Australia has almost finished harvesting a small drought-hit wheat crop as the grains industry is in turmoil following a government decision to strip monopoly AWB Ltd of its power to veto exports by rivals.
Wheat prices, which have stabilised after rocketing to Multi-year highs because of reduced supplies, are poised to rise again if the Australian government authorises groups other than AWB to export, grains brokers said.
After an Australian judicial inquiry found that AWB had deceived the United Nations by channelling $222 million worth of kickbacks to Saddam Hussein's Iraq to secure sales, Australian Prime Minister John Howard announced this week that the export veto would be transferred to Agriculture Minister Peter McGauran.
This would cover a six-month period when the government will consult with industry over changes to Australia's monopoly wheat export system, following AWB's Iraq kickback scandal.
The government transfer of the veto is also a circuit-breaker in an increasingly hostile standoff between Western Australian grains handler and trader Co-operative Bulk Handling and AWB, after AWB vetoed two applications by CBH to export 2 million tonnes of wheat to its own flour mills in Southeast Asia.
CBH said this week it would re-apply to McGauran to export the wheat. Phil Holmes, a director of grains broker and analyst Farmarco, told Reuters on Friday that Australian wheat prices could rise by a further A$20 ($16) a tonne if export licenses were issued to CBH or others.
This would come about through a further reduction of supplies for the Australian market, where drought-induced grain shortages have already sent wheat prices rocketing in October to a high of almost A$350 a tonne from about A$210 in August.
Prices have since stabilised around A$305. "A lot does hinge on what the Wheat Export Authority recommends to the government," Holmes said.
The government-appointed Wheat Export Authority, a toothless tiger in the past AWB-dominated system, is expected to have a greatly expanded influence on export decisions by government.
AWB and CBH are competing to attract every possible grain of wheat into their pools as harvesting draws to a close very quickly this year of a drought-depleted crop of between 9.5 and 10.0 million tonnes. CBH has been offering premium prices to growers and urging Western Australian growers to warehouse their wheat rather than sell it to AWB.
AWB this week also increased prices offered to farmers to deliver into its export pool. AWB said on Monday that deliveries to its 2006/07-export pool were approaching 1 million tonnes. On Wednesday, after the government announced that it would take the monopoly from AWB, the exporter said that if it did not get the 4 million tonnes it was aiming for into its export pool, prices for farmers and the group's profits could both be hit.
AWB spokesman Peter McBride told Reuters on Friday that the company was still aiming to attract 4 million tonnes. He denied a report in an Australian specialist newspaper that if CBH were allowed to export it would raise the risk of AWB defaulting on its forward sales programme. AWB was only selling wheat that was received, he said.