Required Report - public distribution

**Date:** 3/23/2005

**GAIN Report Number:** AS5008

AS5008

**Australia**

**Grain and Feed**

**Annual**

**2005**

**Approved by:**

![](media/image1.wmf)Andrew C. Burst, Agricultural Counselor

U.S. Embassy

**Prepared by:**

Mike Darby, Agricultural Specialist

**Report Highlights:**

Wheat and barley production are both forecast to rise in 2005/06, due
primarily to more favorable weather conditions. The larger crops are
expected to allow exports to also rise in 2005/06. Sorghum production in
2006/07 is forecast at a near-record level, while rice production is
forecast to rise from a depressed level. Sorghum exports should remain
at a relatively high level, while rice exports are expected to rise. The
Australian Government continues to pressure the state-based export
monopolies to reform.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Canberra \[AS1\]

\[AS\]

Table of Contents

[**SECTION ONE: SITUATION AND OUTLOOK
3**](#section-one-situation-and-outlook)

[Single Desk Exporters Pressured by Productivity Council
4](#single-desk-exporters-pressured-by-productivity-council)

[Agricultural Biotechnology -- Go-Slow Approach for Food Grains
4](#agricultural-biotechnology-go-slow-approach-for-food-grains)

[Australia Actively Pursuing Free Trade Agreements
5](#australia-actively-pursuing-free-trade-agreements)

[Government Export Credits 5](#government-export-credits)

[SECTION TWO: STATISTICAL TABLES 6](#section-two-statistical-tables)

[SECTION THREE: NARRATIVE ON SUPPLY AND DEMAND, POLICY & MARKETING
11](#section-three-narrative-on-supply-and-demand-policy-marketing)

[WHEAT 11](#wheat)

[Area 11](#area)

[Yield 11](#yield)

[Production 12](#production)

[Exports 12](#exports)

[Stocks 13](#stocks)

[Consumption 13](#consumption)

[Prices 13](#prices)

[Marketing Arrangements 14](#marketing-arrangements)

[BARLEY 15](#barley)

[Area 15](#area-1)

[Yield 15](#yield-1)

[Production 16](#production-1)

[Exports 16](#exports-1)

[Stocks 17](#stocks-1)

[Consumption 17](#consumption-1)

[Prices 17](#prices-1)

[Marketing Arrangements 17](#marketing-arrangements-1)

[SORGHUM 19](#sorghum)

[Area 19](#area-2)

[Yield 19](#yield-2)

[Production 20](#production-2)

[Exports 20](#exports-2)

[Marketing Arrangements 21](#marketing-arrangements-2)

[RICE 21](#rice)

[Area 21](#area-3)

[Yield 22](#yield-3)

[Production 22](#production-3)

[Exports 22](#exports-3)

[Marketing Arrangements 23](#marketing-arrangements-3)

[PULSES 23](#pulses)

[RECENT GAIN REPORTS ON GRAIN 25](#recent-gain-reports-on-grain)

[APPENDIX: Grain Stock and Consumption Estimates
26](#appendix-grain-stock-and-consumption-estimates)

[Grain Stocks 26](#grain-stocks)

[Grain Consumption 26](#grain-consumption)

# SECTION ONE: SITUATION AND OUTLOOK

Climatic conditions appear to have returned to more normal patterns,
following severe drought in 2002-03. Post assumes normal weather
conditions in forecasting production levels for both the upcoming winter
(2005/06) and summer crops (2006/07). Sharply depleted irrigation water
reserves are expected to continue to constrain rice production.

Current conditions indicate a fairly normal start to the main, 2005/06
winter crop (wheat and barley) growing season. Planting of this crop has
commenced, and will likely continue for the next three months. Prices
received for winter crops are forecast to decline somewhat from record
levels achieved in recent years.

Winter grain production prospects for 2005/06, including wheat and
barley, are currently more favorable than a year-earlier. Production of
wheat in 2005/06 is forecast at 23 MMT, up from an estimated 20.5 MMT,
while barley production is forecast at 7.3 MMT, up from the previous 6.5
MMT. These production forecasts assume normal weather conditions during
the planting, growing and harvesting season. The more favorable
production prospects for wheat and barley are expected to result in a
rise in exports in the 2005/06 marketing years. The 2005/06 winter grain
crop is currently being planted and will be harvested beginning later in
the year.

The 2005/06 summer grain harvest is currently ongoing and will continue
over the next several months. Sorghum production is forecast at a record
2.25 MMT, up from the previous year that was also a bumper crop. Rice
production in 2005/06 is forecast at 431,000 MT (milled basis), the
smallest crop since the mid-1970's. Shortages of irrigation water
continue to constrain rice area. Sorghum exports in 2005/06 are
projected at near-record levels, while rice exports are expected at
near-record lows of recent years.

The 2006/07 summer grain crop will not be planted until late in the
year, into the early part of 2006. At this early date, sorghum
production is expected to stay at a near-record level, while some
recovery is expected in rice production due to an anticipated slow
recovery in irrigation water reserves.

The Australian dollar has strengthened significantly against the U.S.
dollar in recent years. This upward movement, combined with mostly
softer world grain prices, has substantially trimmed export returns for
Australian grain when converted to Australian dollars. The Australian
dollar, which is now trading at about US\$0.79, traded at an average of
US\$0.74 in 2004, US\$0.652 in 2003, US\$0.559 in 2002, and only
US\$0.512 in 2001.

![](media/image2.wmf)

*Source: ABARE data.*

## Single Desk Exporters Pressured by Productivity Council

Much of Australia's grain is exported under government-sanctioned
'single desk' marketing arrangements. On this front, a
government-appointed panel conducted a formal review of the management
and regulation of Australia's single desk wheat export arrangements in
2004. The panels report, released in October 2004, is not likely to have
a material impact on AWB Ltd's bulk wheat export monopoly. Pressure from
the Commonwealth's National Competition Council, under National
Competition Policy agreements, continues to drive reform in state export
monopoly arrangements for barley, canola and lupins in Western
Australia, with the Council exerting similar pressure for reforms in
export monopoly arrangements for barley in South Australia. In New South
Wales, export monopolies for barley, sorghum and canola are due to be
eliminated in September 2005.

The Australian grain sector will soon be characterized by four major
markets with single-desk exports -- national for wheat; Western
Australia for barley, canola and lupins; South Australia for barley; and
New South Wales for rice. The National Competition Council appears to
more-or-less approve of the grain export arrangements that have been put
in place in Western Australia. Under this system, a single entity has
control of most of the state's exports of barley, canola and lupins, but
a monitoring body is allowing competing exports under certain
conditions. It appears likely that this type of model may well emerge in
South Australia. For rice, the Council is not exerting pressure on the
single desk export rights in the State of New South Wales.

## Agricultural Biotechnology -- Go-Slow Approach for Food Grains

The Gene Technology Act of 2000 established Australia's current
regulatory regime for dealings with gene technology and genetically
modified organisms. The Commonwealth's Office of the Gene Technology
Regulator (OGTR) serves the key role in regulating and licensing GMOs
and monitoring and enforcing license conditions. To date, biotech
cotton, color modified carnations and canola varieties are the only
agricultural crops approved for commercial release into the environment,
while biotech cotton is the only crop grown widely in the country.

Most Australian states and territories (using their powers over
commodity 'marketing') have recently moved to restrict or ban the
commercial planting of biotech crops in their jurisdictions. Biotech
canola, which OGTR approved for commercial release in 2004, has been the
driving force behind most of these restrictions. The AWB Group (wheat
export monopoly), the Australian dairy industry, among others, have
voiced serious concerns about introducing biotech canola and have
advocated for a 'go-slow' approach, largely because of the potential
impact biotech canola could have on their business.

