Rabobank Agribusiness Review - August 2010

Please find attached Rabobank’s August 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:

• New Zealand had a relatively dry month, with a three-month outlook for generally normal conditions. By contrast, July was wet across most of Australia although the three-month outlook remains generally neutral. The chances of a La Niña event have improved; this tends to bring above-average rainfall to the north of New Zealand and to eastern and northern Australia.

• Global economic growth has continued on an unsteady trajectory. The global economy has though entered its sixth quarter of recovery and while a double-dip recession cannot be ruled out, it remains unlikely. The Reserve Bank of New Zealand lifted rates to 3%, despite slowing growth in the country’s major trading partners and softening business confidence. Global sluggishness has affected the Australian economy, and Rabobank has cut its GDP forecast for 2010 from 3.2% to 2.9%. Inflation appears to have moderated, along with house prices, and the Reserve Bank of Australia has kept rates on hold at 4.5%.

• The New Zealand dollar has traded in the USD0.70-0.75 range, while the Australian dollar recovered the ground it had given up since May to be trading around USD0.90.

• Global dairy prices slipped again in early August trade auctions, as supply availability has improved. Forward prices though have held their ground, suggesting buyers see tighter market conditions ahead. Falling dairy prices and rising grain prices will place pressure on producer margins.

• Global grains prices shifted dramatically during July, with wheat prices leading the charge up 50% in a month, driven by supply side constraints in Russia and western Europe. Prospects for the Australian wheat crop remain positive, with good conditions prevailing except in Western Australia, where dry conditions are challenging production.

• The market for beef remains a mixed one, with slow improvements in the US offset by soft conditions in north-east Asia. Cattle prices have strengthened slightly in New Zealand during July, driven by offshore demand for manufacturing beef, and in Australia strengthened, largely a result of restocker activity. Lamb and sheepmeat prices remain at strong levels, strengthening slightly in New Zealand and softening slightly in Australia over the past month.

• Oil prices continue to swing around, although over the past month have tightened their range around the USD75 mark.

To view the full report, please click on the link below:

Australia and New Zealand Agribusiness Review

ENDS

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