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Aussie farmers positioned to reap strong world prices

11 July 2007

FOR the first time in over a year, Australian farmers are in a position to capitalise on strong world commodity prices. The Westpac-NFF Commodity Index for June 2007 brings into sharp focus the global strength in agricultural commodity demand – with the Index soaring 15.5% above the levels of June 2006 – and, as drought conditions ease in many parts of Australia, many farmers are gearing up for a bumper season.

"While strong international prices have featured prominently in the Westpac-NFF Commodity Index over several months, severe drought conditions at home have meant that most of our farmers have been unable to reap the benefits," National Farmers’ Federation (NFF) CEO Ben Fargher said.

"Our domestic production this season may finally line up with stronger world prices. This has many farmers upbeat about their ability to recover from the biggest dry on record and meet the demands for our domestic and overseas customers."

Widespread autumn rain across much of the country – especially NSW, Victoria and SA – gives many farmers an ideal start to the 2007-08 winter cropping season, prompting the Australian Bureau of Agriculture and Resource Economics (ABARE) to forecast a robust winter crop for the year ahead.

"ABARE’s prediction of a 21 million tonne increase on the drought affected crop of 2006-07 is resounding testimony to the resilience and effective drought management of Australian farmers," Mr Fargher said. "It shows just how quickly things can turnaround when modern farming techniques are applied to withstand drought, then bounce back quickly when we do get some rain."

However, both the NFF and Westpac will keep a watchful eye on two factors that may disrupt the positive outlook – the strong Australian dollar and poor availability of water for irrigators and livestock producers. Senior Westpac Economist Justin Smirk noted: "While the Westpac-NFF Commodity Index reports in terms of Australian dollar values, the strength of the Australian dollar has eroded some of the price gains being experienced by agricultural commodities across the globe.

"Availability of water for irrigators – representing around one-quarter of the gross value of Australia’s agricultural production – also remains a major concern and recent rains, while welcome, have done little to offer long-term surety for this production."

Compared with May 2007 levels, global prices in June increased for Cotton (7.8%), Barley (11.1%), Canola (3.9%), Wheat (14.8%) and Dairy (10.0%). Decreases in global prices were experienced for Sugar (-3.2%), Wool (-3.5%) and Beef (-1.0%). The overall weighted index increased by 4.8% during June, taking it to 15.5% above year ago levels.

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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.

Media Enquiries: Brett Heffernan on (02) 6273 3855 or 0408 448 250

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