SYDNEY, Feb 9 Australia's AWB Ltd. AWB.AX could export wheat to India this year f

SYDNEY, Feb 9 (Reuters) Australia's AWB Ltd. could export wheat to India this year from a small drought-depleted harvest as crop losses caused by hot weather in the South Asian giant raise the prospect it will need millions of tonnes of imports for a second year in running.

AWB is already rationing exports from a 9.7 million tonne Australian crop, down by 60 percent on the previous year, and had not expected to sell to India this year after last year's big 1.6 million tonne sale -- its first in more than eight years.

But hot weather is withering the Indian crop, which is now seen amounting to 72.5 million tonnes, down from an earlier estimate of 74 million.

India was forced to import massive quantities of wheat in 2006, for the first time in six years, after hot weather cut stocks. This year could cause an unexpected repeat.

''It depends on the timing,'' AWB spokesman Peter McBride said of further possible sales to India. ''At the end of the day it'll really depend on price.'' AWB would have an export pool of more than 3 million tonnes of wheat and has said that there will be a carry over from last year of around 2 million.

While down from exports of around 16 million tonnes last year, exports of more than 5 million this year will be enough to allow AWB to take advantage of market opportunities.

''We're just going through the process of market allocation,'' McBride said.

AWB's international trading office in Geneva might also be able to supply non-Australian wheat to India, he said.

AWB HEDGED OUT? Meanwhile, AWB has told wheat growers that it has not implemented currency or commodity price management for the 2007/08 crop, as uncertainty swirls over export arrangements.

This is the latest twist in the long-running saga over an Australian judicial inquiry's finding last year that AWB broke United Nations sanctions against Iraq by paying $222 million in kickbacks to the regime of Saddam Hussein to secure sales.

The government of Prime Minister John Howard has established a panel of top business and farm representatives to review AWB's export monopoly and report by March 30.

This could result in stripping AWB of its decades-old export monopoly, or partial de-regulation of the tightly-controlled export industry. The government is expected to reach a final decision around May or June, ahead of a national election.

All this leaves AWB and the rest of the wheat industry uncertain about who will be selling Australia's export wheat crop, normally the second largest in the world and worth up to A$4 billion ($3 billion).

McBride said that AWB was still hedging wheat prices on US futures markets for the 2005/06 crop, which is not all sold.

The group usually starts to hedge on foreign exchange markets in late February/early March, and to hedge in US wheat futures markets around June.

AWB is normally one of the largest players on the Chicago and other US wheat futures markets.

The company expects to decide by June whether it will be back into hedging markets for the new crop, McBride told Reuters.

REUTERS DKS BST0632