GrainCorp takeover | Growers concerned about rural delivery and storage as American ownership looms
American commodities giant Archer Daniels Midland has upped the ante in its attempt to buy GrainCorp, eastern Australia’s largest grain handling company.
ADM has pledged to increase capital spending on GrainCorp’s grain handling and transportation infrastructure by $50 million to $300 million should the $3.4 billion takeover deal go through.
The new commitment is 20 percent higher than the $250 million capital expenditure budget previously announced by GrainCorp executives.
The $300 million would cover programs announced by GrainCorp in late 2012 that are slated to take place over the “next few years” and an additional $50 million for strategic expenditures, ADM said.
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ADM spokesperson Jackie Anderson said in an email that the company has no immediate plans to close older, less efficient grain receiving and storage facilities in New South Wales and Queensland, where GrainCorp buys the lion’s share of its grain.
Many of GrainCorp’s country facilities sit idle for much of the year and are opened only when large grain volumes warrant their use, usually at harvest time.
“Right now, decisions about what infrastructure to open are taken in the context of the expected size of the harvest. We have no plans to change that,” Anderson said.
“In keeping with GrainCorp’s current practice, ADM will continue to assess which facilities should be opened each year based on harvest forecasts. To effectively prepare for bumper harvests, ADM will open more sites to cope with increased demand. In years where the harvest is lower, some will not be required. Those decisions will be taken at the time.”
ADM’s proposed takeover of GrainCorp has concerned eastern Australian farmers who see American ownership as a threat to the Australian grain industry.
Farmers in New South Wales, Queensland and Victoria fear that ADM will decommission some of eastern Australia’s older and less efficient rural delivery and storage facilities in an effort to maximize grain handling efficiencies.
Access to port terminals owned by ADM is another source of concern.
GrainCorp owns seven of 10 grain export terminals on a section of Australia’s east coast that covers 3,000 kilometres.
The vast majority of eastern Australia’s grain handling assets, including country storage facilities and east coast terminals, would be controlled by foreign interests if the ADM deal goes through.
ADM grain group president Ian Pinner visited eastern Australia last week and met with producers in Queensland, New South Wales and Victoria, assuring them that ADM is committed to maintaining an efficient network, addressing growers needs and ensuring access to terminals.
In addition to immediately boosting near-term capital expenditures by $50 million, the company said it will also invest $40 to $60 million a year over the coming years to maintain and improve existing infrastructure assets.
“We see this acquisition as an opportunity to work as a partner to add value for Australian growers, agriculture and the Australian economy as a whole,” Anderson said.
“Together, ADM and GrainCorp can provide Australian growers with more choice, greater access to global markets, more efficient and effective logistics and deeper knowledge of market dynamics and best practice.
“A combined network offers growers the choice of a global partner, with access to markets that are not necessarily available to GrainCorp on its own, as well as demand generated by ADM’s own processing activities.”
Anderson said ADM’s global footprint will allow growers to trade profitably amid market volatility by offering farmers greater insight into global and regional wheat supply and demand, and end-user requirements.
Canada Malting, Canada’s largest malting company, is also expected to fall under ADM control if the deal goes through.
GrainCorp acquired it and other global malting facilities in 2009.
Canada Malting produces 450,000 tonnes of malt per year. It owns nine country elevators in Western Canada as well as malting plants in Calgary, Thunder Bay and Montreal.
It is one of a handful of companies that make up GrainCorp’s global malting operations.
GrainCorp Malt also operates in the United States as Great Western Malting Co., in Australia as Barret Burnston Malting, in the United Kingdom as Baird’s Malting and in Germany as Schill Malz.
