December 7, 2020

By Lynda Kiernan, Global AgInvesting Media

After owning a 50 percent stake in the company since 2010, and fully owning it since 2014, Sumitomo has agreed to sell Emerald Grain to Sydney-based investment manager Roc Partners. 

Based in Melbourne, Emerald Grain controls the Melbourne Port Terminal, the only bulk grain terminal at the city’s port, and has five grain storage facilities in southern New South Wales and another four in northern Victoria with a capacity to handle 1.5 million tons.

The transaction involves all of Emerald’s grain trading and supply chain management activities, which will continue uninterrupted throughout the transition – a critical point, since Australia’s grain belt is currently in the midst of its 2020 harvest.

Under Sumitomo’s ownership, Emerald Grain has seen substantial development, according to managing director David Johnson. Working with Sumitomo, Emerald has restructured its business and streamlined its strategy which will help position Roc Partners as it enters into the Australian grain industry during a year where conditions are highly favorable for Emerald’s operations.

“Sumitomo was involved with Emerald for many years, the past five as parent company, working strongly with Emerald as we restructured the business and refined our strategy – a very important period during which we appreciated Sumitomo’s support and guidance,” said Johnson. 

He continued, “ROC Partners are entering the grain industry in a year when seasonal conditions are highly favourable in all our operating regions, they recognise the strategic nature of Emerald’s assets and are excited by our growth prospects.”

Roc Partners already hold various agricultural assets including Australian Oyster Coast, premium Wagyu beef operation Stone Axe, chicken producer ProTen, and tomato grower Flavorite, however, this deal represents the firm’s first foray into Australia’s grain sector. And it’s an opportune moment. 

After two years of below-average rainfall and challenging dry conditions, Australia’s grain growers have benefitted from ample and widespread rainfall earlier this year, likely due to a La Nina occurrence. The country’s wheat crop is estimated to come in at 27.9 million tons – an increase of 84 percent year-on-year. Season-long favorable growing conditions have also boosted the country’s forecasted wheat exports to 17 million tons for the 2020/21 marketing year – up from 9.1 million tons for the 2019/20 marketing year. 

At the same time, output for Argentina, Australia’s main competition on the global grain market, is being estimated by the U.S. Department of Agriculture (USDA) to be 17.4 million tons – a drop-off from its typical harvest of 19 million tons, and exports being cut by 15 percent to 11.2 million tons, likely due to drier conditions brought on by the same La Nina that brought rain to Australia. 

And despite the global pandemic, and global production that is expected to reach a record this year, demand for grain from China is expected to outstrip supply with consumption forecast to increase by 2 percent to 302 million tons and imports expected to jump by 49 percent year-on-year to 26 million tons. 

At US$266 per ton, Australian wheat is currently some of the cheapest in the world, making it attractive for Asian buyers and positioning Australia’s growers, which now count Roc Partners in their number, to capitalize upon a confluence of factors that will be a boon for the industry.

– Lynda Kiernan is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, and HighQuest Group’s Oilseed & Grain News. She is also a contributor to the GAI Gazette. She can be reached at lkiernan@globalaginvesting.com.