1. POLICY
1.1 What is a Stock Swap?
A Stock Swap is the exchange of ownership of Wheat between 2 owners of Wheat at different locations.
1.2 Why enter Stock Swaps?
The ability to exchange ownership of Wheat is a valuable risk management tool for Domestic Traders and end-users in the Domestic Market. Some of the reasons for entering a Stock Swap are:
(a) to take advantage of domestic freight arbitrage opportunities
(b) to access stock close to premium domestic country markets
(c) to realise efficiency gains by consolidating diverse stock holdings
(d) to benefit from the marketing advantages of consolidated stock positions
(e) to prevent stock being moved to unwanted sub-terminal or port locations when country storage Sites are cleared
(f) allows AWBI to capture domestic basis premiums relative to international wheat prices (as represented by ESR’s)
(g) to obtain access to Wheat of a specific variety or quality at Sites that are more suitable for flour milling or stockfeed manufacturing.
1.3 Basis of Stock Swaps
Having regard to the above matters, Stock Swaps may be negotiated on any of the following bases:
(a) Bin Grade for the same or different Bin Grade
(b) Port Zone for the same or different Port Zone
(c) Site specific
(d) Different Seasons.
1.4 Forms of Stock Swaps
(a) Forward Stock Swaps
A forward Stock Swap is a Stock Swap negotiated prior to the actual receival of the Wheat. For example, a forward Stock Swap may be negotiated in April for a swap of Wheat the following January. There is a risk in the intervening period that weather conditions or market conditions could cause substantial price differentials between markets or between different Bin Grades. These risks are priced into the forward Stock Swap.
(b) Operational Stock Swaps
A party may have difficulty accessing Wheat owned by it at a particular time. An operational Stock Swap enables the party to swap its inaccessible Wheat for Wheat owned by another party at an accessible Site. Operational Stock Swaps have a maximum tonnage limit of 200mt.
An operational Stock Swap may also be initiated by a Receival Agent to facilitate performance of the Receival Agent's logistical obligations to move its customers' Wheat.
1.5 Authority to enter into Stock Swaps
The National Pool Swaps Administrator may authorise the entry by AWBI into Stock Swaps of up to 50 tonnes.
The National Pool Manager, the National Pool Pricing Manager and the National Pool Stock Swap Merchant may authorise the entry by AWBI into a Stock Swap in accordance with the AWB Group Authorisations Policy
1.6 Stock Swap pricing
(a) Price
Stock Swap prices are negotiated on an FOB basis between AWBI and the Counterparty.
Stock Swap prices are dependent on various factors including the following:
(i) Domestic Market Price differentials between 2 Port Zones
(ii) Domestic Market and international market price spreads between Bin Grades
(iii) Freight and Port Cost Differentials between Sites in the Stock Swap
(iv) Other logistical factors
(v) Wheat quality and profile.
The price payable for the Stock Swap is in the discretion of AWBI but will normally reflect the difference between the total value of the stock for AWBI and the Counterparty.
(b) GST
GST applies to all Stock Swaps.
AWBI provides an RCTI to a Stock Swap Counterparty who has signed an agreement with AWBI agreeing to receive an RCTI. This ensures that the amount of GST applicable to the Stock Swap is matched for both transfers of Wheat. For Counterparties that do not want to receive an RCTI, the stock must be priced at the same FOB price as under the Stock Swap Contract. This is to avoid any discrepancies in the GST payable on the Stock Swap.
(c) Reconciliations
- Port costs reconciliation
Stock Swaps between different Port Zones are negotiated on the basis that the relevant port cost deductions are reconciled, unless otherwise agreed.
For example, if AWBI is swapping into a Port Zone with lower port costs it will pay the difference to the Counterparty. If the Counterparty is swapping into cheaper port costs, and AWBI into higher port costs, then the Counterparty will pay the difference.
(ii) Outturn costs reconciliation
Stock Swaps between Sites are negotiated on the basis that the relevant Receival Agent’s outturn charges are reconciled, unless otherwise agreed. AWBI’s outturn rates are applicable and these may differ from what the Receival Agent charges other marketers.
When the AWBI port costs and outturn charges are published, and also upon invoicing, they will be combined together under the heading “PCD’s and other costs”.
(iii) Export freight reconciliation
All Stock Swaps either within a Port Zone or between different Port Zones are subject to export freight reconciliations (using the applicable fixed National Pool Swap Rates, unless otherwise agreed).
