ACCC won’t oppose Cargill grain takeover

Posted by Nicole Eckersley on 18th March 2011

The Australian Competition and Consumer Commission announced today that it does not intend to oppose Cargill Incorporated’s proposed acquisition from Agrium of the commodity management businesses of AWB Limited.

“The ACCC concluded that the proposed acquisition would be unlikely to substantially lessen competition as post-merger Cargill would continue to face competition from a number of significant sources,” ACCC chairman Graeme Samuel said.

The ACCC conducted a full review of the grain industry, and concluded that Cargill’s purchase would not reduce competition in the marketplace, with the company’s main rival, GrainCorp, providing a check on prices.

The two giants are joint venture partners and owners of major flour producer Allied Mills, but the ACCC said that any attempt by Cargill and/or GrainCorp to deny supply or raise prices would probably not succeed, given the number of smaller competitors (including CBH, Elders, Glencore and Viterra) and the possibility of obtaining grain direct from growers.

The ACCC said that the existing competition between Cargill and AWB is focused mainly in NSW in grain trading and, to a lesser extent, grain storage and handling.

“The ACCC concluded that the proposed acquisition would be unlikely to enable Cargill, post-merger, to depress prices paid to growers for grain or raise prices of grain to domestic customers due to the presence of the remaining grain traders,” Samuel said.

In relation to storage and handling, the ACCC considered it unlikely to be practical or profitable for Cargill and/or GrainCorp to foreclose access to storage by rival flour millers.

To reach its decision, the ACCC conducted an extensive public review process which involved consultation with grain growers, competitors, customers and industry groups such as the various farmers’ federations and associations.