Research is being conducted on other biotech crops, with OGTR-controlled
field trials being conducted on some, i.e., rice, white clover,
narrow-leafed lupin, grapevines, pineapple, papaya, sugarcane and
poppies. OGTR is currently assessing applications for field trials for
biotech wheat, while field trials of other biotech wheat varieties were
conducted dating back to 1996. Presently, however, there is significant
resistance to any commercial growing of biotech wheat. AWB, for example,
expresses concern about biotech wheat's potential impact on its existing
export markets and argues that commercial releases shouldn't go forward
until market preferences change and/or the supply chain can guarantee
segregation.

This commercial resistance and the restrictions in place in the states
and territories are clearly slowing the introduction of the technology.
The Australian cotton crop is over 80 percent biotech, and there is
little controversy concerning its cultivation. Indeed, the significant
decline in pesticide and herbicide use for this crop has been widely
reported. The experience with biotech canola would seem to indicate that
it could be some time before Australia has large-scale commercial
plantings of biotech wheat, or any other biotech food grain crop, even
when varieties have met the approval of OGTR.

## Australia Actively Pursuing Free Trade Agreements

Australia has been very active in negotiating free trade agreements
(FTAs) of late. An FTA was implemented with Singapore in 2003, and with
Thailand and the United States in 2005. Under these agreements,
Australia agreed to immediately eliminate essentially all import tariffs
on agricultural products.

Under the Thailand-Australia FTA, Thailand agreed to immediately
eliminate import tariffs on Australian wheat and barley, while tariffs
on wheat flour and gluten, and milling and bakery products will be
phased to zero in 2010. Prior to the FTA, Australian wheat faced a Thai
ad valorem import tariff equivalent to about 12-20 percent, while the ad
valorem barley tariff was equivalent to up to 25 percent. Thailand's
tariffs on wheat flour and gluten, and milling and bakery products range
from 30-56 percent.

In the Australia-U.S. FTA, both countries agreed to "work together to
reach an agreement on agriculture in the WTO that substantially improves
market access for agricultural goods, reduces, with a view to phasing
out, all forms of agricultural export subsidies, develops disciplines
that eliminate restrictions on a person's right to export, and
substantially reduces trade-distorting domestic support."

Australia is now pursuing additional FTAs with a number of countries,
including Malaysia, the Association of Southeast Asian Nations, China
and most recently the United Arab Emirates. Importantly, FTAs with these
countries would be expected to provide Australia with preferential
access for grain and products in some key export markets.

Australia has a long-standing Closer Economic Relations Trade Agreement
with New Zealand that also provides significant bilateral trade
concessions.

## Government Export Credits

The Export Finance and Insurance Company (EFIC), which is owned by the
Commonwealth of Australia, provides financial support for Australian
exporters of goods and services. EFIC provides export finance,
insurance, risk management services and advice. EFIC's focus is in areas
where the private market lacks capacity or willingness, 'market gap'.

A National Interest Account (NIC) is maintained for cases where the size
or risk of the credit exceeds EFIC's operating parameters. In these
cases, the Minister of Trade makes the transaction decision and the
Commonwealth carries the direct liability. The NIC has traditionally
been used to provide export credit support for wheat and other
commodities to difficult markets. EFIC left the short-term 'Commercial
Account' export credit insurance business in 2004, turning this over to
a commercial provider.

There is little publicly available information on EFIC transactions,
particularly on credit/finance terms.

# SECTION TWO: STATISTICAL TABLES

+--------------------+-----+------+-----+------+-----+------+------+
| PSD Table          |     |      |     |      |     |      |      |
|                    |     |      |     |      |     |      |      |
| Wheat              |     |      |     |      |     |      |      |
+--------------------+-----+------+-----+------+-----+------+------+
|                    | **  | **R  | **  | **Es | **  | **Fo | *    |
|                    | 200 | evis | 200 | tima | 200 | reca | UOM* |
|                    | 3** | ed** | 4** | te** | 5** | st** |      |
+--------------------+-----+------+-----+------+-----+------+------+
|                    | **U | **   | **U | **   | **U | **   |      |
|                    | SDA | Post | SDA | Post | SDA | Post |      |
|                    | Of  | Esti | Of  | Esti | Of  | Esti |      |
|                    | fic | mate | fic | mate | fic | mate |      |
|                    | ial | \    | ial | \    | ial | \    |      |
|                    | \[O | [New | \[O | [New | \[O | [New |      |
|                    | ld\ | \]** | ld\ | \]** | ld\ | \]** |      |
|                    | ]** |      | ]** |      | ]** |      |      |
+--------------------+-----+------+-----+------+-----+------+------+
| **Market Year      |     | **1  |     | **1  |     | **1  | *    |
| Begin**            |     | 0/20 |     | 0/20 |     | 0/20 | MM/Y |
|                    |     | 03** |     | 04** |     | 05** | YYY* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Area Harvested** | 13  | 1    | 12  | 1    | 0   | 1    | *(   |
|                    | 024 | 3024 | 200 | 1991 |     | 1850 | 1000 |
|                    |     |      |     |      |     |      | HA)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Beginning        | 3   | 1708 | 5   | 4603 | 4   | 3663 | *(   |
| Stocks**           | 142 |      | 459 |      | 434 |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Production**     | 26  | 2    | 21  | 2    | 0   | 2    | *(   |
|                    | 231 | 6231 | 500 | 0500 |     | 3000 | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **TOTAL Mkt. Yr.   | 73  | 59   | 75  | 60   | 0   | 60   | *(   |
| Imports**          |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Jul-Jun          | 71  | 60   | 75  | 60   | 0   | 60   | *(   |
| Imports**          |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Jul-Jun Import   | 0   | 0    | 0   | 0    | 0   | 0    | *(   |
| U.S.**             |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **TOTAL SUPPLY**   | 29  | 2    | 27  | 2    | 4   | 2    | *(   |
|                    | 446 | 7998 | 034 | 5163 | 434 | 6723 | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **TOTAL Mkt. Yr.   | 18  | 1    | 17  | 1    | 0   | 1    | *(   |
| Exports**          | 031 | 7895 | 000 | 6000 |     | 6800 | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Jul-Jun          | 15  | 1    | 17  | 1    | 0   | 1    | *(   |
| Exports**          | 096 | 5104 | 000 | 6800 |     | 6500 | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Feed Dom.        | 3   | 2500 | 2   | 2500 | 0   | 2600 | *(   |
| Consumption**      | 231 |      | 900 |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **TOTAL Dom.       | 5   | 5500 | 5   | 5500 | 0   | 5600 | *(   |
| Consumption**      | 956 |      | 600 |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Ending Stocks**  | 5   | 4603 | 4   | 3663 | 0   | 4323 | *(   |
|                    | 459 |      | 434 |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **TOTAL            | 29  | 2    | 27  | 2    | 0   | 2    | *(   |
| DISTRIBUTION**     | 446 | 7998 | 034 | 5163 |     | 6723 | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+

