December 18, 2003


Australia Pursuing Wheat Sales to China


Australia is hoping to export a huge chunk of its bumper 2003/04 wheat crop to China. AWB Ltd, Australia's monopoly wheat exporter, has been unable to break into the Chinese market as yet despite its best efforts. But AWB is aggressively pushing sales following news that China could import more wheat because of its poor domestic harvest,


Regional grain traders said Australia might be pricing its wheat competitively to get a chunk of the Chinese market, which is expected to import up to three million tons of wheat in 2004. Out of that, traders are expecting China to buy at least one million tons from the United States.


"I think China will definitely step in to buy wheat from Australia soon. Australia will provide a tough challenge to the United States and Canada," said one Singapore-based trader.


China, which is struggling to rein in domestic food prices amid eroding grain stocks, has decided to buy 500,000 tons of Canadian wheat for 2004 delivery.


Australia has harvested more than 70% of an expected crop of about 24 million tons in 2003/04, its second-biggest crop ever. Drought cut last year's harvest to around 10 million tons.


According to Chinese customs data, the country imported 320,157 tons of wheat in the January to October period, about 46% less than a year earlier.


It is difficult to get exact prices at which AWB offers wheat to its customers but traders said Australia might be quoting prices of around $200 a ton C&F, while the landed cost of U.S wheat would work out to be around $210 a ton.


The surging freight market may make Australian wheat all the more attractive in most Asian nations, regional traders said.


"There are not many origins this year and Australia will continue to have a bit of an advantage compared with U.S. or Canadian wheat in this region," said one Singapore trader. "They have a lot to offer and can afford to price it competitively."


Peter McBride, a spokesman for AWB Ltd, said the company would continue to talk to the China National Cereals, Oils and Foodstuffs Import and Export Corporation (COFCO), the state-run grain trading agency, to explore business possibilities.


"We are always making efforts into potential markets like China and we will continue to talk to COFCO," McBride told Reuters. "But we haven't secured anything as yet."


The comments from AWB come after statements last week from COFCO vice-president Yu Xubo that China might import more wheat in 2004 because of poor domestic crops. China's fall-seeded crop is forecast to be smaller than last summer's production of 82 million tons.


McBride declined to comment on the volumes already contracted out of the new crop but said overseas demand was strong.


"Our marketing program is progressing very well. We are very satisfied with our forward sales."

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