March 20, 2013

Over the next three years, Australia's Emerald Grain plans to double storage capacity to three million tonnes by building new facilities in the country's east coast and South Australia State, a move that could intensify competition in a hot sector.

The new capacity will mean Emerald Grain, the third-largest grain handler in Australia's east coast, may become a bigger competitor to GrainCorp, the nation's No. one grain handler by volume which dominates the east coast, and Glencore, the largest in the business in South Australia.

Australia's grain industry has recently drawn interest from foreign firms keen to capture the benefits of the country's rich agricultural land and close proximately to Asia.

GrainCorp last year rebuffed a US$2.9 billion takeover approach from US agribusiness firm Archer Daniels Midland Co., saying the offer undervalued it. Privately-owned Emerald Grain did not disclose how much it will spend on the expansion or how it will be funded.

The new capacity would allow Emerald Grain to better compete with GrainCorp and Glencore in buying grain direct from farmers, which can then be sold on to international customers. It can also charge farmers fees to store their grain.

Danielle Buller, a spokeswoman for Emerald Grain, earlier told Reuters the locations of the new storage sites would be revealed over the coming months. Where the storage sites are located will determine how effectively the company can compete, some analysts said.

Emerald Grain's storage expansion comes amid forecasts for strong grain production in Australia next year. The country, the world's second-largest wheat exporter, forecast production at 24.9 million tonnes in the 2013-14 season, up 13% from the 2012-13 season.

Emerald Grain currently has 14 storage sites across Australia. GrainCorp owns 280 grain receiving sites on the east coast, capable of accepting more than 21 million tonnes of grain a year, while Glencore has 117 storage sites with a capacity of more than 10 million tonnes.