Rabobank Agribusiness Review February 2010

Rabobank Agribusiness Review February 2010

Please find attached a link to Rabobank’s February 2010 Australia and New Zealand Agribusiness Review.

Prepared by the bank’s Food & Agribusiness Research and Advisory division, the report provides monthly commentary on New Zealand and Australian economic and agricultural conditions. Highlighted in this report:

• The start of 2010 has seen the south of New Zealand wet and cool, while the north of the country has been dry and warm. In Australia, the beginning of the year has been wetter and cooler than usual in Queensland and the Northern Territory, and warmer and drier than normal elsewhere. Pacific Ocean temperatures remain warm – above El Niño thresholds in most areas – but the trend is now to cooling, with an expectation that the Southern Oscillation Index will gradually return to normal conditions over the next few months

• The recovery in the global economy continues, although there are signs of volatility. The economic recovery in New Zealand remains fragile, with several risks to momentum, including non-residential construction, the housing market and unemployment. The Australian economy has surprised mainly on the upside, with improving labour, housing and consumer and business confidence. While the Reserve Bank of Australia held rates at its most recent board meeting, it confirmed its tightening bias. There has been an easing of both the New Zealand and Australian dollars over recent weeks, although both are expected to firm over coming months.

• Global dairy prices have eased over the past six weeks. Rabobank sees this as a correction to a price overshoot; the fundamentals are still positive, at a time when milk production in key export regions remains restricted. The recent weakening of local currencies has protected exporters from some of the impact of falling prices.

• Young cattle prices have improved during December-January in both New Zealand and Australia, although remain below five-year average levels. Exports have been hampered by the relative strength of the local currencies against the USD and subdued demand in export markets, particularly in Asia. Good rainfall, a recent weakening in currency, improved prices in the US (New Zealand producers), and potential access for additional exports to the EU (Australian producers) offer some potential for improvement.

• World grain prices tumbled in January, on the back of expectations of ample global grain stocks. Yield results in Australia show the wheat crop has come in just under expectations, at around 22 million tonnes. The sector has shifted to marketing, with the recent softening of the AUD/USD exchange rate spurring interest in Australian exports, particularly from Asian buyers.

• The Baltic Dry Index has levelled off after falling during December. Oil passed the USD80/barrel mark in early January but has since fallen back to the mid-USD70s range.
To view the full report, please click on the link below:

Australia and New Zealand Agribusiness Review

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