The year 2007 saw some significant and exciting changes in the Australian grains industry and for ABB Grain in particular.
For ABB, a most significant event in 2007 was the vote by the company’s A-Class shareholders on July 31 to redeem their non-tradeable shares, resulting in ABB adopting a single class of ‘ordinary’ shareholdings and new constitution. The current five A-Class directors were then elected to the board as ordinary shareholder directors.
In the newly deregulated barley market, this new structure is essential for ABB to compete on equal footing with other traders who operate under fully commercial ownership structures.
A single class share structure enables ABB to more readily access capital, offer more competitive cash prices within a deregulated market and deliver more innovative services to growers, who remain an important stakeholder of ABB’s business.
Nationally, the Federal Coalition government’s decision to give the grains industry until March 1, 2008 to establish a grower owned entity to run wheat exports, or face deregulation, came in the wake of the Cole Commission into the Iraqi wheat exports scandal, and after the Ralph committee’s nationwide survey of public opinion.
Since late 2006 the Coalition government has granted special bulk wheat export licences when considered to be “in the public interest”. The deregulation of export wheat in containers and bags from August 2007 enabled new entrants into the wheat export market – previously controlled by the wheat single desk. ABB has already received considerable interest for wheat in containers from many customers.
Following the election of a Federal Labor government, it now appears certain the wheat single desk will be deregulated in time for the 2008 harvest, albeit with some licensing controls.
The year 2007 was also notable for ABB’s signing of a major long-term agreement with Saudi Arabia’s United Feed Company to supply feed barley. This five-year, $1 billion deal, builds on ABB’s long standing relationship with United Feed.
The agreement provides a solid, long term support base for Australian barley growers and their grain which is very highly regarded by Middle East customers. ABB and United Feed will also explore other business ventures over the next five years, including other cereal opportunities.
ABB continues to expand and diversify. In the past 12 months we have established a pastoral and rural services division and made strategic acquisitions in purchasing the Adelaide Wool Company, Wardle Co and Stawool.
Internationally, we have also begun an exciting joint venture with Soufflet Negoce in Ukraine to accumulate and trade feed barley and other grains. In the Managing Director's Report, ABB’s managing director, Michael Iwaniw, has more to say about this partnership and other acquisitions.
Looking ahead, the decision by the New South Wales and Victorian governments to lift the moratorium on genetically modified canola will enable Australian farmers to compete on a level playing field with their contemporaries overseas. The lifting of the moratoria on growing GM canola has presented a challenge for the South Australian government as it considers its review of its moratorium due to expire in 2008.
ABB believes that if Australian growers are to increase their productivity and efficiency, and compete with other producers elsewhere in the world, then a move to GM crops is unavoidable. But we also believe that
ABB is well placed to accommodate such changes in policy within our storage and handling system.
ABB remains committed to industry development and in July 2007 ABB signed a five-year barley breeding agreement with the University of Adelaide. Under the agreement, ABB will provide nearly $6 million in cash and in-kind support to the university’s research activities at the Waite campus, which is regarded as one of the world’s foremost plant breeding facilities. The plant breeding agreement follows ABB being chosen in 2006 as the commercialisation partner for Flagship and Fleet barley varieties developed by the university.
In 2008 we will see the completion of ABB’s major infrastructure investment in South Australia – the deep sea grain terminal at Outer Harbor. This is a pivotal commitment by ABB in the future of grain exports from SA aimed at ensuring our company and SA growers remain internationally competitive.
ABB Grain continues to strengthen its ties with rural communities, the backbone of the Australian grains industry. In the past year we have provided more than $350,000 to help rural communities across Australia through the ABB Grain Community Fund. Established in 2006, it provides rural communities with the chance to secure funds for community minded projects in areas of education and training, health, youth development and community amenity.
Finally, I want to thank my fellow board members, our managing director and all of the company’s staff for their continued support and tremendous efforts in the past year. Faced with what became the worst growing season in more than 25 years, staff lifted their efforts in the face of adversity, got behind our drought strategy, and helped the company still deliver shareholders a profit despite quite exceptional circumstances.
PERRY GUNNER
Chairman
December 2007
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