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Aussie farmers set to withstand global financial chaos

23 October 2008

AS all sectors weigh up the implications of the global financial crisis, Australian farmers are relatively well positioned to weather the storm. Notably, the Westpac-NFF Commodity Index declined by less than 2% in September despite sharp corrections across various global markets.

Westpac Senior Agribusiness Economist Andrew Hanlan noted: “The Australian dollar can play a cushioning role during such volatile times. That is exactly what we are seeing at the moment.

“World economic prospects for the remainder of 2008 and for 2009 are not as promising as they appeared to be just a couple of months ago. That has triggered a sharp sell-off in global commodity prices – including agricultural – in US dollar terms. The Aussie dollar, however, has virtually matched this downward movement – hence the resilience of Aussie dollar commodity prices.

“One positive in this crisis is that in the emerging world – which has become an ever increasingly important market for soft commodities – economic growth is slowing but not slumping. Also, by its very nature, demand for many soft commodities tends to be less cyclical.

National Farmers’ Federation (NFF) Vice-President Charles Burke added: “Agricultural commodity prices have risen substantially over the last five years on the back of high demand, spurred on by the global population boom; changing diets due to more affluent economies, particularly in Asia; and owing to the surge in demand for biofuels.

“When you combine these factors with the international food shortage, reflected in record low world foods stocks, the outlook for Australian agriculture and soft commodities is solid beyond the temporary impact from the current global downturn.

“For Australian farmers, challenges may emerge from the global credit crisis. There is a more impressing need than normal for farmers to actively manage their finances and business during this period.

Over September the Westpac-NFF Commodity Index declined by just 1.7% despite the global turmoil. It was the depreciating Australian dollar that largely offset the more than 9% drop in US dollar global agriculture prices.

The Index is now 4.7% below year-ago levels. Commodities suffering falling prices include canola (-4.9%), wheat (-4.6%), cotton (-1.4%), dairy (-3.3%) and barley (-3.6%). These falls outweighed the rise in the price of wool (1.0%), sugar (0.4%) and beef (1.1%).

[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.

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

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