December 17, 2007

 

Australia AWB lifts estimated returns on export wheat sales

 

 

Australian wheat exporter AWB Ltd. (AWB.AU) on Monday (December 17, 2007) again lifted its estimate of pool returns for the crop to be harvested by about year end, citing ongoing strength in the global wheat market.

 

AWB's estimated gross return on its No. 1 pool for new crop benchmark Australian Premium White grade of 10.5 percent protein rose A$5 from the last review a week ago to A$423/ tonne, free on board, Australian Prime Hard grade of 13 percent protein rose A$5 to A$438/tonne, Feed grade rose A$10 to A$315/tonne and Australian Premium Durum rose A$5 to an estimated A$605/tonne.

 

The rise for the No. 1 pool benchmark grade returns extends gains from A$385/tonne in mid-November.

 

Estimated returns on all grades in a No. 2 pool for the current crop rose A$7/tonne, with the benchmark grade now estimated to return A$403 and Australian Prime Hard A$418.

 

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

 

David Johnson, general manager of AWB's pools, said while the international wheat price continues to rise, buyers are reluctant to lock in significant tonnages at the current high prices as their flour margins are negligible.

 

"While we have locked in significant sales over the past few months, many buyers are shying away from the current high prices," he said in a statement. "The AWB national pool expects the international wheat market to remain extremely tight for the first half of 2008 until the northern hemisphere wheat comes on line."

 

A weaker Australian currency over the past week remains a positive influence, with AWB's hedging program structured in a way to take advantage of a lower Australian dollar, he said.

 

AWB held unchanged its estimate of pool returns for the 2006 crop, with the benchmark grade steady at an estimated gross return A$239.50/tonne gross, FOB.

 

Australian wheat production is facing another poor year, with industry estimates focussing on a crop of around 12 million to 13 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 December 24.

 

A$1 = US$0.8587 (Dec. 17 2007)