AWB to review services agreement

26 Sep, 2007 09:00 PM
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AWB will meet this week to decide what, if any, changes it will make to the services agreement it has put in place for managing this year’s national wheat pool.

A heads of agreement between the AWB Ltd (AWBL) and AWB International (AWBI), outlining the costs associated with servicing this season’s pool, was released as an ASX announcement on September 3.

The agreement has suffered a barrage of criticism despite the AWB’s attempts to increase its transparency levels by making it public for its final national pool.

Critics believe the agreement does not conform to the Wheat Marketing Act and appears to allow for costs associated with managing previous pools, in addition to the costs of winding up AWBI, to be carried by this year’s pool.

As a result, the Wheat Export Authority (WEA) announced last week that it would conduct an investigation into the agreement

The investigation is being directed by Federal Agriculture Minister Peter McGauran’s and echoes similar concerns raised by national farm lobby groups, including WAFarmers and the Wheat Growers Association (WGA).

AWB chief executive officer Gordon Davis and AWB International (AWBI) chairman Ian Donges met with local farming organisations last week during a short visit to WA.

Mr Davis said he had acknowledged WAFarmers and WGA’s concerns but he was still urging growers to deliver their wheat to the pool as soon as they could, in order to take advantage of the high prices on offer.

“What I would say is that the services agreement is just one aspect of the final returns, and all the projected costs are reflected in the EPR,” Mr Davis said.

“We are obliged to do that, as our estimate of those costs get reduced, then the EPR gets affected.

“What I would say to anyone not considering delivering their wheat to the pool is that the EPR went up last week by $26 a tonne because of the buoyant world grain market.

“As we said in the EPR announcement there’s a strong inverse in the market, so there’s a real incentive for the growers to deliver into the pool early so we can sell that wheat into the market while the market is still very strong.

“That would be by far and away the biggest determinant of their income and not the variations in the service agreement being talked about at the moment.

“Those costs may impact on the EPR by 0.25c to 0.50c per tonne, but the variations in the market, due to the commodity price, impact on the price of wheat by a lot more and many tens of dollars.”

Mr Davis said the pool had a track record of financial soundness.

“We have customers lined up who are desperate for our wheat and we can export without a permit,” he said.

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