July 31, 2008

Local players still hold sway despite foreign interest in Australian wheat

Consolidation in Australia's grains industry is likely to be driven by the four key local players rather than international groups buying Australian firms, Reuters reports.

The industry is expected to consolidate following the end, on July 1, of a 70-year-old monopoly on wheat exports previously held by Australian Wheat Board, which opened up competition to market the country's wheat crop.

Cargill Australia managing director Ralph Selwood said it was hard to predict the results of any consolidation as there appeared to be a lot of interest, both local and foreign, on Australian wheat companies.

The four big Australian grain merchants are AWB, GrainCorp, ABB Grain and Cooperative Bulk Handling.

Selwood declined to comment on whether Cargill would buy a stake in GrainCorp, with which Cargill has a milling joint venture.

Cargill's rival Glencore was reported this week to have bought a stake of around 2 percent in GrainCorp.

Selwood said Cargill planned to apply for an export permit under the new regime.

Alongside the four Australian grains merchants, international grains traders likely to tap the market include Paris-based Louis Dreyfus, Swiss-based Glencore International, Elders-Toepfer Grain, Noble Grain and Bunge.

Selwood said he expected Australian wheat to return to its usual markets in Asia if the crop recovers as hoped this year. Typical markets for Australia include Indonesia, Japan, Korea, Malaysia and Thailand.

Forecasters are expecting a wheat crop of around 23.5 million tonnes this year, up from last year's crop of 13.1m tonnes. Australia's worst drought in 100 years halved its wheat crop in the past two years.