THE Australian Competition and Consumer Commission says it will not oppose the acquisition of animal feed supplement supplier, XF Australia (Performance Feeds) by Graincorp Limited.

GrainCorp and United States-owned XF Australia both supply molasses-based liquid animal feed supplements to the livestock industry across eastern and southern Australia.

At the time the takeover was announced in November last year, some concerns were raised about concentration of ownership in the livestock liquid feed supplement field.

One large liquids customer estimated that a combined Performance Feeds and Graincorp Liquid Feeds business might represent 50 percent or more of all molasses-based liquids sales to the beef industry.

The ACCC’s review focused on the closeness of competition between GrainCorp and XF Australia. This included whether the removal of XF Australia as a result of the proposed acquisition would substantially lessen competition in the supply of animal feed supplements in regional markets across eastern Australia.

Another focus was whether the acquisition would provide GrainCorp with the ability or incentive to restrict sale of molasses to other third-party distributors and competing producers of animal feed supplements.

“After carefully examining the molasses supply arrangements between GrainCorp, XF Australia, other animal feed supplement suppliers and sugar mills, we concluded there would be no substantial lessening of competition,” ACCC commissioner Stephen Ridgeway said.

GrainCorp buys molasses as an input for its feed supplements from sugar mills and on-sells surplus amounts to other distributors, competing producers of animal feed supplements and farmers directly. XF Australia buys molasses from sugar mills to produce its supplements, but does not resell molasses to third parties.

GrainCorp has two animal feed supplement manufacturing facilities in Queensland and a toll processing agreement in Victoria, while Performance Feeds supplies animal feed supplement products out of three facilities in Queensland and one in Victoria.

Fortified molasses is a valuable source of energy and trace minerals, and is a widely used animal feed supplement.

In a statement, ACCC said it had consulted with a wide range of market participants, including feedlot operators, graziers, liquid feeds market competitors as well as third party distributors of molasses and sugar mills.

“We have listened to the concerns expressed by some businesses about shortages of molasses supplies from to time to time, particularly during times of severe drought. We have been very careful in examining this proposed acquisition to ensure that it does not exacerbate these existing challenges in a way that breaches our merger laws,” Mr Ridgeway said.

ACCC concluded that despite the merger, GrainCorp will still face significant competition from other animal feed supplement manufacturers such as Bundaberg Molasses and Riverina.

The ACCC also considered that the proposed acquisition would not create the ability, or incentive, for the combined entity to reduce molasses supplies to downstream players.

“We concluded that competing animal feed supplement suppliers will still be able to obtain molasses supply directly from sugar mills, distributors and other resellers,” Mr Ridgeway said.

Background

GrainCorp Feeds Australia supplies molasses-based liquid animal feed supplements to customers in the feedlot, pasture and feed mill sectors, under brands such as Molafos and Rumifeed, and vegetable-oil based supplements for beef cattle under the brand Energro.

XF Australia is an animal feed supplement and nutritional consulting business, supplying liquid and loose lick animal feed supplement products for beef and dairy cattle and sheep through its subsidiary Performance Feeds to customers in Australia’s feedlot and grazing sectors. Performance Feeds also distributes pasture-based products under brands such as Anipro, FibrePro and WeatherPro.