Louis Dreyfus begats another marketing JV with Namoi Cotton

Namoi-Louis Dreyfus partnership splits trading and warehouse ventures

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Louis Dreyfus Company will bankroll and own most of the new Namoi Cotton Marketing Alliance


Namoi Cotton's joint venture marketing, packing and warehousing relationship with global farm commodities trader Louis Dreyfus Company is to split into a second partnership.

Following lengthy restructure talks, the two companies have resolved to create another offshoot of their seven-old Namoi Cotton Alliance venture which will be specifically for marketing and trading Namoi's ginned cotton lint.

However, the listed Namoi Cotton's profits from the lint marketing partnership will be capped at just $1.5 million a year under the deal.

As flagged in May, Louis Dreyfus will be the dominant stakeholder in the new Namoi Cotton Marketing Alliance, while the former farmer-owned co-operative will hold just 15pc.

Option to grow

Namoi Cotton, will however have the option to expand its stake in the marketing alliance to 35pc in 2025.

While marketing profit share will be restrained, the new joint venture will also "cap and collar" Namoi's exposure to any losses in the volatile cotton trading environment to $1.5m a year.

"We don't have the balance sheet to fund trading on the global market, but trading is very much a core competency for Louis Dreyfus which sources cotton around the world," said Namoi's managing director, Michael Renehan.

The restructure was part of Namoi Cotton's overall strategy to limit its exposure to lint trading and associated debts, while focusing on its ginning and related services to cotton and grain growers

Meanwhile, the existing Namoi Cotton Alliance will continue running containerised grain and cottonseed packing operations and operating about 500,000 bales of warehousing space at Goondiwindi on the NSW-Queensland border, Wee Waa in North West NSW and Warren in the Central West.

The listed Namoi Cotton also retains its majority 51pc share in NCA.

NCA's trading and marketing role will phase out after the newl NCMA receives regulatory approval and third party consent for its launch.

Busy summer ahead

Mr Renehan said while this year's drought-depleted ginning and warehousing activity was wrapping up, NCA was bracing for a return to much busier grain packing operations, primarily at Goondiwindi and Wee Waa, as much improved winter grain crop prospects delivered a rush of pulse and cereal orders for the container export trade.

"Although we've had a very light ginning season - but better than some - we've already got a good number of container contracts to keep employees busy.

"We're very optimistic about the season - we could need 50 to 100 people at Goondiwindi and Wee Waa at the peak."

Depending on how the grain harvest worked out and what volumes had to be loaded, NCA could also utilise space at Warren, or cottonseed storage sheds elsewhere in the Namoi network to meet exporters' demands.

Namoi Cotton was delighted to have finalised restructuring its joint venture arrangements with Netherlands-based Louis Dreyfus and believed the new arrangement strengthened the company's ability to trade and market cotton lint globally.

Mr Renehan said it also reinforced Namoi's reputation as a "secure and reliable counter party for Australian cotton growers".

Auscott opportunities

Meanwhile, Namoi was also watching to see if any opportunities may emerge with the sale of pioneering cotton farming and ginning business Auscott by its long-time US parent, the JG Boswell Company.

"We're not in the land and water ownership business, but we're obviously interested in the future of any ginning assets," Mr he said.

The 57-year-old Auscott can process up to 1m bales a year at its NSW gins at Narrabri and Trangie, Warren and Hay which share similar ginning footprints to Namoi in those cotton growing areas of the state.

Initial expressions of buyer interest for Auscott were due to be considered last month.

Although Auscott's assets were being marketed as a whole package, the cotton industry is watching closely for any indication the gins may be offered in a separate deal.

Some observer speculation has suggested Auscott and Namoi ginning assets could merge, but Mr Renehan would not be drawn on the theory.

He noted, however, cotton gins were expensive to run and Australia had about 10m bales of overall capacity, or about double what was needed to process the national crop.

"Just because they're for sale doesn't make buying the Auscott assets a simple consideration for anybody."

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