Archer Daniels Midland
chief executive
Patricia Woertz
says the United States-based agriculture giant is committed to investing $300 million in
GrainCorp
, arguing the $3 billion deal was a critical example of the importance of foreign investment.

Speaking to The Australian Financial Review on a visit to Australia this week, Ms Woertz said ADM wanted to build the Australian group into a more-efficient provider of grains to burgeoning Asian populations and tap into the spiralling demand for food products.

“We’re not here to cut costs, we’re here to invest,’’ Ms Woertz said on Thursday, just a day after her first face-to-face catch-up with GrainCorp chief executive
Alison Watkins
. “I think it’s really is about growing together’’.

The deal, though, is yet to receive a critical tick of approval from the Foreign Investment Review Board amid highly-sensitive concerns by some groups such as NSW farmers association about the benefits for the Australian agricultural sector.

Ms Woertz said the deal was in the national interest because ADM, which owns more than 270 facilities processing the likes of oilseeds, corn and wheat around the world, would improve the efficiency of local producers at a time of rising global demand for food.

“The inevitable trends of (world) population growth where you have a growing middle class, particularly in developing nations such as China, the demand for food will double.

“Australia has a key role to play, as do other regions in the world where they either have additional land or the opportunity to have greater productivity of their crops.

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“So whether it is South America, North America to some degree, the Black Sea or Australia – those are key areas where we look for further investment."

Ms Woertz said efficiency was not about cutting costs. She argued Australia had a “real role to play" by “welcoming foreign investment, investment in infrastructure, allowing innovation and technology, potentially greater crop diversification if that’s possible".

“Anything that will increase the value of the export – which is both price and volume. Your own national food plan talks about a 45 per cent increase by 2025. What if that was 100 per cent? I’m not saying that it’s possible . . . what if Australia had loftier goals than the 45 per cent?"

A $3bn tilt for an Australian agricultural business

Ms Woertz sits on President Obama’s export council, which aims to double US exports within four years.

A former senior executive with US oil and gas major Chevron, Ms Woertz, became chief executive officer at the 110-year-old ADM in 2006.

She also moved to dispel fears about foreign ownership of Australia’s agriculture sector, and the position of growers, whom she likes to refer to as “customers" rather than suppliers.

“Everyone along the (value) chain needs to win and be prosperous’’.

Ms Woertz would not comment on the FIRB process, saying she wanted to respect the political process.

She would not say if the timetable for that process may be complicated by the change in Prime Minister and Treasurer and several other key federal cabinet positions following the Labor leadership coup on Wednesday night.

ADM, which is based Decatur, Illinois, has 30,000 employees across the globe. Its market capitalisation is $US22 billion ($24 billion).

The $3 billion offer for GrainCorp is the largest acquisition the company has made. The company’s pitch to politicians and growers is that the deal will benefit the broader Australian economy will benefit as ADM invests in the sector.

ADM has promised to spend an additional $50 million in the Australian agricultural sector, on top of an original $250 million which GrainCorp had already earmarked for investment.

It has also unveiled a raft of measures designed to placate potential opposition, including a commitment to maintain open access to GrainCorp’s ports, and increased community spending.

GrainCorp formerly recommended to its shareholders that the bid from ADM be accepted with a target’s statement released this week.

An independent expert’s report has outlined that ADM’s offer of $13.20 per share is within a valuation range of $12.74 and $13.97 per share.

GrainCorp takeover ‘good for the economy’

Ms Woertz emphasised the importance of building long-term relationships and said ADM had been successful around the world by ensuring the importance of maintaining strong links to local communities, and this was a model it intended to pursue with the GrainCorp acquisition.

“We’ve been listening, we’ve been learning. That won’t stop if we have the deal completed. We’ve been talking about putting a grower and community committee or outreach council together so that we have an ongoing way to get input. We do that in other places."

“The fact that we are a large corporation with experiences elsewhere and potentially best practices means we can share. We may see best practices in Australia that duplicate elsewhere. So it’s this idea of a partner."

Ms Woertz said examples of best practice included giving local managers some autonomy or high-tech loading facilities in ports.

ADM relies heavily on technology to improve performance, with Ms Woertz describing the company as a combined “processor and logistics group".

She was adamant the takeover offer for GrainCorp would ultimately be a plus for the Australian economy, as ADM invested in the business, helping to underpin an increase in the volume and value of food products being exported.

“I think it’s good for the Australian economy, it’s good for growers’’.

Ms Woertz said the global strength of ADM presented an ideal opportunity for GrainCorp to maximise the opportunities presented by Australia’s geographic proximity to the fast-growing populations of Asia.

She highlighted changing consumption trends as higher numbers of people preferred a more Western-style diet as their incomes grew.

Australia has natural economic advantages when it comes to industries such as mining and agriculture.

Agriculture exports could double by 2050

But while resources companies such as
BHP Billiton
and
Rio Tinto
are global powerhouses there has been no “national champion’’ created in agriculture.

A “Greener Pastures" report by ANZ Banking Group and Port Jackson Partners released earlier this year estimated that Australia could double agricultural exports by 2050.

“The continuing shift of economic growth from the developed world to the developing world is driving an enormous opportunity for agriculture in Australia and New Zealand," the report notes.

“The new-found wealth of the developing world and rising incomes are leading to increased calorie consumption and higher protein diets. This and population growth will see the world demand at least 60 per cent more agricultural output by 2050 compared to 2005-07.

“If biofuel uptake and the economic growth of developing countries ­accelerate, demand for agricultural products could more than double over the same period."

Ms Woertz said there was growing demand for certain crops such as wheat, malting barley and canola but would not provide advice to local grower about what to plant. “Our job is to give them more information and more tools to make decisions," she said.

Speaking at a broad level about the agricultural industry, Ms Woertz said patience was required by investors, with investment spending in agriculture requiring long-term time frames for a payback.

“I think it’s at least a five- to 10-year cycle,’’ she said.

“The good thing about agriculture is that it re-sets itself twice a year’,’’ she said referring to the growing seasons in the northern hemisphere and southern hemispheres.

Ms Woertz said the ACCC’s approval of the planned acquisition of GrainCorp was a positive step.

“We’re happy with the progress that we’re making on the regulatory front,’’ she said.

The competition regulator closely scrutinised two specific areas in its review of the proposed acquisition.

On a broad basis, it is satisfied that if ADM and GrainCorp are merged then competition won’t be substantially lessened in the agricultural sector.

On a second front, the ACCC also looked at whether ADM would have different incentives to GrainCorp and whether it would be likely to foreclose third party access to the storage and transport supply chain after the merger, which may then result in reduced competition between traders to buy grain.

The ACCC was also satisfied about this area.

Ms Woertz said she expected the Australian dollar to move lower from its current position, and this would help in driving the export performance of Australia’s food producers.