October 23, 2008


AWB secures 800,000 tonnes early commitment to wheat pools



AWB Ltd. (AWB.AU) Managing Director Gordon Davis said late Wednesday (October 22) he was pleased with an 800,000 tonnes early commitment of new crop wheat by growers to the agribusiness' collective sales pools.


Global demand for wheat is "very strong" and AWB has made sales to a range of different countries in anticipation of the harvest, he also told reporters.


These sales are predominantly to buyers in Asia and the Middle East, a company spokesman said Thursday.


To assist growers to market their wheat, AWB offers separate collective sales pools in eastern and western regions of Australia, as well as cash and various risk management options. It is one of a number of companies offering growers these sort of marketing choices.


"We believe that pooling will continue to be popular amongst growers who like the ability to participate in a market over time with regular distribution payments," Davis said in a separate statement.


In committing to a pool, growers outsource their marketing to AWB or another company, spreading sales risk through the year.


AWB charges a 1.75 percent management fee on gross pool returns.


"Growers and marketers will be operating carefully in the new deregulated environment until they understand how wheat prices and the supply chain perform in 2009," he said.


Bulk wheat exports were liberalized from July 1, ending AWB's longstanding monopoly over bulk wheat exports, giving growers a choice as to who exports their produce for the first time since World War II.


Regulator Wheat Exports Australia said Monday that 16 companies are now accredited as bulk exporters, and it is considering another half dozen applications, including Emerald Group Australia, which also is offering a pool product in Western Australia state.


AWB's export pool peaked earlier this decade at almost 18 million tonnes, but the company managed only 4.35 million tonnes from a drought affected crop of 13 million tonnes harvested late in 2007.


Davis said AWB's business strategy remains focussed on building margins rather than volume of market share.


Production from an Australian wheat crop to be harvested by year end is broadly in a range of 19 million tonnes-23 million tonnes. After annual domestic demand of about 7 million tonnes is met, the rest is available for export, usually making Australia a major supplier to the global wheat trade.

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