October 17, 2006

Australia's AWB denies major losses from US wheat rally
 

Australian wheat exporter AWB Ltd has acknowledged it has been impacted, but has not suffered in any major way from last week's strong rally in US wheat futures.

Peter McBride, a company spokesman, said like all major global wheat trading companies, AWB has been affected by a strong rally and volatility in international wheat futures in the past week.

"We're closely monitoring the situation and will inform the market of any material developments," McBride told Dow Jones late Monday (Oct 16).

Australian newspapers reported Tuesday that AWB is believed to have forward-sold as much as half of its wheat on Chicago Board of Trade and could face losses of up to A$100 million (US$75 million) if it fails to get wheat from Western Australian growers and is forced to buy grain at higher prices to cover the contracts.

Craig James, chief economist at Commonwealth Securities Ltd, said investors were worried about the impact of the wheat futures rally on any possible forward wheat sales the company had made from the new crop.

"It's in the company's interest to clarify the situation and make sure that investors don't go unduly speculating about its financial position," he said.

Production from the Australian wheat harvest now getting underway is expected to fall sharply in the face of a severe drought, with analysts focusing on output of around 10 million tonnes, down about 60 percent from production of 25 million tonnes last crop year.

AWB operates a range of commodity and currency hedging programmes to support its operation of a monopoly over wheat exports from Australia.