Insights

Risk posed to Graincorp (ASX:GNC) share price following ACCC verdict

The GrainCorp Ltd (ASX: GNC) share price is being closely watched after the ACCC handed down its verdict on the Grain Warehousing Agreement.
The post Risk posed to Graincorp (ASX:GNC) share price following ACCC verdict appeared first on The Motley Fool Australia. –

asx share price falling represented by graph of paper plane trending down

The GrainCorp Ltd (ASX: GNC) share price is likely under the watchful eyes of shareholders today. This is due to the conclusion of the warehousing agreement investigation.

At the time of writing, the GrainCorp share price has dipped 0.3% to $4.71 per share.

A fairer deal for farmers

An investigation was conducted by the Australian Competition and Consumer Commission (ACCC) yesterday. Consequently, it was found that  19 terms in the company’s Grain Warehousing Agreement were unfair under Australian Consumer Law.

GrainCorp acts as an intermediatory between grain growers and grain buyers. Therefore, the company uses an agreement to protect all parties. However, the ACCC determined facets of this agreement to favour GrainCorp over its farming suppliers in protections.

In particular, a concerning term in the agreement capped the company’s liability to grain growers at $100,000. This was applicable even if the loss was a consequence of GrainCorp’s negligence or omissions.

ACCC Deputy Chair Mick Keogh made the following comment regarding the limiting term:

We believe the term which limited GrainCorp’s liability created a significant imbalance between the rights and obligations of growers and GrainCorp, and had the potential to cause significant financial detriment to growers without being reasonably necessary to protect GrainCorp’s legitimate interests.

GrainCorp has committed to amending these 19 various terms in the 2021/2022 warehousing agreement. This includes removing limited liability on losses attributable to gross negligence, fraud, criminal conduct, or wilful misconduct by GrainCorp. Additionally, all other instances of liability for losses will be increased to $200,000.

Risky business for GrainCorp and its share price

Although the amendments are likely to the delight of many Australian farmers, fundamentally it puts the risk back on GrainCorp.

Along with the change in limited liability terms, the following changes will be included:

  • Providing growers with sufficient time to make necessary arrangements should they not want to continue the arrangement into the new season.
  • Addressing concerns about GrainCorp having the unilateral right to renew or amend the terms of the agreement.
  • Removing limitations on GrainCorp’s obligations to perform certain services GrainCorp was contracted to provide under the Grain Warehousing Agreement.
  • Removing terms that allowed GrainCorp to deny reasonable requests by growers to inspect grain stored with GrainCorp
  • Eliminating terms that provided GrainCorp with a broad discretion to vary the goods or services it provided to growers.

The changes increase the risk to GrainCorp’s bottom line in the event of negligence. In essence, the amendment could result in a double whammy to the company. If an incident were to occur, GrainCorp would lose out on revenue. Additionally, GrainCorp would be required to cover the saleable value to farmers.

Rains outweighing risks

Despite the added risk for GrainCorp, the share price has fared the revelations reasonably well. Potentially shareholders are more bullish on the company due to the continued above-average rainfall.

While Major #Flooding is occurring in #Sydney‘s west it’s also important to be aware this is a large & widespread event. Western #NSW will see increased #rain from Monday & many areas will see more rain on Tuesday. Check regularly for updates https://t.co/sNdzpEYEQ1 @NSWSES pic.twitter.com/uEQpjjSlAc

— Bureau of Meteorology, New South Wales (@BOM_NSW) March 21, 2021

The La Niña weather event being experienced in Australia is providing optimal conditions for Australian farmers while hampering it in the Northern Hemisphere. As a consequence, prices for commodities such as grain remain elevated. This explains the over 42% gain in the GrainCorp share price in the past 12 months.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Risk posed to Graincorp (ASX:GNC) share price following ACCC verdict appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!