Crop Week: AWB experience similar but different to CWB

The changes to wheat marketing currently underway in Western Canada, with the end of the Canadian Wheat Board’s single desk, echo those made in Australia over the past decade.

Canada can expect to face some of the same challenges and opportunities as experienced in Australia going forward, but there are also key differences between the two countries that may lead to different results in Canada, said Geoff Honey of Grain Trade Australia, in comments to the media ahead of a speech here during Crop Week on Wednesday.

While efforts to end the single desk have been underway for years in Canada, the move to an open market in Canada still came about relatively abruptly with the passage of Bill C-18 in late December 2011.

Honey pointed out that in Australia plans were already underway to move away from the Australian Wheat Board’s single desk in the early 1990s. An industry fund to deal with the transition was established at that time which had grown to A$600 million by the time the changes actually occurred in the middle of the last decade following a scandal involving the AWB and wheat sales to Iraq.

The AWB had already been a publicly traded company since 2001, and Honey said the Iraq scandal provided the catalyst to eventually do away with the single desk altogether in 2008.

AWB’s grain trading and origination arm was split off and sold to Cargill last year, after Canadian fertilizer and ag retail firm Agrium, interested mainly in the board’s crop input and retail businesses, bought AWB in 2010 for A$1.24 billion.

"Standing start"

When the changes took place in Australia, all the levels of government were in favour, and no court actions were pursued, said Honey, which compares with Canada where politicians are still divided and a number of legal challenges are before the courts.

As a result, Honey said, Canada appears to be entering the open market from a "standing start," compared to Australia where the period of change had been underway for some time. The uncertain legal situation in Canada also may be causing some concern amongst importers.

As wheat had been Australia’s major grain export prior to the end of the AWB single desk, Honey said there were some growing pains in terms of logistics and moving grain from the ports in the immediate aftermath of the changes. However, he said those problems have since worked themselves out.

Other changes to the Australian structure include an increase in international trading houses now participating in the Australian market.

In addition, Honey said accredited wheat exporters have climbed from one to 25. Pooling is also still an option in Australia, with up to nine different companies offering pooling options for producers.

Another interesting development in the Australian wheat market over the past few years has been the sharp increase in wheat exported by container. Under the former AWB next to no wheat was shipped by container, but now smaller companies and individual operations are shipping over two million tonnes of wheat annually via container into niche markets, said Honey.

Asked if Australian farmers were better off with or without a single desk, Honey was diplomatic, but said overall profitability will come down to the individual growers’ marketing skills.

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