Forrest: CBH co-op structure “archaic”

14 Apr, 2016 06:28 AM
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Mining and agricultural entrepreneur Andrew “Twiggy” Forrest has rejected speculation about his involvement in a CBH corporatisation bid.
Mining and agricultural entrepreneur Andrew “Twiggy” Forrest has rejected speculation about his involvement in a CBH corporatisation bid.

MINING and agricultural entrepreneur Andrew “Twiggy” Forrest has dismissed suggestions of any involvement in the recent Australian Grains Champion’s offer to try and corporatise giant WA grain handling and marketing co-operative CBH.

However, the Minderoo Chair says he’s looked at CBH and considers it to be well-managed but has an “archaic” co-operative structure that isn’t maximising value to growers in a modern and dynamic market place.

Speaking to Fairfax Media yesterday, Mr Forrest spoke publicly for the first time about AGC’s controversial move to try and convince CBH’s 4200 grower-shareholders to change structure and publicly list.

He said rumours of his involvement and alleged last minute withdrawal of financial backing for the AGC bid to the tune of $200 million which reduced the offer’s impact, were “not true”.

“We’ve had nothing to do whatsoever with Australian Grains Champion,” he said.

But Mr Forrest said he had looked at CBH and applauded the AGC consortium for just one reason, “solidifying the opinion of all farmers that that’s not what they want”.

“I think what AGC would have succeeded in doing is solidifying grower support, if only against a common enemy,” he said.

“It would not have been something I would have supported.”

Mr Forrest said having looked at CBH he considered it to be a well-run organisation that provided “a wonderful service to WA farmers” but had structural issues.

But he said, “Does it maximise that service and does it maximise that value, because of its archaic cooperative structure – the answer is no”.

“It’s very hard for management to truly manage the dynamic environment that we face in an evolving world where Western Australia must remain competitive and Australia must remain highly competitive (when) there is no change,” he said.

“And there is no improvement without change so if you’re hoping for a different result by doing it the same way - as Einstein said - you’re going to define insanity.

“If you actually want a structure which is capable of evolving and changing to meet and optimise requirements of an ever changing world, for your thousands and thousands of WA farmers who deserve optimised valued and deserve the lowest operating costs to get their product to market, then a cooperative will not deliver that.

“But within that structure are the management doing the very best anyone could ask for - yes they are.

“But it’s an archaic structure and not one which ultimately serves the two causes that every farmer needs; one is the lowest possible cost and two is value.”

AGC was formed by two former CBH directors and large WA farming families and in February pitched a proposal of up to $1 billion in cash, plus tradeable shares, from varied funding sources including $300m by publicly listed agribusiness GrainCorp.

However, the CBH Board considered and rejected the proposal unanimously following professional advice, declaring it would not enter into a process agreement.

Core reasons for rejecting the approach were; it would result in the loss of grower control over the CBH’s strategic supply chain; destroy value for grower members; and give too much power to GrainCorp.

Subsequently, the offer was not put to CBH’s grower-members in order to achieve the 75 per cent vote needed to change structure and list on the ASX.

Mr Forrest said he did not share a view expressed by other analysts that a multinational agri-giant like Archer Daniels Midland would eventually make an offer to grower-shareholders they’d be unable to refuse and CBH would eventually be corporatised.

He said the majority of farmers would not make decisions based on the short term monetary gains that they could make via such an offer.

“They look at farming like I do; that it’s a long term and potentially multi-generational business and the fact that you can get prices frozen for potentially five years – well what then?” he said.

“No one has any trust that, an organisation with a straight return on capital parameter to themselves, not to their stakeholders, is going to look after the best interests of the 4000 plus farmers.

“I’d say ‘an offer they can’t refuse’ implies cash and I think farmers look way too long term to be influenced by that.

“And I’m not talking all farmers - there are plenty of farmers who have kids who don’t want to go back to the farm or have decided it’s time to get out and they will take the cash.

“They’re in the minority and they’re perfectly within their rights to behave that way and (you would) expect that.

“But the majority of farmers I’ve spoken to - and I speak to hundreds who just walk up to me or write to me and contact me - they’re in it for the long term and they all believe they deserve value but what they deserve most is really efficient delivery to market.”

