GrainCorp wants more offshore assets as insurance

GrainCorp's Aussie business good, but offshore growth looks better

GrainCorp managing director, Mark Palmquist and chairman, Graham Bradley.

GrainCorp managing director, Mark Palmquist and chairman, Graham Bradley.


A $10 million jump in this year's energy costs is one reason GrainCorp is looking overseas to grow its agribusiness activites


Soaring energy costs and the need to further weatherproof its marketing, processing and logistics business have driven Australia’s biggest listed agribusiness to seek more grain business expansion overseas.

GrainCorp is eyeing off grain sourcing options in Eastern Europe’s fast emerging Black Sea grain belt as well as more northern hemisphere supply chain expansion prospects, and possibly South America.

The success of the company’s malt business overseas and its newly developed grain terminal partnership in Canada with Japanese farm co-operative giant, Zen-Noh, have convinced GrainCorp to seriously explore more offshore investment to help counter the impact of Australian farm production volatility on its balance sheet.

A looming $9-plus million rise in its Australian malting and oilseed processing energy costs this financial year has also contributed to managing director Mark Palmquist’s interest in overseas options where ever energy, labour and water supply fundamentals are attractive.

He said another joint venture with Zen-Noh may easily be on the cards in the next 12 to 24 months.

“One particular negative here at the moment is the high energy costs we’re suffering’s one of the issues making us look overseas.” - Mark Palmquist, GrainCorp

“It’s not that Australia is not a good place to be in, but some of the higher growth rates in supply and demand are outside Australia,” he said.

“One particular negative here at the moment is the high energy costs we’re suffering.

“It’s one of the issues making us look overseas.”

Without being specific, Mr Palmquist noted the Black Sea region and South America were areas GrainCorp was yet to gain a foothold and may appeal to the company and Zen-Noh as new investment targets.

“We like to grow our business as close to the farmer as possible, building on our core capabilities,” he said.

“South America is a significant crop production area – big in barley and meal for animal nutrition, which are areas we see as important.

Shared goals with Japanese 

“One primary reason we have Zen-Noh as a very good partner is their global customer network base.

“Zen-Noh is not necessarily the only partnership option available to us, but they’ve been an excellent partner for us in Canada.

“They want want to be in this sort of business for another 100 years and so do we, so there’s a natural alignment to what we’re both looking at in the short term and longer term.”

“South America is a significant crop production area – big in barley and meal for animal nutrition, which are areas we see as important. - Mark Palmquist, GrainCorp

The GrainCorp-Zen-Noh venture, GrainsConnect Canada (formed in 2015), is about mid-way through building four high-capacity, 35,000-tonne elevators in western Canada to service growers who who currently travel furthest to deliver grain to origination sites for delivery to port.

Mr Palmquist observed the Japanese generally were, again, enthusiastic about working with Australian agribusiness, partly because Japan was acutely alert to food supply security and quality issues, but also more broadly because of agriculture’s value as an investment class.

Black Sea experience

New GrainCorp chairman, Graham Bradley’s extensive banking and business ties in Asia, and the wider marketplace, had also provided a timely and healthy contribution to GrainCorp’s global strategy.

Over summer, directors and executives were in the Baltic and Black Sea regions looking closely at grain production and logistics developments in Eastern Europe, acutely conscious this zone is likely to be challenging global grain markets for some.

Black Sea exports already compete with Australian wheat in nearby Asian markets at significant price discounts.

Our ambitions are to expand the amount we trade from non-Australian sources, as we are already doing in Europe. - Graham Bradley, GrainCorp chairman

“It’s important we understand the risks and opportunities in areas such as this which will be long term participants in the market,” Mr Bradley said.

“Black Sea infrastructure and grain quality are relatively second rate at the moment, but improving, so we know to expect increased competitive potential.

“It’s also important to have good market intelligence in that region.

“Our ambitions are to expand the amount we trade from non-Australian sources, as we are already doing in Europe.

“We could look at (a business position in) the Black Sea in the longer term, if opportunities arise as political risks subside.”

Although additional European investments were not necessarily on the radar right now, both he and Mr Palmquist noted they were “always looking around”, pointing tothe diversification rewards GrainCorp had gained as a big investor in the Europe and North America malt sector, as well as GrainsConnect Canada.

Oilseed experience

Oilseed processing was another of the company’s diversification strengths with more offshore potential.

It already has interests in New Zealand and China.

Back in Australia, where the oilseed refining sector can be over-serviced, Mr Palmquist was confident GrainCorp’s Victorian and West Australian plants would prove their cost efficiency value following significant capital upgrades.

“We think we’ve got a natural advantage over some other operators in this area – we’re now well located in the main canola production heartland and close to end user customers,” he said.

“The best way to tackle the over-capacity is to get costs down.

“Much of our capacity is new, so we are focused on bedding it down, running it at an optimum efficiency, and the rewards will follow.”  

GrainCorp runs Australia’s largest integrated edible oils business with crushing, refining, food processing, stockfeed and bulk storage operations. 

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