Emerald stakes its grain supply chain claim

Grain marketer Emerald Group confirms its place as a third force in the grain supply chain with $120 million investment in capacity and shipping

Emerald stakes its grain supply chain claim
Emerald stakes its grain supply chain claim

By Anna Game-Lopata | December 1, 2011

Grain marketer Emerald Group has confirmed its place as a third force in the eastern Australian grain supply chain with $120 million investment in capacity and shipping.

The company says it
will compete with GrainCorp and US-based Cargill to offer integrated services across the entire grain supply chain including origination, storage, logistics, shipping, port access and marketing.

Its investment
is part of
a three-pronged strategy which includies the purchase of the Australian Bulk Alliance’s (ABA) grain assets, currently owned by Emerald’s major Japanese shareholder Sumitomo Corporation.

The company will purchase grain storage sites in Victoria at Werneth and Elmore, with further sites expected to be announced in the new year, and lease and run trains from southern New South Wales and Victoria to the Port of Melbourne.

Owned by SQP Storage, the Werneth storage facility is a venture between 20 farmers, SQP Co-operative and Emerald Group representing increasing frustration over the lack of bulk grain storage capacity in Victoria and NSW.

This has recently prompted
grain growers to form co-operative ventures to build their own.

Three new storages either totally or partially owned by growers will open in time for harvest this year, bringing a total of six storages built in the past decade with a combined capacity of 500,000 tonnes.

Along with the 100,000-tonne site at Werneth, north of Cressy in Victoria's Western District, the other sites include a 70,000- tonne receival site at Boort and a 100,000-tonne site at Tabbita, west of Griffith, NSW.

The storage facilities at Boort and Tabbita have been built by farmer co-operatives, with the help of Moulamein Grain Co-operative.

Cargill, one of Australia's largest wheat exporters following its recent purchase of the grain trading arm of AWB Ltd, will also make a major investment in capacity spending more than A$10 million ($10.3 million) to expand dozens of its receival sites in eastern and southern Australia.

Its sites in NSW are at Bogan Gate, Gilgandra, Grong Grong, Narromine, Nyngan, Oaklands, Stockinbingal and West Wyalong.

However Emerald Group seeks to trump these activities claiming its ABA transaction will enable the company to link operational control of country to port grain facilities with capacity to store 1.5 million tonnes of grain.

The integration of ABA’s assets will provide Emerald ownership of five Victorian storage facilities, eight ABA franchised sites in Victoria, New South Wales and South Australia and 100 per cent ownership of its Terminal at the Port
of Melbourne.

Emerald says linking trains to the ABA network in Victoria and southern New South Wales with the Melbourne port is a key part of its expansion strategy.

"Emerald’s rail investment will not only increase our rail capacity and improve our timeliness, but it will also reduce our cost structure, thereby providing greater returns to growers," says Chairman Alan Winney.

"It will also add substantial value to our joint venture marketing companies in Victoria and New South Wales, and over time to our businesses and partnerships in South Australia.

Winney adds Sumitomo’s decision to partner with Emerald through ABA to integrate the grain marketing and logistics capabilities will create a truly world class soft commodity marketing and logistics company.

"This will enable Emerald to become an integrated supply chain business, with storage, transportation and importantly port access,’ he says.

ABA will operate as a wholly-owned subsidiary of Emerald and all ABA employees will have the opportunity to transfer across to Emerald after the current harvest is completed.

Emerald has funded this three-pronged investment strategy through a mixture of debt and equity.

The company will raise an additional $80 million in new equity from existing shareholders, with the current ownership structure remaining unchanged.

The transactions are expected to be completed by early 2012.

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