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Higher prices show early signs of combating protectionism

17 December 2009

THE European Union’s decision to scrap their dairy export subsidies has been a welcome lift for Australian dairy producers, allowing them to gain some relief through a 13.1% lift in the global dairy price during November.

On the back of this price lift, the Westpac-NFF Commodity Index gained 2.6% during the month, despite the continued strengthening of the Australian dollar.

“As the world trade ministers return from the Doha Round discussions in Geneva, the importance for farmers of removing impediments to trade has never been stronger,” said NFF Vice President Charles Burke.

“Australian farmers are always looking for signals that the world’s leaders may finally be mustering the courage to do what they know is right for the world’s bulging population, and stop distorting the free trade of food and fibre.

“The EU’s removal of dairy export subsidies could be interpreted by some as being one such positive signal.

“Unfortunately this is far from being the case and the global trading environment still abounds in measures that restrict the prices attainable by Australian farmers. If anything, the EU’s move merely highlights where such measures remain active, such as the United States’ dairy export subsidy program.

Westpac Senior Agribusiness Economist Andrew Hanlan added: “Much has been said of the fact that protectionism has inhibited global economic growth and recovery, particularly during the past 18 months when the world economy was crunched by the financial crisis.

“With higher dairy prices coinciding with the EU reconsidering its domestic policy settings for dairy exports, the question must be asked at to whether strengthening prices across all commodities will draw governments to embrace a freer trading environment.

“If food security concerns continue to become a reality, one wonders whether countries will be striving to be customers of choice, rather than erecting barriers that restrict agricultural trade.

“We hope that the EU decision on dairy export subsidies points to this being the case.”

During November 2009, the Westpac-NFF Commodity Index increased 2.6% and is now 9.3% lower than a year ago. International commodity prices that lifted during November were dairy (13.1%), barley (10.1%), wheat (6.8%), cotton (5.1%), canola (1.5%) and wool (0.4%). While prices to ease were beef (-3.5%) and sugar (-3.2%).

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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: NFF – (02) 6273 3855 or 0408 448 250.

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