GrainCorp's 'Regeneration' pain

13 Jun, 2014 04:00 AM
Comments
4
 
We need to see some of these efficiency savings passed back to growers

THE $5-a-tonne cost cut farmers have been promised throughout the GrainCorp network will not come without pain, with sites and jobs on the chopping block.

As part of an ambitious three-year, $200 million revamp of its storage network, GrainCorp is set to shed 80 jobs and operate 72 less sites this harvest compared to 2013-14. When taking into account smaller sites that have been used as surge capacity in big harvests over the past five years, the total number of sites to close will exceed 100.

Farmer reaction to the announcement of the launch of "Project Regeneration" has been mixed.

Many believed the rationalisation of the storage network was inevitable and welcomed the focus on improving the major or ‘primary’ sites to create efficiencies, however, there were reservations.

Brett Hosking, president of the Victorian Farmers Federation (VFF) grains group, welcomed the news of the investment, but issued the challenge to GrainCorp to live up to its promises in relation to savings for growers.

“We understand that efficiencies need to be found and that can mean rationalization, but we need to see some of these efficiency savings passed back to growers.”

There was also scepticism surrounding the spend-up, with GrainCorp itself acknowledging co-investment from rail track operators was needed to see the full efficiencies implemented.

GrainCorp executive chairman Don Taylor said the company was hopeful of investment of around $50 million from other parties.

"Obviously for the growers to get the benefit of our investments, we need the rail siding speeds," Mr Taylor said.

“These sidings obviously service our network but are not part of our infrastructure. We need an investment in that."

In terms of site closures, Mr Taylor said growers had virtually made the decisions themselves by voting with their feet and delivering grain to the most efficient sites.

“We’ve seen receivals at these smaller sites halve, and farmers move to the bigger sites, where there is more marketing competition and more prices offered.”

GrainCorp came under criticism in some quarters for focusing on areas that were well serviced by viable rail networks rather than more isolated sites that rely either on branch rail lines or road freight for unloading.

Ron Hards, a farmer in Victoria’s Millewa, where there is no rail network, said he hoped GrainCorp would invest in the Meringur site, which is the only presence the company plans to have in the region.

“We just want to hear what plans they have for that site, otherwise we will only have the option of going to the Viterra site at Werrimull.”

He said he hoped there was similar investment in the outlying sites GrainCorp had identified as strategic as in the ones well serviced with freight options.

The spend incorporates features of the promised spend by ADM, which failed in its bid to buy GrainCorp last year.

Mr Taylor said in spite of capital constraints, GrainCorp was committed to improving its services for customers.

Officials at the company are hopeful it will help the company wrest back market share from rival bulk handlers and on-farm storage.

The project will reshape the site network, moving away from traditional rail line shaped systems to work on cluster operations and also acknowledging the domestic market requiring grain to move around within the network rather than straight to port all the time.

GrainCorp said the closures will only impact about 10pc of receivals, with the 180 sites it will operate this year receiving 90pc of the grain last year.

The company is also plugging the environmental credentials of its plan, with Mr Taylor saying the project would see an additional million tonnes of grain a year moved by rail.

“That means 30,000 less truck trips on the road.”

GrainCorp has said it has worked closely with state farmer organisations (SFOs) in making its decisions regarding Project Regeneration.

“We have met up with all the SFOs down the east coast along with Grain Producers Australia and Grain Growers twice before making our announcement,” GrainCorp corporate affairs manager Angus Trigg said.

“Our aim there was to explain to them what was happening in the network and what we were trying to do and to get their feedback about what needs to be done better.”

Mr Trigg said a series of advisory meetings held to discuss what the changes would mean on a local level had started this week.

He advised growers interested in attending to contact their local regional office for meeting times and locations.

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FarmOnline
Gregor Heard

Gregor Heard

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

READER COMMENTS

bongos
13/06/2014 7:50:04 AM

how about the $5 goes back in to buy shares in graincorp on behalf of the growers? so we can slowly increase control that way
Mark
13/06/2014 10:44:25 AM

All savings will not be seen by most as the additional distances and time at sites unloading will soon eat up the token $5 . On farm storage will see grain lost from Graincorp and off farm sales take over. Total inefficiency of the Graincorp system should have been dealt with first such as losing buyer support from difficulties extracting grain out of the Graincorp system. Not to mention being forced to go to other sites to obtain grain bought from another site. Many of the best staff they had have left or have been sacked and many of them are now working as competitors to Graincorp.
Jock Munro
13/06/2014 9:44:06 PM

There is absolutely no guarantee that any savings will be passed back to growers. Graincorp has a legal obligation to its shareholders and not customers. WA CBH is an entirely different entity and growers from the West are reaping the rewards. Graincorp has been a disaster for growers from the time it was privatised.
Short memory
15/06/2014 5:33:00 PM

Ahhh, such short memories Mark. You're forgetting that if it wasn't for the reform group, GrainCorp would never have been in this mess. It was the left wing extremist flat earth group that tried to take over GrainCorp via graingrowers leaving the board with no choice but to let the graingrowers controlling share dilute to prevent GrainCorp being destroyed completely by agrarian socialist. Proof is in the pudding, look at graingrowers now, wandering around lost, trying to buy relavence

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