Poor crop, deregulation threaten wheatRay Brindal, Dow Jones...

Poor crop, deregulation threaten wheat
Ray Brindal, Dow Jones Newswires | September 14, 2007

A COMBINATION of another poor wheat crop and deregulation of exports in containers could bring Australia's bulk export trade near to collapse, Australia's biggest wheat grower says.

Ron Greentree said yesterday while bulk exports would not disappear, they would contract with a drought-reduced crop, compounding the impact of a commercial advantage container exports now enjoyed over high-cost bulk freight rates.

Moreover, the expected fall in bulk exports would highlight the futility of some growers trying to set up a new system to regulate this trade when control of it was stripped by law from AWB after it marketed the new crop, said Mr Greentree. He has long criticised AWB's historical stranglehold over bulk wheat exports.

"You'll still have some bulk," he said. "But what you've got is all these overseas customers now that are so happy to be able to deal with someone besides AWB and are busting to do a trade with someone else and would even pay a bit of premium not to use AWB because they've been shafted for so many years."

In bumper crop years, Australia's wheat exports can exceed 17million tonnes in volume and, if world prices are high, almost $5billion in value. But coming exports will not reach anything like that, with Mr Greentree estimating new crop production at 12.5million tonnes, if achieved, up from 9.8 million tonnes produced from the drought crop last year but half the 2005 harvest.

Mr Greentree estimates domestic demand of 8 million tonnes, though AWB puts it at 7million tonnes, leaving the balance available for export at about 5 million tonnes.

Container exports were deregulated on August 27, and he reckons up to 4 million tonnes could be exported from the new crop, more than quadrupling from the 2005 crop, given the 200,000 surplus shipping containers that have left Australia empty each year.

"There's a bit of a charge on to get into this trade now, and there would have been a bigger charge if there was some wheat," Mr Greentree said. The big grower held back his 2006 harvest and is well placed to export in containers, which he estimates could handle 40,000 tonnes in the coming year.

He has bids priced out to Japan, Vietnam, Israel and Singapore, just four of 12 countries from which he has fielded inquiries in recent weeks, and appears to be enjoying selling his produce into a world market that touched record prices earlier this week.

The Australian price, as measured by the ASX January 2008 milling wheat futures contract, has doubled since April.

The bulk freight rate to Japan stands at about $65 to $70 per tonne compared with $40 a tonne for containers, he said.

So with large quantities of wheat consumed domestically and the container trade to boom, Mr Greentree finds it hard to understand why the Wheat Export Marketing Alliance, or WEMA, bothers to try to set up a new system to regulate bulk exports.

WEMA, an alliance of grower lobbies, was set up after John Howard told growers in May that they had until March 1 next year to set up a new entity completely separate from AWB to control wheat exports from Australia.

Noting the size of the domestic market and expected container exports, "why would WEMA want to set something up when the majority is going to be sold by farmers in deregulated markets?" Mr Greentree said.

WEMA is seeking grower donations to build the company structure, engage skilled staff and provide it with working capital.

"This will be the best survey of how much growers want the single desk," Mr Greentree said.

"How many times do we have to keep doing it?" having set up the Wheat Industry Fund to capitalise AWB, he asked.

"Farmers will say 'Go jump in the lake'."

http://www.theaustralian.news.com.au/story/0,25197,22414075-643,00.html