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Australia's Emerald Grain aims to double storage capacity
March 18, 2013 / 6:26 AM / 5 years ago

Australia's Emerald Grain aims to double storage capacity

* Move may heighten competition with GrainCorp, Glencore

* Storage site locations to be revealed in months ahead

* No details given on funding

By Colin Packham

SYDNEY, March 18 (Reuters) - Australian grain handler Emerald Grain said it plans to double storage capacity to 3 million tonnes over the next three years 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.1 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 $2.9 billion takeover approach from U.S. 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. Calls to company executives were not returned immediately.

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.

HIGHER GRAIN OUTPUT FORECAST

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.

“If Emerald is going to expand its presence up-country, where it is more competitive, it is going to marginally negative for GrainCorp,” said James Ferrier, senior analyst at Wilson HTM.

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 percent 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. (Editing by Muralikumar Anantharaman)

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