+--------------------+-----+------+-----+------+-----+------+------+
| PSD Table          |     |      |     |      |     |      |      |
|                    |     |      |     |      |     |      |      |
| Barley             |     |      |     |      |     |      |      |
+--------------------+-----+------+-----+------+-----+------+------+
|                    | **  | **R  | **  | **Es | **  | **Fo | *    |
|                    | 200 | evis | 200 | tima | 200 | reca | UOM* |
|                    | 3** | ed** | 4** | te** | 5** | st** |      |
+--------------------+-----+------+-----+------+-----+------+------+
|                    | **U | **   | **U | **   | **U | **   |      |
|                    | SDA | Post | SDA | Post | SDA | Post |      |
|                    | Of  | Esti | Of  | Esti | Of  | Esti |      |
|                    | fic | mate | fic | mate | fic | mate |      |
|                    | ial | \    | ial | \    | ial | \    |      |
|                    | \[O | [New | \[O | [New | \[O | [New |      |
|                    | ld\ | \]** | ld\ | \]** | ld\ | \]** |      |
|                    | ]** |      | ]** |      | ]** |      |      |
+--------------------+-----+------+-----+------+-----+------+------+
| **Market Year      |     | **1  |     | **1  |     | **1  | *    |
| Begin**            |     | 1/20 |     | 1/20 |     | 1/20 | MM/Y |
|                    |     | 03** |     | 04** |     | 05** | YYY* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Area Harvested** | 4   | 4404 | 3   | 4159 | 0   | 4170 | *(   |
|                    | 404 |      | 800 |      |     |      | 1000 |
|                    |     |      |     |      |     |      | HA)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Beginning        | 948 | 873  | 1   | 1720 | 1   | 1024 | *(   |
| Stocks**           |     |      | 787 |      | 337 |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Production**     | 10  | 1    | 7   | 6454 | 0   | 7300 | *(   |
|                    | 287 | 0287 | 000 |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **TOTAL Mkt. Yr.   | 0   | 0    | 0   | 0    | 0   | 0    | *(   |
| Imports**          |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Oct-Sep          | 0   | 0    | 0   | 0    | 0   | 0    | *(   |
| Imports**          |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Oct-Sep Import   | 0   | 0    | 0   | 0    | 0   | 0    | *(   |
| U.S.**             |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **TOTAL SUPPLY**   | 11  | 1    | 8   | 8174 | 1   | 8324 | *(   |
|                    | 235 | 1160 | 787 |      | 337 |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **TOTAL Mkt. Yr.   | 6   | 6374 | 3   | 3900 | 0   | 4200 | *(   |
| Exports**          | 398 |      | 800 |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Oct-Sep          | 6   | 6300 | 3   | 3950 | 0   | 4150 | *(   |
| Exports**          | 105 |      | 800 |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Feed Dom.        | 2   | 2134 | 2   | 2200 | 0   | 2250 | *(   |
| Consumption**      | 150 |      | 700 |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **TOTAL Dom.       | 3   | 3066 | 3   | 3250 | 0   | 3300 | *(   |
| Consumption**      | 050 |      | 650 |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Ending Stocks**  | 1   | 1720 | 1   | 1024 | 0   | 824  | *(   |
|                    | 787 |      | 337 |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **TOTAL            | 11  | 1    | 8   | 8174 | 0   | 8324 | *(   |
| DISTRIBUTION**     | 235 | 1160 | 787 |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+

+-------------------+-----+------+-----+------+-----+------+------+
| PSD Table         |     |      |     |      |     |      |      |
|                   |     |      |     |      |     |      |      |
| Sorghum           |     |      |     |      |     |      |      |
+-------------------+-----+------+-----+------+-----+------+------+
|                   | **  | **R  | **  | **Es | **  | **Fo | *    |
|                   | 200 | evis | 200 | tima | 200 | reca | UOM* |
|                   | 3** | ed** | 4** | te** | 5** | st** |      |
+-------------------+-----+------+-----+------+-----+------+------+
|                   | **U | **   | **U | **   | **U | **   |      |
|                   | SDA | Post | SDA | Post | SDA | Post |      |
|                   | Of  | Esti | Of  | Esti | Of  | Esti |      |
|                   | fic | mate | fic | mate | fic | mate |      |
|                   | ial | \    | ial | \    | ial | \    |      |
|                   | \[O | [New | \[O | [New | \[O | [New |      |
|                   | ld\ | \]** | ld\ | \]** | ld\ | \]** |      |
|                   | ]** |      | ]** |      | ]** |      |      |
+-------------------+-----+------+-----+------+-----+------+------+
| **Market Year     |     | **0  |     | **0  |     | **0  | *    |
| Begin**           |     | 3/20 |     | 3/20 |     | 3/20 | MM/Y |
|                   |     | 04** |     | 05** |     | 06** | YYY* |
+-------------------+-----+------+-----+------+-----+------+------+
| **Area            | 761 | 761  | 700 | 850  | 0   | 734  | *(   |
| Harvested**       |     |      |     |      |     |      | 1000 |
|                   |     |      |     |      |     |      | HA)* |
+-------------------+-----+------+-----+------+-----+------+------+
| **Beginning       | 54  | 70   | 107 | 178  | 102 | 210  | *(   |
| Stocks**          |     |      |     |      |     |      | 1000 |
|                   |     |      |     |      |     |      | MT)* |
+-------------------+-----+------+-----+------+-----+------+------+
| **Production**    | 2   | 2108 | 2   | 2250 | 0   | 2150 | *(   |
|                   | 108 |      | 000 |      |     |      | 1000 |
|                   |     |      |     |      |     |      | MT)* |
+-------------------+-----+------+-----+------+-----+------+------+
| **TOTAL Mkt. Yr.  | 0   | 0    | 0   | 0    | 0   | 0    | *(   |
| Imports**         |     |      |     |      |     |      | 1000 |
|                   |     |      |     |      |     |      | MT)* |
+-------------------+-----+------+-----+------+-----+------+------+
| **Oct-Sep         | 0   | 0    | 0   | 0    | 0   | 0    | *(   |
| Imports**         |     |      |     |      |     |      | 1000 |
|                   |     |      |     |      |     |      | MT)* |
+-------------------+-----+------+-----+------+-----+------+------+
| **Oct-Sep Import  | 0   | 0    | 0   | 0    | 0   | 0    | *(   |
| U.S.**            |     |      |     |      |     |      | 1000 |
|                   |     |      |     |      |     |      | MT)* |
+-------------------+-----+------+-----+------+-----+------+------+
| **TOTAL SUPPLY**  | 2   | 2178 | 2   | 2428 | 102 | 2360 | *(   |
|                   | 162 |      | 107 |      |     |      | 1000 |
|                   |     |      |     |      |     |      | MT)* |
+-------------------+-----+------+-----+------+-----+------+------+
| **TOTAL Mkt. Yr.  | 550 | 550  | 350 | 590  | 0   | 500  | *(   |
| Exports**         |     |      |     |      |     |      | 1000 |
|                   |     |      |     |      |     |      | MT)* |
+-------------------+-----+------+-----+------+-----+------+------+
| **Oct-Sep         | 425 | 425  | 500 | 585  | 0   | 500  | *(   |
| Exports**         |     |      |     |      |     |      | 1000 |
|                   |     |      |     |      |     |      | MT)* |
+-------------------+-----+------+-----+------+-----+------+------+
| **Feed Dom.       | 1   | 1447 | 1   | 1625 | 0   | 1650 | *(   |
| Consumption**     | 500 |      | 650 |      |     |      | 1000 |
|                   |     |      |     |      |     |      | MT)* |
+-------------------+-----+------+-----+------+-----+------+------+
| **TOTAL Dom.      | 1   | 1450 | 1   | 1628 | 0   | 1655 | *(   |
| Consumption**     | 505 |      | 655 |      |     |      | 1000 |
|                   |     |      |     |      |     |      | MT)* |
+-------------------+-----+------+-----+------+-----+------+------+
| **Ending Stocks** | 107 | 178  | 102 | 210  | 0   | 205  | *(   |
|                   |     |      |     |      |     |      | 1000 |
|                   |     |      |     |      |     |      | MT)* |
+-------------------+-----+------+-----+------+-----+------+------+
| **TOTAL           | 2   | 2178 | 2   | 2428 | 0   | 2360 | *(   |
| DISTRIBUTION**    | 162 |      | 107 |      |     |      | 1000 |
|                   |     |      |     |      |     |      | MT)* |
+-------------------+-----+------+-----+------+-----+------+------+

