AWB prepared for loss of export monopoly

AWB is resigned to losing its status as the nation's monopoly wheat exporter after Terence Cole hands down his report into the Iraqi kickbacks scandal on Friday.

AWB is resigned to losing its status as the nation's monopoly wheat exporter after Terence Cole hands down his report into the Iraqi kickbacks scandal on Friday.

The Australian understands that AWB has accepted the loss of the so-called single desk, which has protected its monopoly for more than 60 years, is inevitable.

And it is now preparing for what it hopes will be an orderly transition to full deregulation of the market, which would allow other companies to export bulk Australian wheat.

It believes a slow transition is in the best interests of shareholders, grain growers and Australia's international trading reputation.

AWB would not comment yesterday, but it is believed it has taken advice that its current position, as the only company able to export wheat, is not sustainable.

The changes were likely to be forced on AWB as part of a new World Trade Organisation agreement, irrespective of Mr Cole's report, which is likely to recommend that charges be laid against former AWB executives involved in the $290million kickback scandal.

Mr Cole has been investigating accusations that AWB rorted the UN's oil-for-food program by paying bribes to secure lucrative wheat sales to the regime of Saddam Hussein.

AWB's acceptance of the inevitability of reform allows John Howard to avoid a damaging split in the Coalition.

A group of six Liberal backbenchers have been campaigning for reform for months. Peter Costello has expressed sympathy for farmers forced to deal with AWB, when higher wheat prices were offered by rivals.

But Nationals leader Mark Vaile and Trade Minister Warren Truss are staunch supporters of the single desk.

Reform of the wheat market would drag Australia into line with Canada, which recently adopted 2013 as the date for deregulation of its wheat board, which in turn brings both countries in line with new global rules on export competition. A WTO framework agreement of July 2004 put monopolies such as AWB up for "further negotiation' but stopped short of making them illegal.

The federal Government will now be able to use the single desk as a bargaining chip in negotiations for export competition.

AWB's campaign for a long transition is backed by some of its major overseas clients, which have this week inundated the Prime Minister's office with letters of support for AWB.

Foreign companies in Indonesia, Malaysia and Vietnam have expressed concern about changes to the single desk and, in particular, to a campaign by the West Australian grain giant CBH, which wants to export wheat to its own mills in Indonesia.

Indonesia's Fugui Flour and Grain company wrote to Mr Howard on November 15, saying it was "particularly concerned" about changes to the single desk.

Malayan Flour Mills, which has operations in Vietnam and Malaysia, has also backed the single desk, saying "we wish to appeal to the Australian Government not to permit the CBH group to export wheat to its subsidiaries in Asia".

"There are four major wheat exporters in the world. In our experience, Australia is one of the more reliable and consistent," it wrote.

Malaysia's Federal Flour Mills has written several letters to Mr Howard, saying "we will not feel comfortable" dealing with companies other than AWB.

AWB has not given up the fight for its future as a grain exporter, with chairman Ian Donges yesterday vowing to win back even the Iraq market, which was lost when AWB was exposed as the largest single supplier of illicit funds to Saddam's regime. The US snatched most of the Iraq market from AWB.