February 4, 2009

Growers in eastern Australia have sharply cut the proportion of grain they are warehousing in GrainCorp Ltd (GNC.AU) storage facilities since harvest late last year, David Ginns, the company's corporate affairs manager, said late Tuesday (February 3).

 

By the beginning of February, growers using GrainCorp storages had cut to 20 percent from 95 percent around harvest, the proportion of grain - mostly wheat - they were warehousing, ahead of a decision where, when and who to sell it to, he said.

 

"Grower selling behaviour, who they sell to and the period of time in which they have sold, this year hasn't really been much different from previous years when there's been a crop," Ginns said by telephone.

 

"At 20 percent of grain left in warehousing at the beginning of February, it isn't unusual," in years of normal production, he added.

 

Growers likely sold their produce to generate cash flow after two years - in 2006 and 2007 - of failed winter crops in eastern Australia, he said.

 

Ginns and other industry participants previously said they expected growers in eastern Australia to focus on how they would market or sell their crop after they had completed their harvest, the end of which was delayed by rain for several weeks.

 

GrainCorp reported Monday it had received 7.7 million tonnes of newly harvested winter crops from growers in the four months ended Jan. 31.

 

The company owns and operates the largest grains storage network in eastern Australia, with industry participants estimating it accounts for about half the region's total grain storage.

 

GrainCorp doesn't own the grain, though it does buy some of it; rather, farmers store their grain in the company's system for a monthly fee, before selling it. The sharp drop in the proportion of grain being warehoused doesn't mean it has actually been moved; rather, it is ownership of it that has been transferred, with physical relocation occurring at a later date.

 

"What we are seeing this year, for the first time ever, is a fully operational, proper, commercial grain market," Ginns said.

 

Growers can see the transition to a deregulated system for bulk wheat exports from a monopoly operated by AWB Ltd. (AWB.AU) has worked, with a robust transparent market and evidence through shipping stems or schedules that shipments by multiple exporters is occurring, he added.

 

"The shipping stem provides a new level of transparency that we haven't seen before," he said.

 

Under liberalized bulk wheat export arrangements introduced Jul. 1, 2008 major grain logistics systems operators in Australia - namely GrainCorp, ABB Grain Ltd. (ABB.AU) and Cooperative Bulk Handling Ltd. - must publish a daily shipping schedule.