Farmgate key to ADM deal

LIBERAL MP Angus Taylor’s comments questioning the value of an Archer Daniels Midland (ADM) takeover of Australia’s only top 100 listed ag company GrainCorp are pertinent.

Most growers are asking the same questions.

Like Mr Taylor, they have limited confidence in the value of the Australian Competition and Consumer Commission (ACCC) to safeguard the grain handling and marketing network from exploitation.

These should be important points the government seeks to clarify before signing off on the approaching December 17 deadline it has set for the sale.

It’s fully expected ADM will want to recoup some costs from its biggest ever takeover outlay – if the deal is allowed – and it won’t want to maintain any potentially marginally performing assets.

This, in turn, would immediately have the effect of increasing transport and storage costs for many

growers to cart their grain to the next closest depot.

It strengthens the argument for growers building more on-farm storage to increase their marketing flexibility.

But while these expensive on-farm storages might be practical in large operations, or areas where groups of mid-to-large scale farmers can pool resources, it will have its limitations in areas where farms don’t have such scale or the funds to build new silos.

Farmers’ concerns also extend to the risk that ADM’s sheer global scale will see it aim to accumulate and market large capacity grain shipments, working on an average quality and therefore achieving its target profit margins through its economies of scale.

This could increase the commoditisation of Australian grain, leading to less segregation in marketing options and reducing ability to chase premium markets.

Australian growers are likely to be well positioned under either GrainCorp or ADM in terms of either company’s ability to crack the much talked-about Asian food boom.

However, as Angus Taylor points out, if we don’t see any farmgate benefit, the farm sector’s enthusiasm or ability to efficiently supply emerging Asian markets through ADM’s network may be limited.

For farmers, any benefits from the promised Asian Century are not just about new market access, but achieving farm cashflow improvements and reinvesting that money to make their operations better positioned to supply emerging markets.

TheLand
Date: Newest first | Oldest first

READER COMMENTS

mark2
12/11/2013 6:39:36 AM

very well put Andrew. In my view GNC has been already exerting pressure on growers by limiting up country storage access with cliff face pricing and classification and receival standards working against growers as well. The reaction by growers is on farm storage or delivery direct to port, all adding to our costs. It seems to me that the only solution to this is vertical integration of the supply chain and for growers to own it.
A matter of opinionA selection of editorials from around the Fairfax Agricultural Media group covering the issues of the week.

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