March 10, 2005

 

Australian 2005-06 wheat output to rise

 

 

Output from the next Australian wheat crop should rise about 10 percent from the last crop to 22 million-23 million tonnes, assuming normal seasonal conditions, Andrew Lindberg, managing director of agribusiness AWB Ltd., said Thursday.

 

Most of the new crop will be tipped onto a subdued world wheat market that could face some downward pressure on prices, he told the company's annual general meeting.

 

AWB, which operates a bulk wheat export monopoly from Australia and trades other grains, also will shortly open a trading office in New Delhi to boost business in the region, he said.

 

Australia produced 20.4 million tonnes of wheat this crop year ending March 31. Domestic demand accounts for about 6 million tonnes of wheat a year, with the balance available for export, making AWB a major global supplier.

 

Lindberg appears reasonably confident that Australian wheat output will rise next crop year, noting that widespread rains in recent months in eastern Australia have boosted soil moisture levels and generated a significant rebound in summer crop production.

 

The short term outlook for wheat prices is subdued, he said.

 

February, AWB issued an estimate for gross pool returns from collective sales of its benchmark wheat type grown next crop year in a range of A$170-A$180 a tonnes, about 13 percent down below estimated returns from the last crop.

 

The direction of prices in coming months will depend on progress of the northern hemisphere crop, which is currently in good condition, he said.

 

A rally in recent weeks of US wheat futures appears unlikely to be maintained unless there is a significant change to the global supply and demand balance sheet, he said.

 

The next few months, as the northern hemisphere crop moves through dormancy, will remain critical, he said.

 

However, with world stocks finely balanced, upward price movements are possible, he said.

 

AWB is determined to build its presence in international grains trading, and has several years ago established a trading office in Geneva.

 

Lindberg said that business nearly doubled trading volumes to 2 million tonnes in the company's last fiscal year ended Sept. 30, significantly expanding its oilseed book in the process.

 

The Geneva office also made a significant contribution to profits from ship chartering, another area in which AWB is expanding, with all sales through Geneva involving a freight component, he said.

 

Now, AWB is set to expand its international presence through an office set to open in New Delhi in April, he said.

 

"This will build our customer base with a focus on accumulation to fill customer needs," he said.

 

The New Delhi office will allow AWB to capture opportunities within a large and diverse grains market on the subcontinent, he said.

 

Depending on local weather and production, Australia has in the years past been a major supplier of wheat to India, Pakistan and other countries in South Asia.

 

Lindberg emphasized that AWB is a broad-based agribusiness, which includes fertilizers and chemicals, farm merchandise, and rural and financial services.

 

For overseas customers, AWB's physical products are increasingly bundled with value-added services such as freight, finance and risk management, he said.

 

"Our access to an increasing range of agricultural production is of significant interest to them," he said. "There is, however, the scope and opportunity to do much more," he added.

 

AWB's rural merchandise Landmark unit acquired in 2003 is delivering a substantial contribution to profit and performance, he said.