AWB, the Australian wheat exporter, is in merger talks with local rival ABB Grain that if successful would create the country's second-largest listed agricultural company after Incitec Pivot.

The merged group - which based on yesterday's closing price would be worth about A$2.5bn (US$1.6bn) - would have the largest wheat and barley marketing operations in Australia as well as international marketing operations in Ukraine, India, Brazil, Switzerland, Singapore, Japan and China. AWB warned yesterday, that the discussions were "non binding" and "incomplete".