August 17, 2009

AWB cuts price on 2009-10 wheat

Agribusiness AWB Ltd. late Friday (August 14) cut its estimated pool return on benchmark 2009-10 Australian Premium White grade wheat by A$25 (US$20.59) per tonne to a range of A$265 (US$218.34) to A$275 (US$226.30) per tonne, citing increasing world supply and falling demand.

"When there is so much supply, the buyers hang back and only commit for their immediate needs, hoping for lower prices next time. It's a spiral that continues until there is a shock to break it," Stuart Richardson, a spokesman for AWB's Australian commodity management unit, said in a statement.

Strong production numbers in the US and higher on-year output in Europe have added to global supply. While Russian production is down a little, there is a larger percentage of milling wheat in Ukraine, so there is still a large volume of Black Sea wheat to export, he said.

Add the impact of a strong Australian currency to the equation and "you don’t have an attractive picture for Australian wheat prices in comparison to the last two seasons," he said.

AWB is an important exporter of Australian wheat and its estimated return on collective sales is an important guide for the local industry.

Most official and private forecasts for Australian wheat production this year ending March 31, 2010, are in a range of 22 million to 23 million tonnes.

Australia produced 21.4 million tonnes of wheat in the last crop year. After annual domestic demand of almost 7 million tonnes is met, the balance is available for export, making Australia a major supplier to the global trade.

US$1 = A$1.21 (August 17)