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World food shortages impact Australian farmers

2 June 2008

THE May Westpac-NFF Commodity Index continues to record agricultural commodity prices at 22% higher than this time last year, despite a slight softening of prices as international buyers delayed purchasing additional stock on world markets.

“Scarcity and record high prices for basic food items, such as wheat, precipitated violent riots in Egypt, Morocco, Senegal and Cameroon in April,” National Farmers’ Federation (NFF) Vice-President Charles Burke said.

“Food-related riots have also broken out in Haiti, Indonesia and the Philippines as global demand grows in an environment of stock shortfalls, sending prices surging to record highs and remaining constant for several months.

“Australian farmers, grappling with the ongoing drought, an exceptionally high Australian dollar and mounting fuel and other input costs, are hoping for rain over the next five-week window to get out a winter crop and get their stock on the world market.”

Westpac Regional and Agribusiness Banking Chief Executive, Graham Jennings said for Australian farmers, the current high costs of inputs for winter crops, restocking and business inventory will certainly impact on their decision-making this season.

“Ongoing climate and market volatility are clearly impacting on the agribusiness sector. It is vital that good financial management controls are key in planning for the winter and spring seasons,” he said.

“Budgeting costs and forecasting revenue are important steps for all businesses, it is paramount that farmers and agribusiness operators consider the wider economic and commodity cycles of domestic and global markets when making their finance decisions.

“Effectively managing cash flow during uncertain times allows businesses to prepare for good or bad seasons, we believe it is always timely to review budgets for income as well as expenditure.

“While ultimately individual enterprises will have their own response to uncertainty, it is the solid planning undertaken by businesses that helps effectively manage risk.”

Compared with March 2008 levels, global prices in April increased only for Barley (1.9%). Wheat (-13.5%), Cotton (-5.5%), Canola (-6.0%), Sugar (-4.1%), Beef (-0.5%), Wool (-2.3%), and Dairy (-1.3%) all experienced decreases from previous month levels. The overall weighted index decreased by 5.0% during April, taking it to 22.0% above year-ago levels.

[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 – wheat, barley, beef, wool, cotton, sugar, dairy and canola – in both $US and $A.

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

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