AWB era ends with a whimper, not a bang

AWB shareholders this week voted overwhelmingly to take the money of Canadian agribusiness Agrium and run.

It brings to an end the life of what was in its hey-day the most powerful agribusiness in Australia, yet the whole process has failed to excite anyone within the grower lobby.

The most anybody from the state farmer organisations had to say was that it was a shame there was now no chance to develop a genuine Australian powerhouse on the international grains scene.

The apathy probably extends from the fact the change to Canadian ownership matters little at the farmgate.

Farmers are interested in good prices and getting paid. Foreign-owned companies such as Cargill and Louis Dreyfus have been operating in the Australian space for years with success. So, while there may be an argument that this deal is bad for Australian agribusiness, it matters little to Aussie growers.

Of more pressing interest is the future direction of the commodities business. Agrium will focus on Landmark, and has repeatedly said the future of the commodities business is yet to be decided.

Growers will want as much choice as possible. The mail is that a large number of organisations trading in Australia are very keen on taking over what remains one of the top three trading businesses in the country.

However, any moves to remove another marketing option will probably mobilise farmers into action more than the Agrium sale, as they work to ensure they have as big a range of strong businesses to sell their grain to as possible in the absence of the single desk system.

There are also questions about the shape of those businesses buying our grain. AWB chairman Peter Polson said it was tough for a listed company to run a commodities business as investors were wary of the earnings volatility and the large amounts of capital required to run such a business.

He said it was no coincidence that many of the world’s major grain trading businesses were privately owned.

With GrainCorp and Elders, by virtue of a joint venture with an international trading house, now the only major two trading businesses listed on the ASX, perhaps the move is for major grain businesses that don’t have the obligations of maximising shareholder returns.

Some growers are happy with the co-operative model. CBH is the obvious example of this, while the Emerald Group’s joint ventures with local co-operatives are also working well.

The best prices will continue to be the ones rewarded, but it will be interesting to take a snapshot of who is buying Australia’s crop in five years time and see what model is working.

The other issue raised by the Agrium sale was the increase of foreign ownership in Australian agribusiness.

This issue was compounded somewhat when the Canadian government virtually vetoed the sale of its fertiliser business Potash Corp to BHP – although this does not appear to be comparing apples with apples, the BHP hostile bid and Agrium’s play for AWB were vastly different.

Food security has been raised as an issue, however, this probably is a furphy in relation to the grains industry, with Australia still focused firmly on the export trade.

Agrium may have snuck the deal in at a good time, before murmurings about increasing foreign ownership of Aussie agricultural assets grow to a roar, but the ongoing interest is very much in their next move in regards to the commodities business.

They may need to move fast – all commodities businesses know they are only as good as their traders and we’ve seen recently with Gavilon poaching many of CBH’s senior traders, the landscape can change rapidly.

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READER COMMENTS

Ken
18/11/2010 7:50:24 PM

The original wheat board was a product of an egalitarian spirit, inspired by a generation of returned serviceman post WW1 that has long since been bashed into history and really I don’t think the self centered modern Australian deserve an institution that has good will and consideration for the disenfranchised at heart. What a tragedy. "Lest we forget", I think we have.
Spray Fallow.
19/11/2010 3:22:32 PM

The whole wheat marketing treachery will become an embarrassment for our Nation.
mark2
26/11/2010 7:39:35 AM

Unbelievable isn't it, we had the perfect setup until the public listing of AWB and now we've lost the lot and even the prawns that did most of the destroying are admitting what we were trying to tell them all along.
Predo
1/12/2010 11:49:21 AM

Yes, Gordon Davis & Brendon Steward should be happy now we have loss every thing. All grain growers should learn a lesson from this, a sad down in grain industry. Growers are asking Gordon Davis how much he has collected in payments and bonus since growers loss control of AWB? What a disgrace to the once almighty AWB.
Grain of TruthRural Press grains writer Gregor Heard on the big issues facing the broadacre farmers today.

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