CBH Group, the country’s largest co-operative, is preparing to derail GrainCorp’s ambitions of becoming a major biofuel player, closing in on a partnership with BP that would involve building its own large-scale oilseed crushing plant in Perth.

The move would also stymie GrainCorp’s push to extend its operations from its traditional base along the east coast into Western Australia. The ASX-listed group has outlined plans to spend several hundred million dollars on a plant in WA and has been in negotiations about securing a site, canola supply and a partnership with BP and others.

The WA plant, which analysts have estimated could cost upwards of $350 million, is a major part of GrainCorp’s growth strategy. But CBH – which has the WA equivalent of GrainCorp’s vast east coast storage and handling and port terminal network – has always fiercely protected its near-monopoly operations from outsiders.

Industry sources said the rivalry between CBH and GrainCorp made the prospect of any crushing plant-biofuels alliance unlikely.

BP has been weighing up a $1 billion-plus investment in converting an oil import terminal at Kwinana, south of Perth, into a renewable fuel production hub and will need feedstock from a major oilseed crushing plant. CBH has spare land at its Kwinana grain export terminal and could deliver canola to a crushing plant with its fleet of locomotives.

BP is lobbying the Albanese government to impose green fuel mandates to decarbonise air travel. “BP is talking to multiple parties about a crushing facility in WA, but due to the nature of those discussions we are unable to comment further,” a spokesman said.

WA farmers produced about 2.5 million tonnes of canola in the last harvest, down from 4.3 million tonnes in a bumper harvest last year.

Most of the canola, particularly genetic-modified varieties, is exported to crushing plants with farmers paid a premium for high oil content. A major crushing plant of the scale built by global grain heavyweight like Bunge, Louis Dreyfus, Cargill and Archer Daniels Midland would need at least 750,000 tonnes a year of canola feedstock.

CBH reported a net profit of $353 million last year when it exported 21 million tonnes of grain from four terminals and invested $572.7 million in its network and rolling stock.

In response to questions, CBH confirmed it was looking at options to move downstream and into biofuels after previously investing in flour mills and a malting plant in Asia.

“Recent global and local investments in the expanding biofuel industry – in response to government and corporate sustainability mandates – have increased the global demand for vegetable oils as a critical feedstock for biofuels like sustainable aviation fuel and renewable diesel,” CBH said in a statement.

“As a reliable and substantial provider of canola, WA growers are well-placed to serve this growing market either internationally or domestically if there is local investment in biofuel processing.

“WA grain growers are already a large provider of canola into international export markets where a significant portion of the canola is crushed for oil and meal.

“In line with our purpose to create sustainable value for WA growers, CBH is open to considering opportunities that provide growers with market optionality that utilises our supply chain.”

GrainCorp declined to comment.

Speaking at the GrainCorp annual meeting on February 14, chief executive Robert Spurway said the company was working closely with WA farmers who would supply canola to its plant and with other stakeholders in the state.

“WA will play an important role in Australia’s journey to decarbonisation, and GrainCorp is well positioned to drive the development of this new domestic market,” he added.

IFM Investors said last November that it would work with GrainCorp, already Australia’s biggest oilseed crusher and exporter of tallow and used cooking oil, in a bid to make Australia a leading supplier of sustainable aviation fuel.

The IFM and GrainCorp plan involves steering farmers towards crops suitable for biofuel and downstream investments to supply major airlines.

Extracted in full from: https://www.afr.com/companies/agriculture/cbh-gatecrashes-graincorp-s-biofuels-strategy-closes-in-on-bp-deal-20240301-p5f90v

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