July 12, 2007

 

Australia's AWB to finalise 2005 pool in October
 

 

Australian wheat exporter AWB Ltd. could finalise returns to growers from its collective export sales pool by October, according to Michael Vaughan, the company's manager in New South Wales state. This will mean that cash-strapped farmers would not have to wait longer for their final crop payment on wheat harvested in November and December 2005.

 

A drought in 2006 slashed production and the cost to plant new crops has increased, squeezing growers.

 

Many growers want control of sales of their own wheat, but the domestic market's limited size means the majority have to deliver to government-mandated AWB.

 

Vaughan, writing in Thursday's (Jul 12) edition of The Land weekly farming newspaper, said a sixth distribution from the 2005 pool will be made on Jul 18 and will mean that more than 95 percent of pool equity will have been distributed to growers, with the durum pool payout reaching 100 percent.

 

The total outstanding to be paid from the 2005/06 pool is not clear, as AWB does not publish the amounts of different grades of wheat delivered to it - the value of which varies - but the total pool could run in excess of A$3 billion (about US$2.588 billion).

 

"Remaining equity for other grades will be distributed and the pool finalised in October," Vaughan said in a regular column in the newspaper.

 

Pools normally are closed about 18 months after the crop is harvested.

 

Normal pool finalisation would just involve selling one pool forward into the next, but with the 2006/07 pool so small, due to the drought, too much pricing and execution risk would have been transferred forward, Vaughan said.

 

"Ongoing sales have been reducing the remaining 2005/06 tonnage, so a sell forward will be possible in time for pool finalisation in October," he said.

 

AWB pool managers "believed it was in growers long-term interests to keep servicing premium international customers even during drought."

 

The 2006/07 season was so poor, there were critical shortages of some grades, whereas there was supply still available from 2005/06, and as customers do not want all their annual supply at once, it is spread through the selling year, he said.