GrainCorp boss backs Australian canola quality as shares plunge
Investors ditch GrainCorp shares as the global grain oversupply weighs on markets, despite China's move to lift its five-year ban on Australian canola.
GrainCorp boss Robert Spurway has backed Australia’s ability to compete in key markets and the quality and screening processes for agricultural exports as China moves to lift a five-year lockout on canola.
Its shares crashed on Thursday, with the east coast harvest in full swing and with the world awash with supply of major export commodities wheat and barley.
The company’s share price fell nearly 12 per cent to $7.85 during the trading session on Thursday after the release of full-year results that missed market expectations.
The move to re-open the canola trade comes with China, the world’s biggest importer of the oilseed, locked in a row with major supplier Canada.
Farmers are hoping demand from China boosts canola prices, with GrainCorp admitting “abundant global supply and increased competition” in most commodities had affected its results for the 12 month to September 30.
China banned Australian canola imports in 2020, claiming it had detected the fungal disease blackleg in a shipment.
The ban has remained in place until now, with a trial shipment of 65,000 tonnes of canola leaving the WA port of Esperance in recent days bound for Qingdao, in north-east China.
Mr Spurway said on Thursday that it was too soon to speculate on what China re-entering the Australian market might mean for canola prices or his company’s plans to expand its oilseeds crushing footprint in either WA or on the east coast.
Mr Spurway vouched for the high quality of canola grown by Australian farmers and said it was in high demand around the world. A big chunk of the canola export by GrainCorp goes to Europe to make biofuel.
“There has and continues to be strong demand for canola globally, across all markets,” Mr Spurway said.
“We work closely with the Australian government, including DFAT (the Department of Foreign Affairs and Trade) and DAFF (the Department of Agriculture, Fisheries and Forestry) on market access issues, and we have seen significant interest from all markets for Australian canola given the high quality reputation that it has.”
China blocked canola imports in 2020 around the same time it effectively banned barley imports by imposing an 80.5 per cent tariff.
The bans on canola and barley came amid tension between Canberra and Beijing over issues such as access to the South China Sea, communications technology provider Huawei, human rights and national security.
The ban on barley and other Australian agricultural products, including lobster on contamination grounds, have been lifted since 2023.
China imposed hefty tariffs on Canadian canola imports earlier this year amid a row over Canadian tariffs on electric vehicles made in China.
GrainCorp has been working with IFM Investors and Ampol on an integrated renewable fuels supply chain in Australia. It is considering building a large-scale oilseeds crushing plant in WA, the state which produces most of Australia’s canola, or on the east coast where it has a dominant position in grains storage and handling.
GrainCorp’s share price plunged after it reported full-year profit of $40m, down from $62m last year and below market estimates for a similar performance. Underlying profit improved to $87m, from $77m in 2023-24.
RBC Capital Markets analyst Owen Birrell said it was a mixed result on ongoing margin pressures, with some other misses on market expectations.
The group’s adjusted earnings before interest, taxes, depreciation and amortisation, which rose 15 per cent to $308m, came in blow consensus forecasts of $314m. Underlying profit was also 1 per cent below consensus but 2 per cent higher than RBC’s estimates.
Mr Birrell also noted cautious outlook commentary from GrainCorp.
Mr Spurway said it was too strong to say the world was awash with grain, with Australia also on track to produce another well above average harvest.
“We’re seeing a strong production performance out of all the major supply areas. That’s meant that prevailing absolute grain prices for farmers are lower than they’ve been in recent years,” he said.
“So growers are not particularly excited about selling, and buyers are not rushing to market, given they’re not concerned about any shortages.
“We’re confident we’ll be able to find opportunities and leverage the reputation that Australian grain has and the long-term relationships we have with customers around the globe, but across Asia in particular.”
Its shares closed 11 per cent lower at $7.97 in a lower market.
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