March 3 (Bloomberg) -- Australia's ABB Grain Ltd., CBH Group and GrainCorp Ltd. won a contract to sell wheat to Iraq, gaining an opportunity to replace Australia's monopoly wheat exporter AWB Ltd. during a kickbacks probe.
The three will work together to fill the order for as much as 350,000 metric tons of wheat, the companies said in a statement. Melbourne-based AWB agreed not to exercise a right to veto companies filling the order while it's under investigation for alleged illegal payments to Saddam Hussein's regime.
Prime Minister John Howard said this week that AWB's monopoly is open to question, raising the prospect that other companies may handle the forecast A$4.1 billion ($3 billion) in exports from Australia in the year ended June 2007. The contract would be the second time the nation, the world's second-largest wheat exporter, has sold wheat outside the monopoly.
``This could prove an important test case for the future of the wheat export industry,'' Greg Canavan, a senior equities analyst with independent researcher Fat Prophets, said in Sydney today.
Shares in AWB have slumped 36 percent since the inquiry started Jan. 16, plunging to their lowest in more than 2 1/2 years on March 1. They rose 26 cents, or 7 percent, to A$3.97 at the 4:15 p.m. close in Sydney on the Australian Stock Exchange.
Shares in Adelaide-based ABB, the nation's biggest barley exporter, have gained 8.5 percent since the inquiry started and stock in Sydney-based GrainCorp, eastern Australia's biggest grain handler, has risen 10 percent.
Willing
``AWB has confirmed that it is willing to provide access for Australian-owned grain trading companies to wheat from the national pool,'' Trade Minister Mark Vaile said in a statement. ``I encourage AWB to work expeditiously with these three companies to secure this opportunity.''
The contract would only be the second time Australia has exported a shipment of bulk wheat outside its monopoly system, David Ginns, the chief operating officer of the Grains Council of Australia, said from Canberra. The industry body could not give any details of that sale.
The contract would be worth about $50 million based on the current prices in Chicago.
Australia sold 1.5 million tons of wheat to Iraq in 2004-05 according to the Australian Bureau of Agricultural and Resource Economics.
On Feb. 14, it raised its estimate for the latest wheat harvest by 3.7 percent to about 25 million metric tons, which would be its second-biggest crop on record. Total wheat exports could be worth A$4.1 billion in the year ending June 30, 2007, according to Abare.
``AWB International believes that this arrangement is a positive outcome for Australian wheat growers,'' the company's spokesman Peter McBride said today from Sydney.
Separate Issues
Retired judge Terence Cole is investigating claims made in a United Nations report by former U.S. Federal Reserve Chairman Paul Volcker that AWB inflated wheat contracts and funneled $222 million back to Hussein through a Jordanian-based trucking company. Iraq last month refused to deal with AWB during the Cole inquiry.
