Grain marketer spreads wings

The Emerald Group has made a play for dominance in the eastern states grain logistics industry, announcing a $120 million supply chain expansion last week.

Under the deal the grain marketer acquires the Australian Bulk Alliance network (ABA), which includes the Melbourne Port Terminal, from Sumitomo, which also has a half share in Emerald.

The deal saw Sumitomo and Emerald each raise $40 million, with another $40 million of bank debt taken on to secure the purchase from a separate division of Sumitomo.

The company can now claim 1.5 million tonnes of up-country storage in the eastern states. But as just the first stage in a three-year expansion plan it means Emerald is bracing to become one of the major players in the grain logistics industry.

Emerald chairman Alan Winney said while GrainCorp and Viterra had more grain delivery sites, Emerald's sites generally had greater capacity and were newer.

"We will have about 15 sites (with the deal)," Mr Winney said.

"They tend to be on average about 100,000-tonne sites, quite a bit bigger than the average size of the GrainCorp or Viterra sites.

"The ABA network is one that's only been built in the last 15 years, so it's much more modern than either of those networks and the port of Melbourne is the newest port that's been built in Australia."

Set to increase their storage to three million tonnes within three years, as well as set up further sites in South Australia, northern New South Wales and Queensland, storage capacity will be doubled through joint ventures with grain growers.

The expansion has already seen Emerald raid the employee list of other grain companies.

Both the former head of Viterra's storage and handling business and the AWB national logistics manager have been poached by Emerald.

According to Mr Winney, the benefits of securing the east coast supply chain will flow through to WA growers in the form of improved prices.

"It makes Emerald more competitive on the logistics base on the east coast, which makes us stronger out in the world market," he said.

"Buyers will be more comfortable dealing with Emerald because the integrated supply chain gives us greater access to those markets, more sales, high prices, and that flows back to all the growers who are in our pools.

"It gives us higher prices that we can bid in the cash market as well."

But despite the bid to snatch grain from paddock to port in the eastern states, Mr Winney said the grain marketer has no such plans in WA.

"Our preference is not to go into competition with CBH," he said.

"We've felt that CBH operations always provided a pretty good service, so if we can find a way of working with CBH operations and utilising the infrastructure that is there, which is generally more modern than what is existing on the east coast, then that's what we prefer to do."

However, that could change in the future if CBH were to favour its own marketing arm in storage and transportation.

"It will depend on CBH and how they respond to increased competition in the market in WA," Mr Winney said. "If they try to block people out of their system then we probably wouldn't have too many choices."