Please. Google. Landline ADN. Story. PIP COURTNEY, REPORTER: Sowing of winter grain crops is now well underway across the country, and for growers in the east, theres the prospect that by the time they go to sell their next harvest, theyll be dealing with yet another foreign grain trader and a big one at that. Archer Daniels Midlands takeover of the countrys largest-listed agribusiness, GrainCorp, is inching forward. A senior ADM executive has been in the country this week and plenty of concern has been expressed everywhere from Canberra to the bush at the prospect of yet another Australian company falling into foreign hands. Chris Clark has more. CHRIS CLARK, REPORTER: If you want to export grain from Australia, then owning the storage and handling facilities is a big help. Thats what Archer Daniels Midland, or ADM for short, wants with its takeover of GrainCorp. GrainCorp owns most of the bulk grain ports in Victoria, New South Wales and Queensland, as well as hundreds of storage sites up country where farmers deliver their grain. For a global company like ADM, GrainCorp is a ready-made entry-ticket to Australias grain trade and its growing Asian markets. BOB CRACKNELL, INDUSTRY CONSULTANT: Everyone in the grain industry worldwide is saying Asia is the place where its all happening and the expansion. GrainCorp covering the whole of the East Coast of Australia would be an ideal launch pad for that. It would also provide them with an option: drought proofing it, if you like. Weve seen the US struggle a bit with drought this year and thats put pressure on profits. Whereas its unlikely that well have a drought here and also in the States, so it gives them another source of grain. CHRIS CLARK: ADM certainly has the scale to take advantage. This, from their own promotional material: ARCHER DANIELS MIDLAND PROMO VIDEO (female voiceover): It takes excellence every step of the way. From sourcing, transporting and processing crops, to distributing and marketing essential products, ADM employees are constantly looking to create more value from agriculture. CHRIS CLARK: ADMs roughly seven times the size of GrainCorp. 30,000 people work for it, selling to 149 countries. MATT JANSEN, PRESIDENT, OLISEEDS BUSINESS UNIT, (ADM promo video): Having a global footprint within ADM gives us the insight and perspective to changes and what is happening all over the world. CHRIS CLARK: The original business was a linseed crushing plant in Illinois. Its still big in oil seeds and corn for biofuels and ethanol. Its a flour miller as well and a processor of everything from soy beans to cellulose. And of course, it trades wheat. GrainCorps shareholders might find ADMs takeover offer attractive, but whats in the deal for growers? ADMs head of grain in North America, Ian Pinner, was in Australia this week to answer that question and many others. IAN PINNER, ADM GRAIN GROUP PRESIDENT: We have global reach. We have destination marketing into over 120 countries in the world, but then also if you think about the globe as it is in Europe, their surplus production, in Canada, in the US, in South America and also in Australia. And if you take ADM and its existing footprint and bring Australian grains into that, then intuitively were bringing value because were bringing all of our opportunities with our customer base to the grower, but at the same time theres information that we have on a global basis which we can give to the farmer to help him make his marketing decisions. CHRIS CLARK: Bob Cracknells a veteran from the days of Australias single desk exporter, AWB. He sees GrainCorp as a good fit for ADM. BOB CRACKNELL: They are a mega-organisation, they have enormous market information, global market information, trading information, their ability to manage currency - all those sorts of things would be really world class and that would be a great asset. I think what they would see in GrainCorp also is that its quite strong technically. They have laboratory set-ups, they publish crop reports, which are excellent, which are on the public record, which is even better. And so hopefully all of that will continue. So, you know, in that regard its a pretty good mix. CHRIS CLARK: But the prospect of Australias largest listed agribusiness slipping into foreign hands horrifies some. Growers worry that local storages will be shut or that storage and handling charges will increase to pay for the takeover. Maybe they will, but ADM needs grain to make money. BOB MCKAY, AGFARM: My gut feel is that ADM will run the business quite similarly to the way GrainCorp did. I mean, GrainCorps been running their business as a commercial business for 15 years now. Its been a listed entity. Their obligations are to their shareholders, and if they felt the need to shut local silos or change the way they do business, theyve already done that. CHRIS CLARK: Will ADM close storages and put up charges? IAN PINNER: What I do know from ADMs point of view and what Ive seen in the past and experienced in my business today is that we have to make sure that our storage is relevant and that we supply the best service that we can to our grower customer base. If I think about our system in the US, South America or even in Europe, we have to be competitive and we have to be available. The farmer will drive past our gate if were not able to turn their truck around in time. And they need to make sure - they will ensure rather that theyve got the best price available to them on the day. And I think thats the same here. The grower will have access to the system, theyll have access to the network and as ADM we need to make sure that were competitive on the day when were bidding for the grain alongside our competitor base. CHRIS CLARK: Bob McKay grew up on the family farm in NSW and these days runs grains marketer Agfarm. BOB MCKAY: The only concern that I have is that we now have a major multi-multinational grain trader who does control all the ports down the East Coast of Australia, and I think from a growers perspective and from the competitors to ADMs perspective, its absolutely critical that we have open access to our ports on the East Coast to ensure that anyone who wants to buy grain from growers on the East Coast is allowed and able to export that grain without any hindrance or without any complications because one of their competitors owns those ports. CHRIS CLARK: That concern reflects the wider industry debate about how best to regulate port access, a topic we looked at earlier in the year on Landline. (Landline, 10/03/2013): While shipping slots are auctioned in the west and in South Australia, on the East Coast, the dominant bulk handler GrainCorp runs a first in, first served system. This is their Geelong terminal in Victoria. GrainCorp also trades wheat, but a lot of its money comes from storage, handling