Is ADM giving us the ol' razzle-dazzle?

AS SUITORS go, few have put as much effort into wooing growers as Archer Daniels Midland (ADM).

Since making its $3 billion bid for GrainCorp in April, ADM has gone into overdrive trying to sell its plan to growers and quell fears it will restrict outside players' access to what will be its near-monopoly on eastern States grain port facilities.

ADM's US-based grain boss Ian Pinner - a key player in its charm offensive - has been to Australia at least twice in the space of about five weeks and is believed to have a third trip planned.

And he's not just courting politicians and farmer bodies.

Last week he was in northern NSW to meet with growers who deliver into the receival network ADM could soon own and who, justifiably, have concerns about how many receival sites will stay open - and who they will be open to - if they end up under ADM control.

ADM this week made its biggest pitch for grower support so far with promises of $50 million in capital improvements to GrainCorp's country silos, ports and freight network on top of $250m already budgeted for as part of strategic upgrades in the next three years.

Mr Pinner reckons there's scope for ADM to commit as much as another $60m a year to improvements and maintenance of existing infrastructure assets based on expected operating efficiencies.

It will also throw $1m a year towards rural community charity projects, set up a scholarship fund for ag science graduates and put dollars into research projects.

Such promises are certainly welcome - and far superior to anything offered by previous suitors for Australian grain businesses like AWB and ABB.

But you have to question why ADM is prepared to throw so much cash at trying to win over growers.

Given the make-up of GrainCorp's share register and the Foreign Investment Review Board's seemingly complete disregard for the importance of agricultural assets, growers will ultimately have little say in whether the deal goes through.

Arguably, grower support could help ease the way for a deal to be done quickly.

As noted in this space previously, delays beyond October will be costly for ADM - and every day it drags on there's the risk of a competitor making a counter bid.

But if ADM was hoping to dazzle growers with its promises into forgetting about that tricky little issue of port access, it has another thing coming.

Date: Newest first | Oldest first


Peter Holding
16/06/2013 8:21:43 AM

Just ask yourself what would be the situation for many growers if ADM simply removed one service ie warehousing. Look at brazil for the answer.
17/06/2013 10:27:38 AM

ADM can make all the promises to growers they like. None are guaranteed. A bigger risk is that they will be so dominant as to preclude competition by stealth. That is, competitors wanting to use the ADM Storage System to buy from growers will be ham strung and reluctant. Growers will dominated and monopolised and too weak to fight back. The only fair way for ADM to prove their wish to do the right thing by growers and competing buyers would be to split GrainCorps silos into three and sell off 2 thirds in 2 bites.
17/06/2013 8:57:38 PM

There is a way to prevent the ADM take over; make a higher bid say $4 billion. Then run it the best way you think.
18/06/2013 11:54:59 AM

While you are at it Mark, why don't you get ADM to take over, CBH WA, Wesfarmers, Woolworths, Harvey Norman and the big 4 Banks?
18/06/2013 6:12:59 PM

Hmmmm I guess all you need is a lot of cash and capacity to manage the businesses better than existing management
19/06/2013 5:52:05 AM

Myopia has got Aust into the current bind regarding agriculture. Firstly myopia caused some farmers to fall for the BS that deregulating wheat exports would create so much more competition for our grain. Then Govt myopia resulted in wheat export deregulation. Now, that change is about to allow a multinational grain trading and processing giant to get an effective monopoly over half of Australia's grain growers. Proof that the increased competition argument was BS and all the suckers who believed in it were myopic suckers. Will Govt open its eyes and look further now. I fear not.
19/06/2013 8:50:39 PM

Governments are subject to politics and are not able to make logical long term choices.
20/06/2013 7:19:46 AM

Mark, Govt's make long term decisions all the time. They do so believing they are logical, but of course logic varies depending on one's objective.
20/06/2013 8:06:54 AM

USA and EU gets critisised regularly for paying out subsidies to its farmers. It has been doing this for a long time with no change in sight. While what they are doing is corrupting commodity markets, they are, more significantly, ensuring the continuation of farming, land management and food security in their own regions. They are also helping the down stream industries that rely on farming. We can not stop that process. We can take a leaf out of their book in other ways (without subsidies) to ensure that farming here survives in our hands and is not taken over by USA or EU to our detriment.
A matter of opinionA selection of editorials from around the Fairfax Agricultural Media group covering the issues of the week.


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