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Australia Agribusiness Report Q2 2010
Market |
Agriculture, Farming & Raw Materials |
Report Type |
Market Research |
Country |
Australia |
Published |
22 February 2010 |
Number of Pages |
68 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
Despite continuing dry weather in some parts of the country we expect grain production in 2010 to be up again on the 2009 level. Falls in production in the eastern states of Queensland and New South Wales, where El Niño-induced dry conditions are likely to see yields fall, will be more than made up for by large increases in production in Victoria and South Australia where production is expected to be considerably higher than the previous year.
Despite the increases in production, many grain farmers will still find 2010 to be a difficult year. A high global crop combined with a strengthening Australian dollar - from the beginning of April to mid- November 2009 the dollar rose from 0.69US$/AUD to US$0.93/AUD - has put downward pressure on wheat prices in the country. From September to October 2009, the price of wheat on the Australian Securities Exchange fell from AUD250/tonne to AUD200/tonne. In mid-November, prices were still only fractionally above AUD200/tonne. We expect prices to remain subdued into 2010.
The strong dollar has also been hurting the competitiveness of Australia's livestock product exports.
Exports to Japan, the biggest foreign market for Australian beef, were sluggish through Q3 and into Q409. Demand has been hurt both by the increased price owing to the strong dollar as well as the poor state of the Japanese economy. Demand for Aussie beef in another major East Asian market, Korea, has also taken a bit of a battering over the past year. January to August volumes were down by 12% year-onyear, while the value of exports was down by 24% reflecting the lower prices. Demand for Australian beef in Korea has been hurt by the surprisingly resilient demand for higher priced domestic Hanwoo beef.
The rising dollar also served to cancel out the gain in world dairy prices through the second half of 2009.
The world price for whole milk powder rose from US$2,000/tonne at the beginning of August to US$2,850/tonne in October. Despite the rise, the price paid to farmers for their milk are still very low, often below the cost of production. The low price offered by National Foods to dairy farmers in Tasmania, which produces just over 7% of Australia's milk, led to a dispute with farmers refusing to supply milk at the AUD0.20/litre price offered. Farming bodies claimed this was little over half the cost of production. In November, negotiations were still underway with National Foods having raised their offer to AUD0.33/litre. Farmers' representatives were demanding close to AUD0.40/litre. The dispute gained considerable national attention and has provoked a federal government investigation into milk pricing. We expect friction between major dairy producers and farmers to continue as long as milk prices remain around their current low level.
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