Less than a year after opening a trading office in Eastern Europe’s risky Ukraine market, GrainCorp is making a bold move into another challenging, and potentially corrupt, marketplace - India.
The big eastern states grain handler, processor and trader is to set up a Dehli office, eyeing off the subcontinent’s long term pulse trade prospects, particularly containerised, or smaller bulk markets.
Chickpeas represent the most attractive immediate export opportunity as India’s population grows and its own farming output gradually dedicates more land to perishable horticulture crops, sourcing grain from external marketplaces when necessary.
Managing director, Mark Palmquist, is also confident a free trade agreement of some sort will make India a more consistent trading opportunity within five to seven years.
We have faith in an India-Australia trade agreement process and generally improved relationships between the two democratic economies
However, he was under no illusions about the huge Indian market’s volatility, and other challenges such as lack of transparency and government tariffs.
Import tariffs can range from zero to 50 per cent, appearing without warning in response to domestic farm subsidies, the success of local grain harvests and domestic politics.
“With a country like India if you are looking at the short term you’ll be disillusioned and probably not get involved, but long term there is a good market with population growth to support it,” he said.
“We have faith in an India-Australia trade agreement process and generally improved relationships between the two democratic economies.
“Both governments are working towards making things a bit more seamless and there’s real acknowledgment in India that quite a lot of what’s now in place creates negative consequences domestically.”
Having spent considerable time and effort understanding the traps and complexity of the Eastern European marketplace before opening its Ukraine trading desk in 2018, GrainCorp was well aware of the need to move carefully as it established a footprint in another potentially risky environment.
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Mr Palmquist said the company was working with established, reputable traders, with help from the Department of Foreign Affairs and Trade.
There’s a whole set of customers who can’t physically handle big volumes, or don’t have the working capital to buy in bulk
Although GrainCorp had sold grain legumes to India for a decade, particularly chickpeas in the past five years, it would pay increasing attention to buyers unable to take advantage of big bulk shipments.
Options included container exports from its Fisherman Island packing and export terminal in Brisbane, or holding bulk inventory in India and re-loading consignments as smaller orders.
“There’s a whole set of customers who can’t physically handle big volumes, or don’t have the working capital to buy in bulk,” Mr Palmquist said.
GrainCorp was not, however, looking at buying any Indian grain handling or storage assets.
Meanwhile, its Ukrainian desk had made a slow start after getting established last year but was now achieving "good trading" and was set be an important export point given the amount of Black Sea region wheat now selling worldwide, including in Australia’s backyard.
Good luck. I would watch the situation (in Ukraine) very closely
GrainCorp was also sourcing corn and expected other crops, including barley, to become widely marketed from its Eastern European base.
However, a shareholder with considerable experience in the region told this week’s annual general meeting he was uneasy about a host of trading risks, including the Russia’s military support for civil unrest in Ukrainian and “huge bribery and corruption everywhere”.
“Good luck. I would watch the situation very closely,” he said.
Too good to ignore
Chairman Graham Bradley, said the company had worked methodically with many specialist advisors before setting itself up in Ukraine and continued to rely on “very good market intelligence”.
Board directors had visited and satisfied themselves the emerging market could be managed safely, and it had big future as a supply area which could not be ignored.
Ukraine and Kazakhstan have also opened up as new organic grain sources for GrainCorp, already one of the largest organic crop handlers in Britain and enjoying good business in the fast growing North American market.
In Canada the company's joint venture GrainsConnect will complete building the final two of four fast loading receival sites this year.
Each will handle up to 250,000 tonnes and send grain direct to port via 135-wagon trains.
By 2021 the grain's port destinations will include an export terminal in Vancouver half owned by GrainsConnect - a partnership with Japan's big Zenoh co-operative.
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The story Indian trading desk to add spice to GrainCorp market footprint first appeared on Farm Online.