Thursday, 14 November 2013

Graincorp and ADM takeover

Graincorp is an Australian grain receival and storage company owned by grain growers. See wikipedia article. Grain, being an annual crop, can be controlled via the transport and storage lever. With the expansion of Graincorp in the past years, it has essentially established a monopoly position and obtains the control of grain production. If the major shares remain in the hands of the growers, the interest of the growers will be looked after. Archer Daniels Midland is an American global food-processing and commodities-trading corporation. See another wikipedia article. In 2012 Graincorp received acquisition bids from Archer Daniels Midland. Australian parliament is considering the bid and Treasurer will be determining if he would approve or veto the bid. Australia produces more food than we can consume. About 1/3 to 3/4 of grains are exported. At the moment, the main export which drives our economy is from mining resources - which are of finite supply. On the other hand, food - which depends on sunshine and water - is renewable. In the long term, food will become a critical factor when Earth continues to warm up and current farmland's climate make the land unsuitable. International companies do not have royalty towards another country. If the controlling of Graincorp is transferred to a foreign country, I'm afraid Australian growers will be the losers in the long run. Is a short fall in profit of Graincorp a reason to sell it?

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