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Boost from strong Aussie harvest helps GrainCorp shares to two-year top

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Shares in GrainCorp hit a two-year high after the Australian grains handler-to-processing group reported a leap in half year profitability on the back of the large domestic harvest.

The Sydney-based grain trader, processor and food manufacturing group said investment in its storage and export infrastructure helped it manage this years volumes, and for future expansion.

GrainCorp earnings from the first six months were 176% higher at Aus$236m from the Aus$134m a year earlier.

Record east Australia crop

The record eastern Australia crop production estimate of 28.2m tonnes for 2017 (18.6m tonnes in 2016) has favoured GrainCorp's farm procurement, storage and export activities, despite some disruption from rain transport strikes in Victoria.

"Strong Australian production has improved opportunities and increased competitiveness with a higher exportable surplus from Australia," said managing director and chief executive Mark Palmquist.

However, the 2017 sorghum crop is down by some 700,000 tonnes to 1.2m tonnes as a result of poor seasonal conditions.

Craft beer demand slows

Mr Palmquist noted the small drop in global barley production to 147.0m tonnes predicted from 2016's 148.7m tonnes.

He forecast softening beer and malt demand in mature markets and slower growth in developing markets.

Even the North American craft beer boom, up 6% in 2016, is slowing, but it is leading a global shift away from large to smaller brewery businesses, and continued strong demand for specialty malt products.

With Australia's canola production estimated to rise 30% to 4.2m tonnes, GrainCorp said it woujld benefit from a more competitive crushing and refining market and steady demand for bulk liquid storage.

"GrainCorp's strong first half performance benefited from the large Australian grain harvest and higher export volumes, combined with our intense focus on improving network efficiency and managing costs," Mr Palmquist concluded.

The company's share price ended on Thursday up 8.3% at Aus$9.88, a two-year closing high.

By Jamie Day

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