By Caroline Henshaw
SYDNEY--Australian farmers have written to the government
demanding the sale of some GrainCorp Ltd. (GNC.AU) assets as a
condition to its takeover by Archer Daniels Midland Co. (ADM),
fearing the U.S. grain giant could squeeze the few remaining
competitors out of the market.
GrainCorp late last month accepted a sweetened A$3.4 billion
(US$3.3 billion) takeover offer from ADM. The deal--ADM's largest
ever purchase--will give the Illinois-based company control of
seven of the eight ports on Australia's east coast, the gateway to
Asia's booming food market, and 90% of the grain shipped from
it.
"We have a monopolistic supply chain infrastructure that makes
it difficult to ensure competition," Fiona Simson, president of the
NSW Farmers, said in an interview. "We want conditions applied to
the takeover that would assist in that."
Among the demands in a letter to Treasurer Wayne Swan--the man
who will have the final say on the takeover--Ms. Simson calls for
ADM to divest one or two ports, for other parties to be allowed
access to GrainCorp's 20 million-ton storage network, for ADM to
share information on the stocks it holds and for it to commit to
upgrading the east coast's creaking infrastructure. These measures
will help safeguard farmers' bargaining position in the supply
chain, she argues.
ADM and the Treasury had no immediate comment. GrainCorp
declined to comment.
ADM's purchase is still subject to scrutiny by Australia's
competition watchdog and foreign investment regulator, which the
companies hope will be completed before October.
If approved, the deal will leave almost all of the
grain-handling infrastructure in Australia--the world's
second-largest wheat exporter--in the hands of foreign companies.
The dismantling of the former wheat monopoly AWB in 2008 paved the
way for the entry of major international players such as Canada's
Viterra Inc. (VT.T), now owned by Glencore International PLC
(GLEN.LN), and Cargill Inc., which took over AWB's grain assets
from Agrium Inc. (AGU.T) in 2010.
But Ms. Simson said years of underinvestment meant much of the
east coast grain rail network is now unusable, with farmers
frequently having to move their produce by road. That, combined
with the additional costs of moving it to silos, has meant farmers
are spending up to a third of their grain earnings on
transportation.
"Farmers right up and down the eastern seaboard aren't seeing
the benefits of deregulation," she said. "These assurances would do
a lot to assuage growers concerns about these assets going into
foreign hands."
Write to Caroline Henshaw at caroline.henshaw@wsj.com
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