in a vulnerable position, particularly when you're gonna flex up. Now, as we look at through the cycle, a composition that is cost allocation year in, year out, regardless of the year two, our preventative maintenance program ensure that when these big years come, we can step up. Best practice stock management or another acronym there, BPSM. This is just a fundamental program about our physical and data-driven stock management system. This is very, very important, for a number of reasons. We talk about the intrinsic value of grain. Quality is a core component of that.
If you have out of quality grain at a site that you don't know about, that could just undo your whole execution program for a big task like this. This data, as we're talking about in terms of the optimization, is very, very critical. Also, I see a few bankers here, it makes the grain in the GrainCorp system bankable for seasonal finances for growers and for our own facilities. It's very important. The final one there, Robert, operator excellence. It's very true to our heart as operators, just trying to that process of continuous improvement. The key with operator excellence is building standard operating processes that are scalable and safe systems of work to look after our team.
A lot of activity going on there, improving the network and delivering exceptional results every day. I touched on this slide earlier, Nigel, or this feature earlier around diversifying what we handle through the network. Perhaps talk us through at an operational level, what that looks like and some of the examples.
Yeah. Well, there's been some good questions for the break too, Robert, and so I expect later. The bulk materials piece is. It just further accentuates the importance or the strategic importance of our port assets. Klaus touched on, I believe, that we're not using them to the full capacity with the grain program. That creates an opportunity. Then when we talk about the through the cycle number, it's important to underpin that with some non-cyclical or non-seasonal returns, and that is the focus of the bulk materials program. As you can see there, that's the Port of Brisbane, where we're building a cement unloading facility. Two major projects that were finished in the last couple of years have been a cement unloader at Fisherman's Island, which is at Brisbane and at Port Kembla.
The other commodities that we venture into is wood chips, sugars, aggregates, sand. Fertilizer importing.
Yeah. As I said earlier, on the right-hand side there, those volumes, half-on-half for the half year 2022 increase from 900,000 tons- 1.3 million tons. As you said, Nigel, the picture on the left-hand side there, finished about two years ago. That's
That's great.
...a picture showing through construction. We've got the Port of Geelong on the right-hand side there, which is one of our larger and more diversified port facilities.
That's right. It's the largest volume, which would go out of there.
Excellent.
Do you want me to touch on the reversing supply chain?
Yes, please.
Okay. Now, this is an important one for us, certainly as a team, and for GrainCorp being relevant through the cycle and to a grower and our end user customers. In the drought period that Sean talked about, there was a huge domestic deficit on East Coast Australia and surpluses in the West Coast. The relevance of our supply chain through the good times and the bad times has been highlighted by this reversing the supply chain. We brought in over 4 million tons of grain in all the ports across the East Coast, particularly into Fisherman's Island, where you've got that big feedlot demand in the Darling Downs. For us, it was great to show that, one, we're relevant in all times.
Two, the capability of our assets to keep mills having grain in them, to keep milling and animals fed. I will note there from a community level, upcountry we ran a program specific and bespoke to individual growers to really partner with them through the hard times. Not just a catchphrase of there in the good and the bad times, I truly believe we were.
I think it's all of that activity that demonstrates the agility, but also the resilience, of our network and our workforce. This perhaps sums it up, Nigel, in terms of some of the key metrics we've managed this year, despite some of the challenges from COVID and other disruptions in the supply chain.
Yeah, it sure does. Klaus's touched on a few of the challenges. I look back at the year and we've had, you know, mice plagues, floods, weather disruptions and of course COVID over the last couple of years. The resilience of the team and our assets and our capability, and that's not just the operations team, it's our whole end-to-end value chain has been remarkable. You look at the tonnages we're doing from an export point of view, export point of view, over 6 million tons and heading towards 9 million tons. Our bulk materials numbers are up. In terms of the harvest receivals, we had two 13-plus million-ton harvest receivals, and within that, each year there's been site records broken. 40 site records the first year and 15 last year.
It's just a sign of, you know, a capable team that continue to deliver. That's super exciting. For me, the last one I wanted to touch on, Robert, was the 3,000. This is on the people side. It's so fantastic to be involved in an industry that has got all this opportunity. 3,000 is the number of harvest casuals we employed last year. The previous year, we needed a similar amount. Last year, we probably needed 500 more. This year we need 3,000-3,500. My takeaway to all of you here that have got built up leave, long service leave, that if you're looking for a sabbatical, wanna rejuvenate, reinvigorate, we've got some great jobs for you.
We pay well, we look after you, and we train you, so don't feel that you can't do the job. More seriously, yeah, nieces, nephews, sons and daughters, we need a heap of people. There's a great opportunity to come out into a fantastic supply chain and rub shoulders with a very capable team.
The digital recruitment program's already underway. I think, you know, testament to the sort of planning that we've talked about was the fact that in COVID challenge years, we've been able to recruit those people for harvest. We build on the learnings each year. We're starting this year and again, very confident, we'll get there by starting early and planning to attract those people back into our business. Many of them are returning, I think. On exit, we survey, and 70%-80% of people say they'll come back the following year.
I should say that in terms of applications there, Robert, 6,500 applications to get that 3,000 people. As I said, we could have done with more. COVID was a big challenge. Any of you have had any of in your younger years or your children now regional social events, Robert's daughter's one of these, they go out there and the next Monday inevitably we lost half a team. It was just a continual challenge. It didn't-
Which COVID was the reason that they lost them there?
Yes. Not New Zealander finding an Aussie man, was it? No.
Before we move on to the processing business, Brad, the 6.3 million tons there, that's our year-to-date exports. That is in the context of the 8.5 million tons-9.5 million tons that we've flagged in our earnings guidance. It says we're well on track with the export program to meet those targets for the year end. Brad, as we move away from the grains business, there's a lot of overlap and integration between grains and oilseeds. We're procuring often from the same growers. But also a lot to celebrate around the resilience of our processing business, the diversity of that, the fact that we do operate an integrated end-to-end supply chain.
We're also operating in an environment that's creating lots of opportunity, lots of demand, but also highly competitive as well. Perhaps if you can take us through the details of this business and explain how it works, Brad.
