Australia: ABB Grain has reduced its grower indicator interest rate for lending by 0.15%

Everyone knows that lending rates are a significant factor in operating a business – especially those who make their living from agriculture. For grain growers, too, changes in borrowing rates can impact on the operations of the farm and, in the case of significant interest rate rises, even affect its long term viability. That’s why it’s pleasing to deliver some good news ABB reported on February 2.

From yesterday ABB Grain has reduced its grower indicator interest rate for lending by 0.15% as a result of the increased capacity of our company to borrow at a lower rate than before our merger with AusBulk Ltd.

The reduced interest rate of 7.55% will apply to SA barley pools and the Victorian No.1 pool for malt and feed, effective from February 1, 2006.

Because of its bigger size, ABB can borrow at more advantageous rates than it did previous to its merger with AusBulk in September 2004. That merger resulted in a stronger company that has a combination of more substantial assets (net assets of $808 million at the end of September 2005, compared to around $540 million pre-merger) and stronger cash flow.

A year on from that merger, ABB successfully renegotiated its funding lines through a tender process.

Commonwealth Bank Australia and Rabobank Australia retained our business and because of the combined businesses that make up the enlarged ABB Grain, it’s been possible to secure more attractive borrowing margins.

The grower indicator rate remains a variable rate and will, of course, reflect monetary conditions. The base cost of funds to ABB will be market driven but the margin has been improved.

ABB also believes its grower indicator rate is particularly competitive with other lending sources because growers are not required to establish any costly security arrangements when borrowing from ABB.