GrainCorp’s big gamble

GrainCorp has now very publicly thrown the carrot out to growers.

GRAINCORP has managed to minimise farmer backlash to its planned rationalisation of its receival network by publicly putting a figure on the cost savings that will be passed on to growers.

Generally, farmer reaction to the news GrainCorp is set to focus on a core receival network of 180 sites, closing 72 from last year has been reasonable, with farmers welcoming the promised efficiency gains.

The major thing GrainCorp has got right is to include growers in the savings, with executive chairman Don Taylor publicly estimating a drop in storage, handling and freight costs of $5 a tonne.

There were concerns from the growers that sites may close but that there would be no compensation in terms of reduced costs, with GrainCorp keeping any funds saved through efficiency gains.

GrainCorp has now very publicly thrown the carrot out to growers. It means it has won the public relations battle for now, but the critical step will be in ensuring the talk becomes reality.

For most growers, the announcement of "Project Regeneration" is simply the formalisation of a process GrainCorp has been working on for several years - an attempt to shift deliveries to its preferred sites by virtue of improved turnaround times, segregations and marketing options.

Growers increasingly have been prepared to cart to these sites, meaning a slow death for the smaller, less efficient sites.

There’s nothing intrinsically wrong with this - larger trucks mean it is possible for growers to cart further than 30 years ago, but there have been some losers in the reshuffle.

Those growers in isolated areas or in areas serviced by road appear to be worst off according to GrainCorp’s initial list of sites to close.

The rationale is easy to understand, GrainCorp is doing nothing its newer rivals haven’t been doing in terms of putting its focus into sites in good locations rather than setting itself more difficult tasks.

Another point of discussion is the future of the closed sites. In terms of pure business, you could understand GrainCorp not giving a sucker an even break and selling the sites to rival bulk handlers.

However, we’d hope there will be some give and take, especially in terms of smaller sites, which could be used for boutique segregations and niche markets, making use of these assets in businesses not in direct competition to GrainCorp’s bulk focus.

GrainCorp has managed to argue its case well thus far, but ultimately the proof will be in the pudding – anything less than a $5/t drop in fees and they can expect a substantial grower backlash.

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FarmOnline
Gregor Heard

Gregor Heard

is the national grains writer for Fairfax Agricultural Media
Date: Newest first | Oldest first

READER COMMENTS

tim from oakey
12/06/2014 7:43:02 AM

Congratulations GrainCorp, for finally opening your eyes and understanding that all Corporations need customers in order to satisfy shareholders. Just goes to prove Australia does not need to be taken over by ADM and other bullying merchants to run business properly. Had we started this approach many years ago we could be doing the takeovers.
Michael from NE Vic
12/06/2014 12:13:37 PM

Nice move Graincorp but I suspect ADM and or a combined ADM/CBH will be back to have another crack at taking out Graincorp
A matter of opinionA selection of editorials from around the Fairfax Agricultural Media group covering the issues of the week.

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