Yeah, sure, Robert. Thank you and good morning to everyone. I think as Nigel touched on there, I think he made some really good points around our asset profile in the grains business on the East Coast. Similarly in our processing and our value adds business, particularly in Australia and New Zealand, we've got a really unique footprint and allows us to take that end-to-end, the value chain that he touched on there. If we look at the map, we can see from the start there, the Auscol yellow dots on the map. Auscol is, as Stephanie touched on earlier, that's our recycling business where we collect waste oils and those waste oils predominantly are going into renewable fuel applications offshore, either up to Asia or into North America.
Obviously the canola growing regions, we're well suited. The red and blue dot there up in Northern Victoria reflects our Numurkah site. There's a photo of it here to the right. That's the largest crushing plant in Australia. At that site, we're able to produce animal nutrition products and also food grade, edible grade oil products that are then passed through for further processing at our plant down in Victoria in West Footscray. Over in New Zealand, you can see our footprints where we also got edible food grade refining and also the darker dots there reflecting our infrastructure and port assets where we bring in, we can handle bulk liquids, and that helps support our commodity businesses.
Up further north in Queensland, this reflects our businesses in animal nutrition, where we're buying products like molasses and adding nutrients and medicines to support the feedlot industry in Northern Australia. We support the industry in Southern Australia. What I think the point and what I really find interesting here is it ties in closely to some of those broader thematics that were talked on, the decarbonization, the supply chain resilience, and then also what was the last one? Food security. I think it's interesting around the food security, we have the ability to give our customers where we're value adding the certainty around domestic manufacturing, local capability, Australian manufacturing capability, which I think over the last 18 months really has a revised value.
It's really come to its core, and the quality and high value products that we're producing are really being appreciated by our customers. In terms of decarbonization, whether you look at the Auscol or those commodity collection businesses where we're buying tallow, aggregating it, and turning it for renewable fuel applications, or the other end of the spectrum, connecting with the farmers directly, we're buying the seed from the farmers, talking to them about sustainability initiatives, talking to them about how do we understand your carbon footprint, and then how do we incentivize you to put in initiatives to be able to pay you better premiums for your products is also a real benefit that we're able to add by having that direct connection with the farmer all the way through to a finished retail product.
I think it's one of the assets, well, at least Nigel sort of touched on our asset and our footprint is quite unique in the region.
I think before we move to the next slide, I think, you know, as you say, it's unique, but more importantly, it's a very diverse range of assets, very high quality set of assets, and indeed the people that run them. We saw that in the video. You can see that from the outside, picture here of the Numurkah site. If you drive around regional Australia, it's kind of easy to see the ever-present nature of more than 160 sites, the blue tarpaulins, the big silos. The business is far more diverse than that and the quality of the processing assets. I think it's harder to share and visualize. You can see trains and ships and ports and upcountry sites.
As you said here, Brad, really high quality set of assets, both from the outside and the inside.
Yeah
As we saw in some of the video footage this morning.
Yeah. What Nigel touched on around the grain side of business, I think this is just highlights and gives a quick snapshot as to the great performance and the resilience of the team over the past 18 months. No zero COVID enforced shutdowns. You know, these are in some of the Foods manufacturing plants, you know, very dense, high workforce, you know, being able to manage that, being able to segregate those teams. There's some real credit to the operational and on-site leadership on those teams. The bulk production, the DIFOT, the delivery in full on time, you know, continuing to supply high-quality products, no recalls.
At the same time, as you can see by the bottom row of numbers, you know, grown the business growth, solid growth through across a range of the different applications and assets that Robert then touched on. Really positive, and some, you know, really strong fundamentals for the next few years on how to grow further in this business. As Robert touched on there, it's the last few years have really taken a proactive stance to try to integrate, you know, these grains, the procurement, the storage, all the way through, and really try to show that full end-to-end value chain.
I think the performance in these metrics, the areas that we can control, lifting volumes are driving that resilience, and the performance we've talked about so often today is about making the most of the opportunities that are there in the market.
Yeah.
We do that through an integrated supply chain. Talk us through this, Brad.
I thought this might be helpful for some that may be less familiar in this part of the business. Just to give a quick snapshot all the way from the sourcing from the farmer. You know, we have the direct relationships. We're buying, we're actually giving them the signals and the directives on how to, you know, whether it's sustainability initiatives, as I touched on earlier. You know, we're now procuring a lot of ISCC canola, which also then is for food and fuel applications at the other end. The sourcing through to the storage, GrainCorp storage network and logistics are very. That's quite a point of differentiation in the market. A truck and rail capability.
The processing and production, whether that's in our feeds business, our foods businesses and our quality and innovation teams. You know, we have a set team that are able to have that direct relationship with our customers, get the signals, feed it back to the supplier and the commodities, and whether that's a high oleic seed, whether that's a sustainability around a certain modern slavery initiative at an origin where we're buying an offshore product to bring it into Australia, we have the ability to connect both ends of the value chain. I think that's something that's quite really a real positive and a strength for the business. The distribution side, we're the largest importer and exporter of vegetable oils in and out of Australia. We have long-term commitments on vessel freights.
We have bulk storage as we touched on that earlier map in Australia and New Zealand, and also the shipping and logistics, you know, gives us the differentiation to others in the market. Then lastly, you know, the long-term commitments with our customers and, you know, whether that's a third-party manufacturing for a retail product through our Foods plant, whether that's our feeds business, you know, some of the long-term relationships and innovation, and collaboration partnerships we have. You know, Jesse touched on FutureFeed, and we have some really positive projects in play at the moment. Then lastly, you know, when the customer, you know, whether it's a credit risk support or financing opportunities, we're able to give, you know, positive solutions for our customers.
Lastly, the upcycling story, and it's taking these waste products, these waste oils, waste fats that, you know, many years ago maybe had little or no residual value, but now being turned into sustainable airline fuel, that are being turned into renewable diesel. It's a really positive story and it helps complete that value chain.
It's not just about the design of the value chain, it's the opportunity to add value and margin at every step in the chain, Brad.
That's right. Yeah. This is sort of another, sort of reinforces the previous. It just gives a highlight of each of those phases where GrainCorp's able to add value for both, you know, our own opportunity, but also for our customers to make them longer term relations, to make that service and that partnership longer term. You know, really positive story and, yeah, happy to take any questions a bit later about it. Yeah.
