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STRONG WORLD PRICES DEMAND BETTER SUPPLY CHAIN EFFICIENCIES

16 November 2006

THE Westpac-NFF Commodity Index rose 6.4% in October – for the most part reflecting the strength of a global grain market as supply falls.

“With Australia usually contributing around 12% of the world trade in grain, concerns over the drought’s affect on our crops have contributed to world grain prices going through the roof – Wheat up 19.7% and Barley up 17.5%,” NFF Vice-President Charles Burke said.

“This global price hike highlights the necessity for Australia’s agricultural commodities to see greater efficiencies achieved throughout the supply chain, by delivering produce to world markets in a way that maintains our premium position on the world stage.

“It is essential Australia’s super-efficient farm production is backed up by better efficiencies in the transport, processing, retail, food services and export sectors. In reality, our agricultural supply chain is only as strong as its weakest link.

“NFF is disappointed by revelations from the Australian Competition and Consumer Commission that productivity levels for Australian container stevedoring are decreasing, while total revenue and unit costs are escalating.

“Clearly, export-oriented industries, including agriculture, can ill-afford such a trend, let alone as we face significantly reduced incomes due to drought.

“NFF will be highlighting transport-related deficiencies and solutions to bolstering them in our 2007 Pre-Budget submission to the Federal Government. We will address the fact that farmers are now forced to deal with an out-dated rail network, the inefficiencies that come with over-regulated transport infrastructure, a lack of inland and local level road capacity and poor connectivity to limited freight hubs.

“These areas require urgent investment to ensure Australian regional-based industries can continue to make a significant contribution to the Australia economy, not only in today’s climate but into the future beyond drought.

“Stronger world prices for agricultural commodities serve to highlight the imperative to deliver our goods efficiently to the world market. Farmers have done their bit in averaging productivity growth of 3.8% each year over the past 20 years, on the back of efficiency gains. It’s time other sectors played their part.”

Justin Smirk, Senior Economist with Westpac Banking Corporation, added: “The current strength in global farm commodity prices is the result of dry conditions in many agricultural regions around the world and solid demand growth. While it is logical to expect a solid rise in global farm output next year as farmers respond to current high prices, we still expect the global economic environment to provide a positive back-drop for farm commodity prices in 2007.”

Compared with September 2006 levels, global prices in October rose for Wheat (19.7%), Barley (17.5%), Beef (2.1%), Canola (5.1%), Dairy (2.2%) and Wool (3.1%). However, these price gains were out-weighed by a fall in the price of Cotton (-3.0%), and Sugar (-3.5%). The overall weighted index increased by 6.4% for the month.

[ENDS]

The Westpac-NFF 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.

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Media Enquiries: Brett Heffernan, NFF Public Affairs, (02) 6273 3855 or 0408 448 250 email:

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