+--------------------+-----+------+-----+------+-----+------+------+
| PSD Table          |     |      |     |      |     |      |      |
|                    |     |      |     |      |     |      |      |
| Rice, Milled       |     |      |     |      |     |      |      |
+--------------------+-----+------+-----+------+-----+------+------+
|                    | **  | **R  | **  | **Es | **  | **Fo | *    |
|                    | 200 | evis | 200 | tima | 200 | reca | UOM* |
|                    | 3** | ed** | 4** | te** | 5** | st** |      |
+--------------------+-----+------+-----+------+-----+------+------+
|                    | **U | **   | **U | **   | **U | **   |      |
|                    | SDA | Post | SDA | Post | SDA | Post |      |
|                    | Of  | Esti | Of  | Esti | Of  | Esti |      |
|                    | fic | mate | fic | mate | fic | mate |      |
|                    | ial | \    | ial | \    | ial | \    |      |
|                    | \[O | [New | \[O | [New | \[O | [New |      |
|                    | ld\ | \]** | ld\ | \]** | ld\ | \]** |      |
|                    | ]** |      | ]** |      | ]** |      |      |
+--------------------+-----+------+-----+------+-----+------+------+
| **Market Year      |     | **0  |     | **0  |     | **0  | *    |
| Begin**            |     | 3/20 |     | 3/20 |     | 3/20 | MM/Y |
|                    |     | 04** |     | 05** |     | 06** | YYY* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Area Harvested** | 65  | 65   | 65  | 50   | 0   | 60   | *(   |
|                    |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | HA)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Beginning        | 604 | 479  | 397 | 295  | 212 | 162  | *(   |
| Stocks**           |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Milled           | 383 | 383  | 400 | 308  | 0   | 368  | *(   |
| Production**       |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Rough            | 536 | 536  | 559 | 431  | 0   | 515  | *(   |
| Production**       |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **MILLING RATE     | 7   | 7150 | 7   | 7150 | 0   | 7150 | *(   |
| (.9999)**          | 150 |      | 150 |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **TOTAL Imports**  | 65  | 88   | 70  | 95   | 0   | 110  | *(   |
|                    |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Jan-Dec          | 60  | 88   | 70  | 90   | 0   | 105  | *(   |
| Imports**          |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Jan-Dec Import   | 0   | 0    | 0   | 0    | 0   | 0    | *(   |
| U.S.**             |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **TOTAL SUPPLY**   | 1   | 950  | 867 | 698  | 212 | 640  | *(   |
|                    | 052 |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **TOTAL Exports**  | 275 | 275  | 275 | 156  | 0   | 175  | *(   |
|                    |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Jan-Dec          | 225 | 225  | 250 | 175  | 0   | 170  | *(   |
| Exports**          |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **TOTAL Dom.       | 380 | 380  | 380 | 380  | 0   | 380  | *(   |
| Consumption**      |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **Ending Stocks**  | 397 | 295  | 212 | 162  | 0   | 85   | *(   |
|                    |     |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+
| **TOTAL            | 1   | 950  | 867 | 698  | 0   | 640  | *(   |
| DISTRIBUTION**     | 052 |      |     |      |     |      | 1000 |
|                    |     |      |     |      |     |      | MT)* |
+--------------------+-----+------+-----+------+-----+------+------+

AUSTRALIA: Wheat Exports 2002/03 -- 2003/04 (Oct -- Sep), in MT

  ------------------------------ -------------------- --------------------
  **Country**                    **2002/03**          **2003/04**

  Indonesia                      1,483,754            3,066,300

  Egypt                          297,850              2,764,737

  Iraq                           747,198              1,597,991

  China                          8,120                1,414,893

  South Korea                    916,823              1,250,642

  Japan                          1,201,625            1,211,241

  Malaysia                       437,520              817,142

  Sudan                          477,926              715,303

  Vietnam                        251,211              592,835

  Italy                          124,357              390,951

  Thailand                       403,634              358,954

  New Zealand                    300,591              331,591

  Yemen                          327,978              322,672

  Turkey                         49,620               308,065

  South Africa                   25,908               300,550

  Others                         2,093,316            2,451,705

  **TOTAL**                      **9,147,431**        **17,895,572**

  Of which in bulk               8,796,442            17,049,190

  Of which in bag                8,638                12,446

  Of which in container          121,221              511,601

  Of which flour                 198,013              303,257

  Of which wheat products        23,117               19,078
  ------------------------------ -------------------- --------------------

*Source: Wheat Export Authority; World Trade Atlas*

*Note: Flour & wheat products in wheat equivalents.*

# SECTION THREE: NARRATIVE ON SUPPLY AND DEMAND, POLICY & MARKETING

## WHEAT

### Area

Australian wheat area in 2005/06 is forecast at 11.85 million hectares,
down slightly from the revised estimate for the previous year and in
line with the Australian Bureau of Agricultural and Resource Economics
(ABARE) forecast. Despite the slight forecasted decline in area, this
wheat area figure remains high by historical standards. The bulk of the
2005/06 wheat crop will be planted over the next three months.

Lower area for wheat in 2005/06 reflects rising livestock numbers in
mixed farming areas due to improved climatic conditions and strong
animal prices. This trend is supported by recent ABARE and Australian
Bureau of Statistics (ABS) reports showing incremental increases in
livestock numbers. Furthermore, agronomic factors, such as the need for
crop rotation (following historically high wheat plantings), should also
contribute to a slightly lower wheat area.

Wheat area in 2004/05 is estimated at 11.99 million hectares, slightly
below Post's previous estimate (see GAIN Report #AS4043 dated 12/30/04).
Mixed planting conditions and a dry finish in some areas were the major
factors behind the slight downward revision in area. Of note, some areas
in southern New South Wales actually reverted back to drought
conditions, following a general period of improving conditions.

Wheat area for 2003/04 is estimated at 13.02 million hectares, unchanged
from Post's previous report and in line with official ABS statistics.
According to historical ABARE figures, this area is an all-time record,
surpassing the previous record of 12.93 million hectares reached in
1983/84. ABARE estimates wheat area in 2003/04 at 12.4 million hectares.
Given past practice, Post expects that ABARE will ultimately adopt the
higher ABS estimate.

![](media/image3.wmf)

*Source: ABARE data.*

### Yield

Post's area and production forecasts for 2005/06 assume an average yield
of 1.94 MT/ha, in line with the long-term trend of steadily improving
average wheat yields (excluding the 'abnormal' 2002/03 drought year).
ABARE projections show average wheat yields increasing at 0.02 MT/ha per
annum, reaching 2.04 MT/ha in 2009/10.

Post estimates assume an average yield of 1.71 MT/ha for 2004/05,
slightly higher than the 1.70 MT/ha reported by ABARE. Average yield in
2003/04 is estimated at 2.01 MT/ha, an historically high figure,
although still well under the record of 2.11 MT/ha reached in 2001/02.

![](media/image4.wmf)

*Source: ABARE data.*

### Production

Wheat production in 2005/06 is forecast at 23.0 MMT, up 12 percent from
the previous year. This figure remains slightly above ABARE's forecast
of 22.56 MMT, due to a lower assumed yield of 1.90 MT/ha. Post assumes
normal weather conditions for the remainder of the 2005/06 season in
arriving at this production forecast. Improved yield is expected to more
than compensate for the slight drop in wheat area. Furthermore, more
normal weather conditions are expected to see some key wheat growing
areas more fully recover from drought conditions and contribute to an
improved national average yield.

Wheat production for 2004/05 is estimated at 20.50 MMT, unchanged from
Post's previous report (see GAIN Report #AS4043). This figure remains
slightly higher than the 20.38 MMT reported by ABARE. A past tendency to
underestimate the size of the wheat crop under mixed climatic conditions
and ABS historical revisions that have typically increased the size of
the crop contributed to Post retaining the slightly higher production
figure.