Yeah, sure. We're coming to the question session now, but just to recap, you've heard from the leaders of our business units and what we're doing at an operational level to drive the exceptional results that we're seeing this year and last year, and our confidence in that continuing into the future. It's built off the fact that we do have a very valuable set of assets, end-to-end supply chains and strong capabilities, with a focus on embedding and investing in those capabilities into the future, including use of data and data technologies. We have invested in those assets and capabilities over a number of years now, and you're seeing the benefits of that investment being returned as we've got the grain and the oilseeds to pass through the network.
We're operating extraordinarily efficiently and in an agile way to respond to the conditions that exist in the market and make the most of the opportunities. Each of the businesses is performing extremely well, and that's something that we're very proud of, and we'd be delighted to answer any questions on. I think a couple of other things that came up out of that session, though, and that is the depth of capability of our people, but also the resilience of both our model and our response to an inflationary environment. While like all businesses, we're seeing the impact of inflationary costs coming through. One of the differences of GrainCorp and our business that many don't appreciate is the way that we trade in commodity-based pricing. We don't actually have to put through price increases.
It's picked up automatically and flows straight through the market. On top of the relentless approach we've got to cost control and efficiency in the business, it means that the sellers and the buyers at either end of our supply chain recognize automatically the cost pressures that exist. Again, that's a strength and a resilience we have across the GrainCorp network. Klaus Pamminger, I might just get you to join us on stage as we move to question and answer session two for the next 10 or 15 minutes. Again, just to remind you, if you could just introduce yourself, wait for the microphone, and Luke, you'll be looking for any questions coming in online as well. Richard from CLSA, I think you've got the first question.
Thank you again. I think, I reckon I asked this question last year and I can't remember exactly what the answer was, but I'd be interested in an update in any case.
I'm sure it's a great answer.
Yeah. Well
We'll try to come up with the same one.
Well, in terms, obviously with your sourcing, you talked about the 10,000 grower relationships. No data on in terms of how they view GrainCorp. I'm sure you're tracking that. I'd love to hear some of the thoughts there because, you know, every grower's got alternatives and I think you got a question earlier around your market share. Sort of pulling all that together, what are the issues that the growers have? What are they saying about GrainCorp? Are they happy? Is that improving?
Yeah, it is a really good question and something that's on our minds every day. I'll hand to Sean in a moment to talk to that. First of all, we do track it and we measure it and we report it. We do that through the Net Promoter Score or NPS, and that's improved significantly over the last four-year period. We have seen a bit of a flattening off of that over the last harvest, which was a very wet harvest and a frustrating harvest for growers, and also saw us introduce a number of additional tests to help maximize the value of the grain to the grower through that period.
I refer to the video, where you heard Charles talk about the one thing that I consistently hear that's important to growers, throughout the year, but particularly at harvest time, and that's the basic service level of the turnaround time on site. So that's an area that Nigel's touched on that we're continuing to invest in in response to those annual surveys that we do on an ongoing basis. Sean, your team are talking to growers every day. Do you want to elaborate on what we're hearing and the sort of response we're making to that?
I just think I'd reiterate your points there. Our Voice of the Customer program's been running for five years. I think over the last two years, about 2,500 responses to that. Our growers really engage, really happy to give us that feedback. There is no doubt in the last 12 months, their request to us is to respond on turnaround time and service levels. We've got a good focus on that. As Nigel mentioned, that condensing of harvest, the speeding up of that, they're asking us to respond to that, and we are responding to that. That is definitely the main feedback we receive, both verbally and then through the NPS survey, where lots of opportunity for comments to come through on that.
Do you feel confident if they're unhappy, they're gonna participate in this sort of feedback survey?
Just for those online, the Q&A follow-up question was, are we comfortable that growers will respond and engage if they're not happy? Absolutely. You know, to be fair, I get emails from growers. It's probably only five or six a year. On balance, about half are telling us we've done a really great job and half are, "Hey, we've got a problem." One of the ways that I can lead by example is responding to those growers that do have a problem. Quite often I'll pick up the phone and call them. They don't know quite whether to believe it's me to start with, but then we get into a discussion. I think what Sean demonstrated is we listen.
We've got a team that are engaging with growers every day so that they don't have to fill out a survey to tell us what's going on. Sean, I think we can be pretty certain if they do wanna send us a message, not only do they do that directly, but they do it through the surveys as well.
Yeah, absolutely.
You know, the other area, Nigel, that we get repeated feedback from is even where they have got something to share with us they'd like to see us improve on, the overwhelming response is about, that's always positive, is about the relationship that growers have with our site managers and the people on sites and the service levels they operate. Do you wanna talk about some of the things we've heard in that space?
Yeah, absolutely. That's the point in terms of getting the teams in these remote areas and incentivizing to get the right people to build that, the face of GrainCorp out there. It's really important to us, and that's where we do have a strong connectedness. We're seeing it more and more in the nearly 10 years I've been here. Our customer centricity and the focus on the customer system, you know, has been there rather than just shrugging things off. It's like we do listen, and we do act, and we don't overpromise. The key is then when we've got good products, we deliver. Some things we can't do for various reasons, and we've got to be upfront with that. We do the things we can work on, we work on closely.
Over time, in terms of, I think of a lot of the development approvals, we go to the growers to actually do letters of support through the VFF, through AgForce, through New South Wales Farmers. You know, our connectedness and our feedback loops, a lot of time that Klaus and I spend in terms of the grower groups as well as that feedback piece, we're trying to be the first point of call. I feel that the work we're doing is good and we haven't done everything they like, I suppose, but we've done a huge amount, which has improved their business. What I like is you just get that constructive criticism straight up.
Agree. Klaus, you shared earlier that, as well as being our Chief Operating Officer, you have a farming business as well, so you've got the unique opportunity to be undercover boss from time to time. What do you hear from some of your farming friends and what do you see when you go undercover?
Living in a rural community, I'm not based in Sydney, I'm actually based in Wagga Wagga. Don't be surprised if I get some fair dinkum frank Australian feedback very quickly in local small rural communities. Please remember, GrainCorp is 100 years old. We've operated in those rural communities for 100 years, so we are part of the fabric of that community. Farmers are very frank, and they don't sugar-coat it with their feedback, and we're prepared to listen. We also have, you know, focus groups to try and test of, what if we did this, would that actually add value as to what are your problems out there? Let us try and figure out a solution as opposed to building something and they will come.
