The prospect of a $90 million full-year loss for drought-savaged GrainCorp is adding to farm sector concerns about the east coast grain giant's decision to float its valuable malt enterprise as a separate business.
Grain growers are also miffed chairman, Graham Bradley, will join chief executive officer, Mark Palmquist, in jumping from GrainCorp to the new MaltCo, leaving the grain infrastructure business looking like an unloved orphan.
Although farmer demand for GrainCorp's bulk storage, handling and export services is currently near all-time lows after two droughty years, grower groups are uneasy about how financially robust the remaining business will be when seasonal conditions bounce back.
There's a feeling GrainCorp management simply isn't really focused on the grain business any more
"There are quite a few murmurings and a bit of cynicism about what's happening," said GrainGrowers chairman, Brett Hosking.
"Growers are well aware GrainCorp bought its malting investments to mitigate the income risk in times when the season or markets were not going so well."
The malt division owns distribution operations and malt houses in Britain, Canada and the USA, plus Australia's Barrett Burston plants in Brisbane, Melbourne and Perth.
"I think there's a feeling GrainCorp management simply isn't really focused on the grain business any more," he said.
"There's definitely frustration emerging from growers who feel a bit abandoned and believe company leadership team is almost more focused on selling the business."
His comments echoed similar observations across the sector.
Some agribusiness executives privately noted GrainCorp's traditional position in the bulk handling and export market now appeared far weaker than a decade ago when it spent $750m diversifying and drought-proofing itself by acquiring international maltster, United Malt Holdings.
Since 2009 GrainCorp had been challenged by booming on-farm storage competition against its own silo sites, two new grain export infrastructure rivals in NSW, plus a more active domestic stockfeed market absorbing grain previously handled by its network and destined overseas.
Other observers focused on whether GrainCorp director, Peter Reynolds, had enough grain industry experience and empathy to take over the chairman's job at such a complex time for the company after Mr Bradley moved to MaltCo.
Trading losses grow
Late last week GrainCorp forecast its net loss after tax for the 2018-19 year would be between $70m and $90m, with underlying earnings before interest, tax, depreciation and amortisation (EBITDA) below $85m.
In addition to the drought-withered NSW and Queensland harvest, the company had weathered a blowout in grain trading losses to between $60m and $70m, having being caught with unsold feed grain in an increasingly turbulent global market spooked by the US-China trade tensions.
"This is an extremely difficult year for GrainCorp due to the significant disruptions we've seen in global grain markets compounded by the drought," said CEO, Mr Palmquist.
GrainCorp's anticipated crop trading opportunities in the current quarter were not likely to materialise as international buyers were shy about new season contracts in the wake of ongoing international trade disruption.
However, its ports were unusually busy handling an expected 2.3m tonnes of "imported" feed grain from South Australia and Western Australia destined for eastern states livestock during 2018-19.
A strong GrainCorp is very important to farmers' livelihoods
NSW Farmers grains committee chairman, Matt Madden, was concerned GrainCorp also faced the prospect of a "pretty ugly crop production situation" in 2019-20.
MaltCo impact examined
The grains group would meet later this week discussing GrainCorp's demerger plans and "drill down to see what it means for members".
"A strong GrainCorp is very important to farmers' livelihoods," Mr Madden said.
"It's the biggest grain business on the east coast and we are interested in, and impacted by, what happens.
"We're also key stakeholders in the future of this company."
He was a little surprised GrainCorp had not talked with farmer groups about the planned MaltCo spin-off, implications to the grain handling and storage network, or even explained more about its risk mitigation safety net deal with insurer, Aon.
"Farmers are all looking at income protection and risk mitigation options for themselves, so it's not surprising GrainCorp has similar plans, but I still don't understand how it will actually work," he said.
"Our last talks with the company were early this year when Long Term Asset Partners had a takeover bid in the wind."
Drought distraction in Qld
However, AgForce grains president, Brendan Taylor, said most Queensland farmers appeared disinterested in what would be left of GrainCorp after the malt business demerger, or who would run it.
We do need a viable bulk handler, but GrainCorp hasn't done itself many favours with farmers
Drought was a far bigger concern than the restructure agenda for most growers, many of whom also felt they got a better deal from on-farm storage than GrainCorp's aging receival sites.
"We do need a viable bulk handler, but GrainCorp hasn't done itself many favours with farmers who have much bigger headers, trucks and handling expectations these days," said Mr Taylor from Warra, near Dalby.
"With the exception of a few big sites like Goondiwindi and Thallon, we've got a lot of very slow elevators in Queensland."
"If you're a shareholder you'll be paying more attention to what's going on, but I'm not hearing much talk about GrainCorp from our members."
Fresh focus hopes
While some observers have speculated the big restructure changes could also be undermining management morale within the grain handling division, GrainGrowers' Mr Hosking suggested the shake up may turn out well for farmers.
"Maybe those who are left at GrainCorp will be the managers who want to do it well and run the grain storage business with the sort of focus farmers would like to see," he said.
"Sentiment I've heard from some growers has been that GrainCorp management should get out of the way and let somebody who wants to run the grain business do it properly."
However, there was also lingering suspicions about GrainCorp's network falling into the hands of a big multinational like former takeover bidder, Archer Daniels Midland.
"There's not much confidence in how an overseas owner would treat the business in difficult times like this."
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