November 26, 2003



Australia's AWB Says Global Wheat Market Outlook Good And Eyes China for Sales


Australian wheat exporter AWB Ltd. is confident of an improved global outlook for the grain over the next year that includes a possibility of sales to China, Managing Director Andrew Lindberg said Wednesday.


"Wheat prices remain reasonably good, they've moved up and they have the potential to move even higher," he told a telephone briefing of reporters and others while discussing the company's financial results for last fiscal year ended Sept. 30.


Asked about the likelihood of China purchasing wheat in the short-term, Lindberg told of "all sorts of rumors circulating in the market but I couldn't confirm any of them. We're always talking."


"There remains the tantalizing prospect of potentially some significant sales into China," he said earlier.


Lindberg said he believes China has "quite significantly" rundown its wheat stocks.


AWB sells wheat collectively on behalf of growers through a pooling system.


The company exports most of the wheat it receives from growers, making it a major global supplier, and also trades in the domestic market.


Australian wheat production is set to rebound, with output from the crop now being harvested forecast in a range of 23 million metric tons to 24 million tons, well up from the drought-depleted output of 9.7 million tons from the last crop, he said.


The domestic market for wheat is about 6 million tons, leaving the remainder available for export.


Lindberg said Australia is well placed to sell into China with a freight advantage over northern hemisphere exporters.


China has also been a long-term buyer of Australian wheat, though not much in recent years, he said.


China, the largest producer of wheat in the world, has paid high subsidies to farmers to grow wheat, with the cost of production there twice that in Australia, he said.


Looking at other major countries in the world wheat trade, Lindberg said Argentina appears to be set for a smaller crop than previously thought, while Canada has suffered weather problems.


"We think we're pretty well placed, as is the U.S." he said.


This will also be helped by only limited, if any, sales from non- traditional exporters, such as Russia, Ukraine and other Black Sea exporters, which made up a significant part of world trade in 2002-03, he said.


India and Pakistan are expected to swing to importing from exporting wheat, he said.


Monday, AWB held unchanged its estimate of returns from collective sales of benchmark new crop Australian Premium White type wheat of 10% protein at A$218 a metric ton free on board and exclusive of a 10% goods and services tax.


"There is certainly a reasonable chance that there could be further upside on the price front," Lindberg said of this estimated price.


The company's net profit fell to A$43.9 million last fiscal year ended Sept. 30, from A$107.2 million previously.


The decline largely reflected the impact of the drought on grain production, throughput and revenue, he said.


Net profit this fiscal year is estimated in a range of $110 million to A$120 million, he said.