National Farmers' Federation

Drought – short-sighted to think it's just a farm problem

THE Westpac-NFF rural commodity index was 1.7% lower this month as beef prices, in particular, showed a significant decrease on levels 12 months ago – exacerbating farmer concerns as the dry conditions turn critical.
Australia-wide the combined effects of drought have prompted ABARE to forecast a 45% decline in net farm income, plummeting to its lowest level in 12 years.
Australian agriculture directly contributes $36 billion to the Australian economy, but its impact is actually $103 billion when accounting for the flow-on effects farm production generates throughout its related sectors.
“It would be short-sighted to dismiss drought as just a problem for farmers,” NFF Vice-President and Chair of the Farm Business and Economics Committee Charles Burke said.
“There is growing awareness of the interconnectivity between the various sectors of the Australian economy and agriculture’s vital role within it. Therefore, not only farmers, but related industries such as contract harvesters, stock and station agents, exporters, transporters and retailers are bracing themselves for the challenges that drought brings.
“Preparing for, and managing, drought is a fact of life in Australia and farmers are embracing new technologies and environmentally-friendly techniques to manage our harsh climatic conditions, because that is the future of the sector.
“Still, the current drought is a one-in-25-year event. Even the best farm management practices will struggle under the prevailing conditions. I think the broader community is starting to recognise that when farmers hurt this bad, the economy and living standards suffer, and we all feel the pain.”
Westpac Senior Economist Justin Smirk added: “ABARE’s forecast highlights just how significant the deterioration in farmers’ terms of trade has been. The commodity boom has inflated farm inputs far faster than farm outputs. This has hit farm net incomes hard and, as such, many regional communities will feel the pinch in 2007 as farmers reduce their spending on local goods and services.
“So while the drought may not yet be as deep as 2002/03, for many regional communities its impact will feel at least as bad… if not worse.”
Compared with August 2006 levels, global prices in September lifted for Wheat (6.4%), Barley (2.1%), Canola (1.3%), Dairy (3.0%) and Wool (0.2%). However, these price gains were outweighed by a fall in the price of Cotton (4.0%), Beef (6.1%) and Sugar (9.0%). The overall weighted index decreased by 1.7% for the month.
[ENDS] The Westpac-NFF Index is weighted according to the value of Australian agricultural exports and includes only rural commodities – unlike other price indices that are overshadowed by oil, mineral and energy prices. It provides daily movements based on prices of Australia’s eight key farm exports – wheat, barley, beef, wool, cotton, sugar, dairy and canola – in both $US and $A.
The latest Westpac-NFF Rural Commodity Index can be found here.

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