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Horror cropping season triggers multimillion insurance payout for GrainCorp

By Clint Jasper, Wednesday February 19, 2020 - 12:40 EDT
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GrainCorp said it had to reverse its supply chain this year to send grain interstate instead of overseas. - ABC

A light harvest has weighed heavily on GrainCorp's financial position this season, but it has also triggered a $57.9 million insurance payout.



Yesterday, the national commodity forecaster ABARES pegged Australia's 2019/20 winter crop production for New South Wales, Victoria and Queensland at .

In June last year, GrainCorp signed a 10-year contract with White Rock Insurance, to help manage the ups and downs of Australia's cropping seasons.

Under the agreement, if east coast grain production dips below 15.3m tonnes, GrainCorp gets a payout.

If the harvest is above 19.3m tonnes, GrainCorp makes a payment to White Rock Insurance.

The agreement "is designed to mange the risk associated with the volatility of eastern Australian winter grain production, and to help smooth GrainCorp's cash flows across harvests", according to information released to the ASX last night.

The company expects to receive 90 per cent of the payment by March this year.



Harvest blues

Addressing shareholders at today's AGM in Sydney, CEO Mark Palmquist said drought had led to a "substantial decline" in GrainCorp's business.

Overall, the company posted a $113m loss, with its grains and oill businesses weighing on the balance sheet.

GrainCorp sold Australian Bulk Terminals for $333m in December last year, and combined the grains and oils businesses.

Once again, its malt business was the most profitable, buoyed by strong demand for craft beer in the US.

That is the part of the business the company's directors are recommending shareholders vote to carve off.

The vote will take place at a meeting in March, with hopes to have it wrapped up by April.

Mr Palmquist and current chairman Graham Bradley will take up roles at the demerged malt business, United Malt.

Robert Spurway, Fonterra's chief operating officer for the last five-and-a-half years, has been picked as the next managing director and CEO for GrainCorp.


- ABC

© ABC 2020

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