Rabobank Aus and NZ Agribusiness Review March 2011

Rabobank’s latest Agribusiness Review for Australia and New Zealand.

Prepared by our Food & Agribusiness Research and Advisory division (FAR), the report provides monthly commentary on Australian and New Zealand agricultural conditions.

Key highlights:
• February was generally wet in Australia, although this pattern appears set to change with a return to average conditions expected as the La Niña conditions start to breakdown in autumn. February was dry and hot in New Zealand’s North Island and wet in the South Island, with the seasonal outlook for a mild autumn and wet conditions, especially in the North Island.

• Political unrest in North Africa has exacerbated inflation concerns, with energy prices pushing up steeply. Agri-commodity prices, as measured by the UN Food and Agriculture Organisation’s food price index, have also hit record highs. Australia’s economy is continuing to expand, even though consumer confidence and consumption remain flat. In New Zealand the major earthquake in Christchurch has had tragic consequences. Its impacts are also expected to flow through the economy with a pessimistic outlook now prevailing. The Reserve Bank of New Zealand dropped the Official Cash Rate by 50 basis points, back to emergency settings, in response to the earthquake.

• The AUD remains strong against the USD, and is still trading around parity despite recent risk aversion in the global economy. The NZD has dropped in response to the earthquake and OCR adjustment, and is now expected to trade in a range of USD0.70-0.75.

• Global grains markets remain at high price levels in response to geopolitical unrest and weather risks, and look set to remain at elevated levels well into 2011. Grain exports remain strong, but attention is now shifting to the coming planting season, where Rabobank expects the area planted to expand in response to strong prices and favourable conditions.

• Beef prices remain at high levels in Australia and New Zealand, largely in response to a shortage in overseas markets. Strong local prices are remarkable given the high levels that local currencies have been trading at. Lamb prices are at record levels in Australia and are also very strong in New Zealand, with short supply the main driver.

• The rally on global dairy markets has continued, driven by strong demand and supply limitations. Local prices in Australia and New Zealand have shifted upwards in response, although elevated currencies have tempered the gains.

• Oil prices continue to respond to instability in north Africa, reaching over USD115/barrel.

To view the full report, please follow this link:
Australia and New Zealand Agribusiness Review

ENDS

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