February 11, 2008

 

Australia opens up wheat export market with permits to foreign companies
 

 

In what is a significant broadening of Australia's wheat trade, three new entities including two global trading companies were granted permits Friday to export a total of 450,000 tonnes of wheat, worth well in excess of AUS$200 million.

 

Glencore was granted a permit to export 300,000 tonnes of wheat to Iraq while Louis Dreyfus was granted a permit to export another 100,000 tonnes, also to Iraq. Australian company GrainCorp Ltd. (GNC.AU) was given a permit to export 50,000 tonnes to the United Kingdom, Agriculture Minister Tony Burke said.

 

"The permits for Iraq will help Australian grain reestablish a presence in that market after it was locked out as a result of the wheat-for-weapons scandal," Burke said in a statement.

 

It is for the first time that foreign trading companies are being been allowed to export Australian wheat.

 

Cooperative Bulk Handling Ltd., an Australian concern, had earlier been given a license late last year to export 500,000 tonnes of wheat to its own mills in Asia.

 

Until then, Wheat Australia Ltd., which received a permit in 2006 to export to Iraq, was the only exporter of Australian wheat other than AWB Ltd. (AWB.AU) which traditionally enjoyed a monopoly over exports until it was linked to the Iraqi food-for-fuel scandal.

 

Wheat Australia, an equal joint venture of CBH, GrainCorp and ABB Grain Ltd. (ABB.AU), exported around 360,000 tonnes of wheat to Iraq after Iraq suspended business dealings with AWB over revelations during the Iraqi kickbacks scandal.

 

Burke said the latest approvals were made under existing wheat export legislation enacted by the previous government.

 

Under law that lapses June 30, 2008, the agriculture minister holds a power of veto over all applications for bulk wheat export licenses, other than for majority exporter AWB.

 

Before the special law moved the veto power to the agricultural minister, AWB enjoyed the veto power and successfully prevented competitors from exporting Australian wheat.

 

However, Burke said his decisions should not be seen as an indication of future wheat marketing arrangements.

 

"The Government is committed to its wheat marketing reforms which will provide greater choice for growers," he said.

 

The Australian Labor Party, which won office at a general election Nov. 24, has pledged to change existing arrangements and license multiple bulk exporters, effectively scrapping a system favoring the now discredited AWB.

 

In granting these permits, Burke said he considered the public interest merits of the applications as required under the Act.

 

Burke said he also considered their impact on a national collective export sales pool operated by AWB and the estimated returns for growers who sold their wheat through this pool.

 

There is no reason for AWB to adjust its estimated pool returns for growers because of these decisions, he said.

 

The permits do not overlap with AWB's current markets and is not expected to be able to service them this year, he said, adding that none are premium markets for AWB.

 

Govt considering one more application
 

The Australian industry is currently focused on the 2007-end wheat crop of around 13 million tonnes, about half of which would be available for export after domestic demand is met.

 

AWB has already announced growers have delivered about 4.3 million tonnes to its pool.

 

The minister said he rejected 35 other applications in this latest round and is giving further consideration to another.

 

The decision follows his consideration of 39 applications provided by the Export Wheat Commission on Jan. 15, 2008.

 

The applications included 28 outstanding applications from the previous government and 11 new applications, he said.