That goes to the digital solution that Nigel talked about, the marketplace and other things. We can't take the farmer, our customer, the grower, for granted. There's lots of other options available, as you say, Richard, and we need to make sure we are an attractive proposition for that grain to come to GrainCorp, to then move it through our supply chain to international customers or domestic customers.
In the next session, Jesse Scott's gonna talk about customer experience and what we're doing in that space. I think bottom line is, our focus on customer service at either end of the supply chain is evidenced in the results. Our share is improving. Not only do we measure what farmers think, we measure it in terms of the outcome and the benefits to the business in that. Luke, any questions coming through online?
Sorry.
Just stick the mic on up the front here. Yep, away you go.
It's a question from James Ferrier from Wilsons again. How's the container export market looking now given freight rates and port congestion? Do the unit economics look more favorable for this channel to help address some of the challenges at the moment?
Yeah, just to check that everyone online heard that question. It's about container exports and how they're looking at the moment, given some of the global constraints on container supply and also cost. Sean, I might get you to talk to that because interestingly, as an industry, container volumes have actually gone up in the last couple of years versus 2016, 2017, despite some of the COVID disruptions.
Yeah, it is interesting to look back there. There's definitely constraints and disruption in the container market overall when you see that. When you step away on a yearly basis in grains, we have seen a slightly more grain go out in containers last year than we did in the 2016-2017 year overall from doing that. For us as GrainCorp, we operate container packing facilities at Fisherman's Island and Geelong, so we're closer to the port. Getting access to empty containers, that gives us an advantage there for what we're doing. It is a much smaller part of our export supply path to the bulk on that. We look to a customer point into Asia from that.
Bulk freight rates are about AUD 30-AUD 40 more competitive than container freight rates into those markets. That's definitely our focus. It's definitely our customer's focus. We'll continue to put our efforts into the bulk supply path to get that grain to market.
I think with well over 95% of our volume in bulk, we're very resilient in that respect. Just picking up on your point in terms of our proximity to container supply at the ports. Just a couple of months ago now, I was up at the Brisbane port, and just to give you some numbers, we were and still are packing over 100 containers a day at that facility, in an environment where everyone else in the sector is complaining about the availability of containers.
That's a good example of planning ahead, the proximity to port, but most importantly, the capability of our local teams who had built a relationship with the container providers, had provided the assurance that we could turn the containers around more quickly than anyone else, because of our location on port. Then to make sure they weren't drawing attention to themselves, they'd carefully consolidated the containers behind our silos and between the shed, so that anyone driving past looking for containers wasn't drawn to the fact that we had plenty of containers there and were merely packing over 100 a day. A good mix of, again, forward planning and capability of our teams. Any questions? More questions online, Luke? One more?
There's one more question here. It's an anonymous question, so I'm not sure who's asking this. Just asking around current utilization rates across the key points of the supply chain. Any sort of estimate, how does that compare to through the cycle? Do you want me to ask it again now?
Yeah, maybe just ask it again so everyone.
Is it working now?
Everyone online can hear. Thanks.
It's gonna be working now.
I'll repeat the question.
Hello?
The question is just about utilization rates throughout the supply chain, and how that might compare with through the cycle. I think to some extent we've answered that already. Klaus, I might get you to comment on it, but we are fully utilizing the available capacity we've got. There is excess capacity in our ports, as evidenced by the fact that we're still growing our bulk materials portfolio. That's because it takes longer to accumulate the grain at port than it does to load it on a ship. I think the constraint point in the supply chain is the transport from upcountry to port, Klaus.
Very much so, Robert. I think you've got it covered there already. One of the measures would be what is our capacity at the port, which is occupancy of the berth. How, what time period do we have ships sitting there? Could we add additional ships? We could. Our berth today is only occupied 50%-60% of the time. That means we can actually elevate, if we had the grain in the facility, more grain onto the, to the vessels. Where's the bottleneck? To Robert's point, it's all in transportation. All rail operators are running 100% of capacity, and all trucking companies are running 100% of capacity. That capacity could potentially be higher if only there was more labor available through, in the transportation area.
As to our upcountry facilities, Nigel articulated earlier that we built an additional 1 million tons of space last year, and we pretty much filled all our capacity last year, except parts of northern or central Queensland because the crop was not there. This year, we're expecting with the larger carryover of this year's harvest, that we will need to add to our capacity. Again, we're embarking on a 2 million-ton expansion program, which should accommodate the additional crop, which is, as Sean said earlier, at this time of the year, already forecast to be same, maybe better than this time last year. Don't know. It depends on the weather in September, but we're planning for it now.
I think there's a couple of ways we can create capacity in our upcountry network. One is building that extra capacity. It's really important we start early, which we've done on that to make sure we've got the capacity where we need it. The second really important way is with the strong demand for Australian grain. The ongoing export program is moving grain from upcountry down towards the port. To give you some numbers that Klaus referred to there, the carry in this year was 4.3 million tons. The guidance that we've issued around carry out will be between 5.5 and 6.5 million tons.
It's 2 million tons more, but still plenty of capacity to meet and exceed growers' expectations for that new harvest coming in, even as a bumper crop. Klaus?
Robert, people quickly ask about or always ask about the East Coast of Australia's utilization of our capacity. Remember, we're a diversified business and Brad has articulated that. We've got many other facilities, operations, and as Brad has articulated, we've increased the utilization of those facilities and capacities as well. Our Numurkah crushing plant is running much better and much more efficient. That's the extraction of the oil out of the seed. Continuous improvement, and we have improved as well. It's not all about East Coast of Australia. Yes, it's big, but it's not our only business.
Okay. If there's no questions in the room, we do have a final question and answer session at the end of today's investor meeting. So perhaps at this point, I'll thank our gentlemen on stage here for that presentation, and invite Jesse Scott to join me. We've talked through the macro trends in our industry through this morning. You've heard from our general managers around why GrainCorp is performing so well and so strongly, and I want to emphasize that point. It is a standout performance, and it is through hard work, combining the capabilities of our people and our assets, and to put GrainCorp in a strong position, not just for the current period, but for the future. So what we wanna move to now is the area of growth and innovation to understand.
for you to understand more about how we're looking at the future, the sort of themes and the way we'll deliver on the strategy. I'm gonna hand across to Jesse Scott to talk through the growth themes that we've been looking at in the 12 months, the last 12 months, the progress we're making on those and some of the partnerships that we've already formed, as we move forward in that area. Jesse Scott, welcome. You want to sit there?