and finally loading everything from wheat to woodchips and fertiliser. This is canola, bound for Pakistan. While first in, first served is the principle, GrainCorps allowed to sell some of its capacity up to three years in advance and there are those in the trade who say that cuts competition by favouring the biggest exporters with the deepest pockets. ALISON WATKINS, GRAINCORP (Landline, 10/03/2013): I would argue that a large customer, just as I would argue if I were running an airline, a customer who flies with me every week or a customer who does - has a huge corporate account with me, I probably do want to be able to give them a certain kind of treatment compared with the small guy. CHRIS CLARK: Over the next year, the industrys meant to come up with new legally enforceable rules on port access. Bob McKay says getting the rules right is more important than whether GrainCorps foreign owned. BOB MCKAY: To me it doesnt really matter whether its ADM as a shareholder or whether its hedge funds or whether its Australian farmers. The important thing is the rules of the game that GrainCorp need to operate under. And its critical that whoever owns GrainCorp operates under an open access agreement for their ports to ensure that whoever wants to buy Australian grain from our growers can do so without any hassles and without any fear of retribution or retaliation from a competitor who may own those assets. Thats the critical component and thats what we need to get right. CHRIS CLARK: So would ADM keep GrainCorps port access agreement? IAN PINNER: Its something that wed need to look at once we get into the business and ownership of the business. I do like what GrainCorps done. Theyve grown very successfully over the last few years and thats one of the reasons why were attracted to the business. And I think theyve managed their customer base with their grower customers, their port customers and their destination customers very well. The agreements that theyve set up seem to be suitable for their business model and its something that well have to review when we get in there. But I do like the way that GrainCorps worked to put a base in that business. Its important when youve got such an investment in such assets that you have the volume going through them and that you can drive the efficiency and I think GrainCorps been very good at doing that. CHRIS CLARK: The other big issue for exporters is reporting of stocks information. The amount of grain held in up-country storages. Those without the information want it, those who hold it want to keep it. RON STORY, AUSTRALIAN CROP FORECASTERS: Theres a really good example right now this year where we have a canola crop that was harvested back at Christmas time. Weve got canola exports, thankfully, streaming out through the ports at the moment. In theory - and were in the forecasting business, so were in the middle of this - weve got got a canola crop that in theory has already run out. Now, one of the reasons why no-one can really get a handle on this is we dont know where the stocks are in the bulk handling system. CHRIS CLARK: And that, argues crop forecaster Ron Story, reduces competition because exporters who dont know what stocks are about wont bid for growers grain. RON STORY: We need to, I think, get a better quality information service here so that weve got a better opportunity to see the marketplace give us the right signals and be able to respond to them rather than seeing perhaps the misinformation captured by perhaps a couple of dominant parties and then who gains outta that? Well certainly they do as the owners, and we understand thats a vested interest, and why not? But does the industry in total gain? Are we going to get the sort of - capture the opportunities that are there as an exporter? CHRIS CLARK: This is current GrainCorp CEO Alison Watkins view, as told to Landline back in March. ALISON WATKINS (Landline, 10/03/2013): Traders, being traders, always like to have more information rather than less. And, to be honest, Im not apologetic, given the significant investment - over a billion dollars of our shareholders funds that we have tied up in concrete and steel at our ports and up country - that we should be providing information on a whim for free. I dont think that thats reasonable. CHRIS CLARK: Would an ADM-owned GrainCorp be any different? IAN PINNER: I think wed have to understand that a little bit more once we have gone through the process and weve acquired GrainCorp. In my experience, if I look at where were doing business around the world, stock information is an important piece of information, but its only part of the picture. If I think back to my family farming, my wifes father whos farming, what hes interested in is supply and demand factors around the world. Whats happening in the different regions where there is that surplus production? Whats happening in those areas where there is a deficit and where our customers are looking to import grains? And thats something which we want to make sure that the farmers got, from an information point of view, to really help them make good, sound marketing decisions when theyre looking to market their crops. CHRIS CLARK: If GrainCorp goes to ADM, then the vast bulk of the countrys grain trade will be in foreign hands. The deal will need regulatory approval. Theres a national interest test. How does ADM answer that one? IAN PINNER: One thing that we will make sure we do is have the business run by an Australian management team. Its important for us to have local people running local businesses and working with the local stakeholders, the growers and the customer base to make sure that the business is relevant to the region its operating in. And then when I think about what ADM can bring to GrainCorp and then bring to Australia, we have one of the strongest balance sheets in the industry. We have the opportunity to open up a global domestic marketing network to the Australian grower and we have a history of investing in businesses that were involved in and that we acquire throughout the world. And so what I would say is that through ADMs ownership were going to have an Australian management team, an Australian-run business, a strong balance sheet, an investment for growth. And, for me, I would think that thats in the interests of the stakeholders and of Australia to look to support that. CHRIS CLARK: The deal will likely take months to complete, and if it goes through, growers will probably see little change by the time they deliver their grain at harvest time next. But ADM will be serious competition for other exporters. It has money and a global network. As the industry looks at new rules to structure the trade, ADM will be a powerful voice.
Posted on: Sun, 24 Nov 2013 01:46:54 +0000
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