Australia resumes Iraq wheat sales with Glencore deal

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29 Apr 2008

Australia has resumed wheat exports to Iraq, ending years of trade blockages over illicit payments to the past government of Saddam Hussein, with a global commodities trader loading a ship for first delivery. Australia, a strong supporter of reconstruction in Iraq and among the first to commit troops there, has been keen to regain its position as the country's major wheat supplier. Swiss trader Glencore [GLEN.UL] was loading the first 50,000-tonne shipment on Tuesday in a total deal for 250,000 tonnes, and negotiating further sales, trade sources said. At current Australian wheat cash prices of over A$400 a tonne, the deal would be worth well over A$100 million ($93 million).
The deal signals a return to normal ties between Iraq and Australian wheat exporters, after the falling out over the bribery allegations.
"It's a big win for Australian wheatgrowers," Australian Agriculture Minister Tony Burke said on Tuesday.
"We have been locked out of the Iraq market and this is the first chance for Australian growers to get back into what used to be our biggest market," he said.
Iraq suspended wheat purchases from Australia in early 2006 over monopoly exporter AWB Ltd paying $222 million in kickbacks to Saddam's government to secure sales.
Iraq bought no further wheat from AWB after a judicial inquiry found that the former Australian Wheat Board had broken United Nations sanctions by paying the kickbacks.
Later in 2006, Iraq bought 350,000 tonnes from a newly formed, non-AWB consortium Wheat Australia, but further sales were blocked by lack of access to wheat for export and by lack of agreement over prices.
Iraq was Australia's biggest and most lucrative customer for wheat in the last years of Saddam's government, mostly taking over 2 million tonnes a year between 1999 and 2003.
Australian wheat, which had a virtual monopoly of the Iraqi import market before Saddam's overthrow and the kickbacks scandal, was still regarded by Iraqi buyers as the preferred quality grain, trade sources said.
PREMIUMS
Glencore found no difficulty attracting wheat for export from Australian farmers and also received premiums in the Iraq deal of at least $50 a tonne over Chicago Board of Trade futures because of freight and quality advantages, trade sources said.
Trade sources confirmed for Reuters on Tuesday that Glencore, which in February was allocated a special license by the Australian government to export 300,000 tonnes of wheat to Iraq, sold 150,000 tonnes to Iraq in February and followed this up with a further sale of 100,000 tonnes in recent weeks.
Louis Dreyfus, another international grains trader, was also allocated a special permit by the Australian government in February to export 100,000 tonnes of wheat to Iraq.
Louis Dreyfus Australia executive Alick Osborne on Tuesday declined to comment on whether his group had sold wheat to Iraq.
But several Iraqi tenders had been recently issued and more would be out soon, he said.

Source: Reuters