Despite Doha and Interest Rates, World Prices and Rain Offer Relief

The Westpac-NFF rural commodity price index for July rose 2.5% on the same time last year providing some upside for Australian agricultural producers who have otherwise been disappointed by the suspension of the Doha Round and a rise in interest rates.
“While the suspension of the WTO negotiations does not mean Australian farmers will be worse off, it has further delayed the realisation of new trading opportunities for the sector,” NFF Vice-President and Farm Business and Economics Committee Chair Charles Burke said.
“However, with some 70% of Australian agricultural production servicing export markets, the breakdown in discussions has increased farmer’s resolve for global trade reform and the provision of a fairer trading environment for our agricultural commodities.”
The Reserve Bank of Australia’s decision to lift interest rates by 0.25% is also unwelcomed by farmers, many of whom continue to have a heightened exposure to debt due to drought.
“The upward pressure that higher interest rates have on the Australian dollar means agricultural exports are less competitive on world markets,” Mr Burke noted.
“Yet despite such pressures, Australian farmers are resilient and are currently enjoying higher world prices for some agricultural commodities, whose markets are in a considerably stronger position than they were a year ago.
“The onset of widespread rains in the second half of July have also lifted prospects for much of the winter grain crop in south-east and south-west Australia, giving farmers something to smile about.”
Westpac Senior Economist Justin Smirk said: “Global farm commodity prices continue to be supported by robust demand growth and dry seasonal conditions.
“So while not reaching the stratospheric heights of the energy and resources commodities, firmer world prices for our rural exports is helping to take some of the sting out of the appreciating Australian dollar.”
[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.