Wheat production in 2003/04 is estimated at 26.23 MMT, the same as the
official ABS figure. According to historical ABARE data, this remains an
all time record for wheat production in Australia, easily surpassing the
25.70 MMT set in 2003/04. ABARE has not adopted the higher ABS
production estimate, and currently estimates the crop at 25.7 MMT. Given
past practices, Post would expect ABARE to ultimately adopt the higher
ABS figure.

![](media/image5.wmf)

*Source: ABARE data.*

### Exports

Total wheat exports in 2005/06 (Oct-Sep) are forecast at 16.80 MMT, up
five percent from the figure for the previous year. Increased wheat
production is likely to facilitate a higher export level in 2005/06.

Total wheat exports in 2004/05 are forecast at 16.00 MMT, unchanged from
Post's previous forecast, but down 11 percent from the previous year.
The reduced size of the 2004/05 crop following the record 2003/04 season
was behind the decline in exports. This export level is still largely in
line with the long-term trend, according to ABARE historical data.

Total wheat exports in 2003/04 remain unchanged at 17.90 MMT, in line
with official Wheat Export Authority (WEA) figures supplemented by ABS
figures for wheat flour and products adjusted to wheat equivalents.
These figures have Indonesia as Australia's largest export destination
at 3.07 MMT, followed by Egypt with 2.76 MMT and Iraq with 1.60 MMT.

![](media/image6.wmf)

*Source: ABARE data.*

### Stocks

Wheat ending stocks in 2005/06 (end September 2006) are forecast at 4.32
MMT, up sharply from the revised estimate of 3.66 MMT for the previous
year. The larger 2005/06 crop and the replenishment of stocks that were
depleted during the 2002-03 drought is expected to see stocks stabilize
at between 4.00-4.50 MMT.

(See the Appendix for a further discussion of stocks.)

### Consumption

Total domestic consumption for 2005/06 is forecast at 5.60 MMT, up
slightly from the 5.50 estimated for the previous year. Total
consumption includes food and industrial use, feed and seed use. A
higher number of animals on feed is expected to keep demand high for
wheat as feed.

(See the Appendix for a further discussion of stocks.)

### Prices

Returns to Australia's wheat growers for the upcoming 2005/06 season are
likely to be somewhat lower than in 2004/05 and well under 2003/04,
according to AWB International's Estimated Pool Returns (EPR). As of
March 2005, AWB's estimated pool range for the benchmark APW (Australian
Prime Wheat) for 2005/06 is A\$175-\$185 per MT (see table below). The
2005/06 Pool is still subject to major price movements, as it is still
in its early stages. The 2004/05 Pool will not likely see major price
movements, as the marketing program is well under way.

**Wheat Pool Returns, 2000/01 -- 2005/06**

(nominal prices in A\$ per metric ton)

  ------------- ------------- ------------- ------------- ------------- -------------
  **2000/01**   **2001/02**   **2002/03**   **2003/04**   **2004/05**   **2005/06**

  234           259           256           231           199           175-185
  ------------- ------------- ------------- ------------- ------------- -------------

Note: Estimated Pool Returns for APW 10% protein (FOB, GST exclusive)

Source: AWB Ltd., March 15, 2005.

### Marketing Arrangements

The Wheat Marketing Act 1989 (as amended) currently governs wheat
marketing in Australia. Under the Act, AWB International Ltd., a
subsidiary of AWB Ltd. holds the 'single desk', national monopoly export
rights for bulk wheat. The Government's Wheat Export Authority (WEA) has
oversight responsibilities for monitoring AWBI's export monopoly and
performance and also operates an 'export control' system for bagged and
container wheat. AWB Ltd., a publicly listed company controlled by wheat
growing shareholders, replaced the former Australian Wheat Board, a
Government-owned statutory marketing authority.

In 1999, a review of the Wheat Marketing Act and the privatization of
the Australian Wheat Board the National Competition Council was
conducted under National Competition Policy (NCP) criteria. The Council
determined that the Government failed to meet national competition
principles (under the Competition Principles Agreement -- CPA) in
relation to the privatization. In subsequent annual reviews, the Council
has noted that clause 4 of the CPA sets out obligations aimed at
ensuring reform paths lead to competitive outcomes. The Council argues
that "the protection of some public monopolies from competition through
regulation or other government policies has allowed structures to
develop that do not readily respond to market conditions ... and ..
rectifying strategies include removing the relevant legislative
restrictions and applying competitive neutrality principles." The
Council has repeatedly found that the Australian Government has not met
its CPA clause 4 obligations in regards to the Government-sanctioned
wheat marketing arrangements.

In 2000, a Commonwealth-funded review of the Wheat Marketing Act and
wheat marketing arrangements determined that it would be premature to
repeal the Act and recommended that the single desk be retained until a
2004 review, which was already required under the Act.

A Government-appointed independent panel conducted the mandated 2004
review and a summary of its findings and recommendations was released in
October 2004 -- "Growers' Report". The main focus of this review was to
examine the issues affecting the management and regulation of
Australia's single desk wheat export arrangements. According to the
Australian Minister of Agriculture, the findings reflect favorably on
the existing arrangements, but that a set of recommendations was made
for improving the system. The panel's report will be tabled in
Parliament and the Government will study the recommendations and,
according to the Minister, will develop a response. The Government
insisted that the 2004 review was not about the continuation of the
export single desk, nor was it intended to fulfill NCP obligations.

The National Competition Council, in their last annual assessment
("Assessment of governments' progress in implementing the National
Competition Policy and Related Reforms: 2004"), indicated that the
incomplete nature of the 2004 review means the Council is still unable
to assess the Australian Government as having met its CPA clause 4
obligations in regards to the current wheat marketing arrangements. (See
GAIN Report #AS4011 for further information.)

## BARLEY

### Area

Total barley area in 2005/06 is forecast at 4.17 million hectares, up
slightly from the previous year. This area figure is in line with
ABARE's forecast, which also shows a slight increase in forecast area,
while ABARE is forecasting a lower barley area figure for 2005/06 and
2004/05.

Post assumes normal weather conditions in arriving at this area
forecast. However, barley faces a slightly different agronomic outlook
than wheat as it is typically planted later in the crop rotation and is
less likely to be constrained by agronomic or livestock considerations.
Furthermore, quicker maturing barley sometimes is used in the shorter
growing conditions associated with drought.

Barley area in 2004/05 is estimated at 4.16 MMT, down about six percent
from the previous year. Difficult planting conditions in key barley
producing areas of southern New South Wales contributed to the drop from
the record area of the previous year.

Total barley area for 2003/04 is estimated at 4.4 million hectares, the
same as the official ABS statistics. This remains an all time record
according to ABARE's historical data. ABARE has not adopted the ABS area
estimate, but would be expected to at some point consistent with past
practice.

![](media/image7.wmf)

*Source: ABARE data.*

### Yield

Barley yield in 2005/06 is forecast at 1.75 MT/ha, in line with the
long-term trend established using ABARE's historical data. Post has
assumed normal weather conditions in arriving at this figure. (The
'abnormally' poor 2002/03 barley yield results in a downward sloping
trend over the period in the following barley yield graph.)

Barley yield in 2004/05 is estimated at 1.55 MT/ha, well below the
historical high of 2.33 MT/ha recorded for the previous year. Difficult
planting conditions combined with drier than average growing conditions
in key barley growing areas contributed to the historically low yield in
2004/05.

![](media/image8.wmf)

*Source: ABARE data.*

### Production

Australian barley production in 2005/06 is forecast at 7.30 MMT, up
nearly 13 percent from the revised estimate for the previous year. This
figure is largely in line with ABARE's current forecast of 7.27 MMT. A
slight increase in planted area and yields more reflective of the
long-term average are likely to drive the expected rise in production.

