The Future of Country Grain Storage
- By: "Farm Tender" News
- Cattle News
- May 27, 2019
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By Simon McNair - Agribusiness Consultant.
The market for country grain storage in eastern Australia is massively over supplied and change must occur.
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The big four handlers – GrainCorp, Grainflow (Cargill), Emerald (Sumitomo) and AGS (Ricegowers) – have over 27 Mmt of storage capacity. On-farm storage and smaller private operators have probably a similar amount. This 50+Mmt of storage capacity dwarfs average annual winter and summer grain production in Queensland, NSW and Victoria of about 25 Mmt.
Competition is intense and I predict that over the next few years we will see some M&A activity.
GrainCorp has been unsuccessfully targeted recently – ADM and LTAP. Sumitomo is rumoured to have sought bids for Emerald. There are also a number of smaller private storage operators in SE Australia on the market. Business is tough when volumes are down.
GrainCorp is now splitting its business in two with the grain business to be separately listed on the ASX by next harvest. It’s no secret Sumitomo has been looking to offload Emerald due to poor volumes. Cargill cannot be satisfied with the tonnage Grainflow has taken given the high price they paid for AWB. And Ricegrowers must be considering what to do with AGS as rice production continues to decline in its traditional area of the Riverina.
GrainCorp talk about having a 42% market share of east coast production. That’s all well and good when a there’s a bumper harvest looking for a home but what about in poor harvest?
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What about the effect of climate change on production? Greater variability in rainfall will result in more volatile grain production. Rising temperatures will result in lower yields. The future is lower production growth and more variability in harvest volumes.
Who is going to invest in infrastructure when volumes are going to be more uncertain?
It would make sense for some mergers to occur and more sites to be closed. But who and where?
Not surprisingly the future is fewer grain storages offering a superior service to growers and traders, new technology facilitating better visibility of stock. But who will be the winners and losers?
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