Canadian dairy group Saputo boss hits out at Australia’s inefficient ports

The boss of Canadian dairy giant Saputo has warned Australia’s inefficient ports, rated among the worst in the world, and shipping container shortages are denting export sales.

Canadian dairy giant Saputo boss Lino Saputo Jr says Australia’s ports inefficiencies and a shortage of shipping containers are denting export sales. Picture: Kelly Barnes

The boss of Canadian dairy giant Saputo, Australia’s biggest milk processor, has drawn the global investment community’s attention to crippling port inefficiencies around the country and the skyrocketing cost of shipping containers, with supply chain constraints denting the group’s export revenue.

Australia’s ports were a subject for lengthy discussions during Lino Saputo Jr’s second quarter results presentation to US analysts, plus the soaring costs of containers amid a worldwide shortage.

Mr Saputo highlighted the ports slowdown in the briefing, blaming growing pressure on supply chains due to Covid-19 for crimping sales for his international division which is heavily weighted to its dairy operations in Australia.

“Supply chain challenges, due to container shortages and port inefficiencies, negatively impacted export sales volumes in our international sector,” he said.

“Although access to containers is slowly improving, it remains difficult to find vessels to get our products to market, due to Covid-related port closures and inefficiencies.”

It follows a report issued last week by the Australian Competition and Consumer Commission on ports and stevedoring, which revealed the huge inefficiencies and poor productivity at Australia’s ports that had made them among the worst in the world and which is threatening the economic recovery out of the pandemic.

The ACCC findings also raised concerns about the soaring cost of shipping containers for importers and exporters with prices rising sevenfold, while this was particularly a problem for food manufacturers.

This has become a growing headache for dairy producers that need refrigerated containers to ship products.

Over the last decade, Saputo has built up a sprawling dairy empire in Australia including spending more than $1.8bn buying local dairy groups Warrnambool Cheese & Butter and Murray Goulburn, making it a key exporter.

“Australia, initially, challenged with the lack of milk production coming from the country, which impacted our milk intake at our plant … and so we were hindered in the first quarter and second quarter trying to fill those orders with the container shortages at lower prices than what we would normally sell,” Mr Saputo told analysts.

Fonterra Australia managing director Rene Dedoncker recently said his dairy group was also facing pressure on its supply chain.

Janine Waller, executive director of the Australian Dairy Products Federation, which represents dairy manufacturers, said there was an issue of demand exceeding supply when it comes to shipping as well as visibility for the industry to schedules and freight availability.

“Availability of all food-grade shipping containers is a challenge in itself, (but) the greater challenge is demand is exceeding supply and we don’t always get visibility so when you see what is coming across on a ship you don’t get visibility of how many refrigerated containers there are versus their dry boxes or ambient containers,” Ms Waller said.

“Most companies are having to order well in advance to make sure they are meeting their contractual obligations.”

Ms Waller said delays at ports was also an issue as dairy producers needed to keep products chilled.

“If you have a ship that is delayed coming in to a port you then have to find power to keep your container cooled … and that is obviously an administrative burden and inflicting a massive amount of costs onto businesses.”

The ACCC stevedoring report for 2021 said Australia’s biggest ports had been rated among the worst-performing in the world and rank near the bottom of a league table of 351 global container facilities, with Sydney’s Port Botany and Adelaide highlighted as the most inefficient.

“The Australian empty container parks are full, but do not always have the food quality containers that many exporters need,” the ACCC report said.

“The difficulty obtaining food grade containers has impacted on some exporters’ businesses. Some exporters have had to delay or cancel bookings, causing considerable inconvenience and expense. Some exporters have had to scale back export programs, while some lower value agricultural products (for example grain and hay) have been squeezed out altogether.”