Barley production in 2004/05 is estimated at 6.5 MMT, unchanged from the
previous estimate (see GAIN Report #AS4043). Difficult growing
conditions in key barley growing areas significantly lowered both
national area and yield. Despite the decline, barley production remains
at historically high levels according to ABARE's historical data.

Barley production for 2003/04 is estimated at 10.29 MMT, unchanged from
Post's previous report and the same as official ABS statistics. Like
wheat, ABARE has not adopted the ABS production estimate for 2003/04,
but would be expected to given past practices.

![](media/image9.wmf)

*Source: ABARE data.*

### Exports

Barley exports in 2005/06 (Nov -- Oct) are forecast to rise about eight
percent to 4.20 MMT. The larger expected 2005/06 barley crop is expected
to increase the availability of barley suitable for export. Barley
exports used in this report do not include barley malt exports ( in
grain equivalent), which is instead included in the domestic consumption
figures.

Barley exports in 2004/05 are estimated at 3.9 MMT, down sharply from
the previous year, but up slightly from Post's previous estimate.
Reduced production and poor harvesting conditions greatly reduced the
availability of barley suitable for export.

Barley exports in 2003/04 are estimated at 6.37 MMT, an all time record
according to ABARE's historical data. This record export level was due
to record production and average to above average grain quality.

![](media/image10.wmf)

*Source: ABARE data.*

### Stocks

Ending stocks for 2005/06 (end October 2006) are forecast at 0.82 MMT,
down from the 1.02 MMT forecast for the end of the previous marketing
year. Post anticipates that more normal weather conditions will improve
average grain quality levels and should see exports improve at the
expense of stocks.

(See the Appendix for a further discussion of stocks.)

### Consumption

Post forecasts total barley consumption in 2005/06 at 3.3 MMT, up
slightly from the 3.25 MMT projected for the previous year. The 2005/06
consumption forecast is largely in line with ABARE's forecast, taking
into consideration Post includes malt (grain equivalent) exports in
domestic consumption, while ABARE does not. Strong economic growth
combined with historically high livestock numbers is likely to support
higher barley consumption.

### Prices

Returns to Australia's barley growers for the upcoming 2005/06 season
are likely to be below 2004/05 and well under 2003/04, according to ABB
Grain's opening export barley gross pool indicators. In February 2005,
ABB Grain announced the opening export pool indicator for barley in
South Australia for the 2005/06 season at A\$180-\$190 per MT for
malting #1 barley and A\$140-\$150 for feed #1 barley. ABB Grain
announced the same opening export pool indicator for barley in Victoria
in March 2005. These prices are roughly similar to the opening barley
gross pool indicators announced for the 2004/05 barley season. ABB Grain
is the primary domestic marketer and exporter of Australian barley and
holds the export monopoly rights for barley produced in South Australia.

### Marketing Arrangements

Barley exports are currently dominated by statutory state monopolies
('single desks') in all the major barley producing states, except
Victoria. ABB Grain and Grain Pool Pty Ltd. hold the single desk export
rights in South Australia and Western Australia, respectively. The
monopoly export rights in New South Wales, presently controlled by
GrainCorp, is due for elimination in September 2005. Statutory export
monopolies for barley have been eliminated in the states of Victoria and
Queensland.

[Western Australia]{.underline}

Under the Grain Marketing Act 2002, the Western Australian state
government legislated changes to the export monopoly for barley, canola
and lupins grown in the state, which opened exports to some competition.
Under the new arrangements, the Grain Licensing Authority (GLA) acts as
the regulator of the exports of these commodities from the State. Grain
Pool Pty Ltd. (GPPL), a subsidiary of Cooperative Bulk Handling and the
former Grain Pool of Western Australia, holds the 'Main Export License',
while GLA can issue 'Special Export Licenses' for certain markets, for
certain time periods. These changes resulted from an amalgamation of the
Grain Pool of WA (then a statutory marketing authority) and CBH, and
from pressure by the Commonwealth's National Competition Council, which
threatened to withhold payments to the state pending 'reform' of the
export monopoly.

Under the new licensing procedures for the 2003/04 season, GLA issued
Special Export Licenses for 433,000 MT of feed barley, 35,000 MT of
malting barley, 48,000 MT of canola and 20,000 MT of lupins. Of this,
about 340,000 MT of feed barley was actually shipped to the Middle East.
Thus far for the 2004/05 season, GLA has issued over 500,000 MT of
Special Export Licenses. However, to date only about 50,000 MT of feed
barley has been shipped, all to the Middle East.

Subsequent reviews of the new export arrangements indicate that the
granting of the Special Export Licenses have had no significant impact
on GPPL's marketing strategies and any premiums that they may be
extracting through the use of market power. For example, in a report on
the operation and effectiveness of the new operating procedures for the
2003/04 season, the GLA stated that the new procedures "have had a very
positive impact on the cash market for prescribed grains in WA."
Further, the GLA stated that "the issue of whether the GPPL can attain
price premiums for the export of prescribed grain through the exertion
of market power through the 'single desk' is something that is clearly
very difficult to show." An independent review conducted on behalf of
the WA state government, which was released in January 2005, came up
with similar findings.

The National Competition Council, in their 2004 Assessment, finds that
the Grain Marketing Act 2002 and associated reforms made by the State
essentially put the current grain marketing system in compliance with
National Competition Policy. The Council is still calling for some
improvements in the guidelines to improve the predictability of the
export licensing arrangements.

In a recent interesting twist, AWB International, applied for and the
GLA issued a Special Export License for 38,000 MT of canola from Western
Australia to the subcontinent. GPPL criticized this action, indicating
that the GLA is undermining Western Australia's single desk grain
marketing system and questioning why AWB Ltd., a strong advocate of the
single desk, would work against a similar state-based system. In
response, AWB has stated that "there is no conflict of interest and
growers should realize that AWB is well within its rights to apply for a
GLA license."

[South Australia]{.underline}

There is a monopoly on all bulk barley exported from the State of South
Australia, typically the largest barley producing state. The rights to
the monopoly are held by ABB Grain Ltd., the former Government-owned
Australian Barley Board. ABB Grain Ltd. has been a publicly listed,
grower-controlled company since 2002. In 2004, ABB Grain Ltd. purchased
AusBulk, the major South Australian commodity bulk handler.

The National Competition Council has recommended changes in the barley
marketing arrangements in South Australia, including the elimination or
reform of the export monopoly. In its 2004 Assessment, the Council notes
that the South Australian Government introduced the Barley Exporting
Bill to Parliament, which would remove the barley export monopoly by
repealing the States' Barley Marketing Act 1993. Under the Barley
Exporting Bill, ABB Grain Ltd. would be given the main barley export
license, and a licensing authority would be established to grant special
export licenses to other barley exporters (somewhat similar to the
Western Australian system). It is not clear when/if the State will pass
the Barley Exporting Bill. Meanwhile, the Commonwealth Government
continues to withhold competition payments to the State pending reform.

## SORGHUM

### Area

Sorghum area in 2006/07 is forecast at 734,000 hectares, about 14
percent lower than the estimate for the previous year. Despite the
forecasted decline, this area is still at a relatively high historical
level.

Sorghum area in 2005/06 remains unchanged from Post's previous report at
850,000 hectares (see GAIN Report #AS4043). This figure is in line with
recent ABARE figures and represents a record sorghum area. Historically
high prices and widespread favorable rainfall at planting provided the
incentive to grow sorghum.

Sorghum area sown in 2004/05 is estimated at 761,000 hectares,
equivalent to the official ABS statistic.

![](media/image11.wmf)

*Source: ABARE data.*

### Yield

Post forecasts sorghum yield at an average of 2.92 MT/hectare in
2006/07. This yield figure is largely in line with the historic trends
established using ABARE's historic data.