(iv) Protein, screenings and moisture reconciliation
All Stock Swaps are subject to protein, screenings and moisture adjustments using the Golden Rewards Payment Scale based on stack averages at each Site at which Wheat is being swapped out at the time of title transfer except:
(A) protein, screenings and moisture reconciliations do not apply for FEED Wheat
(B) AWBI may agree not to apply protein, screenings or moisture reconciliations.
All quality parameters are reconciled using the Golden Rewards Payment Scale (posted on the AWBL website and amended, if necessary, after each EPR update) on either the date the Stock Swap Contract is agreed orally or by email or on the date of title transfer. If Golden Rewards Payment Scales for the relevant Season have not been posted on the AWBL website, quality parameters will be reconciled on a date to be agreed following posting of the Golden Rewards Payment Scales for the relevant Season.
If a Counterparty is swapping Wheat from an earlier Season in a Stock Swap, the relevant Receival Agent stack averages for that Season will apply. If this information is not available then the current Season Receival Agent stack averages will apply. In all cases, quality reconciliations will be calculated in accordance with the Golden Rewards Payment Scale.
- No reconciliation for up-country costs
Stock Swaps with AWBI are not reconciled for up-country costs (including time-based storage costs, receival fee and any charge imposed by the Receival Agent in relation to the Golden Rewards Payment Scale).
1.7 Other quality/hygiene characteristics
All Wheat swapped must comply with Receival Standards. AWBI and a Counterparty may agree to enter a Stock Swap Contract with other specific requirements.
1.8 In-Store Transfer Policy/Ticket‑by‑Ticket Policy
Each party to a Stock Swap with AWBI must comply with the In-Store Transfer Policy.
Stock Swaps do not have to comply with the Ticket‑by‑Ticket Policy because the Wheat is swapped according to Bin Grade (not Pay Grade).
1.9 Segregations
Wheat is available for swapping each Season on the basis of the Bin Grades that are established within a Port Zone for that Season.
Primary Bin Grade segregations (and quality parameters of that Bin Grade) for Stock Swaps are published on the AWBL website.
1.10 Credit Limits
Counterparties must have either an adequate unused credit limit with AWBI, or must pay for a Stock Swap before title transfer.
The credit limit established by AWBI may be varied at any time by AWBI.
1.11 Responsibility for charges
After the title transfer, each party is responsible for any stock reservations, draw-downs, freight, Receival Agent charges and other charges that apply to the Wheat that it has acquired through the Stock Swap. Before the title transfer, each party is responsible for all charges that apply to the Wheat that it is swapping out.
1.12 Terms & conditions
The terms and conditions set out below apply to all Stock Swaps entered into by AWBI with any Counterparty unless otherwise agreed in writing.
(a) Supply
(i) The Counterparty agrees to swap Wheat in accordance with the Stock Swap Contract.
(ii) The Counterparty warrants that the Wheat will comply with all State and Commonwealth pesticide regulations.
(iii) Unless otherwise agreed, AWBI may supply Wheat from any Season.
(b) Transfer of Title
(i) Transfer of title to each parcel of Wheat being swapped occurs when the relevant Receival Agent signs the applicable Title Transfer Form (or in the case of a Counterparty that owes AWBI money under the swap transaction and does not have a credit limit with AWBI, transfer of title of Wheat from AWBI to the Counterparty occurs on payment by the Counterparty).
(ii) The Counterparty must pay carry charges associated with the Wheat acquired by it under the Stock Swap on the Business Day after the transfer of title.
(iii) The Counterparty must ensure that the Wheat is free from any crop lien or encumbrance prior to transfer. AWBI is not to be liable in respect of any undisclosed crop lien or encumbrance.
(c) Terms of Payment
(i) Payment is to be made within 5 Business Days of receipt of an RCTI (or execution of both Title Transfer Forms if the Counterparty has not agreed to receive an RCTI).
(d) Security
If required by AWBI, the Counterparty must provide security satisfactory to AWBI.
(e) Reservation of Rights
AWBI reserves the right to differentially price Wheat within and between:
(i) Port Zones
(ii) Different Bin Grades.
(f) Disclaimer
AWBI accepts no responsibility for any loss suffered by a Counterparty in connection with the movement or carriage of the Wheat by a Receival Agent (or its subcontractor or agent). The movement of a Counterparty’s Wheat by a Receival Agent is not deemed to be a Stock Swap.
