February 24, 2005

EU subsidies will cut Australian wheat prices

Australia's Grainns Council says that wheat prices are likely to fall by A$20 a tonne, as Europe prepares to dramatically increase wheat export subsidies.

Just weeks after the EU re-introduced subsidies on wheat for the first time in two years, it's applied to increase the rate of subsidisation.

Grains Council says the amount of subsidised wheat is also expected to rise from two to nine million tonnes. Export subsidies in excess of A$20 a tonne could have a direct dampening on global prices, cutting returns for Australian producers, the council added.

Grains analyst Lloyd George says any increase in European subsidies is likely to have a big impact on pool returns for growers.

But he says wheat exporter AWB Limited would already have already factored in Europe increasing its subsidies in next year's pool returns, and he expects this year's prices to be hardest hit.

"It really caps the markets, here and now; I mean the EU stocks are in the bin, and it's now that they'll be trying market them in to some of the markets that AWB would likely be targetting as well."