Shall I?
Yep, go for it.
Hello, everyone. I'm gonna talk a bit about growth and some of the four themes and the projects within those themes that Robert mentioned earlier this morning. As you may remember from last year's discussion, we launched these four growth themes with a mission to deliver on our vision of sustainable and innovative agriculture, but especially to double down on two things. One, to partner more closely with our growers, and two, to develop diverse earnings streams for GrainCorp. For each of our four growth themes, I wanna talk a bit about probably two or three projects that are underway that have started in the last twelve months. I'll talk about alternative protein, which, as you're aware, is the kind of production of protein from plant ingredients there.
I'll talk about digital agtech and some of the moves we're doing with the agtech startups that we see in the system. I'll talk about animal nutrition and where we're playing animal nutrition, where we think that may evolve over time. Sorry. And finally, I'll talk about additional grower services and what we're seeing in those spaces there. Alternative protein. For each of these themes, I'll talk a bit about the trends that we've seen in the long term, what's been happening in the last 12 months, and then why we think GrainCorp is well positioned in this space. Alternative protein, extremely strong demand signals. At the top there from global protein, and then, Sorry, top is overall protein, including traditional as well as alternative, and bottom is alternative. In the last 12 months, a couple of key movements.
I think interestingly, I'll start with the bottom one potentially, which is we've seen, say, from the U.S., 60% of households have tried alternative protein and almost 80% making multiple purchases. We see the demand ticking up in an interesting way. We've seen big investments from both CSIRO and the government in this space here, and GrainCorp is well positioned, as I'll talk about in just a second. Our right to win and how GrainCorp can play in this space, I wanna re-emphasize. In some ways, we are already doing all the steps in this chain. If you think about alternative protein, it is about the accumulation of plant, the processing of that plant, and the production of food and packaging of food. We already do that in our East Coast and as well as our international networks.
We already have the largest processing plant in Australia, and we already have a very mature foods business. It's about how do we transpose those skills and find the right partners in the alternative protein space. Here are the two main focus areas for GrainCorp in alternative protein. On the left-hand side here, it's about partnering with the existing alternative protein players to help them with the input ingredients that they need for their products there. GrainCorp is working with one of the leading alternative protein companies to think about the plant protein ingredients as well as the fats ingredients from our Numurkah and West Footscray facilities. On the right-hand side is about the science. How do we play a part in pushing this industry forward?
As you can see, in partnership with CSIRO as well as v2food, we're working on how to improve both the processing and the manufacturing capabilities in Australia, not just of some of the commodities we carry, but across chickpeas, soy, fava, and other commodities there, so we can help that industry take a big step forward. Let's shift to animal nutrition. As you know, GrainCorp is built on 100 years of working with growers. Many of those growers are also graziers, either sheep or livestock. The traditional protein industry is extremely important for GrainCorp. It is an industry that is growing, actually growing more quickly. This is not about picking alternative protein versus traditional protein. These things are gonna exist side by side.
I think what's really interesting when you talk a bit about some of the stats on the bottom there, as well as the middle, is where that growth is coming from. Yes, there's overall increase in total demand. There's also major shifts towards more high margin areas like sustainable feeds, like focusing more on animal welfare and the animal biome, and GrainCorp's trying to position itself to be a player to help our graziers in some of the kind of higher value add parts of the animal feeds business. We already have a large liquid feeds business. We already have investments in key parts of this animal nutrition value chain. I think that's only gonna continue in the future. Let's talk about three areas where we're paying attention.
I'll keep my eyes on Brad, who'll tell me whether or not I'm getting all this right on some of the more traditional stuff we're doing. I'll talk a bit about FutureFeed, which has been mentioned today, as well as our existing business. FutureFeed, for those who don't know, is the company that owns the rights for the use of Asparagopsis in feed. Asparagopsis has this active ingredient called bromoform, that when you kind of mix it in a feed supplement, it reduces, potentially eliminates the production of methane in livestock. What I also talked about earlier today is this double benefit. Not only does it reduce the methane, but when a cow is not producing so much methane, all that energy goes towards fatter cows. You have fatter cows, they're producing less methane, which is a win-win for our graziers.
Now how do we deliver that? This goes to the right-hand side of the slide here, where we talk about increasing production capacity in our existing feeds business, as well as putting in place, programs like RationAssist, where we are bringing science to the graziers to help them think about what supplements and what feed to give their cattle. I was in Queensland two weeks ago, and I met with a bunch of our graziers kind of in country Queensland there. I was talking through some of these things with these kind of graziers. Interestingly enough, they were interested in FutureFeed. They were fascinated in the stuff on the right-hand side. These graziers are coming from a traditional place where they live and die by the productivity of their cattle.
Anything we can do to help with productivity growth, help with fertility, help with calving rates, is enormously beneficial. That is the right-hand side of this page. If we can start to mix Asparagopsis into that feed supplement, suddenly you have these graziers who are increasing their productivity as well as potentially getting the carbon credit or the carbon neutral benefits of being these cattle farmers, because they are feeling the pressure as well as seeing the opportunity. Digital and AgTech, enormous investment in technology and IT, especially in the agricultural sector. Earlier today, Sean talked a bit about the difference between the last drought versus this drought, and how actually productivity had doubled in that time, primarily through the application of technology in the space of agriculture. I think it's at the bottom of this page, you see that AUD 20 billion target there.
When folks like the National Farmers' Federation talk about agriculture becoming a AUD 100 billion industry by 2030, they see AUD 20 billion of that growth coming from the application of technology, and GrainCorp wants to be front and center in that space. Australian startups. Over 300 startups are working in the AgTech space so far in Australia. I think I've met almost every one of them so far in the last six months or so. We're trying to think about who to partner with and how to be as effective as possible as a partner, hence some of these movements here. Hone we've talked about before. For those who don't know, Hone produces this handheld device that can measure the quality of, frankly, of anything. I mean, the quality of grain is obviously why we think it's so attractive.
