Voluntary Report - public distribution

**Date:** 7/19/2006

**GAIN Report Number:** AS6046

AS6046

**Australia**

**Agricultural Situation**

**Ag Down Under Vol. 11**

**2006**

**Approved by:**

![](media/image1.wmf)Kathleen Wainio, Agricultural Counselor

U.S. Embassy

**Prepared by:**

Meredith Elliott, Agricultural Assistant; Mike Darby, Agricultural
Specialist; Lindy Crothers, Agricultural Marketing Assistant

**Report Highlights:**

-   AWB Cole Inquiry

-   US wheat farmers sue AWB

-   Dry conditions likely to cut winter cereal production

-   94 percent of NSW remains in drought

-   Orange production slashed by frost

-   Australian oranges gain access to China

-   Australian rice growers win access to South Korea

-   Japan open to Tasmanian apples

-   Beef exports ease in 2005-06

-   No more sugar sweeteners

-   Wine cheaper than bananas

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Canberra \[AS1\]

\[AS\]

# AWB Cole Inquiry

GRAIN exporter AWB Ltd has won a court battle to delay giving 1300
secret documents to the head of the inquiry into the Iraq kickbacks
affair. AWB is claiming legal professional privilege over the documents
Commissioner Cole has asked for in his inquiry into kickbacks the wheat
exporter paid to the regime of Iraqi dictator Saddam Hussein, in breach
of UN sanctions.

Last month, the Government gave Commissioner Cole the power to demand
the documents but he is now prevented from doing so by a court
injunction until the matter is heard in full. The federal court will now
determine AWB\'s claim over the 40 volumes of documents. (*Source:
www.news.com.au 07/18/06)*

# US wheat farmers sue AWB 

A group of six U.S. farmers has launched a \$1 billion dollar damages
claim against the exporter for its actions in the Iraqi kickbacks
scandal. For the case to succeed, the complainants' legal team will
firstly have to prove that AWB acted criminally in its actions in Iraq
and that the growers suffered direct financial damage from AWB\'s
actions. Early indications from the Australian legal community suggest
the court case will face substantial hurdles on multiple fronts,
including proving jurisdiction over AWB, and the fact the U.S. had trade
sanctions against Iraq at the time. *(Source: FarmOnline 7/12/06)*

# Dry conditions likely to cut winter cereal production

Dry conditions recently experienced across the Australian continent are
likely to see production forecasts for winter cereal crops fall. The
Australian Bureau of Meteorology recently reported that June, usually
the peak planting period for winter cereals, recorded "some of the
coldest and driest" conditions for decades. Currently, Post has forecast
2006/07 wheat production at 24 MMT and barley production at 8.9 MMT,
although these are likely to be revised downwards in Post's quarterly
grain and feed report, due July 31.

Some reports have slashed 2006/07 wheat production by as much as 5 MMT,
although Post is unlikely to cut production this far. Previous seasons
beginning with dry weather conditions have gone on to produce near
record crops.

# 94 percent of NSW remains in drought 

Rainfall over much of NSW in the past week has given winter crops the
moisture to see them through the next few weeks. However, 94 percent of
NSW remains in drought, according to the July drought figures released
today. June rains had helped NSW\'s cropping industries but had little
impact on overall drought conditions. Nearly all of the anticipated 4.6
million hectares of NSW winter crops is now in the ground. Follow-up
rains over the next several weeks will be needed to support those crops.
*(Source: FarmOnline 07/19/06)*

# Orange production slashed by frost 

Australian fresh orange production is forecast to fall sharply in
2006/07 to 450 TMT. At least two significant frost events perpetuated by
some of the coldest and driest conditions on record have sharply reduced
Australian citrus production, particularly Navel oranges. It is too
early in the production cycle to confirm whether these conditions may
also affect Valencia production and associated orange juice production.
*(Gain Report #AS6045)*

# Australian oranges gain access to China

The government of Australia recently negotiated access to the Chinese
market for Australian citrus. This negotiation included a field visit by
Chinese quarantine officials in March 2006 which concluded with the
confirmation of correct management procedure and pest mitigation
practices.

The Australian citrus industry hopes to ship citrus to China during this
harvest and is currently formulating a strategy with its business
partners. Industry sources remain skeptical of the success of such
exports in the first year as sharply reduced availability of suitable
fruit will likely constrain new market development in 2006/07*. (Gain
Report #AS6045)*

# Australian rice growers win access to South Korea 

Australian rice growers have gained long-term access for the first time
to the South Korean market. Australian Minister for Agriculture, Peter
McGauran, says revised specifications mean the industry now has quota to
export 9,030 MT of rice to South Korea each year for the next 10 years.

