Farmers Brace to Weather Another El Nino

Despite August 2006 being the driest on record, the Westpac-NFF rural commodity index shows continued strength on 2005 levels.
The Westpac-NFF rural commodity index, measuring the weighted world price of agricultural commodities, was 1.4% lower than previous month levels as the AUD rose above the psychological $US0.77 mark. Increases in the price of Barley, Cotton and Beef were outweighed by price falls on previous month levels for Wheat, Canola, Sugar, Dairy and Wool.
Meanwhile, Australian farmers are bracing themselves in the face of news of an emerging El Nino – a climatic system characterised by low rainfall, high temperatures and widespread drought. However, farmers recognise Australia’s harsh and variable climate is a fact of life that must be managed.
“While such news is obviously a concern for Australian farmers who are acutely exposed to changes in the weather, few could say that they would be overly surprised about the prospect of further dry conditions,” NFF Vice President Charles Burke said.
“Fluctuations in the weather – in the form of drought, floods, cyclones or other natural disasters – are increasingly seen as the ‘norm’ by farmers, who have recognised the need to gear up for such challenges.
“Our primary producers have demonstrated time and time again that they can reliably meet the increasingly complex needs of their domestic and export customers, in the face of severe and erratic climatic conditions.
“El Nino weather systems are now accepted as one of the obstacles that must be addressed in meeting our customer needs.”
Westpac Senior Economist Justin Smirk noted: “Farmers and mortgage holders would have been relieved when the RBA left rates on hold this week. While we think the dry conditions means that farming will clearly be a drag on growth this year, we doubt it will be enough to offset the booming resource sector.
“So with inflationary pressures continuing to build, consumer spending remaining robust and housing in the early stages of a recovery there is a clear risk the RBA may raise rates as early as the November meeting.”
[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.