If you take grain and you measure it with a Hone device, it can tell you the same things that you find out in a GrainCorp sample stand. It'll tell you the protein level and the moisture level, and it can help you make buying decisions. You can also take that same device, measure leaf quality. You can measure carbon in soil. You can measure a proliferation of different use cases. They've got this great device. They just need to figure out where they're gonna use it. GrainCorp's acquisition of 15% of them means that we are playing a role in helping them shape the best proposition for our growers. We've been working with them over the last year to help them think about what comes next and scaling up that rollout. GrainCorp Ventures is the next step in that process.
GrainCorp has a long history, as you can see in the third column here, of working with startups. We have multiple pilots underway with startups who are trying to address issues in agriculture, but probably are struggling to transition from that science stage to the commercial stage. They've got founders who come from a strong science background. They've got a great idea, but they maybe lack the capabilities to think about how to scale it and position it with their customers. GrainCorp Ventures is a way for us to professionalize that approach, to make small investments in three to four companies a year with a dual mission of either applying it to the GrainCorp network, to our growers, or both. By having a small stake in them, really invest to make them as successful as possible and to help bring that technology to our growers.
On the right-hand side, CropConnect. I think Nigel did a really good job of explaining how the benefit of that digital platform is a way for us to close in that contact with our growers, as well as provide more value to our growers as they interact with GrainCorp. Finally, additional grain grower services. Loam, you may have seen about two weeks ago, we announced our collaboration with Loam. Loam is an Australian-based startup that has this miracle product, as far as I can tell. It is a seed inoculant. So it means basically a seed coating you apply before sowing. And what it does is encourages the fungal growth in the soil. Fungal growth in the soil, especially this particular inoculant that they have found, does two things.
One, it improves the soil health, and so they're seeing kind of a 6% improvement in yield, which is really what gets the growers' kind of ears tingling, whatever the right metaphor is there. Also sequesters 2 tons of carbon per hectare. Suddenly you have this product that by applying it, an inoculant is something that a farmer works with every year. By applying it, they're seeing yield improvement, carbon sequestration, and they get to take part in that growing sustainable industry. That's Loam Bio. We've got a pilot on this year. We're thinking about how to scale it next year. Then in customer experience. GrainCorp has always been built on deep relationships with our growers. This is the next step in that process.
We've hired a new head of customer experience, Luca, as you can see in that slide, and his job is to implement effectively the next level of standard when it comes to customer experience. He's working on a couple things. How do we invest in the technology around customer experience, whether it's good data, good technology like CRMs to provide more transparency over what our growers want? He is building capabilities internally. Thinking about how do we build customer experience capability all the way from the site level to top leadership and bring some of the best practices that he learned from McDonald's and Volkswagen and his previous employers there. Finally thinking about how do we bring a customer lens to our innovation.
Innovation isn't just new carbon offerings or home devices, but innovation in the way that growers interact with our upcountry sites and the interactions we have with them all the way from their decision-making at sowing to the decision-making at selling. Quick run through. I look forward to any questions. As you can see, this is a clear strategy of partnership with the grower. It's aligned with the macro trends, especially sustainability before. It is built deeply off GrainCorp's capabilities as well as collaboration with the growers there. We hope that it will deliver on the partnership with the grower as well as diversified earnings.
Thank you for that, Jesse. We now move to the final question and answer session. It's an opportunity for questions specifically on growth and innovation and the things that we're excited about, Jesse's talked about in that area. But also an opportunity to question us on anything you've covered today, we've covered today or frankly, anything we haven't covered today. Ian, I might get you to join us on stage for that session as well. For the other GrainCorp leaders in the room, just keep your ears peeled. I might pass to you if a question comes up that we need to head your way. Luke, we might just start with you. Have we got any questions coming in online? Zoe's got a microphone here, so we'll bring that through.
Can you hear? Yep, it's working. The question's from John Campbell from Jefferies. He's asking around the four or five growth themes that you've talked about. Which one do we feel has the potential to deliver material earnings in the shortest time period?
I don't know why everyone thinks that's so amusing. Not allowed to have favorites. You have all of them. Let's have a bit of fun here. I think, I'll provide some comments, and I'll ask Jesse what he thinks and Ian what he thinks. We're confident about all of them, would be the first thing I say. When we look at our portfolio and investments, we also look at not just the prospect of returns, but we also look at the timing of those. To some extent, it depends is the answer to that question, because it depends on the entry into that the opportunity exists, or how quickly it's developing.
The one I'm gonna lead with before I hand to Jesse and Ian for a view is if you look at what's happening in our business already, we're seeing the benefits of agri energy flow through the returns we're getting from feedstock supply into that industry. The returns particularly in our Auscol and oil upcycling business. I think the growth prospects and the enthusiasm we're seeing in the marketplace for that weigh some odds in favor of that being you know something that we're really excited about. I just wanna qualify that. It's not at the expense of the other areas that are also very exciting, but it's one that I can objectively say we're seeing benefits from right now in terms of the pricing signals and the exposure we have.
Ian, you gotta build on that. Different, same view?
Look, I'll probably be a bit boring and agree with that view. I do think agri energy's a really interesting space for us because of our presence already in it. We already are the largest crusher. We're already a leading upcycler. I think the demand signals are really strong in that area. I think that leads to, you know, really strong potential. The only one I'd add is probably we don't talk about it in the context of growth, but I touched on it earlier, as did Nigel. Additional capacity for the near term opportunity from, you know, back-to-back record crops and another likely well above average crop. I think that near term opportunity also is a key focus for us, and we certainly don't lose sight of that while building out the long-term opportunities for diversified streams of earnings.
I think that's a really nice point, reminding you of the fact that I shared our strategy is deliberately in two parts, growth and core business. Let's not forget that you can achieve growth in your core business, and we're seeing that flow through in our current results. Jesse, innovation and growth requires a dose of optimism as well as realism. What's your view on where the opportunities are timing wise?
Thank you, Robert. We've had the realism. Now for the optimism. I'll put three forward, one ag tech before-
No, you only get one.
