National Farmers' Federation

Time to refocus on industry trends as global conditions begin to stabilise

THE panic emerging from the global financial crisis has had a significant impact on global agricultural commodity prices, with the Westpac-NFF Commodity Index showing a 12.7% decrease over the past year.
However, recent indications are that the fluctuating price movements of the past 12 months among global commodity prices are dissipating as traditional demand and supply forces re-emerge.
“The world economy is beginning to pull out of one of the most severe recessions of the past 60 years,” Westpac Senior Agribusiness Economist Andrew Hanlan said.
“The International Monetary Fund has upgraded its world growth forecast for 2010 to a modest 2.5%, up from 1.9% previously. As the risks of another bout of global disruption recede markets are broadening their focus.
“Industry is now able to refocus on individual commodity trends that were largely irrelevant in the wake of the global financial crisis. We are now starting to see both long and short term opportunities arising for individual agricultural commodities, particularly for barley and sugar – where relatively tight market conditions are supporting global prices.
“While the overall Westpac-NFF Commodity Index declined by 3.1% in June, as the Australian dollar rose by 5% against the US dollar on increasing market optimism, the stand out was the sharp rebound in barley prices – jumping 10% in the month. It is notable that markets are now placing greater emphasis on predictions of falling global barley production in key exporting countries.”
National Farmers’ Federation (NFF) Vice-President Charles Burke added: “With growing conditions during June looking solid in the major agricultural production regions, unfortunately this has translated into lower prices during the month as supply prospects improve.
“Australian farmers still firmly believe that the medium to long term outlook for our products are strong, despite the decrease for all but barley prices during June. This will become more evident as the global economy continues on its road to recovery.”
Over June 2009, the Westpac-NFF Commodity Index decreased 3.1%. The Index is now 12.7% lower than a year ago. The commodities suffering falls were beef (-2.1%), dairy (-3.4%), wheat (-4.5%), sugar (-2.4%), cotton (-8.6%), canola (-2.5%). Only barley (10.0%) recorded an upward price movement.
[ENDS] The Westpac-NFF Commodity 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 – barley, beef, canola, cotton, dairy, sugar, wheat and wool – in both $US and $A.

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