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International response will help global agricultural prices

17 April 2009

GLOBAL markets – including for agricultural products – showed a sense of optimism during March. This reflected the glimmer of hope provided by key positive developments on international policy.

Most significant was the US administration announcement of a banking plan to help restore health to their ailing financial system and the constructive G20 meeting of global leaders in London.

“The US banking plan and the commitment at the G20 meeting to further bolster Government stimulus efforts will help to stabilise the global economy and enhance the prospect of recovery emerging during the second half of this year,” Westpac Senior Agribusiness Economist Andrew Hanlan said.

“These announcements boosted global investor confidence. This lift was also enjoyed by many agricultural commodity markets whose prices showed some correction during the middle of the month.

“This improvement resulted in higher US dollar price for a number of commodities – in particular, beef, dairy and wool. However, the boost to prices in Australian dollar terms was countered in March by the currency rising by 2.6%, a lift which also reflected the greater investor confidence.”

National Farmers’ Federation (NFF) Vice-President Charles Burke added: “While action from large global players such as the United States are important in dealing with investor uncertainty, clearly a coordinated international response will be most effective in addressing the challenges that the global economy now faces.

“We have now seen how responsive global agricultural commodity prices can be to market signals by international leaders. If the rhetoric from G20 leaders can translate into genuine actions, farmers will hopefully be able to expect more stability in the global prices offered for their produce.”

Over March 2009, the Westpac-NFF Commodity Index fell by 0.9%, with the 2.6% rise in the Australian dollar more than offsetting the lift in global prices in US dollar terms.

The Index is now 17.3% lower than a year ago.

Commodities suffering falls were cotton (-8.7%), canola (-5.9%), wheat (-5.2%), barley (-2.4%) and sugar (-1.5%). Only beef (0.6%), dairy (1.0%) and wool (0.5%) recorded upward price movements.

[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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