GrainCorp: a big deal?

... it’s a cost most growers would be happy to wear for the time being

WHAT’S going to happen to the Australian grains industry if the ADM bid for GrainCorp goes through?

In terms of day to day harvest activity, you’d say probably not a lot – ADM will continue to run and operate the GrainCorp receival network in much the same way it always has.

As we’ve seen with other foreign buy-ups, such as Viterra with ABB and Cargill and AWB the sky doesn’t fall in when an international company takes over the reins of our companies.

The arguments surrounding ADM are much the same as those around the aforementioned businesses.

Some parochial Australians are saying GrainCorp was built up by Aussie farmers and should not be sold to foreign hands.

Unfortunately, that situation changed when GrainCorp was corporatised and passed into the hands of investors – and that is who ADM is dealing with.

Yes, it would be nice to have a flagship Australian company that is a serious presence on an international scale but in terms of providing an adequate framework for Australian grain producers it is not necessary.

Another point frequently raised regarding ADM was did GrainCorp really need to sell? No, it didn’t, its results point to the fact it was ticking over quite nicely, but the nature of the corporate world is that the GrainCorp board have to be on the look-out for opportunities that present value to shareholders. Looking purely at the bottom line this deal meets those criteria.

There’s a strong argument to suggest ADM is getting a rare opportunity worth above the sum of its parts.

Extensive receival networks, with port facilities in countries with secure governments and a mature grains industry don’t grow on trees. I’d suggest there is probably a case for the bid to be higher given the scarcity of similar targets for the American-based elsewhere.

But what I think doesn’t really matter, the GrainCorp board and its investors are happy with the deal – ergo it is a fair price.

The one thing that could potentially alter the flow of harvest and the export program is a radical shift in port access arrangements.

ADM has assured it will not alter anything in the short-term, but the majority of Aussie growers still wish to see some sort of government regulation around port access.

The port operators continue to bemoan the high cost of compliance with port access codes and tell growers it is impacting their bottom line, but I think it’s a cost most growers would be happy to wear for the time being.

StockLand
A matter of opinionA selection of editorials from around the Fairfax Agricultural Media group covering the issues of the week.

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