Yield in 2006/07 is estimated at 2.64 MT/ha. Mixed climatic conditions
including drier condition in central Queensland reduced the national
average yield. The five-year average for sorghum yield is about 2.73
MT/ha.

![](media/image12.wmf)

*Source: ABARE data.*

### Production

Sorghum production in 2006/07 is forecast at 2.15 MMT, down slightly
from the projection for the previous year. Lower expected area is
expected to more than compensate for higher forecasted yield. Despite
the lower production forecast, this level of production remains
historically high, according to ABARE historical data.

Production in 2005/06 is estimated at 2.25 MMT, down 0.15 MMT from the
previous estimate (see GAIN Report #AS4043), but still an all-time
record for sorghum production. A poor finish to the season in Central
Queensland was largely responsible for this downward revision.

![](media/image13.wmf)

*Source: ABARE data.*

### Exports

Post forecasts sorghum exports in 2006/07 (Mar -- Feb) at 0.5 MMT, down
slightly from the level projected for the previous year.

Projected sorghum exports in 2005/06 have been revised downwards
slightly to 0.59 MMT, in line with the downward revision in production.
This level of exports is historically high, only surpassed by the record
0.69 MMT of exports achieved in 2000/01, according to ABARE's historical
data.

![](media/image14.wmf)

### Marketing Arrangements

The monopoly export right in New South Wales for sorghum (also canola
and barley), presently controlled by GrainCorp, is due to be eliminated
on September 30, 2005. GrainCorp has allowed other parties to export
sorghum under permit for a fee of A\$5 per metric ton. The export
monopoly for sorghum produced in Queensland has already been eliminated.

## RICE

### Area

Rice area in 2006/07 is forecast at 60,000 hectares, up 10,000 hectares
from the previous year and in line with the current ABARE forecast.
Despite this increase, rice area remains well below the historical
average.

Severe drought conditions that sharply reduced the last three rice crops
continues to constrain the availability of water for rice production.
The area dedicated to rice production in 2006/07 will likely be
constrained by water storage levels that have not yet fully recharged.
According to government sources, key irrigation schemes have allowed
producers to bring forward future entitlements of water for rice during
the recent drought. These entitlements are being repaid over 2005/06 and
2006/07, further constraining the recovery in planted area.

Estimated area for rice in 2005/06 is 50,000 hectares, down from the
65,000 hectares for the previous year and in line with current ABARE
figures. This is the lowest rice area since 1972/73. Depleted irrigation
water reserves due to the severe drought greatly reduced the area
dedicated to rice production.

![](media/image15.wmf)

*Source: ABARE data.*

### Yield

Forecast area and production in 2006/07 assumes an average yield of 9.58
MT/ha (paddy rice). This figure is above the five-year average, but in
line with the long-term trend of steadily increasing rice yields.

Rice yield in 2005/06 is estimated at 8.66 MT/ha, largely in line with
the five year average and unchanged from the previous year. Cooler than
average conditions during the growing period constrained production,
despite an above average amount of sun.

![](media/image16.wmf)

*Source: ABARE data.*

### Production 

Rice production in 2006/07 is forecast at 575,000 MT (rough), up 144,000
MT on the previous year. Despite this relatively large increase, rice
production still remains well under historically average levels. Above
average rainfall in the key catchments areas of New South Wales would be
required before this figure could be increased appreciably. Relatively
high rice prices and a favorable price outlook help to partially offset
the relatively poor production outlook.

Rice production in 2005/06 is projected at 431,000 MT, in line with
ABARE's current estimate. This figure is the lowest production level
since 1974/75.

![](media/image17.wmf)

*Source: ABARE data.*

### Exports

Rice exports in 2006/07 (Mar-Feb) are forecast at 175,000 MT. The larger
2006/07 rice crop is expected to somewhat improve the availability of
rice for export.

Rice exports in 2005/06 are estimated at 156,000 MT, well below the
figure for the previous year. Poor production levels constrained exports
to the lowest level since the 1970's.

There appears to be a fairly significant difference in rice exports
reported by Post and those maintained by ABARE. Post analysis suggests
that over a period of years the differences converge, but they are
significant in single years. Part of the problem is data availability --
release of official rice export statistics are subject to
confidentiality restrictions.

![](media/image18.wmf)

### Marketing Arrangements

The New South Wales Rice Marketing Board has the export and domestic
marketing monopoly for rice produced in New South Wales. The Board has
delegated this right to Ricegrowers Cooperative Limited (RCL), a
grower-owned company, under an exclusive licensing arrangement. RCL also
controls the storage and processing of rice.

The National Competition Council has found that New South Wales'
Marketing of Primary Products Act 1983 (rice marketing) does not meet
obligations under National Competition Policy (NCP), notably because the
State government has not removed the domestic (not export) rice
marketing monopoly as recommended by NCP review. In their 2004
Assessment, the Council notes that New South Wales State Government will
conduct a NCP review of the rice marketing arrangements under the
State's Marketing of Primary Products Act, with a final report expected
early in 2005. The Council will be looking for the State to remove the
domestic rice marketing monopoly.

## PULSES

Australia grows over two million hectares of pulses annually, about
double the area devoted to these crops in 1990. In Australia, grain
legumes are generally referred to as pulses. The five major pulse groups
grown in Australia are: chickpeas, faba beans, field peas, lentils and
lupins. In addition, there are a number of smaller pulse crops grown,
including mungbeans, broad beans, azuki (Adzuki) beans, navy beans, cow
peas and pigeon peas. Pulses play an important role in crop rotations in
Australia, where they are used to break root disease cycles and
positively impact soil nutrition. The stubble residues are also used as
stock feed. Pulse grain or seed is primarily used in Australia for
animal feed, with the remainder mostly destined for the export market.
The industry is represented by Pulse Australia, the peak industry body.

[Lupins]{.underline} are the primary pulse grown in Australia. The major
lupin species grown is *L. angustifolius*, also known as the
narrow-leafed or Australian Sweet Lupin, followed by a much smaller crop
of *L. albus*, or the Sweet Albus Lupin. Lupins, particulary the
narrow-leaved species, is used as a stock feed in Australia, with the
remainder exported. The major lupin producing state is Western
Australia, which typically accounts for about three-quarters of all
producing area.

[Field peas]{.underline} are Australia's second most important pulse
crop, in terms of area. The major field pea variety in Australia is Dun
peas, or dun dimples, which are primarily used as an animal feed, with
limited quantities also destined for food use. Dun peas account for over
90 percent of Australia's field pea production. Relatively smaller
quantities of blue round, white round and maple round varieties are also
grown. The blue and white rounds are typically for human consumption,
while the maple round is used as animal feed. Dun peas are mostly grown
in South Australia, Western Australia and Victoria. Most blue and white
peas are grown in New South Wales. The bulk of Australia's field pea
production is exported.

[Chickpeas]{.underline}, *Cicer arietinum*, are grown mostly in northern
farming systems in the states of New South Wales and Queensland. There
are two groups of chickpeas: Desi and Kabuli. Desi is normally dehulled
and split to obtain 'dahl' and are heavily consumed in India. Kabuli, a
larger seed, is usually consumed whole and are particularly popular in
the Mediterranean region. Most Australian chickpea production is
exported.

**AUSTRALIA: PULSE AREA, PRODUCTION, USE & EXPORTS**

(2003/04 -- 2005/06)

  -------------------------------- ------------- ------------- -------------
  **Pulse type/attribute**         **2003/04**   **2004/05 e** **2005/06 f**

                                                               

  **Lupins**                                                   

  \- area ('000 ha)                638           634           950

  \- production ('000 MT)          953           758           1,160

  \- apparent domestic use ('000   376           462           415
  MT)                                                          

  \- exports ('000 MT)             430           388           651

                                                               

  **Field Peas**                                               

  \- area ('000 ha)                301           321           372

  \- production ('000 MT)          178           407           311

  \- apparent domestic use ('000   85            90            90
  MT)                                                          

  \- exports ('000 MT) (a)         209           201           301

                                                               

  **Chickpeas**                                                

  \- area ('000 ha)                152           113           195

  \- production ('000 MT)          178           114           189

  \- apparent domestic use ('000   5             30            16
  MT)                                                          

  \- exports ('000 MT)             164           135           161
  -------------------------------- ------------- ------------- -------------

\(a\) includes field peas and cowpeas.

