GrainCorp forecast another “large” year for its Australian grain exports, despite the “devastating flooding” hitting the current harvest, which it acknowledged would undermine both crop quality and quantity.
The grain trader-to-oilseeds crushing group said that the impact flooding which has inundated in particular parts of its core eastern Australian operating region had, besides delaying harvest, already been evident in a reduced quality profile of the crop being delivered to its elevators.
“We’re certainly seeing a higher level of feed-grade receivables,” said Robert Spurway, the GrainCorp chief executive.
The rains have “impacted and reduced quality, and we’ve seen that coming through”, he said, adding that “feed grades that are going to be a feature of this current harvest”.
‘Downside production risk’
Indeed, GrainCorp forecast the “devastating flooding… to impact on both yield and quality in parts of east coast Australia”, he said, speaking even as fresh reports of inundations came in from New South Wales.
The town of Forbes, for instance, received 118mm (4.6 inches) of rain in the 24 hours to 9am Monday.
The comments follow cautions from other commentators over the impact of extreme rains on agriculture, with National Australia Bank warning that “flooding has established a downside production risk in Victoria and New South Wales”.
The bank added that “the biggest challenge is likely to be harvest rain”, which “will make the crop hard to get off paddocks and could see quality downgrades”.
Farm retail group Elders reported setbacks to summer crops, which are being planted, saying that “we’ve had washout” of some cotton, although adding that there was still time for reseeding.
Still time
However, commentators have shied away from estimating the extent of the crop damage, in quality or volume terms, with Mr Spurway saying that the results may yet depend on the whether the rains continue.
“A number of weeks of dry weather will certainly improve the situation for many and indeed all growers,” he said, although adding that “ongoing wet weather will only make it harder for some of those that have already suffered flooding”.
He also noted that not all farms were affected, saying that “if we look across the more than 6m hectares planted, on the east coast of Australia, as devastating as the floods are for those that have low-lying areas, there are plenty of traditionally drier areas or undulating country where the crops are looking pretty strong.
“That’s one of the reasons that we’re keen to get through the next number of weeks working with growers to see where the volume ends up.”
‘Very strong demand’
Mr Spurway was upbeat on GrainCorp’s export prospects even if a substantial portion of the east coast crop was downgraded, saying that “there’s very strong demand globally for feed grades and indeed, very good pricing for that.
“That’s one of the mitigating factors for growers. They’re seeing very high decile pricing for feed grain.”
He also noted that GrainCorp itself, which raised its storage capacity by 1.5m tonnes last year, had “a high level of grain inventory in our network” left over from the last harvest, “and we expect a large export programme to continue throughout” the financial year to September 2023.
‘Record results’
The comments came as the group unveiled “record results”, including a 170% jump to Aus$380m in earnings for the year to the end of September 2022, on revenues up 43% at Aus$7.87bn.
The group’s agribusiness division raised ebitda by 127% to Aus$624bn, backed by exports of 9.2m tonnes of grains and oilseeds, up by 1.3m tonnes year on year.
The total volume of crop handled grew by 6.7m tonnes to 41.1m tonnes.
Ebitda in the processing division rose by 63% to Aus$127m, helped by oilseeds crush margins swollen by the hit from the Ukraine war to global sunflower oil supplies.
The group also noted that it would pay shareholders a special fully franked dividend of Aus$0.16 per share, on top of a final dividend for 2021-22 of Aus$0.14 per share.
GrainCorp shares closed down 2.0% at Aus$7.83 in Sydney on Wednesday.
