GrainCorp to receive $58 million in insurance as crop production drops

With east coast production expected to total just 11.4 million tonnes, GrainCorp will receive a payment of about $57.9 million from its crop production contract.

Risk eased: GrainCorp is set to receive about $57.9 million from a crop production contract after ABARES forecasts low winter crop production.

GRAINCORP will receive about $57.9 million from its insurance contract after eastern Australia’s grain volumes plummet.

Announced at the company’s annual general meeting today, GrainCorp will receive the payment subject to the completion of its submission to crop production contract insurer White Rock — which it has a 10-year deal with.

It comes as the Australian Bureau of Agricultural and Resource Economics crop report released yesterday forecast total winter production for the east coast of Australia to total just 11.4 million tonnes.

During a low production year of 15.3 million tonnes and below, the crop production contract means GrainCorp will receive a production payment of up to a maximum of $80 million.

If east coast production is above 19.3 million tonnes, GrainCorp pays a production payment of up to a maximum of $70 million.

MORE: GRAINCORP CONFIDENT ON DEMERGER

SLUMP HITS WINTER CROP

For the 2019 financial year ending September 30, it was found GrainCorp recorded an underlying net loss of $82 million.

The company’s underlying earnings before interest, taxes, depreciation and amortisation was $69 million.

The “disappointing” financial result was attributed to the severe drought in eastern Australia.

“The value of the crop production contract is evident in a year like this, and it will be important over the longer term in helping to smooth GrainCorp’s cash flows through the cycle,” GrainCorp chief executive Mark Palmquist said.

According to Mr Palmquist, it was the second year in a row the company would produce low export volumes.

“For the year to date, GrainCorp received about 3.7 million tonnes into their network — primarily from Victoria and southern NSW,” Mr Palmquist said.

“We expect minimal exports of grain again this year.

“However we will see further importation of grains coming from Western Australia and Victoria, as well as a flow of grain south to north on the eastern seaboard.”

Mr Palmquist said new rail connections had also begun, which were expected to offer “greater flexibility”.

“This will provide GrainCorp with much greater flexibility to align volumes to rail usage,” he said.

Meanwhile the scheme meeting of the proposed demerger of the company’s international malting business, United Malt, announced last year, will take place on March 16.