At the beginning of the week, Illinois-based grain trader Archer Daniels Midland put in its second, higher bid for Australia's last independent grain trader, GrainCorp. The Eastern Australian handler is tipped to hold out for a slightly higher offer, according to Australian speculators, though ADM now owns almost 20 percent shares in GrainCorp.

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Following an initial bid in mid-October, ADM offered a renewed Aus $2.8 billion (£1.8bn) bid, at Aus$12.20 per share, on Monday (3rd December). However, analysts suggest GrainCorp will not be wooed by ADM's 4 percent price increase. Rejecting the agribusiness' first offer, GrainCorp said ADM had "materially undervalued" the company.

The proposed takeover, which would see grain major ADM gain a foothold in Asia, has sparked concerns over the future of the grain trade in the South Pacific. National governments, farming groups and anti-poverty organisations have warned oligopolistic control of the grain supply chain, which has witnessed a number of buyouts in recent months, may lead to artificial rises in the cost of food and suppressed farm-gate prices in the region.

The governments of Indonesia and South Korea, both significant net importers of grain, have warned that the situation in the region may threaten food security at a time when pressure is increasing to feed a growing population. Advocates of the Grain Majors argue that the amalgamations occurring in the South Pacific could bring an end to price volatility, through Lee Gaus, vice president of International Futures Group has refuted this claim. He said, "I don't know any time that you can concentrate so much leverage in so few hands that it doesn't eventually impact the consumer."

Farmers already beleaguered in grain major’s target region

Nick Rose, of the Australian Food Sovereignty Alliance, commented on the situation on the ground in Eastern Australia. He said, "GrainCorp has a near-monopoly on grain storage, handling and trading on the East Coast of Australia. This will be passed on to ADM, should it succeed in any takeover bid.

"As far as the East Coast grain farmers are concerned, they are already disadvantaged under existing arrangements. The farmers may have built and financed many of the original grain storage facilities and related infrastructure, but they don't own them now. They are price-takers, and have been for some time. This compares to the situation in Western Australia, where the farmer co-operative CBH is in a strong position and offers very favourable terms to its members on transport, storage and handling, compared to GrainCorp."

Farmers in the East find themselves in an invidious and powerless position. After ten years of drought, Eastern Australia was afforded a brief respite earlier this year, before dry conditions returned. Rose said that the prolonged drought has left many farmers, the majority of whom are now over 60, ready to sell up and has discouraged their children from taking over. He continued, "Selling up often appears as an attractive proposition, and selling up is a growing trend. Unlike their counterparts in WA, East Coast grain farmers are not organised and in a position to join together to advocate for, and protect, their own interests."

Other majors move in

ADM is not alone in seeking to consolidate its interests in Australia and the surrounding continent. Other international grain majors including Glencore and Marubeni have also been at work, hoping to benefit from increased trade with China and other 'emerging economies'. Growing demand for meat and grains in Asia makes Australia a lucrative option, as the country is already the world's number two wheat exporter and, according to industry insiders, grain and other agricultural acreage in Australia could potentially be doubled with the opening up of the Ord irrigation scheme, and similar landholdings in north Queensland (although this project will be unsuitable for wheat production).

Food Sovereignty Alliance spokesperson Nick Rose commented, "Currently, only about a third of East Coast grain is exported, compared to nearly 100 percent of WA grain, but that could change with an ADM takeover and the rising significance of food security as a geo-political issue." He concluded, "The long-term outlook for east coast farmers is not a particularly happy one. The ADM takeover of GrainCorp may make matters worse, even if only by hastening trends and patterns that are already well-established."

In August, as grain rallies led food prices to rocket to record highs, a number of respected political economists compiling a report for Oxfam's Grow campaign on food security suggested the grain majors' influence on food policy is understated and poorly understood. They said, "[ABCD traders are] too often invisible in policy debates about farmers and consumers, these companies are careful about where and when they get involved in such debates... They do not have brand names to protect in the way that a food processor such as Nestlé does."

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