Farmer-owned SunRice is battening down the hatches and planning job cuts less than two months out from a critical shareholder vote on plans to list part of the food business on the Australian Securities Exchange (ASX).
If the past month's sliding share market and a summer of crop water restrictions were not already causing unease among the 888 A-class grower shareholders, last week SunRice confirmed this season's depleted planting of less than 30,000 hectares was too small for its current milling program.
SunRice will therefore shed more than 40 staff in April, most likely cutting milling and packaging operations at Leeton and Deniliquin back to just five days a week.
Only Leeton's milling and packing plants are planned to stay running around the clock, while Deniliquin mill would operate only one eight hour shift a day.
Only a year ago the company also mothballed its Coleambally rice mill because last season's 690,000 tonne harvest was not big enough.
Limited irrigation water allocations and prices as high as $260 a megalitre for additional water at planting time prompted many southern NSW ricegrowers to sell this season's allocations and leave cropping blocks fallow over summer.
Some in the Murrumbidgee Irrigation Area (MIA) bought extra water and switched to growing cotton or other summer crops in anticipation of better gross margin results.
SunRice chairman, Laurie Arthur, estimated less than 400 farmers were involved in rice growing this year - less than half the industry's usual grower base.
Intensified pest pressure from ducks and kangaroos had added to the water restriction and price issues to create a difficult season for those persisting with their reduced rice programs.
However, he said SunRice was firmly committed to its Riverina rice businesses, employees and farmers and interestingly the tight times, including recent share market volatility, had emphasised the need for SunRice to have access to "a deeper pool of capital" as proposed in the restructure being voted on in March.
While the share market dive is not likely to assist SunRice directors' ambitions to float a special capital trust on the ASX, Mr Arthur said market volatility had not triggered as much discussion among growers as other more immediate production issues.
"When you look at the fundamentals, SunRice is trading well and we believe our results will be similar to last year," he said.
Given its reputation as an international food brand and major Australian exporter, SunRice was also set to benefit from the more positive investor sentiment around food and agriculture businesses if its 66 million B-class shares were floated on the ASX.
The proposed SunRice Trust float would enable outside investors to buy stocks currently restricted to those within the industry, earning dividends in line with grower returns.
The main SunRice business would be owned and controlled growers.
"It's our opinion that a bit of turmoil on the stock exchange or times of dry season difficulty are good reasons to embrace some prudent planning ahead, including the option of having access to extra capital from different sources," Mr Arthur said.
"Drought can be tough on our business and on our farmers, so rather than calling on growers to chip in at times when we know it's a tough ask we need a structure which lets us access a deeper pool of capital if necessary.
"There's no plan to go out raising extra capital, but that option should be available if we need it."
Chief executive officer, Rob Gordon, said despite the slide in Australian rice production SunRice was still well positioned to manage crop variations, sourcing rice overseas.
"We also remains well positioned for ongoing growth, with both the profit and paddy businesses performing strongly," he said.
A "reconfiguration" of Riverina operations from late April would focus on minimising job losses and making employee welfare a priority.
"Regrettably, the changes mean reduced staff numbers, with the company anticipating fewer than 50 positions will be lost," he said.
All options to retain as many people as possible were being explored, including re-locating staff, job sharing and temporary leave.
SunRice, which has invested around $80 million in its Riverina sites in the past three years, continued to be one of the region largest employers, with more than 500 local staff.
Australia-wide it employs more than 1000, including a team at a small North Queensland mill acquired in 2014 as part of a production diversification push.
