March 8, 2007

 

Australian firm wants reform on wheat exports; brand protection
 

 

Australia's GrainCorp Ltd. (GNC.AU) Managing Director Tom Keene has called for liberalisation of Australia's wheat export arrangements, and said the industry must protect and develop the Australian brand of wheat.

 

Keene said wheat exporting should be open and fully contestable as the crop is not different from any other grain.

 

In moving to this position, it is essential to protect and develop the Australian grain brand, he said.

 

He noted international buyers choose Australian wheat because of its inherent quality and logistics advantages, adding that choosing the company from which is to purchase is just a secondary consideration.

 

Wheat export arrangements are under review, with an export marketing consultation committee preparing a report for delivery to the government by March 30 on the needs of growers and the industry.

 

At stake is a wheat export trade that can reach almost 20 million metric tonnes a year, valued at almost A$5 billion and accounting for in excess of more than 15 percent of world trade.

 

Wheat exports are currently dominated by majority exporter AWB Ltd. (AWB.AU), which until 2005 operated a legislated monopoly.

 

The Australian wheat industry needs to develop a services concern, similar to the red meat industry, to provide technical support, develop strong market research capabilities and use this to promote local grain and gain greater access to markets, Keene said.

 

Liberalising current wheat exports would substantially change the operating environment, reduce costs by increasing competition, introduce innovation and greater competition in grain buying and establish a solid platform for growth, he said.

 

AWB argues that the collective export sales arrangement it operates enables it to extract a premium for Australian growers over the spot market.

 

But Keene argues existing arrangements cost growers A$120 million a year, with A$70 million of this transferred to AWB shareholders as monopoly profits and A$50 million being lost in domestic returns because of lower single desk prices weighing on domestic prices.

 

Keene said the estimate based on overall available information that the current single desk arrangement would cost growers A$5 per tonne compared to an open competitive market.