FARMER lobby groups are calling on GrainCorp to share the benefits of shutting various grain silos with growers, amid concerns the closures will drive up farmers' freight costs and pressure marginal growing regions.
After Treasurer Joe Hockey's shock decision to block US giant Archer Daniels Midland's (ADM) $3 billion takeover bid for GrainCorp, chairman Don Taylor has said the company's storage and logistics network needs upgrading and would require rationalisation.
Farmer groups, which lobbied intensively against the takeover deal, said the move to close some silos is not surprising but could have significant consequences for growers.
AgForce grains president Wayne Newton, who represents Queensland's grain farmers, said some marginal grain-growing parts of the state may become uneconomic if they lose access to nearby silos.
"It's a real balancing act in some areas. Growers are already questioning whether they will stay in grain in some areas where the combination of freight and handling costs are so high," he said.
"There's a lot of people upset about how run down the infrastructure is. There are plenty of stories of big lumps of concrete falling off silos and the general state of repair has been poor."
One of the nation's biggest growers, Ron Greentree, says as many as 150 of GrainCorp's 280-odd east coast storage sites could be closed.
Many of those sites are closed depending on seasonal conditions in any given year. About 80 per cent of GrainCorp's annual receivals go through 100 sites and the company spends between $40 million and $60 million every year on repairs and maintenance for its storage network.
In some areas, dilapidated country branch lines make rail impractical because of weight and speed restrictions. Closing marginal silos in those regions would allow costs to be recouped and reinvested in the core storage sites.
NSW Farmers grains committee chairman Dan Cooper said no one expected GrainCorp to keep investing in 280 different sites but added the company needed to work with growers during the rationalisation process.
"Rationalisations are fine as long as they reinvest in key areas. We have to make sure growers don't lose efficiency, otherwise it would push grain out of the system," he said.
"ADM was going to do it so I don't see it as new. The big problem is if people cart grain further, there needs to be a cost benefit to do it. Some of the efficiencies GrainCorp picks up need to be passed back along the system."
Victorian Farmers Federation grains president Brett Hosking said rationalisation "will mean higher freight cost and more trucks on the road".
Michael Riley, who conducts business advisory services for Riland and is a former director of venture capital for Lend Lease, said a way to resolve the monopoly and foreign-ownership concerns could have been to split GrainCorp's infrastructure from its grain trading and processing business.
"Separation would remove a vested interest further along the value chain, facilitating more open access and competition among grain traders, with grain producers benefiting from that price competition," he said.
An Australian wholesale fund could be established to house GrainCorp's infrastructure assets, with a potential role for investors like the Future Fund, he said.
Analysts say there are several options for ADM in relation to GrainCorp, including a marketing alliance, returning with another takeover bid in the future or buying some GrainCorp assets.