April 10, 2007

Australia faces tough choice on wheat exports
 

 

The waning popularity of Australian Prime Minister John Howard in an election year may affect the decision on the future of Australia's wheat export monopoly.

 

As his government is torn between total deregulation of wheat exports and retention of monopoly, Howard's decision by the end of April could compromise the outlook on Australian wheat exports. 

 

The Australian grain industry is unsure of what the government will do despite a year of heated debate in A$222 million in kickbacks the Australian Wheat Board (AWB) paid to secure sales in Iraq.

 

The decision on AWB's wheat monopoly, which is strongly opposed by the United States but still passionately supported by a majority of Australian wheat growers.

 

David Ginns, chief operating officer of the Grains Council of Australia, which represents the country's 35,000 wheat growers, said the government must decide on its policy by the end of April to provide certainty for grains producers looking at establishing their cereal crops.

 

The decision on the wheat monopoly is a major factor for Howard who is facing a slump in poll survey against new Labour leader, Kevin Rudd, who fiercely accused the government last year of involvement in the AWB scandal.

 

A grain trader said the decision is a political thing, adding if the government was ahead in the polls, it is definite that the wheat board would be gone.

 

Rural National Party members of the coalition government are acutely aware of "extremely emotional" support for the monopoly, the trader added.

 

But Howard would also be vulnerable in the national election campaign if he gave in to the Nationals and left the monopoly unchanged with AWB, one wheat industry analyst said.

 

This leaves either deregulation or retention of the disgraced AWB monopoly unlikely, industry insiders say. Howard is then left with a choice between placing control of exports with a regulatory body, such as the government-appointed Wheat Export Authority, or possibly with a renamed AWB International, which would split from AWB.

 

Under the Wheat Export Authority solution, exports would most likely be carried out by the so-called "Four Sisters" - AWB, the Western Australian grain group CBH, ABB Grain and the eastern grain group GrainCorp.

 

The Wheat Export Authority could also possibly allow exports by international grain giants such as Cargill of the United States. This would allow Howard to say he had retained a "single desk" for wheat, under the Wheat Export Authority, while also throwing the industry open to greater competition.