The industry will also be able to bid for part of South Korea's 'global
quota' for rice, which will increase to more than 200,000 MT a year by
2014. The first export shipment to Korea is expected in November, with
shipments to continue on an annual basis. *(Source: FarmOnline
07/19/06)*

# Japan open to Tasmanian apples 

Tasmanian growers can now export any variety of fresh apples to Japan.
Tasmanian Minister for Primary Industries, David Llewellyn, says,
"Previously Tasmanian orchardists could only send Fuji apples to Japan.
Japan's decision to allow the importation of the full range of fresh
Tasmanian apples reinforces the global recognition of our biosecurity
practices." *(Source: FarmOnline 07/19/06)*

# Beef exports ease in 2005-06

Australian beef exports for 2005-06 finished six percent lower than the
near record levels in 2004-05. The fall reflects lower beef cattle
turn-off and a modest weakening in export demand. Japan, the U.S. and
Korea were again Australia's three main beef export markets in 2005-06.
They accounted for 90 percent of Australia's total beef shipments of
892,000 MT shipped weight. Beef exports, however, remain well above
those of 2002-03, prior to the U.S. BSE incident.

[Japan**:**]{.underline} Fiscal year 2005-06 exports to Japan were the
second highest on record, at 388,000 MT, down 7 percent on those of
2004-05. These falls reflect some disruptions to Japan import demand
caused by an oversupply of product early in the year, ongoing
uncertainty over the timing of a US return and a fall in the
availability of grass-fed Japan steers. Japan accounted for 43 percent
of Australian beef exports (similar to that of 2004-05).

[USA:]{.underline} Australia's beef shipments to the U.S. in June were
29 percent below year-ago levels, at 27,200 MT. Exports during 2005-06
were down 19 percent, at 296,000 MT -- the lowest since 1998-99.
Contributing to the overall fall in exports was a reduction in
Australian cow slaughter, increasing cow supplies in the U.S. and
sluggish demand. But the U.S. still accounted for 33 percent of
Australian beef exports (down from 39 percent in 2004-05).

[Korea:]{.underline} Shipments to Korea for the 12 months to June 2006
were a record 121,000 MT, 33 percent above those of 2004-05. Korea
accounted for 14 percent of Australian beef exports (up from 10
percent). Strong beef exports to Korea were assisted by ongoing delays
in the re-entry of U.S. beef imports. Exports to Korea for the month of
June reached 11,800 MT -- the highest June figure on record. *(SOURCE:
MLA Markets News.)*

# No more sugar sweeteners

The federal agriculture minister, Peter McGauran, said cane farmers and
downstream processors in the sugar industry should not expect another
multi-million dollar assistance package should conditions deteriorate in
future. He said there was no doubt the industry could now stand on its
own feet, in light of high prices for sugar and recent subsidies to aid
industry restructuring. Due to higher sugar prices, the government
expects to withhold about A\$100 million in a budgeted assistance of
A\$440 million. *(Source: Financial Review, 18/07/06)*

# Wine cheaper than bananas

In a sign of the bleak short-term outlook for wine-grape growers,
Australian retailers are now marketing some low-end bottled wine for
less than A\$2 a bottle. It is a phenomenon mirroring that of the
California wine industry in 2003 in response to a large grape
oversupply. The bottles are selling as "cleanskins", which means they do
not carry a label identifying the maker, but retailers offer a "try
before you buy" service to reassure buyers of the quality. Industry
sources state that it is the cheapest retail price ever seen for wine in
Australia. These prices reflect a lower price than the cost of a banana,
currently priced at around A\$2.75 each due to the devastation of the
banana growing region in Queensland from Cyclone Larry (*See GAIN report
AS6019*). *(Source: Financial Review 07/18/06)*

# Recent Reports from FAS/Canberra

The reports listed below can all be downloaded from the FAS website at:
<http://www.fas.usda.gov/scriptsw/AttacheRep/default.asp>.

  ---------- --------------------------------------------------- ----------
  **Report   **Title of Report**                                 **Date**
  Number**                                                       

  6033       Wheat Australia sells 350,000 MT to Iraq            05/31/06

  6034       Ag Down Under Vol. 9                                06/02/06

  6035       Australia Actively Pursuing FTAs                    06/07/06

  6036       Wine Annual                                         06/08/06

  6037       Sugar Smut Outbreak in Queensland                   06/20/06

  6038       Ag Down Under Vol. 10                               06/23/06

  6039       Agricultural Biotechnology Annual                   06/28/06

  6040       Worst Frost in 20 Years Affects Australian Citrus   06/27/06
             Production                                          

  6041       Poultry Meat IRA Released                           06/28/06

  6042       Australian FTA with Gulf States                     06/30/06

  6045       Citrus Update                                       07/17/06
  ---------- --------------------------------------------------- ----------