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Wheat imports loom as drought bites

Published on 15 November, 2006, Last updated at 00:51 GMT

By Deborah Cameron
Sydney Morning Herald

Australia will import grain to offset a national wheat shortage due to crop failure and for the first time in 10 years faces buying wheat on the international market to honour massive export contracts.

"The drought has had a very, very serious impact on our winter crop," the Minister for Trade, Warren Truss, said yesterday in Tokyo.

There will be no exportable surplus from grain growers in the eastern states and much of the West Australian wheat crop was earmarked for export, he said.

"It is actually cheaper to bring wheat or other grain, probably maize, from other parts of the world to the east coast than it is to shift grain from the west coast to the east," Mr Truss said.

Australia has pledged to major customers in Japan, Korea and Indonesia that it will meet forward orders. Even so, Australian exports would fall, the minister said.

The wheat industry expects the Australian wheat stockpile of about 3 million tonnes from last year's crop will be exhausted by export demand.

"There is some carry-over so I am hopeful that we will be able to honour the fundamental and very important contracts with countries like Japan and Korea but there will certainly be a lot of competition for wheat within Australia and around the world," said Mr Truss, who was in Tokyo for trade negotiations.

Imports would be needed to sustain cattle feedlots, he said.

Australia is usually self-sufficient in grain. It has a share of about 16 per cent of the export wheat trade and is a major source of grain and flour in Asia, where it is mainly used by manufacturers of noodles.

Demand from Asian markets for wheat has increased. In Indonesia consumption of noodles rose 23 per cent in the first half of this year. Demand for bread is growing, too. This means the drought could not have come at a worse time.

New markets such as India have become heavy buyers of wheat and have "sopped up quite a bit" of the world wheat surplus, Mr Truss said.

Australia may have to protect its existing orders and market share by sending wheat bought elsewhere, possibly Argentina, where crops are recovering from drought, analysts believe.

"Nobody gives a damn where they get this or that wheat from as long as the seller fulfils the contract with the buyer - that's the main thing," said Bryce Bell, a former grains industry executive and historian.

It was likely that wheat bought by Australia would be shipped from wherever it was grown in the world directly to its contracted destination, said Mr Bell, who is the author of a book about the industry, A Grain of Truth.

A spokesman for the monopoly wheat exporter, AWB, said Australia had rarely been put in the position of buying wheat and other grains.

"It is only ever because of drought and the last time was in 1995 and 1996, and I don't remember a time before that," the spokesman said.

In September the Australian Bureau of Agricultural and Resource Economics forecast a drop in wheat production of at least 35 per cent.


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