Australian farm chemical giant, Nufarm, has opened the gate to potentially sharing its local production facilities with crop protection competitors if the federal government pushes ahead with initiatives to help beef up domestic manufacturing.
Nufarm is looking at further capacity and efficiency upgrades at its Melbourne plant so it can better compete with cheap imports and reduce the risk of chemical supply chain shortages at key times during cropping seasons.
Nufarm chairman, John Gillam, told this week's annual general meeting he believed the future for onshore manufacturing was stronger than many expected.
He praised the government for showing a strong interest in limiting Australia's vulnerability to offshore supply disruption, including the prospect of Canberra working with the agchem maker to bolster local production, possibly with some investment support.
"This government is doing things that are more supportive than any of its predecessors in the past 15 years," he told shareholders.
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Managing director, Greg Hunt, said while numerous chemical companies had formulation facilities in Australia, the farm sector was largely dependent on raw active ingredient materials produced overseas.
This had proven increasingly risky in peak demand periods, especially if China restricted exports to prioritise its own needs, and subsequently undermined Australian farm productivity prospects.
As Australia's only farm chemical manufacturer, Nufarm's domestic production ensured "sovereign capability" for Australia.
Maintaining a healthy input local supply chain is in the national interest
- Greg Hunt, Nufarm
"If you are trying to grow a crop you essentially need four key things - seed, fertiliser, fuel and crop protection products," Mr Hunt said.
"It would be a really tough day for Australian farmers if they were left to completely rely on many, or all, of those key inputs to be imported.
"Maintaining a healthy input local supply chain is in the national interest."
Mr Hunt, who has been campaigning hard to promote farm input security strategies, was buoyed by recent feedback from on-site talks with government delegates, and Canberra's recent decision to extend a four-year anti-dumping duty on popular base herbicide 2,4-D arriving from China for less than its true supply cost.
He also noted a supportive tone in a groundbreaking essay by federal Treasurer, Jim Chalmers, published this week, which promoted greater government investment in a more values-based capitalism model to help the economy and society cope with a new era of serial global disruption.
Co-investing option
"The Treasurer is talking about government co-investment with private enterprise if something is in the national interest," he said.
"I think that's something we'd welcome.
"The government seems more attuned to the concerns we, and farmers, have expressed."
Mr Hunt said Nufarm would "certainly look at any co-investing options" with Canberra to strengthen local supply chains - and make facilities it upgraded available to other participants in the industry.
"It makes sense," he said.
"With some investment we think we can be competitive and sustainable against imports from China and other countries.
"It's about having the confidence to modernise sites to make them more efficient, and reduce emissions where possible."
Sharing with competitors
Making Nufarm's facilities available to other crop protection businesses, and even research bodies, would not just bolster Australian-made product availability, but ensure more volume through the plant.
Nufarm's factories at Laverton in Melbourne and Kwinana in Western Australia already formulate private label herbicides under toll production agreements with other agribusinesses, helping to keep its plants efficient and busy.
Mr Hunt said given a new production facility would cost about $250 million to build, it was no surprise other agchem rivals continued depending on imports of overseas-made products.
"We already have facilities which can be expanded to service a need for critical inputs," he said.
He noted other big grain producing economies, including the US, Brazil and China, all had mechanisms to support local manufacturing and safeguard their domestic supply chain.
In fact, as a global player which spent $US35m in 2018-19 on a plant in Greenville, Mississippi, Nufarm was alert to global options and always looking at where it could best invest for the future with confidence.
Watershed year
Meanwhile, chairman, Mr Gillam told Nufarm's Melbourne AGM 2022 was a "watershed year" for the company, with revenue and market share uplifts across all segments and record earnings.
The company's financial strength and long term growth agenda had been significantly advanced to be on track to meet, or exceed ambitious 2026 revenue aspirations.
"We expect strong trading conditions ahead and hope to maintain dividends, and increase them," he said, but declined to answer a shareholder query about when future dividends may be franked.
While Russia's Ukraine invasion, extreme weather conditions and the coronavirus pandemic caused significant global disruptions, the crop protection segment was still performing strongly as Nufarm focused on core crops and geographies, supported by favourable local seasons and new product innovation.
Nufarm's fast developing seed technology business had gained more momentum and was leading the company towards an exciting growth phase in new technologies.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
