GrainCorp seeks $100m for rail upgrade

GrainCorp chairman Don Taylor believes $100 million in federal government spending on rail infrastructure could make a significant improvement to the network and lift grower returns.

The east coast grains handling, malting and oils business has asked the government for funds to urgently upgrade the main routes on the network and believes there is “a strong eco­nomic case’’.

Federal or state funds could help to replace $200m Archer Daniels Midland promised to kick into a co-investment fund for upgrading rail services in a last-ditch effort to win support for its $3.2 billion takeover bid for GrainCorp. The company has ­repeatedly criticised a lack of ­investment in rail lines that has allowed them to fall into disrepair or restricted the speed and capacity of trains.

But he said that upgrades could allow faster trains to carry heavier loads and reduce the need for farmers to use trucks to haul grain. If upgrades resulted in a $5-a- tonne saving in the cost of moving grain from the farms to the ports, the $100m investment would be repaid over an average 20 million tonne harvest in one year.

“So in economic terms — and put aside getting 1000 trucks off the road and what that does to the road network and congestion in the cities — I think I can make a very strong, sound economic case for investment,’’ he said.

Mr Taylor said he had put the proposal to both Infrastructure Minister Warren Truss and Agriculture Minister Barnaby Joyce.

While it was a tough year to be asking for federal funding, as the government was looking to cut billions in spending, Mr Taylor said the proposal had been “well received’’.

“We should be making investments in things that will make a return for the country and I think this does,’’ he said. “It is not reopening lines or propping up uneconomic lines, it is the core network of the rail system that services the grain areas.’’

Any spending on rail could also have an impact on the rationalisation of GrainCorp’s network of 280 collection points along the east coast.

The company collects 80 per cent of grain from 100 larger sites and is reviewing a large number of lesser sites as it looks to ­improve returns amid a lean ­harvest and heightened compe­tition from grain exporters.

But Mr Taylor said there would also be “significant investment’’ in the network to improve the operation of fewer, larger sites. Other sites could be handed over to growers who wanted to maintain a central collection point and could operate it more cheaply than GrainCorp.

“The little depots that are uneconomic for us in the scheme of things may work for them, may be an alternative to farm storage,’’ Mr Taylor said. “It may be economic for them to use it as farm storage and then deliver it into the system from there.”