Ag tech for our growers. I think we're looking at a bunch of opportunities that have a less than one-year payback. If I had to pick one for GrainCorp, can I do two quickly, which is FutureFeed has had its first commercial sales now. GrainCorp has spent the last year working incredibly hard on testing and formulation and extremely well positioned. That once FutureFeed is commercially scaled, we can run with it. That feels close. Alternative protein. We already have some of the best assets in terms of processing and food. We're already working with alternative protein players. There is a way for us to take advantage of this growth and really offer up new streams of value to some of those processing businesses.
John, I think we've answered your question with more than one answer, but a diversified view there around the fact that it does depend because it depends on the entry and the opportunity in those markets. I'll go back to where I started. We're already seeing significant upside right now in the correlation with renewables and agri energy that remain extraordinarily excited about the prospects in all of those growth themes. It's a case of making sure we get the investment profile and the entry into those areas right, which, you know, I think we're demonstrating a degree of prudence as we develop up the opportunities. Any questions in the room? Tony's got a question down the back. Tony, thanks.
If we just get a bit of data around Auscol. You know, bioenergy, biofuels, I mean, how many liters are you producing at the moment as a starting point? You know, I noticed you did give a data point on oilseed crushing. You know, presumably, you know, it will long-term go in line in terms of that volume. Is that true, or is there additional mechanisms where you can grow at much faster rate than what you're doing in terms of crush volume? Where are we now with the starting point and the growth opportunity?
Yeah. Ian, I might hand to you on that, but we might also call on you, Brad, if we need some help on those numbers. It's a good question, Tony, but remember, Auscol is only very much a part of that feedstock supply chain for. It represents a used cooking oil component. But in addition to that, we consolidate purchase of other oils and tallows for that feedstock space. But Ian, in terms of just a bit of color on the Auscol business, is that.
Yeah.
For comments?
On the Auscol business, we do disclose in our half-year and full-year packs the collection volumes, and it's around about the 20,000. I think that's right, Brad, for this year. That's what we have in that space. As Robert touched on, that's just one of the feedstocks. We also have the crushing facilities. A lot of that goes into food, but also has the ability to go into the biofuel space, and we've certainly worked hard on the accreditations in that space. Then we're also an aggregator of tallow.
I think the benefit we bring is the diversity of feedstocks we play in and our understanding of the connectivity of all of those, as well as the supply chain to then aggregate and get that to the end markets, which today certainly are largely offshore. Brad, you might wanna add anything to that.
If you wanna join us on stage here, Brad, and just because it's a combination, Tony, of both the value of that feedstock and the demand we're seeing for that, but also other volumes as well. Maybe talk about the overall volumes in that part of the supply chain, Brad.
Yeah, sure. In terms of the Australian market being used, cooking oil is gonna be capped by basically the population. In terms of the growth, in terms of volumes over time, you know, Auscol is one of the leading collectors and will continue to be. When we look at the growth in renewable fuels, as per the earlier chart, we'll see that shift more into the veg oil space as well to actually satisfy some of that demand. Hence, that's in terms of the obviously overall crushing capability. That's where that provides the unique opportunity, I think, in the years ahead to differentiate. Obviously, there's multiple applications for the products other than as that demand opens up.
We are seeing a stronger correlation between edible oil prices and fuel prices as that global demand grows. You might have seen a bit of media recently that, at the moment, we're exporting that feedstock for processing and manufacturing overseas. There's strong calls from both government and industry to look at how that capability can be developed onshore in Australia. That creates opportunities for us through partnerships and more permanent feedstock supply and greater participation in that supply chain in Australia. We remain excited, as I said, about that whole opportunity.
You saw by the announcement yesterday with Qantas and Airbus about, you know, supporting a domestic solution, committing to AUD 200 million over the years ahead. How that evolves will be interesting to see.
Yeah. I think we're extraordinarily well-placed, too, as an existing participant in that feedstock supply. Sorry, Chris Cortis has got a question just back there.
Yeah. Thanks. Thanks, Rob. I look at what super funds and industry funds and sovereign funds and PE and infrastructure funds are paying for key and irreplaceable infrastructure. I look at your asset base, which I'd put in that category, by the way. I look at your net cash position, adjusting for inventory. I look at the multiple you trade on, the market cap you're on. How do you unlock that value? The reason behind the question is do you really need to own the infrastructure? What's so critical about owning the infrastructure? What flexibility does it give you?
Sure. I'll hand to Ian to answer that question, but I'll make some introductory comments. You know, I think one observation I'd make is that, as you say, you look at the interest in that type of infrastructure and the valuation multiples on that, and you could argue that that's not necessarily fully reflected or recognized in GrainCorp. We are always looking for ways to better have that value recognized in terms of the models, and ownership is one way of doing that. Ian will talk about the benefits of ownership and the integration of it. But notwithstanding that, we are always looking for ways to try and understand how we can better unlock and have that value recognized.
That value is evidenced in some of the transactions that have occurred, not just in Australia, but elsewhere as well on similar assets. Ian, do you wanna talk about the way we use that infrastructure on our balance sheet and the benefits operationally of the integrated model?
Sure. Thanks, Robert, and thanks for the question, Chris. Some good observations there. A few angles I would say there. One is certainly we're always looking at ways on how we
Have we really realized the value of the infrastructure. I think what we've been trying to do today is demonstrate the value of the flexibility that comes from ownership of the assets right along the value chain. I think what we've looked to do over the last few years is have a much more integrated view of the assets right from the start of the value chain all the way through to the end. As you've seen in the last 18 months, in particular, with disruptions to supply chains through COVID or other disruptions, the flexibility that comes from the ownership of the assets and having them on your balance sheet certainly gives that increased capability and ability to meet customer needs.
You know, it was articulated by a few folk on the panel earlier. Our customers increasingly value that as well and see the benefit that comes from what, you know, the flexibility that comes from the ownership. The second aspect of that is, as I touched on earlier, we do have a high net debt in the current part of the cycle to fund commodity inventory. The asset ownership supports the backing that comes with funding of grain as well. There's that aspect to give you the confidence to take on the facilities to fund the accumulation of grain through the assets. Very much viewing those together gives that benefit to fund grain and maximize the throughput through the assets.
We do view that as a competitive advantage to have access to good facilities to really monetize the growers' grain right through the value chain.
