GrainCorp expands grain origination with joint venture

by World Grain Staff
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SYDNEY, AUSTRALIA — GrainCorp announced on Dec. 14 the expansion of its grain origination footprint in Canada, through the establishment of a joint venture with Zen-Noh Grain Corp., a subsidiary of major Japanese agricultural cooperative Zen-Noh (National Federation of Agricultural Cooperative Associations). The joint venture is incorporated in Canada.

GrainCorp will hold a 50% share in the joint venture, which will be based in Calgary, Canada and plans to operate grain receival sites across Alberta and Saskatchewan. These sites will be part of a fully integrated supply chain for the origination, marketing, storage, handling, distribution and exporting of Canadian grain and oilseed.

To support the start-up phase, including construction and commissioning of the sites, GrainCorp will contribute C$30 million (A$30 million) over the next two years, while the joint venture will source additional funding from financial institutions of C$60 million. GrainCorp’s contribution will be made from existing cash and debt facilities.

Construction is expected to be staged progressively from the second half of fiscal year 2016 through to the end of fiscal year 2018. The construction and other activities of the joint venture are subject to the satisfactory completion of due diligence of the potential sites, as well as obtaining other customary regulatory and planning approvals.

GrainCorp Marketing’s existing office will support the joint venture to manage the origination process with Canadian grain growers.

Managing Director and Chief Executive Officer Mark Palmquist said the expansion was in line with the growth strategy outlined at GrainCorp’s Investor Day in May.

“This is an exciting opportunity to partner with one of the world’s most respected agricultural organizations and deepen our relationships with our international customers by growing our grain origination capability,” said Mark Palmquist managing director and chief executive officer (CEO) of GrainCorp. “The joint venture will leverage GrainCorp’s existing Canadian footprint, including our Calgary Marketing office and Canadian Malting Company operations; plus Zen-Noh Group’s significant experience and customer relationships in exporting agricultural commodities from North America to Japan and other Asian destinations.

“A key part of GrainCorp’s value proposition for international customers is to have a multi-origin offering, so that we are in a position to offer a solution for a broader range of requirements,” Palmquist said. “This gives us greater relevance and a broader platform to engage with the customer, creating more opportunities to offer our services. Of course, the new business also benefits grain and oilseed growers in the Canadian Prairies, by providing an independent and alternative pathway to market.”

“We are pleased to be involved in this project with GrainCorp. This is a good opportunity to grow our business in Canada with a trusted partner,” said John Williams, president and CEO of Zen-Noh Grain Corp. said. “It allows us to strengthen further our ability to supply our customers in Japan and Asia and we look forward to a bright future for the joint venture.”

Discussions have commenced in relation to rail and port access for the joint venture.

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