GrainCorp, the largest grains company on Australia’s east coast, has signed a ten-year agreement with an unnamed insurer designed to help manage the risk associated with grain production volatility.
GrainCorp will receive a production payment each year of up to AU$80 million should annual levels drop below 15.3 million tonnes.
If production levels exceed 19.3 million for the year, GrainCorp pays the production payment, which maxes out at AU$70 million.
A net limit of production payment to either GrainCorp or the insurer of AU$270 million over the 10 year term has been set.
The contract counter-party is White Rock Insurance, a subsidiary of Aon that offers clients a suite of risk management solutions.
GrainCorp’s Chief Executive Officer Mark Palmquist said the agreement was a positive development for the Company.
“The Contract will smooth GrainCorp’s cash flow and allow for longer term capital allocation and business planning through the cycle,” Palmquist said.
