Issue 33
January 2001

Copyright
Prairie Grains Magazine
January 2001

It’s the largest wheat hedger in the world. It rivals the U.S. for wheat export market share, with an office in Portland (“to keep an eye on the competition”) and the sales mantra “Quality Grain Made To Order.” The Australian Wheat Board is now AWB Limited, a government agency turned top-100 private company. But a key question lingers: Does it hold an unfair advantage in global wheat trade?

AWB Ltd. Joint Ventures
AWB Ltd. has investments in several downstream processing facilities, including a joint venture in a Vietnamese flour mill, and minority shares in Shenzhen Southseas Grains Industries Ltd. in China, and Five Star Flour Mills Co. in Egypt. Earlier this year, AWB won a $10 million contract (about $6 million U.S.) to build a grain terminal at Fangcheng, in southwest China, as part of a World Bank project aimed at modernizing the Chinese grain handling system. Also this year, AWB Ltd. bought a small seed company in Australia, in its effort to become more involved with varietal development.

The company is not rushing to bring genetically-engineered wheat to market, but doesn’t want to pass up opportunities the technology may bring either, especially if it’s adopted by competitors and accepted by customers. That’s why AWB Ltd. invested in Graingene in 1999, a joint venture with Australia’s Grains Research and Development Corporation and the Commonwealth Scientific and Industrial Research Organization, whose agricultural research scope  is similar to that of the USDA’s Agricultural Research Service. The venture is applying gene technology in grain, and it will be at least 5 to 10 years before genetically-engineered wheat will be available, and even then, it is not known now if such a product would even be introduced in the marketplace, according to Joanne O’Connell, the company’s corporate communication advisor.

According to AWB Limited, state or national marketing monopolies in place for years for most of the major grains in Australia contributed to the development of centralized, state-based organizations for grain storage and handling, and for transport. Grain storage and handling in Australia is undertaken primarily by six central system Bulk Handling Companies (BHCs), one in each State. This infrastructure is commonly referred to as the central storage system. As Australia’s grain sector is becoming more privatized, on-farm storage and private commercial storage is is becoming increasingly important in total management of the grain storage and marketing function. virtually all of Australia’s main crops are harvested over large areas in a relatively short period and most of the grain is delivered to the central storage system as soon as practicable after harvest. The nature of grower payment arrangements particularly for wheat within three weeks of delivery to the AWB provides substantial incentive to deliver grain as soon as possible to the central storage system.

Drought hits Western Australia
Australian wheat production this year was plagued by drought in Western Australia, the country’s largest wheat state, and excessive moisture in New South Wales and other areas of Australia’s wheat belt. As a result, Australia’s wheat production for 2000-01 is predicted to be about 19 million metric tons (about 700 million bushels), down from the recently revised 1999-00 figure of 25 MMT (917 mil. bu.) of wheat Australia produced.

AWB vs. CWB
The Australian Wheat Board has often been compared to the Canadian Wheat Board, but they have less in common these days, now that the former has restructured itself as AWB Limited.

AWB Ltd. and the CWB both have a single desk monopoly of wheat exports. Both have pooling payment systems for producers, and coordination of grain movement to ship loading.

However, AWB Ltd. as a new commercial company receives no financial support from the Australian government, while the Canadian government continues to underwrite CWB transactions. AWB Ltd. does not have a monopoly in its domestic market; the CWB does. AWB Ltd. is investing in downstream processing and joint ventures, while the CWB does not have such authority.

Another key difference: Canada shares a border with the United States, a major competitor in many of the same grain markets, which increases the visibility of the CWB and policy changes in Canada.

Could it be possible for the CWB to follow AWB Ltd., and become a privatized company—a CWB Ltd.?

“I think the Canadians would like to try, but it would take a concerted effort on the part of their industry and the government,” says Andrew McConville, manager of government relations and corporate affairs for AWB Limited. A capital base for a privatized operation would be a key. “I think that’s the big thing. It was visionary for Australia to start a capital base 10 years ago. It couldn’t be done overnight, unless the Canadian government put the capital in place,” he says.

Ecotourism a Growing Trend in Australia
Ecotourism is becoming a growing trend in Australia, and one example is Banrock Station, a “wine and wetlands” center on the banks of the Murray River, near the borders of Australian states South Australia and Victoria. The property comprises about 4,000 acres, with 600 acres planted to premium grape varieties for wine production. The remaining land including river frontage and wetlands is being restored to its native state. Banrock Station manager Tony Sharley noted that although many people are interested in wetlands, many people haven’t even seen them. Thus, he is overseeing a $250,000 (U.S.) project that establishes a four-mile river walk on a wetland within Banrock Station. Scheduled for completion in January, it will include interpretive information and an aboriginal theme, as aboriginal artifacts have been found in the area. Only small groups of people will be allowed onto the river walk at a time, to preserve the serenity of the wetlands area, says Sharley.

Harold Clapham is CEO is a young, innovative Australian company called Charlie Carp, which has turned the European carp, a major pest that has infested Australian rivers, into a value-added liquid fertilizer product sold in retail garden outlets. The company has about eight full and part-time employees and contracts with fisherman to catch the carp. The small company has been in business for less than two years and hopes to see its first profit within 18 months.