Why we need ADM: Watkins

09 Nov, 2013 01:00 AM
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35
 
GrainCorp CEO Alison Watkins.
GrainCorp CEO Alison Watkins.

IT IS pure fantasy to think it would somehow be worthwhile or even possible to pause or even turn our backs on the process of globalisation that has delivered us such success, GrainCorp CEO ALISON WATKINS told the Australian Farm Institute conference on Thursday. The following is excerpted from that speech:

Incredible opportunity

AUSTRALIAN agriculture is on the cusp of its greatest era of opportunity ever - an era with the potential to dwarf the post WWII wool boom.

Our acknowledged skills as efficient, professional producers of high quality food and fibre, combined with our proximity to Asia … effectively give us an inside run in the race to meet the world’s growing demand.

It’s not all just thanks to circumstance; our sector has also embraced extraordinary change to put ourselves into this prime position. To make sure we don’t squander this unique opportunity, we must remain open to the world and continue to back ourselves in the competition for this extraordinary market.

Through embracing this openness our industry has come a long way already. It was not so long ago, that as a grain grower, you’d plant your crop, apply the inputs, hope for rain at the right times, and drop the harvest off at your local bulk handler.

Growers were largely isolated from end customers and there wasn’t much change in the varieties that were planted, because all the market feedback came back through the filter of the AWB, ABB or the applicable marketing authority.

Since those days, the Australian grains industry has been through enormous changes as part of the process of globalising our national economy. We are now undeniably – and inextricably – global.

Our industry and politicians have shown leadership and enormous courage to … encourage others to invest in our country, to build on our own relatively limited resources and population.

Globalisation makes sense

In the case of the grains industry, there are clear reasons why Australia’s push to globalise makes a lot of sense.

We produce far more than we can possibly consume ourselves and so we need access to global markets to buy our products. Without access to the world, our industry would be substantially smaller, if it existed at all.

Given our small population, and long supply chains that constantly crave extra money, we need to attract capital to maintain and improve our competitiveness.

Despite being outside the top 50 countries in the world by population, our economy is the twelfth largest. We’ve opened many new and formerly closed markets for our produce and our economy has proven more resilient than any other, being pretty much the only economy in the western world to deliver sustained growth over two decades, in the face of the global financial crisis, Asian crisis and other shocks.

We’ve also successfully attracted billions of dollars of investment into our economy from a variety of sources – including international – helping us grow and pursue new opportunities.

ADM’s strong interest in GrainCorp is a case in point here. Its offer is a large and very meaningful vote of confidence in Australian agriculture.

Globalisation has also substantially increased the incentives, competition and options open to Australian growers.

Choice is important

Just five years ago, there was only one export buyer for your wheat. Now there are 20 exporters with connections to hundreds of end-users in every continent.

Growers now have a huge amount of choice who they store their grain with. There is now a staggering 40 million tonnes of grain storage across eastern Australia for an average winter crop that is well under half that size.

In GrainCorp’s catchment, up to half the crop bypasses our export supply chain altogether and is sold to over 100 domestic customers.

If you look at the grain that does leave the country, there are more than 50 different container packers in eastern Australia that now account for fully one-quarter of all grain exports.

Even at the ports, which have been the focus of so much attention, there is growing competition, with four bulk terminals operating in competition with GrainCorp’s ports.

Of course, strict ACCC regulation also applies at our ports, which ensures that they remain open to all exporters, notwithstanding the new competitive pressures they are subject to.

In short, where our road to the world used to be one giant funnel; growers now have choice; there are multiple pathways to market.

No turning back

I recognise there are some industry observers who yearn for a return to more insulation from global dynamics – for us to turn back inward.

But it is pure fantasy to think it would somehow be worthwhile or even possible to pause or even turn our backs on the process of globalisation that has delivered us such success.

It’s a fantasy that assumes that the global environment will remain static, predictable and unchanging. In fact, change is the only constant, as both our domestic and international markets continue to demonstrate.

