By Caroline Henshaw 
 

SYDNEY--Australian farmers have written to the government demanding the sale of some GrainCorp Ltd. (GNC.AU) assets as a condition to its takeover by Archer Daniels Midland Co. (ADM), fearing the U.S. grain giant could squeeze the few remaining competitors out of the market.

GrainCorp late last month accepted a sweetened A$3.4 billion (US$3.3 billion) takeover offer from ADM. The deal--ADM's largest ever purchase--will give the Illinois-based company control of seven of the eight ports on Australia's east coast, the gateway to Asia's booming food market, and 90% of the grain shipped from it.

"We have a monopolistic supply chain infrastructure that makes it difficult to ensure competition," Fiona Simson, president of the NSW Farmers, said in an interview. "We want conditions applied to the takeover that would assist in that."

Among the demands in a letter to Treasurer Wayne Swan--the man who will have the final say on the takeover--Ms. Simson calls for ADM to divest one or two ports, for other parties to be allowed access to GrainCorp's 20 million-ton storage network, for ADM to share information on the stocks it holds and for it to commit to upgrading the east coast's creaking infrastructure. These measures will help safeguard farmers' bargaining position in the supply chain, she argues.

ADM and the Treasury had no immediate comment. GrainCorp declined to comment.

ADM's purchase is still subject to scrutiny by Australia's competition watchdog and foreign investment regulator, which the companies hope will be completed before October.

If approved, the deal will leave almost all of the grain-handling infrastructure in Australia--the world's second-largest wheat exporter--in the hands of foreign companies. The dismantling of the former wheat monopoly AWB in 2008 paved the way for the entry of major international players such as Canada's Viterra Inc. (VT.T), now owned by Glencore International PLC (GLEN.LN), and Cargill Inc., which took over AWB's grain assets from Agrium Inc. (AGU.T) in 2010.

But Ms. Simson said years of underinvestment meant much of the east coast grain rail network is now unusable, with farmers frequently having to move their produce by road. That, combined with the additional costs of moving it to silos, has meant farmers are spending up to a third of their grain earnings on transportation.

"Farmers right up and down the eastern seaboard aren't seeing the benefits of deregulation," she said. "These assurances would do a lot to assuage growers concerns about these assets going into foreign hands."

Write to Caroline Henshaw at caroline.henshaw@wsj.com

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