REDUCED grain production in the eastern states on the back of dry conditions is among the key factors behind the expected hit to GrainCorp profits for 2015.
In its release today of expected full year results for 2015, GrainCorp says it anticipates a statutory net profit after tax of $32 million, down from $50.3m for 2014.
In a statement, GrainCorp managing director and chief executive, Mark Palmquist, said while it was pleasing the processing businesses had contributed to a significant portion of the year's expected earnings, the 2015 financial year had been largely influenced by factors in its grains business.
"Continued challenging conditions in global grain markets have affected the result of GrainCorp Marketing," he said.
"This has only been partially offset by a good performance from Storage and Logistics, with upcountry receivals of 7.4 million tonnes and grain exports of 3.5 million tonnes in the face of a smaller eastern Australian crop."
GrainCorp expects to report sales volumes for marketing of 6 million tonnes, full year EBITDA loss of $2m and full year PBTDA loss of $16m.
Mr Palmquist said lower grain production in eastern Australia resulted in intense competition to originate grain, while bigger crops and stock levels in other regions also generated strong competition from alternative supply origins.
"This situation was exacerbated by lower fuel costs and ocean freight rates, which reduced Australia's freight advantage to major export destinations and made Australian grain more expensive, severely limiting the opportunities available," he said.
Looking ahead, Mr Palmquist said with harvest now underway in the eastern states, GrainCorp had already received 1.4 million tonnes of grain, mostly in Queensland and northern NSW.
The average of the forecasters' most recent updates is 16.1 million tonnes of winter crop for eastern Australia.
"Growers in areas of Victoria and southern NSW have had to contend with particularly hot and dry conditions in September and October," Mr Palmquist said.
"This will temper grain production forecasts relating to our FY16 year but it is too early to make definitive predictions.
"There is a long way to go before harvest is complete and good finishing rains would still be very welcome in many areas."
GrainCorp will release its audited results and a more detailed update on November 12.