If we stay the course, our world-leading growers are ideally positioned to play a pivotal role in feeding the world as we head towards peak population within the next generation.

Yet we can’t just assume that we’ll take part in the benefits of this just because we’re close to Asia.

There are plenty of rival exporters in the wings who are just as hungry – probably even more so having watched our success – than we are. They are investing billions in improving their processes and supply chains and we can’t afford to stand by.

The UN’s World Investment Report of 2013 shows that Australia’s rank as an attractive destination for foreign investment has fallen from sixth last year to thirteenth this year.

For an industry that has relied on the rest of the world for so much of our demand and investment we simply cannot afford to ditch an approach of proven success at this critical time.

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READER COMMENTS

mcheers
9/11/2013 5:05:55 AM

we have the inside run in the race, so why bow out? we own the asset why do we need to sell it? if the world wants good quality product they can buy it. between the Australian producers and marketeers we are quite capable of owning our assets and managing them. the world can come and spend money here yes but not own our assets that our forefathers worked so hard to develop.
seethelight
9/11/2013 9:54:02 PM

Every word true,but unfortunately Alison's eloquent argument will fail to impress the those who are filled with resentment over the failure of the AWB's wheat buying monopoly and the great advances the industry has made under choice and competition.They resent the fact that it is has been successful. They resent their fellow farmers who are making the most of the new opportunities and they absolutely hate the idea that enterprising farmers can act independently of the mob .You cannot reason these fools out of that which they have never been reasoned into in the first place,but bravo Alison.
Bushie Bill
10/11/2013 8:15:14 AM

I hope all the redneck ratbag renogades opposing the takeover that can read do read this intelligent article and begin to think, if they are capable of it. Their futures may depend upon it.
Matt12
11/11/2013 6:29:08 AM

Even though ADM directors are facing criminal charges. ?
Philip Downie
11/11/2013 9:12:33 AM

Alison what a load of crap. AWB fed back more info to growers about the market and its needs than Graincorp ever has. It was an integrated system where market needs were translated into variety requirements. What has happened since dereg is that none of this happens at all and is a major reason why our quality has suffered and will continue its downhill race.
Jacko
11/11/2013 9:26:04 AM

Really well said by our CEO. The ADM guy is wasting his time . We know his line but Alison Watkins should go forth more often now because she is fighting for what is in the best interest of the business and surely that is what we all want. She has credibility and support amongst farmers and shareholders. Most farmers I talk to are not upset by the change of owner at all. They simply want a good infrastructure and a competitive market. At the moment it is pretty good and it seems to be getting even more hectic with so many more players in the market. My vote is for what the board wants for GNC.
MR
11/11/2013 10:55:54 AM

For the last few months as I have read the articles about ADM, I am amazed that those on the "no" case think ADM will spend $3bill then not seek to get a sustainable return on it. In this business you get a return through volume. To get volume you need to pay a competitive price. If they don't get the return the CEO will be out. In a market where there are alternatives for growers, why would ADM come here, pay good money then seek to ruin the business they have just bought by reducing returns to growers?
argis
11/11/2013 4:25:35 PM

MR, if you want to join the dreamers list, be our guest. Not sure how far you have come in the grain business, but I am sure it has not been on hand outs from grain traders like ADM.
mark2
12/11/2013 6:17:07 AM

look, can anyone sight major infrastructure spending by the management of GNC since demutualisation? These people have been lining the pockets of shareholders at the expense of growers who sustain the network. There has not been a year when GNC has not paid a dividend, that is not the behaviour of a company that has long term growth as its aim. They have been setting it up for this moment since it's inception. ADM won't spend a cent , it's a transfer of ownership and there's nothing in it for us, if the job is as robust as Watkins says it is, why would you flog the business off??
what the
12/11/2013 8:42:34 AM

MR, ADM isn't buying Graincorp motivated by its egalitarian spirit, it sees east coast farmers ripe for good old gouging and will have factored the opportunity to rip off growers into its numbers
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