The Canadian Wheat Board (CWB) has taken advantage of Australia’s trouble exporting wheat following deregulation of its wheat industry, according to Rick Steinke, the CWB’s director of logistics.
The Australian Wheat Board (AWB) lost its wheat export monopoly June 1, 2008 following the “oil-for-food” scandal. While the Australian government accredited 21 companies to export wheat, in most regions one company dominates grain-handling facilities inland and at port, Steinke said.
Grain traders in a rush to sell wheat and secure their margins ahead of their competitors tried to push more wheat through the pipeline than it could handle, he said. The fact that the companies that owned inland and port terminals were also trying to expand their export sales put them in a conflict of interest with other exporters who had to use those same facilities.
“You don’t have one company marketing and co-ordination exports (as used to be the case with the AWB), but you have one infrastructure company handling the grain,” Steinke said.
“The truth of the matter is we’d have a similar situation here in Canada (if the CWB lost its monopoly), but not to the same degree.”
In Canada, three companies dominate port terminals at the West and East coasts, he said.
Expecting competition from multiple Australian sellers to undercut wheat prices in the Asia-Pacific region, the CWB shifted its focus to other regions. But when some of Australia’s traditional customers had trouble getting their orders filled, they called the CWB.
“We did make additional sales at higher prices when they (Australia) started failing,” Steinke said, but he couldn’t say how much more business there was or how much more there could be in the future.
“But there’s no doubt we took advantage of the opportunities,” he added. “We had a great year on (grain) movement (in 2008-09). We’ve had good service (from grain handlers and the railways).”
Australia’s shipping problems and price undercutting have been widely reported. Last October Bloomberg said Australian prime wheat was being offered at $40 a ton under futures on the Chicago Board of Trade.
Brett Stevenson, managing director and analyst with advisory firm Market Check at Agrisk Management Pty. in Sydney, said it was due to farmers being in a rush to sell.
Last March, Mike Chaseling of the Australian grain-exporting firm Emerald Group Australia Pty. Ltd. said port facilities operated by CBH, were plugged, according to a story published by the Australian newspaper The Land.
Steinke, who visited Australia in June, said there’s pressure to bring in regulations to ensure wheat exports go more smoothly next crop year. For example, owners of port terminals such as CBH will be expected to give other exporters better access.
“I think it will be a bit of a snafu again, but it will be a bit better managed,” he said.
So long as there are many companies selling Australian wheat, there will be price undercutting, especially at harvest time, he added.
The end of the AWB’s monopoly has left the CWB as the world’s only single-desk seller, which has turned out to be a good thing, Steinke said.
“It works to our advantage to not have the Australian Wheat Board there because we can now offer something that others can’t,” he said, such as reliably delivering high-and consistent-quality wheat. [email protected]