March 5, 2008

 

New Australian law frees up wheat export to companies
 

 

Australia's new wheat export arrangements to come into force July 1 would not have limits on the number of companies that can be licensed to export or the volumes they can ship, Agriculture Minister Tony Burke said Wednesday (March 5, 2008).

 

Nor will the new arrangements involve the agriculture minister deciding on who can export wheat, unlike now, where the minister has the final say on who receives an export license, Burke told reporters on the sidelines of a commodity conference.

 

Burke was commenting ahead of the issue by the government of draft legislation for wheat export arrangements which will put in place a system to license companies wanting to export wheat under a system to be operated by new regulator Wheat Exports Australia.

 

Burke'ss Labor Party government, which was elected in November, pledged to accredit multiple wheat exporters, effectively ending a protected system that has seen AWB Ltd operate either an export monopoly or as dominant exporter.

 

A number of domestic grain companies and international commodity traders want to compete to export Australian wheat. At stake is a share of annual exports of up to 18 million tonnes valued at up to AUS$5 billion, or more than 15 percent of the world's wheat trade.

Burke said Australian and international companies will be able to apply for an export license and will be assessed under the same rules.

 

The regulator will judge companies based on criteria such as the general probity and financial capacity of the company and any particular issues of probity such as making sure all exporters abide by Australian law in respect to UN sanctions, he said.

 

Assessment of the probity of exporters will only go back for five years, he said.

 

Burke said that in putting in place probity controls, there is no ongoing punishment for issues that have now been dealt with.

 

This clears the way for AWB to apply for an export license, as it has previously indicated it plans to do.

 

AWB was at the heart of the wheat for weapons scandal last year, which saw AWB pay US$221.7 million in kickbacks to the now deposed regime of Iraqi dictator Saddam Hussein under a United Nations oil-for-food programme to ensure sales of Australian wheat.

 

The exposing of the scandal in a report to the U.N. in October 2005 by former chairman of the U.S. Federal Reserve Board Paul A Volcker essentially kicked off the process that will result in AWB losing monopoly control of exports.

 

Burke said that with the planned changes to the export wheat marketing law and given the high price for wheat, "we have a real opportunity to open up markets" and generate significant gains for growers.

 

However, the change could see the monopoly operated by AWB simply replaced by three monopolies operated by the three major grain storage companies in Australia, namely ABB Grain Ltd. (ABB.AU), GrainCorp Ltd. (GNC.AU) and unlisted Cooperative Bulk Handling Ltd., he said.

 

Burke also said he would not approve any further export licenses applied for so far under the existing law.

 

The draft legislation will be open for public discussion for four weeks.