Plum deal for Plum Grove

A company founded by three mates from the Wheatbelt has snapped up one million tonnes a year in WA grain export capacity as part of its strengthening relationship with giant Japanese trading house Mitsui.

Plum Grove and Mitsui have taken their relationship to a new level under long-term port access agreements covering the CBH terminals at Kwinana, Geraldton, Albany and Bunbury.

Mitsui Australia chairman Yasushi Takahashi said Plum Grove had been entrusted with its grain operations in Australia in a huge vote of confidence in the Fremantle-based company founded by Andrew Young, Tony Smith and Ashley Bacon.

Mitsui (700,657 tonnes) and Plum Grove (469,438t) combined were already the third- biggest exporters of Australian wheat in the period from October, 2014, to the end of June, behind only CBH (3,256,902t) and Glencore (1,822,955t).

Plum Grove is one of 10 companies, including the world's biggest grain traders, to have signed long-term agreements covering more than 10 million tonnes a year of shipping capacity at the CBH ports.

CBH's marketing and trading arm has signed up for just under 5mt a year over the next five harvests, Glencore for about 1.5mt and Plum Grove for 1mt.

That leaves about 2.5mt divided between Sumitomo-owned Emerald, GrainCorp, Cargill, ADM, COFCO-controlled Noble, Mitsubishi-Olam joint venture Agrex and Louis Dreyfus.

Vitol, US co-operative CHS and Bunge, which has a port terminal at Bunbury, are three traders active in WA who did not take up LTAs.

CBH will offer another 6mt in shipping capacity for this harvest on a first-in, first-served basis at the end of this month. It believes one or two new players could emerge and compete with the existing band of traders.

The LTAs were signed after a bruising year for traders in WA where few avoided big losses under the unpopular and now defunct blind auction system for shipping slots.

Australian Crop Forecasters general manager Ron Storey said traders had wanted a shift away from "the lotto of the shipping auction system" previously sanctioned by the Australian Competition and Consumer Commission.

"There have been a lot of dollars burnt over the last few years on shipping slots," Mr Storey said. "Something in the order of $500 million of working capital has been tied up in the up-front slot fees last season.

"Having traders and exporters there every year as good solid parties to buy grain is far preferable to the volatility of seeing parties enter and exit the market because they lose money in Australia."

Mr Takahashi said Mitsui would use the relationship with Plum Grove to work towards its target of trebling grain exports from Australia to 3mt a year.

"Together with Plum Grove, we would like to establish our geographical reach in WA and the LTA with CBH is a good step toward that goal," he said.

"The reach will not only be into WA but into South Australia and NSW (through Plum Grove-controlled Agrigrain). We would like to diversify what we are doing in wheat and expand into barley, canola and sorghum."

Mitsui is Japan's biggest wheat importer and trades 16mt of grain a year around the globe.

Mr Takahashi, who has flagged infrastructure investment to grow market share, welcomed the LTAs as an alternative way to achieve that aim.

He described the five-year deal as a "mutually satisfactory agreement" with a trustworthy partner in CBH.

The relationship between Mitsui and Plum Grove began in 2011 when they set up a noodle wheat pool for the Japanese and Korean markets.

In 2012, Mitsui paid $10.5 million for a 25 per cent share in Plum Grove. The other shareholders, with 25 per cent each, are the founders, US-based Seaboard and Indonesia's Salim Group.

Mr Young, Plum Grove's executive chairman, said Mitsui had made a significant commitment to the WA company.

"It gives us responsibility for Mitsui's program in Australia and will increase our overall volume and turnover by as much as 40 per cent a year," he said.