Note: Marketing year for pulses is November-October; apparent domestic
use is calculated as a residual of production less exports less change
in stocks.

Source: ABARE, Australian Commodities, March Quarter 2005;

2004/05 estimated, 2005/06 forecast.

## RECENT GAIN REPORTS ON GRAIN

\-- Grain Update -- January 2005, 12/30/04, AS4043

\-- Grain Update -- December, 12/06/04, AS4040

\-- November Lockup, 10/26/04, AS4036

\-- Grain Update -- October, 9/21/04, AS4030

\-- Grain and Feed Annual 2004, 3/19/04, AS4011

# APPENDIX: Grain Stock and Consumption Estimates

## Grain Stocks

In Post's estimation, there are no reliable statistics publicly
available on national grain stocks. ABARE does publish estimates of
relative changes in stocks for wheat in their periodic Australian Crop
Report, but not for the other major grains. For more historical periods,
ABARE's annual publication, Australian Commodity Statistics, presents
closing wheat stocks, but again not for the other major grains. In this
instance, the ABARE wheat stock figure is footnoted as "including AWB
Limited Pool and Trading Division closing stocks." For the other grains,
an 'ABARE' stock figure can only be determined by deriving a figure
using their corresponding production, net exports and domestic
consumption estimates.

This shortcoming in assembling reliable national grain stock figures is
generally recognized by the Government. As such, the Australian Bureau
of Statistics (ABS) has begun assembling and publishing quarterly
estimates of the quantity of grain stored in grain storage facilities
operated by bulk handling companies and major grain traders. These
quarterly ABS stock statistics are available from the 4^th^ quarter of
2002 (December 31, 2002) for wheat, barley, oats, triticale and a
category that includes "other feed grains, pulses and oilseeds." For
wheat and barley, separate stock estimates are published for milling
(wheat), for malting (barley), and for feed and other purposes. (These
ABS quarterly stock estimates are presented in Table 1.)

Post notes that, during the brief period that the ABS quarterly stock
figures are available, the ABS estimates fall roughly in line with
similar figures used by ABARE. Further, Post notes that the ABS
estimates specifically exclude grain not held by the bulk handling
companies and major grain traders, e.g., on-farm and food/feed company
storage, and, as such, would be expected to actually underestimate
actual national grain stocks.

Post factors-in the ABS and ABARE stock estimates, when available (i.e.,
wheat and barley), to prepare grain stock estimates. Post also analyzes
stock figures derived from using set estimates of production,
consumption and net exports, when appropriate. (See consumption for a
discussion of estimating this PS&D component.) In some years, Post's
grain stock estimates/forecasts may vary from official sources,
depending on the perceived reliability and internal consistency of the
other PS&D figures. For rice and sorghum, there are no publicly
available official stock estimates.

## Grain Consumption

As discussed for stocks, finding reliable official consumption estimates
for grain in Australia can be problematic. ABARE publishes estimates of
human and industrial use, feed and seed for wheat, barley, oats; and
feed and seed use for sorghum. For wheat, ABARE's 'feed' consumption
estimate is actually derived as a residual of production less exports
less other domestic uses less change in stocks. (Also of note, ABARE's
supply and disposal estimates typically do not include grain imports,
which may be significant in some years.) ABARE uses area estimates and
seeding rates to derive a seed use estimate for the major grains. (ABARE
domestic use estimates for wheat, barley and sorghum are presented in
Table 2.)

Post factors-in the ABARE use estimates, when available, to prepare
grain consumption estimates. Post also analyzes consumption figures
derived from using set estimates of production, net exports and net
stock changes, when appropriate. In some years, Post's grain consumption
estimates/forecasts may vary from official sources, depending on the
perceived reliability and internal consistency of the other PS&D
figures.

**(TABLE 1)**

**AUSTRALIA: Quarterly Grain Stocks**

(million metric tons)

+--------------+---------+------------+---------+------------+------+
| **Quarter/** | **W     | **Wheat/** | **Ba    | *          | **Oa |
|              | heat/** |            | rley/** | *Barley/** | ts** |
| **En         |         | **fe       |         |            |      |
| d-of-month** | **mi    | ed/other** | **Ma    | **fe       |      |
|              | lling** |            | lting** | ed/other** |      |
+--------------+---------+------------+---------+------------+------+
|              |         |            |         |            |      |
+--------------+---------+------------+---------+------------+------+
| Dec. 2002    | 9.63    | 2.56       | 1.84    | 1.63       | 0.13 |
+--------------+---------+------------+---------+------------+------+
| Mar. 2003    | 7.38    | 1.86       | 1.27    | 1.23       | 0.08 |
+--------------+---------+------------+---------+------------+------+
| June 2003    | 4.61    | 1.36       | 0.84    | 0.87       | 0.06 |
+--------------+---------+------------+---------+------------+------+
| Sept. 2003   | 2.27    | 0.58       | 0.50    | 0.42       | 0.04 |
+--------------+---------+------------+---------+------------+------+
| Dec. 2003    | 17.08   | 3.43       | 2.97    | 4.87       | 0.29 |
+--------------+---------+------------+---------+------------+------+
| Mar. 2004    | 13.58   | 3.04       | 2.14    | 3.22       | 0.24 |
+--------------+---------+------------+---------+------------+------+
| June 2004    | 9.17    | 1.55       | 1.69    | 2.42       | 0.17 |
+--------------+---------+------------+---------+------------+------+
| Sept. 2004   | 4.58    | 0.58       | 0.96    | 0.92       | 0.10 |
+--------------+---------+------------+---------+------------+------+
| Dec. 2004    | 16.63   | 1.82       | 1.65    | 3.17       | 0.15 |
+--------------+---------+------------+---------+------------+------+

Source: ABS quarterly publications -- "Stocks of Grain Held by Bulk
Handling Companies and Grain Traders, Australia"

**(TABLE 2)**

**AUSTRALIA: Grain Domestic Use**

(million metric tons)

  --------------------- ------------- ------------- ------------- -------------
  **Commodity**         **2001/02**   **2002/03**   **2003/04**   **2004/05**

                                                                  

  **Wheat**                                                       

  \- human/industrial   2.21          2.42          2.44          2.46

  \- feed a)            2.10          2.70          2.19          2.24

  \- seed b)            0.50          0.56          0.54          0.53

                                                                  

  **Barley**                                                      

  \- malt/other human   0.16          0.17          0.17          0.17

  \- feed               2.20          1.65          2.10          2.20

  \- seed b)            0.17          0.17          0.16          0.15

                                                                  

  **Sorghum**                                                     

  \- feed               1.64          1.40          1.27          1.63

  \- seed b)            \*            \*            \*            \*

                                                                  

  **Oats**                                                        

  \- human              0.13          0.13          0.13          0.13

  \- feed               1.09          0.67          1.13          0.73

  \- seed               0.04          0.04          0.04          0.03
  --------------------- ------------- ------------- ------------- -------------

\*) 3,000-4,000 metric tons.

a\) Feed is calculated as a residual of production less exports less
other domestic uses less change in stocks; imports not included.

b\) Estimated using seeding rates: wheat and barley, about 45 kg/ha;
sorghum 5 kg/ha.

Source: ABARE, Australian Crop Report, February 2005.