The ACCC Consults With Grain Growers, Competitors, Customers & Industry Groups Over Cargill’s Proposed Acquisition of AWB
NSW, Australia (News4us.com) March 17, 2011
The Australian Competition and Consumer Commission announced today 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.
In forming its view 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.
The existing competition between Cargill and AWB is focused mainly in NSW in grain trading and, to a lesser extent, grain storage and handling. GrainCorp, the largest grain trader and grain storage provider in NSW, and a number of competitors with a smaller presence in NSW (including CBH, Elders, Glencore and Viterra) currently compete with Cargill and AWB.
“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,” Mr Samuel said.
In relation to grain storage and handling, Cargill has a very small existing presence in the market with an interest in three storage and handling sites in NSW. AWB has a more significant presence in the market with an interest in ten storage and handling sites in NSW. Post merger, Cargill would continue to face competition from GrainCorp which has over 150 storage sites in NSW as well as a small number of other storage providers. The ACCC also noted that there was generally overcapacity of storage in NSW which would be likely to drive competition between storage owners.
The ACCC also investigated whether competition may be substantially lessened given that Cargill and GrainCorp are joint venture partners and owners of Allied Mills, a major flour producer in Australia.
The ACCC concluded that attempts by Cargill and/or GrainCorp to deny supply or to raise prices of wheat to competing flour mills would be unlikely to be successful given the remaining options available for sourcing wheat, including from the remaining grain traders and direct from growers. 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.
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