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Feature: grain revolution knocks at CBH's door

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GrainCorp is going into the malt business. ABB Grain has sold itself to Canada's Viterra. AWB wants to bring a foreign group into its midst too.

The first full year of Australia's wheat export liberalisation has transformed the shape of the country's grain handling sector.

But what about the handler which looked like gaining the most from the deregulation – CBH Group?

Its fiefdom, after all, is Australia's biggest wheat-growing state, Western Australia, which has rubbed home its advantage over drought-dogged runner-up, New South Wales.

Rival's praise

Next year will place CBH's shape squarely on the agenda too, with the group in January due to start a consultation with its 4,500 members on its structure.

For the last 75 years, that has been in the form of co-operative, a status many observers think the group should keep.

These include Michael Iwaniw, who judged his failure to pull CBH into the consolidation wave as one of his biggest regrets of his career as boss of rival ABB.

CBH has no "glaring need" to change its structure, Mr Iwaniw said, urging the group to stay a co-operative "until its nose bleeds".

Ship shape changes

But in fact, it looks like CBH's consultation may be aimed at reducing bloodshed, rather than causing it.

Andrew Crane, the group's boss, on being asked why the group is making the move, highlights the "tremendous change" in the grain handling industry.

The number of shippers CBH has to deal with has gone from two to 30, thanks largely to rules opening up port access.

The tally of its competitors has hit 28, as groups down to large farm operations have taken a slice of AWB's former monopoly.

Growers grumble

But Mr Crane acknowledges that pressure for change isn't just coming from outside.

"There are groups of [CBH] growers suggesting different models," he tells Agrimoney.com.

To say the least. A vote in 2000, which rejected a stockmarket flotation, hasn't proved the final word.

The narrow majority which voted in favour of a listing, but was thwarted by a constitutional requirement for 75% of the vote, has rediscovered its voice at a series of grassroots meetings.

Giving back money

Will a listing be on the cards this time? Mr Crane says it is too early to know.

"We are in a listening phase. We have months of consultation ahead. I am not going to prejudge the outcome of that."

What is being discussed is how best CBH can share the fruits of its operations with its 4,500 members.

"We want to discover the best way to get value back to our growers."

This could be through handling charges, rebates, or means associated with equity ownership, for which read dividends.

Raising funds

CBH is fortunate in being in a position where the other side of the coin – getting hold of money – has not been an issue.

The group in October raised Aus$1.5bn (US$1.35bn) to finance grain purchases from farmers.

"We had the fourth or fifth biggest capital raising in Australia the year before last," Mr Crane says.

"Our record has been strong to date."

Can this continue? "What happens in 10 years, 20 years is part of our own debate."

And given the rights issues at AWB and GrainCorp this year, and the growing internationalisation of rival handlers, it may be one which gets airplay, even if CBH is not putting it at the top of its consultation agenda.

By Mike Verdin

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