This week, Federal Agriculture and Water Resources Minister Barnaby Joyce was asked his view on CBH’s structure when he attended a media conference at CBH’s Metro Grains Centre, in Perth.

The media conference launched a study by Deloitte Access Economics that said CBH and its 40000 farming members contributed $3 billion to the WA economy in past financial year and that one in every four dollars generated by the State’s agricultural sector originated from CBH and its members.

Mr Joyce said CBH was owned by WA farmers and he would leave any decision on structure to them but he was “very proud” of the co-op and growers.

“I think what the wheat growers have done in WA - how they’ve created such a massive organisation in CBH and the benefits now giving back to Western Australian people, and to the Australian people – is something we should all be proud of,” he said.

“This is something that’s owned by mums and dads out there growing wheat and they’ve made the decision at this point in time to keep going on the way they are and I respect that and in fact, I’m happy for it.”

In mid-2014, Mr Forrest acquired WA’s largest beef processor Harvey Beef to capitalise on the growing food demand from the Chinese market and has since been a key-note speaker at leading industry events including ABARES.

This week he announced big picture plans to build a Bonded Free Trade Zone in China to bolster the export of high quality Australian agricultural products into the expanding market and to turbo-charge the Australia-China Free Trade agreement.

His plan would also involve stamping food products processed or handled in the innovative agri-hub with the ASA100 “one brand one logo”.

The ASA100 initiative involves Chinese and Australian agri-business leaders looking to improve agricultural trade through strategic common ground and branding awareness; especially of quality produce.

“The BFTZ is a very innovative concept that’s great for China and great for Australia and potentially the most meaningful, solid development, given both countries are continuing to encourage it, to come out of the ChAFTA to date,” he said.

Mr Forrest also has a family history spanning about 140 years in farming and agriculture and worked as a jackaroo on a Tasmanian farms in his youth.

FarmOnline
Colin Bettles

Colin Bettles

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

READER COMMENTS

Jock Munro
14/04/2016 8:10:01 PM

Yes Twiggy the corporate would say that and he has God on his side when he declares that WA growers would be better off with a shareholder company that gouged them rather than a co op that protected their interests.
Mark2
15/04/2016 11:58:37 AM

History would suggest that it is not the smaller operations that ditch their share holdings in newly demutualised coops ,it's usually those that have been larger stakeholders and have been instrumental in the change. They usually take the cash in order to speed up the transition of ownership. Recent history with farmer owned Infrastucture and its devolution suggests that what mr Forrest says is completely wrong
Deregul8
16/04/2016 5:41:36 AM

It does have an archaic structure and that is why the competition will shortly start building up country mega sites in Kwinana to deliver a death blow to the coop. The truth is CBH is charging far too much to handle grain because of the large number of small sites and this apparent need to invest in other opportunities. The only opportunity WA farmers should be interested in is the neighbours farm.
Interested Party
18/04/2016 7:46:45 AM

Deregul8 I've said this before but if you think CBH is charging "far too much" come over to the east and compare the price and service!
Jock Munro
18/04/2016 5:50:03 PM

Thank you deregular for confirming that a corporate structure would only be interested in the bottom line and would close silos. That is exactly what has happened in The East- some of us cart grain past three or more closed sites. Glad to know that you have taken on board what we 'easterners ' have told you.
Interested Party
19/04/2016 7:10:28 AM

Deregul8 your comments have had me pondering why competition hasn't already started "building up country mega sites in Kwinana to deliver a death blow to the coop"? There must be a reason as "they" could have done this years ago but have chosen not to. As you appear to be the font of all knowledge in the west could you please explain why this hasn't happened?
James
19/04/2016 8:44:28 AM

Pretty obvious,its because the Kwinana Zone is actually over-serviced currently, it is where the bulk of the small sites are which are being subsidised by the Geraldton, Esperance and Albany port zones. Easy win for competition was to focus on Albany zone to start with, as there was limited capacity at either GTN or ESP to ship due to mining, but with the mining downturn shipping slots are opening up, meaning may soon make sense to enter GTN and ESP.

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