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Pricing Issues In The Australian Wheat Industry

1641 words - 7 pages

IntroductionThis report is going to outline and explain pricing issues in the Australian wheat industry, covering the topics of production & consumption, trade, industry structure and price. Australia is currently one of top five wheat producing countries in the world. We represent only 3% of global wheat production but account for up to 18% of total world exports.ProductionBetween 1995 & 2000 wheat production in Australia averaged 37.2million tonnes with Western Australia being the biggest producer with an average annual production of 13.19million for the same period. There is about 32,000 grain growing farm in Australia out of about 70,000 board acre farms. On average grain industry farms are about 307ha and producing around 620t. Production declined to 10.05million tonnes in 2002-2003 due to the drought. Australia normally exports about 16.5million tonnes or 16% of the world trade which was also affected by the drought in 2002-2003 with only10.8m/t being exported in that period. Once the drought had subsided in 2003 Australian production has risen to 25 million tonnes in the 2003-2004 season which tops the record production achieved in 99/00 of 24.8 million tonnes.Graph 1: Australian Wheat Production 1981 - 2001PriceEarly in 1996 wheat prices were historically high at up to 750US¢/Bu due to a world grain shortage and concerns about the American winter crop. This affected both feed and food grains which peaked in May to June.Chart 1: Wheat Prices 1995 - 2005 US¢/BuDate Opening Price High Price Low Price Closing PriceMar-95 352.5 357 345.5 357Mar-96 507 750 506.5 640Mar-97 378.5 379 377 378Mar-98 321 322 320 320Mar-99 268 272 267 272Mar-00 256 259.5 256 259.5Mar-01 278.5 278.5 275.25 276.75Mar-02 270 272 270 272Mar-03 312 315 310 311Mar-04 354 359 354 357Mar-05 344 353.5 344 351.5Graph 2: Wheat Prices March 1995 - 2005ConsumptionOver the past 20 years wheat consumption has been growing at about 1% per year and is expected to keep growing at the same rate. Australia's consumption over the past 5 years ranged from 5,328thousand metric tonnes in 2000/01, peaking in 2002/03 at 6104 thousand metric tonnes and at this season 2004/05 stands at 5,600 thousand metric tonnes.Graph 3: Australian wheat domestic use & exportGraph 4: Wheat consumptionTradeAustralia is currently one of the top five wheat exporting countries with the export volume of 18million tonnes in 2000. Compared to USA 35 million tonnes, Canada 26 million tonnes, European Union 14 million tonnes and Argentina with 10 million tonnes. We represent just 3% of the global wheat production but account for 15-18% of total world exports.The Australian Wheat Board (AWB) stated that "in the ten years to 2000, world wheat trade has remained fairly static at about 100 million tonnes. During the same period, Australia's wheat production has grown from around 12-14million tonnes per annum to about 22-24 million tonnes per annum"About 75% of wheat produced in Australia is exported...

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