australia faces tough choice on wheat exports

Australia faces tough choice on wheat exports

Reuters
Monday, April 9, 2007

SYDNEY: Prime Minister John Howard's slumping popularity in an election year may complicate the looming decision on the future of Australia's wheat export monopoly.

With his government split between total deregulation of wheat exports and retention of the monopoly, Howard could hand down a compromise decision by the end of April.

Despite more than a year of heated debate over the $222 million in kickbacks the Australian Wheat Board paid to secure sales in Saddam Hussein's Iraq, the Australian grain industry is unsure of what the government will do.

The decision on AWB's wheat monopoly, which is strongly opposed by the United States but still passionately supported by a majority of Australian wheat growers, could be made at a cabinet meeting in the week of April 23, according to industry officials.

"The government needs to make a decision on its policy by the end of April to provide certainty for grains producers looking at establishing their cereal crops," said David Ginns, chief operating officer of the Grains Council of Australia, which represents the country's 35,000 wheat growers.

Howard's office had no comment, but the decision on the wheat monopoly is coming to a head as the veteran Australian leader battles a slump in opinion polls at the hands of the new Labor leader, Kevin Rudd, who fiercely accused the government last year of complicity in the AWB scandal.

"It's a political thing now. If the government was ahead in the polls, it would be a certainty the wheat board would be gone," one grain trader said, asking that he not be identified.

Rural National Party members of the coalition government are acutely aware of "extremely emotional" support for the monopoly, the trader added.

But Howard would also be vulnerable in the national election campaign if he gave in to the Nationals and left the monopoly unchanged with AWB, one wheat industry analyst said.

This leaves either deregulation or retention of the disgraced AWB monopoly unlikely, industry insiders say. Howard is then left with a choice between placing control of exports with a regulatory body, such as the government-appointed Wheat Export Authority, or possibly with a renamed AWB International, which would split from AWB.

Under the Wheat Export Authority solution, exports would most likely be carried out by the so-called "Four Sisters" - AWB, the Western Australian grain group CBH, ABB Grain and the eastern grain group GrainCorp.

The Wheat Export Authority could also possibly allow exports by international grain giants such as Cargill of the United States. This would allow Howard to say he had retained a "single desk" for wheat, under the Wheat Export Authority, while also throwing the industry open to greater competition.

"There are many definitions out there of what a single desk is," Alick Osborne, a director of the Australian Grain Exporters Association, said.