In a move that has surprised many in the agricultural sector this morning, Federal treasurer Joe Hockey has announced he will to stop the sale of GrainCorp to American-owned Archer Daniels Midland Company.

The issue has emerged as a key early test of the new Coaition Government's attitudes to foreign investment, pitting the business sector and free-marketeers within traditional Liberal Party ranks against the more protectionist stance of its Coalition partner the Nationals.

The Nationals argued that a locally owned GrainCorp was vital for the future of Australia's grain industry, and strongly welcomed Mr Hockey's decision this morning. 

"I understand the difficulty the Treasurer would have had in weighing up all the options that are involved in making a decision like this," Federal agriculture minister and deputy Nationals leader Barnaby Joyce said.

"I believe, and the decision shows, keeping GrainCorp predominantly Australian owned is firmly in our national interest.

"GrainCorp is one of Australia’s greatest agricultural assets, with about 85 per cent of the east coast’s grain storage and handling infrastructure.

"Keeping GrainCorp Australian owned does not mean that foreign investment in agriculture is not welcomed.

"I recognise foreign investment is important for growth and innovation, and contributes to the prosperity of local businesses, rural communities and the broader economy.

"However, it is critical that the Australian Government ensures these investments are not contrary to our national interest and provide flow-on benefits for farmers and rural communities."

Opposition treasury spokesman Chris Bowen has accused Mr Hockey of caving in to the Nationals and making a weak and populist decsion.

“Today Joe Hockey has sent a message to everybody who is thinking of investing in Australia. And that message is, `I'll only tick it off if it passes the popularity test',” he told the media this morning.

`Today, Joe Hockey said Australia is not open for business. The claims by this government that they would lure back investment into Australia lie in tatters this morning because Joe Hockey is too weak a Treasurer to do the right thing by Australia.”

In a media release issued on Wednesday NSW Farmers Grains chair Daniel Cooper urged Mr Hockey and the Foreign Investment Review Board to keep their eyes on firmly on what would bring growth in competition to the Australian grain market. 

While ADM had offered to invest an extra $200 million as a sweetener to improve GrainCorp's grain storage and handling network, including improvements to rain infrastructure, if its bid was supported, Mr Cooper said the deal would have led to reduced competition.

“GrainCorp continues to be the dominant player in the east coast grain market. Its concentration in the market for the storage and handling of grain on the east coast is as high as the two major supermarkets combined and in 2012 it bought almost one third of the east coast crop for its marketing and processing businesses.

“NSW Farmers members are concerned about what will happen to competition for their grain once a large multi-national agribusiness like ADM controls the GrainCorp monopoly.

“While ADM has committed to making an investment in the supply chain if it was to control GrainCorp, its commitment to ensuring that any benefits of this investment flows to farmers falls well short.

“ADM’s representation that mere access to GrainCorp’s upcountry storage and ports leads to competition is shallow.

“Without a true commitment to providing a level playing for all traders to promote real competition for farmers’ grain, farmers will pay for whatever capital investment ADM makes while shareholders on the New York Stock Exchange will take home the benefits."