A BATTLE has erupted between two of the world’s grains powerhouses over last year’s sale of Joe White Maltings.
Cargill Australia bought Joe White from Viterra Malt, a subsidiary of global grains and energy giant Glencore for a figure believed to be around the $420 million mark.
Now, Cargill has launched action against Viterra Malt in the Victorian Supreme Court seeking damages for losses arising from what it claims are breaches of warranty, misleading conduct and negligent misstatement in relation to the sale.
At this stage, Cargill will be claiming close to $32.4 million in damages, relating to lost production and payments it has had to make, but a spokesman said this figure could rise.
Central to the case is a Cargill claim that in order to deliver barley to buyer specifications, it has been forced to cut production of malt by up to 40 per cent.
In its statement of claim, Cargill has said it was forced to cut malt production to 60pc or less of contracted volumes, translating to 60,000 tonnes of lost production.
The capital expenditure required to bring the plants, in three states (NSW, South Australia and Western Australia), up to the standard required to meet current specifications and volumes is estimated by Cargill in its claim to be $30 million.
The other major point of contention regards an agreement with WA-based bulk handler CBH regarding a storage agreement and payments surrounding that deal which Cargill claims it was not made aware of.
It is seeking payments of $2.39 million regarding these payments.
For its part, Viterra - a wholly owned subsidiary of Glencore - says it will dispute the allegations, but remained tight-lipped about the specifics of the case, saying it would not comment further while the legal proceedings were running.
A Viterra spokesperson said, however, that during its ownership of Joe White Maltings, Viterra was not the subject of any material quality or contractual claims from its malt customers.
Cargill is claiming that customers were often supplied with malt that did not meet specifications. It says it is now supplying malt to contract specifications, but doing this has slowed production down.
Peter Meddings, owner of Joe White customer Bintani, which supplies malt to craft brewers said he had not noticed issues with the quality of the malt he had been supplied.
However, the production sector wants to see the issue solved quickly, saying any processes which result in malt being supplied that was not to contract specifications could tarnish the reputation of Australian malt.
Darren Arney, Grain Producers South Australia said his organisation was concerned at the allegations.
He said if there were queries about the varieties of barley being used to produce malt, growers could legitimately wonder whether they were being paid fairly.
He called on the industry to introduce greater stocks reporting so it would be easier to account where malt barley was going and to track whether malt volumes exceeded that which could be extracted from the amount of malt barley delivered.
Mr Arney said an independent grain classification and receival standards body would be a step in the right direction in ensuring compliance throughout the supply chain.
Cargill spokesman Peter McBride said his company was working to ensure best practice at Joe White Maltings, including building additional storage to increase the ability to segregate and blend product.
Joe White Maltings supplies malt to major Australian beer makers including Lion Nathan, CUB and Coopers, and also supplies malt to the burgeoning Asian beer manufacturing sector.
The issue has been bubbling along in company boardrooms for some time, before Cargill lost patience with negotiations and decided to take the matter to court.