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Slow Australian harvest dents boost from bumper crop - GrainCorp

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The slow pace of the Australian grains harvest is undermining the benefit to crop handlers of its large expected size, GrainCorp said, underlining the doubts over quality too.

The Sydney-based group, the top grain handler for eastern Australia, underlined the bright prospects for the country's harvest this year, saying that combined output of barley, canola chickpeas and wheat in its region was pegged at 20.6m tonnes, up 3.3m tonnes year on year.

"This year's larger harvest is welcome," said Mark Palmquist, the GrainCorp chief executive, adding that the group was "expecting a return to a stronger year [in the12 months to September 2017] driven by larger volumes", besides operational efficiencies.

However, the group also flagged that prospects might have been even better were it not for the slow pace of the harvest, which was "impacting costs and storage revenue".

GrainCorp has received only 1.5m tonnes of grains so far, compared with volumes of 2.85m tonnes as of a year ago.

"Harvest is at least three weeks late this year, and there is a long way to go before it is all stripped and in the bin," Mr Palmquist said.

'Global oversupply'

The group underlined too "uncertainty" over crop quality, after persistent rains which, while helping yields, have raised the spectre of pressures from disease and of seeds sprouting in the field.

This against a backdrop of a global harvest marked by high yields, but relatively weak specifications.

Mr Palmquist said that the "global oversupply" of grains, and strong competition with supplies from origins – including Western and South Australia - was likely to mean that trading conditions remain "challenging" for the GrainCorp marketing division.

Grains sourced from Australia's east coast ports remain "relatively expensive in global markets".

Craft beer boom

The comments came as the group unveiled a 4% drop to Aus$30.9m in earnings for the year to the end of September, despite a rise of 1.8% to Aus$4.16bn in revenues.

The malt division saw its operating profits rise by 29% to Aus$108m, helped by orders from smaller brewers.

GrainCorp flagged "ongoing strong demand for specialty products in North American craft and global distilling markets", although added that the rate of expansion "is slowing".

However, in oilseeds processing, a dent to crush margins from firm canola prices, at a time when demand for feed in the Oceania was depressed by weakness in dairy markets, sent divisional operating profit down 34% to Aus$29m.

The operating loss in storage and logistics more than doubled to Aus$10m, reflecting Australia's relatively-low 2015 harvest, while the marketing business also slipped further into the red.

GrainCorp shares closed 0.2% lower at Aus$8.58 in Sydney.

By Mike Verdin

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