October 15, 2007

 

Australia's AWB cuts estimated returns on export wheat sales

 

 

Australian wheat exporter AWB Ltd. (AWB.AU) cut its estimate of pool returns for some grades of the new crop to be harvested by year end, reflecting the impact of a retracement from high levels for wheat futures on the Chicago Board of Trade (CBOT).

 

AWB cut its estimated gross return on new crop benchmark Australian Premium White grade of 10.5 percent protein by A$12 (US$10.87) to A$393/ tonne (US$356.25), FOB, while Australian Prime Hard grade of 13 percent protein was reduced A$5 to A$413/tonne.

 

The estimated gross return for new crop Australian Premium Durum was held unchanged at A$500/tonne while new crop Feed grade was cut A$12 to A$323/tonne.

 

David Johnson, general manager of the pool, said AWB now is "actively marketing and hedging" the new crop.

 

So, while the estimate for benchmark grade has declined and a strengthening Australian dollar isn't helpful, a stronger wheat basis has assisted in making the change much less than the fall in Chicago futures in the same period would indicate, he said in a statement.

 

"We are actively managing our hedge positions. They are performing well at this time and we are making physical sales, which will keep moving forward as harvest progresses," he said.

 

New crop wheat is being sold into a market with low global stocks, which is helping support prices at high levels for late 2007 and early 2008, he said.

 

Johnson said AWB wants growers to commit their wheat early to AWB's pools so it can better plan and manage the sales program, which will be crucial to capturing these high prices.

 

AWB also lifted its estimate of returns for the 2006 crop by A$5/tonne for all grades except durum, with the benchmark grade now estimated to return A$239.50/tonne gross, a rise it attributed to strong sales.

 

AWB, the majority exporter from Australia, pools returns from its export wheat sales and deducts costs before paying producers. Sales from a pool can continue for more than 18 months after harvest, depending on production and demand.

 

Australian wheat production is facing another poor year with the industry focussing on a crop of about 12 million tonnes, up from an actual 10 million tonnes in 2006 but still only about half of the 25 million tonnes produced in 2005.

 

After domestic wheat demand of around 7 million tonnes is met, the balance is available for export, usually making Australia a major global supplier of wheat.

 

The next pool estimate update is scheduled for October 29.

 

US$1 = A$1.1031

As of October 15, 2007