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Prices hold steady despite emerging protectionism
27 February 2009
THE Westpac-NFF Commodity Index broadly held steady this month with both significant upward and downward commodity price movements recorded. While the prospects are for prices to consolidate off their 2008 lows, concerning signs are emerging that protectionism may endanger already fragile global markets.
National Farmers’ Federation (NFF) Vice-President Charles Burke said: “It has been well reported that in addition to a dairy supply glut that has seen dairy prices fall 10.4% during the month, dairy producers have been further hit by the announcement that the European Union (EU) will implement dairy export subsidies.
“This is a concerning sign for global dairy prices already struggling for stability, and highlights a concerning trend as international governments look to protectionist policies as part of their overall approach to addressing the current economic crisis.
“On a more positive note however, global cotton prices rose 8.2% in the month on the back of reduced supplies released onto international markets by major cotton exporters. Wheat also experienced an 8.2% rise in price, reflecting lower production estimates for 2009, while rising global demand for canola drove prices up a surprising 10.5% from last month.”
Westpac Senior Agribusiness Economist Andrew Hanlan added: “The current global economic crisis requires a co-ordinated and consistent policy approach from governments and central banks. One key ingredient, at this time of weak activity, is a sharp lift in public spending - in particular on infrastructure.
“Another key element is for countries to advance significant trade reform. Global trade experienced a sharp setback late in 2008 as the global credit crisis intensified – a kick-start to trade would be a welcome development that will help to bring forward the global recovery.”
Over January 2009, the Westpac-NFF Commodity Indexrose 0.3%. The Index is now 11.1% lower than a year ago. Commodities suffering falls were dairy (-10.4%) and wool (-2%). These falls were slightly out-weighed by gains in canola (10.5%), wheat and cotton (8.2%), sugar (5.8%) and barley (2.6%), while beef recorded no change.
More detail can be found in the Westpac-NFF Commodity Index for February 2009, available at: Publications
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.
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