U.S. wheat moves on RI 'devastating': AWB

U.S. wheat moves on RI 'devastating': AWB

SYDNEY (Reuters): The United States was likely to displace Australian wheat from the Indonesian market by placing half a million tons in a short period into a market which would take only four million tons a year, AWB Ltd. chairman Trevor Flugge said.

Flugge, chairman of the formerly-named Australian Wheat Board, was commenting on U.S. government assurances that its donations of wheat to needy countries would not interfere with Australia's grain markets.

"If the U.S. donates more wheat to Indonesia as suggested it could be devastating," Flugge said in a statement.

The U.S. government has said it would donate 500,000 tons of wheat to Indonesia as part of a 2.5 million ton package to nine nations suffering food shortages.

About 1.5 million tons of that aid is yet to be allocated and there have been indications from Washington that another million tons of U.S. wheat could find its way to Indonesia, Flugge said.

"Australian wheat growers will now require a lot of convincing if they are to believe this is merely an altruistic exercise on the United States' behalf, especially given the comments in support of the exercise by U.S. Secretary of Agriculture Dan Glickman," Flugge said.

Glickman and U.S. President Bill Clinton had specifically referred to the aid measures as a means of boosting prices for U.S. farmers, but futures prices in the U.S. had fallen to their lowest level in seven and a half years since the donation scheme was announced, Flugge said.

Glickman said the package would "...be used for foreign food donations, opening new export channels for American farmers", Flugge said in the statement.

Indonesia was consistently one of Australia's top five wheat customers, purchasing around 2.5 million tons of wheat each year worth close to A$600 million, Flugge said.

Indonesia purchased a total of 4.2 million tons of wheat last year. In the past, the U.S. had been unable to compete with Australia for quality and timing of deliveries in Indonesia, he said.

"The impact of Australia having to find a home for half a million tons which it may not be able to sell to Indonesia will be significant in a year when we too are looking at producing a big crop," he said.

The AWB could possibly have to revise its pool price estimates because of the U.S. actions, he said.

AWB's successful tender for 270,000 tons of wheat to Indonesia last week indicated that there was still commercial demand for wheat in Indonesia, he said.