I think, you know, as you say, Chris, there's a lot of interest from super and particularly global sovereign funds or offshore sovereign funds in that type of infrastructure because of its enduring nature and its long-term nature. I think the resilience of agriculture and indeed GrainCorp on the basis people always need to eat, we've got very valuable assets, is something that we wanna, you know, fundamentally make people realize that this is a very good business long term.
We've done a lot of excellent work to reduce the volatility in the short term, so that we can start to unlock the inherent value of those infrastructure assets, but also the longer term fundamental value of this business, given the positioning, the strength and the resilience of it, and hopefully that theme's come through amongst others today. Thanks, Chris.
Question down here.
Good day. Luke Kurth at Jarden. This one's for you, Jesse, on the carbon side of things. You mentioned with those growers that you met with, they said that they wanted predominantly help navigating the whole carbon space. How's GrainCorp going to get some, I suppose, increased positive exposure to that? Is it through helping them register projects? Is it through transacting the ACCUs for them on that side of things? Thanks.
Jesse, away you go.
Right. At the moment, we've got this pilot with Loam underway with growers up and down the East Coast. That is a pilot that is focused on the application of that Loam inoculant and really working with them to test both the yield and the carbon production. Part of that is also spending time with them to understand what exactly they're looking for when it comes to a partner there. 'Cause growers face this proliferation of choices. Do they go and do the program themselves or with a project manager? With a project manager, do they wanna have a contract that is a fixed contract, or do they wanna have the success-based contract?
Do they wanna keep these carbon credits to try and find a pathway to carbon neutral, or do they wanna sell them and make money as an ACCU on the market there right now? The next year is focused on navigating the right set of choices for our growers, and it may not be a one-size-fits-all solution, and then thinking about who are the best partners to bring to the table for our growers. That is, I think, both upstream and downstream. Upstream, it is about working with these growers to design their carbon programs. Downstream is about working with our customers overseas and domestically to understand their demand for low carbon commodities or to produce carbon neutral products on supermarket shelves. GrainCorp is extremely well positioned for both the grower to the customer end of this carbon chain.
At the moment, we're trying to navigate this series of choices and figure out the best option for both those parties.
I think by taking that approach, we're taking actionable steps to develop the opportunity in that space. The other aspect of that, and Jesse touched on it, is the overlap of the Hone technology. If GrainCorp and growers are able to better and objectively measure carbon levels in soil, for example, that just accelerates exponentially the opportunity to monetize that, and develop the, you know, the market that we all know exists and will develop. Doing it in a very objective way allows us to develop in a sensible way, consolidate the huge number of participants that would like to be involved in that market, with our relationships, our connection, and the science and ag tech capability we're bringing to that sector.
Down the back where Zoe is.
To build on the infrastructure question, and in terms of the infrastructure that you don't actually own, how do you ensure the security of access there? Because I think Klaus earlier mentioned that actually the biggest bottleneck might be getting grain to the port. It's not just owning the storage assets or the port assets, but the trucking, the rail. So how do you ensure you secure access to those parts of the infrastructure? Do you have long-term contracts? Who do you employ? What do you own?
Yeah, sure. That's a really good question because ownership of infrastructure is part of it. Control and management of the overall supply chain has been one of the features that set up the resilience that we're demonstrating and expect to continue into the future. Where's Klaus? You might like to come up and talk to that, Klaus. Just to start with, I think we have very strong and good relationships with the transport businesses. We have no interest in owning a fleet of trucks. You don't need to. It's readily available. The advantage that we've got is, as I said, with the pass-through model we've got on cost, we can pay the fuel surcharges and the costs that are required to lock that transport into our network.
Then Nigel spoke this morning on the importance of the relationships and the contracts we have with rail, many of which extend over multi-year, so 5-10-year contracts. That means while we don't necessarily own that, we've got very long-term and full contracts giving us control over that. Klaus, you wanna add to that?
Sure. We very much look at what is the task required year-on-year. We have some long-term agreements with rail providers servicing our need, our task, and they can also flex up and down like we do. We talked about variable costs and fixed costs, so it's having regard to the mix of that for Australia. As far as trucking fleet is concerned, as Robert quite rightly said, we don't own trucks, have no desire to own trucks, it's not our expertise. We do contract truck freight short-term and longer term, and obviously we need to work with those, longer term trucking companies that they are viable and support them. When it comes to Canada, it's a different model again. We actually lease rail cars in our GrainsConnect Canada business there.
We have a long-term agreement with the rail operator to haul or pull our cars, wagons. We actually lease those wagons. Once again, it's about making sure we got the right mix as to operational efficiencies and cost.
Thank you. Luke, any further questions coming in online?
No.
Any final questions in the room before we wrap up for lunch? No. Look, on that basis, thank you to our panelists for sharing your views with us today and for answering the questions. I'll just make some very brief remarks in conclusion for those online and those in the room. You have heard today our confidence in our strategy and not just the near-term performance of the business, but the long-term outlook. To reiterate, we are a well-invested business with strategic infrastructure assets, extraordinarily valuable assets as evidenced in some of the questions and interest in that. We are delivering outstanding results through outstanding execution, combination of the assets that we own and the capability of our teams that operate them and the planning that goes into that.
We've demonstrated today a strategy that is aligned to global macro trends, and overlaps with our right to win in terms of where those trends are heading and the foundations that GrainCorp has. We are in an extremely strong financial position. Core cash on our balance sheet, very strong balance sheet, and delivering return of capital to shareholders and reinvestment in the business. We've demonstrated and continue to demonstrate our resilience in a disrupted world. Our supply chain is second to none in Australia and world-class in terms of its performance of meeting grower expectations at one end of the supply chain and our global customers at the other end, something that we're extraordinarily proud of.
All of those things combined, and that confidence we have in the outlook mean that we are very well positioned, both for the near term and medium-term outlook, but importantly for the longer-term outlook as we develop and bring through the growth and innovation ambitions that we have. Again, thank you for joining us today. I'm hoping that you found it more useful than you might have dialing into the New South Wales budget, which I think is the other thing in the news today. To those of you that joined online, thank you for your time. For those of you that joined us in person, we hope you found it informative. We've certainly enjoyed the opportunity to share our confidence in the business.
We look forward to joining you over a light lunch and the opportunity for further conversation with the leaders across GrainCorp. Thank you again, everyone. Stay safe and have a good afternoon.