Further consolidation expected for Australia's grain industry

Australian grain cooperative CBH Group could be a takeover target as consolidation within the country's grain industry continues.

Peter Reading of Grains Research & Development Corp., said the impact of changes in the industry since the 1980s has resulted in an ongoing frenzy of activity throughout the grain industry supply chain and this consolidation is expected to continue.

While CBH is the biggest of the four major marketers or bulk handlers, being a farmer's cooperative limits their ability in terms of raising capital, Reading said at the International Grains Conference.

He said there is room for consolidation without hampering competition, estimating CBH, Viterra Inc., AWB Ltd. and GrainCorp. Ltd. between them account for about 70% of wheat traded in Australia, with the remainder handled by smaller outfits.

The four have also diversified into either first-stage processing such as flour mills and malt operations, or along the supply chain to rural mechanising, Reading said, pushing consolidation not only horizontally but also vertically.

"Since the 1980s, this situation has changed with publicly owned infrastructure assets privatised and the deregulation of grain marketing arrangements," Reading said.