Australia is the world's second-largest wheat exporter and GrainCorp is the largest listed grains company, handling approximately one-third of the country's wheat production.
It dominates the country's east coast storage, distribution and marketing of grains, handling 85 percent of eastern Australia's exports.
The deal had previously been approved by Australia's competition regulator and analysts had expected it to proceed.
But it was unpopular with farmers and many voters and had stoked divisions between the Liberal Party and its junior partner, the rural-based National Party.
(Read more: Aussie dollar could tumble 25% by 2016, warns SocGen)
"All the way along we wanted ADM to show us how growers would benefit and no one could," said Dan Cooper, a farmer in New South Wales and committee chair at the NSW Farmers Federation.
Farmers were sceptical of another foreign deal in the grains industry after Canadian agribusiness Viterra in 2009 purchased ABB Grain, then Australia's largest agribusiness. Many South Australian farmers have complained about higher prices and long waiting times to deliver grain.
"The Viterra path was exactly the path we were heading down where growers were being squeezed by a monopoly," said Cooper.
Glencore Xstrata, which purchased Viterra in 2012, was not immediately available for comment.
(Read more: Drought 'likely' to continue this winter)
Only a handful of foreign investment deals are rejected by Australian authorities each year and ADM's tilt at GrainCorp is far from the first foreign deal in the agriculture sector.
Hockey said the deal was the only one of 131 significant foreign investment applications that had been rejected since he came to office. The last major foreign investment blocked wasSingapore Exchange $8 billion bid for ASX in 2011.
"People will interpret this as maybe Australia is not so 'open for business'," said Shane Oliver, head of investment strategy, AMP Capital Investors. "That is the way it will be interpreted, but I think it's a one off and will not set a precedent."
Hockey said he was open to ADM - one of the four "ABCD" firms that have dominated the global agricultural business for decades - increasing its stake in GrainCorp to nearly 25 percent. ADM said it would consider an increase.
The GrainCorp takeover was still awaiting approval from China, which this year imposed stiff conditions on Japanese trading house Marubeni's $5.6 billion purchase of U.S. grain merchant Gavilon amid anxiety over food security.
(Read more: Food safety scare prompts recall in China)
ADM's bid for GrainCorp is part of a wave of international interest in Australia's agricultural industry. Most recently Australia's Warrnambool Cheese and Butter Factory Company has sparked a bidding war involving Canada's Saputo, which has already won FIRB approval.
U.S. wheat has lost about a quarter of its value since ADM announced plans to buy GrainCorp in October last year. A rebound in global grain production is weighing on prices.
ADM was advised by Citi and Barclays , while Credit Suisse and Greenhill advised GrainCorp