Global grain glut pushes growers toward self-storage
Australian grain growers are storing their produce on farms rather than shipping it through overseas carriers as falling commodity prices squeeze already thin margins.
Shares in GrainCorp, one of Australia’s largest agricultural companies, fell to multi-year lows on Monday after it cut its earnings outlook due to a global oversupply and weak grain yields.
Quantities received and subsequent exports are also expected to decline as growers choose to store their own grain rather than paying a monthly fee to someone else to process and sell the product.
“Most growers have realized that the only way to make money is to store it on their own farms because the margins are so tight,” Grain Producers Australia’s southern manager Andrew Weidemann told AAP.
There are also more agencies competing and putting pressure on GrainCorp’s structure.
“In grain production, there is more than a third of the price required to reach the end user once it reaches the farm door, and so farmers are looking at how they can participate in this part of the process in the supply chain,” Mr Weidemann said.
Strong domestic demand also means growers are choosing to sell locally rather than worry about shipping overseas, shifting warehousing needs away from giants such as GrainCorp.
The group’s estimated underlying earnings for the current financial year are expected to fall to between $200 million and $240 million before interest, tax, depreciation and amortization, down from $308 million in the previous year.
Additionally, net profit after tax for the year ending September 2026 is projected to be between $20 million and $50 million, according to RBC Capital Markets. That figure was down from $87 million previously, missing consensus estimates by more than 60 percent.
“GNC (GrainCorp) issued a profit warning in December, citing weakness in global trade margins and a tendency for farmers to hold back strong on-farm production volumes,” said RBC analyst Owen Birrell.
“Today’s trading update and profit guidance highlighted the financial impact of these actions and GNC’s exposure and operating leverage to these actions.”
GrainCorp shares fell 15 percent to $6.12 on Monday, a four-year low.
Its stock price has fallen more than 30 percent since it announced its fiscal 2025 results in December.
“Record global production has created a grain oversupply, outpacing demand growth and putting downward pressure on commodity prices across the entire market,” said Robert Spurway, chief executive and chief executive.
With the east coast winter harvest largely complete, the Australian Bureau of Agricultural and Resource Economics and Sciences is forecasting a winter crop of 31.2 million tonnes.
However, while GrainCorp’s boss acknowledged that market conditions had reduced the incentives for growers to deliver grain to market, its strong balance sheet meant it was still well positioned in the market.
“GrainCorp is implementing strong operating discipline in response to the current environment,” Mr Spurway said.
“At this point in the cycle, we are accelerating cost management initiatives while continuing to provide growers with high-quality and reliable services.”
GrainCorp will hold its annual shareholders’ general meeting in Sydney on 18 February.
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