US giant Gavilon exits WA
US grain giant Gavilon is flying the white flag in WA after losing an estimated $50 million over the past two years in a disastrous attempt to crack the local market.
Gavilon is closing its Perth office after big staff cuts earlier this year signalled the beginning of the end.
It entered the WA market with all guns blazing three years ago, employing up to 24 people and poaching a host of senior trading staff from CBH.
Gavilon's failure in WA reflects the aggressive nature of the local market dominated by CBH, but is not expected to deter other multinationals wading in to meet growing world demand for grain.
Swiss-based and Dutch-owned energy and commodity trader Vitol has emerged as a big new player after buying about 400,000 tonnes of WA port capacity for this harvest and establishing a footprint in South Australia.
There is also speculation Gavilon, gobbled up by Marubeni in a $3.7 billion deal last year, will soon be replaced by another US giant in WA.
US co-operative CHS took a 50 per cent stake in Australian grain marketer Agfarm earlier this year, with Ruralco retaining the remaining share.
Agfarm is a small player in WA and the deal went virtually unnoticed but industry sources now expect CHS to become a significant force in WA over the next few years.
CHS is a diversified energy, grain and food company which sells about 50 million tonnes of grain and oilseed a year.
The Fortune 100 company also supplies crop nutrients, animal feed, insurance and risk management services.
Gavilon said that after studying the Australian operations it had decided to focus on the Wilmar Gavilon joint venture in Brisbane, which has a 50 per cent share in an export terminal.
"We will work diligently with our customers while we execute our remaining book of business," the company said in a statement from its Omaha base.
Gavilon suffered heavy losses after overestimating its ability to fill expensive shipping slots and incurring heavy penalties, while concentrating operations in WA reduced its ability to spread risk.
A leading analyst said a lot of players in the WA market had lost money in the past few years but most spread the risk by operating in other parts of Australia.
"One of the issues in WA has been a tendency to focus on market share rather than profit and loss," he said.
Gavilon lured head of global trading Matt Rutter, head of marketing Justin Swan, wheat trader Chris Brown and canola trader Bryan Keay away from CBH in 2010.
A Chinese conglomerate and multinationals Cargill, Bunge and Louis Dreyfus have invested in WA grain infrastructure in the past 12 months.
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