Cotton growers are seemingly more worried about getting good value on their ginning costs than the sentimental cost of losing Australia's last major cotton business to a foreign buyer.
Queries about cheaper processing cost prospects have dominated grower feedback to Namoi Cotton management in the wake of Louis Dreyfus Company's move late last year to lift its 17 per cent stake in the 62-year-old Australian ginner to full ownership.
The French commodities giant expects it can use its international marketing and supply chain clout to extract more efficiency from its services and keep growers' ginning expenses competitive.
Assuming LDC's $105 million takeover bid doesn't hit any competition or foreign investment regulation hurdles and is approved by shareholders, by June the multinational will grow its ginning strength from three sites in NSW and Queensland, to 13 gins spread from Emerald to Hillston.
In fact, a Namoi takeover would be quite internationally significant for LDC on the ginning front.
Although a big global merchant, Louis Dreyfus only has two other gins outside Australia - one each in Argentina and Zambia.
The deal would also provide strategically important ties to northern Australia's fast emerging cotton industry.
Northern exposure
LDC has helped build, and is now managing, the newly-opened WANT Cotton gin near Katherine in the Northern Territory, while Namoi is a joint venture partner in the Kimberley Cotton Company's northern West Australian gin.
The Kununurra site is due to open for business early next year.
Namoi, which led eastern Australia's cotton industry growth in the 1960s and '70s, has also assessed options for a North Queensland gin, although no construction plans have yet progressed.
Louis Dreyfus Company's Australian managing director, Tony Geitz, said northern Australia's geographic proximity to Indonesia gave the emerging WA and NT assets extra appeal.
Indonesia is Australia's third largest cotton market.
"We are excited about the scale up of cotton production in northern regions of Australia," he said.
"Construction of the Katherine and Kununurra gins serves as catalysts for industry momentum."
Mr Geitz felt an LDC takeover would bring a "robust global presence and solid balance sheet" to the legacy Namoi business, presenting significant advantages for growers and the Namoi company.
Although not making any promises on cheaper services, he said LDC wanted to provide competitive ginning, enhancing its service offering to farmers.
LDC has great respect for Namoi Cotton's history and reputation
- Tony Geitz, Louis Dreyfus Company
"We are committed to improvement initiatives and look forward to working collaboratively with the farming community," he said.
"LDC has great respect for Namoi Cotton's history and reputation.
"We will provide Namoi with the stability of being part of a larger business to enable the necessary operational efficiencies to maximise value of growers' cotton."
Namoi Cotton's executive chairman, Tim Watson, was confident LDC planned to be in the cotton game for the long haul.
"I doubt they'd want to sacrifice the opportunity to build bale volume and reputation by having uncompetitive ginning prices," he said.
"I'd expect LDC to be quite competitive."
In fact, as a rival, Louis Dreyfus had managed to win ginning contracts to process NT cotton trucked east to Dalby on the Darling Downs - cotton which potentially may otherwise have gone to Namoi's Goondiwindi or Mungindi gins.
Mr Watson was relatively philosophical on questions about a Namoi takeover reducing competition options and cementing the dominance of international players in Australia's cotton ginning and trading sector.
"Our industry has so many merchants," he said.
"Increasingly it also seems growers choose to spread their love around to diversify their marketing position," he said.
"Loyalty to one company, regardless of where it's from, is not guaranteed."
He noted cotton growers were very much accustomed to the industry's international scale, supply chains and market complexity.
It was no surprise big global farm commodity names, from Cargill, Cofco and Olam through to more recent local cotton market player, Archer Daniels Midland, had firmly established in the Australian industry.
Long track record
LDC's Mr Geitz noted LDC had a century-long record in Australian ag commodity trading, including a 10-year-old cotton lint marketing partnership with Namoi, and 40 years as a global merchant.
Its operations spanned key cotton growing regions, including India, Pakistan, Africa, Brazil, China, and the US, and 31 cotton warehouse bases.
The company's Namoi agenda was to build on its commitment to local farm sector markets, enhancing support to cotton growers with an expanded ginning and packing footprint, and to contribute to Australian cotton's global reputation.
"The proposed investment will result in greater efficiency and allow us to provide more support for exports in global markets," he said.
Financial services group BDO has been commissioned to provide Namoi Cotton shareholders with an independent experts report on LDC's 51 cents a share takeover offer.
Shareholders will have BDO's verdict by April and are likely to vote on the offer by early May.
The bid is also being reviewed by the Australian Competition and Consumer Commission, the Foreign Investment Review Board and the Australian Securities and Investment Commission.
Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