(g) Force Majeure
Where an event of force majeure (which includes strikes, lockouts, restrictions of operations by Commonwealth or State law or regulation, or any other cause which in AWBI’s opinion is reasonably beyond the control of the parties) occurs, performance of the Stock Swap Contract will be suspended. If the force majeure event ceases, the suspension of the Stock Swap Contract ends and the parties must perform their obligations.
(h) Termination
AWBI may terminate the Stock Swap Contract if:
(i) a Counterparty is in breach of its obligations under the Stock Swap Contract and that breach continues for 3 Business Days after receiving written notice if that breach from AWBI
(ii) a Counterparty ceases to carry on business, becomes bankrupt, is wound up or goes into liquidation
(iii) the credit limit of the Counterparty is varied and the Counterparty is unable to comply with the variation
(iv) the Counterparty fails to transfer title free from encumbrance.
(i) Confidentiality
(i) The Counterparty and AWBI agree to treat as confidential all information provided in the course of negotiation and performance of the Stock Swap Contract.
(ii) The obligation of confidentiality and non-disclosure continues for 12 months after termination of the Stock Swap Contract.
(j) Applicable Law
The Stock Swap Contract is governed by the laws of the State in which AWBI is swapping out Wheat.
2. PROCEDURE
2.1 Information on AWBI's stock positions
On request by any potential Counterparty, the National Pool Swap Merchant will give all necessary information (including Bin Grade and tonnage of Wheat available at a Site) in relation to Wheat at a Site which AWBI would consider swapping out.
2.2 Offer to enter Stock Swap
Negotiations will be initiated by either AWBI making an offer to a potential Counterparty or the potential Counterparty making an offer to AWBI. An offer may be made by telephone, fax, letter or e-mail.
An offer must specify the following parameters:
(a) Premium for each swap out
(b) Bin Grade(s) of Wheat
(c) Port Zone(s)
(d) Season(s)
(e) Tonnage.
Unless the party making the offer states otherwise, each Stock Swap offer stands until the offeror's close of business on the day the offer is made. If the offer is not accepted by that time, the Stock Swap offer is automatically withdrawn.
An offer is also withdrawn if the other party makes a counter-offer.
2.3 Acceptance of offer
An offer may be accepted by telephone, fax, letter or e-mail, unless specified otherwise in the offer.
The agreement to enter the Stock Swap incorporates the terms outlined in this policy.
2.4 Specification of Site
The Counterparty must provide details of the Sites for the Stock Swap within 3 Business Days after the date of agreement on the Stock Swap except if it is a forward Stock Swap (in which case, the parties do not specify the Sites until a date is agreed). AWBI will not hold Wheat after this time and therefore cannot guarantee that the Wheat will be available at the Sites specified by the Counterparty.
2.5 Documentation
On the Business Day after the Sites are specified:
(a) AWBI executes a counterpart of the Stock Swap Contract and a Title Transfer Form relating to its Wheat and sends them to the Counterparty
(b) The Counterparty executes a counterpart of the Stock Swap Contract and a Title Transfer Form relating to its Wheat, and sends them to AWBI.
Upon receipt of the documents specified above:
(c) AWBI executes the Counterparty's Title Transfer Form, and delivers it to the relevant Receival Agent
(d) The Counterparty executes AWBI's Title Transfer Form and delivers it to the relevant Receival Agent.
Transfer of title to each parcel of Wheat being swapped occurs when the relevant Receival Agent signs the applicable Title Transfer Form (or, if the Counterparty does not have a credit limit with AWBI and the Counterparty is paying AWBI for the Swap, title to AWBI's Wheat passes on receipt of payment by AWBI). The Receival Agent at each Site at which Wheat is being swapped out sends a copy of the applicable Title Transfer Form to the other party.
Each party executing a Stock Swap Contract must ensure that its storage agreement with the Receival Agent in each Site in which the Stock Swap will take place permits Stock Swaps on the agreed terms.
2.6 Payment terms
AWBI issues an RCTI (if the Counterparty agrees to receive an RCTI) containing the agreed Stock Swap price once both parties have executed the Title Transfer Forms.
Payment must be made 5 Business Days after receipt of the RCTI (or execution of both Title Transfer forms, if the Counterparty
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