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Agribusiness Review For NZ And Australia

10 February 2011

AUSTRALIA & NEW ZEALAND - January 2011 was a month of extreme weather conditions, with floods in Australia, and rain also visiting New Zealand.

Extreme events have dominated the weather in Australia, especially flooding along the east coast and Tropical Cyclone Yasi in far north Queensland. La Niña conditions are set to prevail through into the autumn, with above-average chances of exceeding median rainfall in Western Australia particularly welcome. Extreme weather has also visited New Zealand, which after fearing a dry summer, has experienced wet conditions during January. The seasonal outlook is for warm and wet conditions.

Political unrest in North Africa and a growing inflation challenge in emerging economies have been the main features of the macroeconomic news. In New Zealand, the outlook is for slow and uneven progress, with a recent increase in the unemployment rate symptomatic of the shaky economic conditions.

Australia’s economy is expected to continue expanding at a robust pace over the coming year. Both the AU$ and NZ$ have strengthened against the US$ over the past two months, with recent risk aversion in the global economy not afflicting the strength in these currencies. The AU$ is expected to trade around parity with the US$ while the NZ$ is likely to settle in a range of US$0.74-0.78.

Global dairy prices have continued to shift upwards, driven by strong demand and some supply limitations. Local prices in New Zealand and Australia have shifted upwards in response, although the elevated currency has tempered the gains.

Beef prices remain at seasonally high levels in New Zealand and Australia. Prices in New Zealand have also followed the strong global prices. In Australia the favourable seasonal conditions that have promoted re-stocker demand have combined with a tightening of supply caused by the weather to push prices to high levels.

Global grains markets have shifted upwards over the past two months, with tight stocks and negative supply sentiment driven by weather conditions, the consideration of US acreage allocations and geopolitical instability. While wet weather in Australia did cause some crop losses, the main impact was on quality, with a significant portion of wheat downgraded to general purpose or feed.

Oil prices have surged in response to instability in north Africa, reaching over US$100/barrel.

TheCattleSite News Desk



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