Rabobank NZ and Australia Agribusiness Review April 2011

The past month brought rainfall to many parts of New Zealand, and the three-month outlook is for average rainfall in most areas, and above average temperatures. Australia has just experienced its wettest March on record, and the outlook in New South Wales and Queensland is for ongoing wet weather over the next three months, with other regions expected to experience average conditions.

• Political unrest in North Africa and the Middle East and the earthquake in Japan are driving global markets and lifting inflationary pressures around the globe. New Zealand has avoided a double dip recession, and the resetting of the OCR to emergency levels of 2.5% highlights that the growth outlook is fragile at best. In Australia, recent indicators suggest an increase in economic activity in coming months, although Rabobank’s view remains that the Official Cash Rate (OCR) will stay on hold until the second half of the year.

• The NZD dropped in response to the Christchurch earthquake and OCR adjustment, but has since recovered to over USD0.75. The AUD remains strong against the USD and is trading above parity despite recent risk aversion in the global economy.

• Global dairy markets have softened over the last month, with powder prices dropping back to early February levels. A tight supply position leading into northern hemisphere spring production will keep prices at elevated levels; prices for exporters in New Zealand and Australia remain strong.

• Global prices for beef remain very strong, driven by a short supply position. New Zealand prices are strong, despite the high levels that local currencies have been trading at, while in Australia cattle prices hit record levels in March. Lamb prices hit record levels in New Zealand in early April and in Australia in early March.

• Global grains markets have experienced large swings in March, following the global macro-economic drivers, but will again turn to the fundamentals; the key question is whether current tight stocks will be alleviated by the northern hemisphere crops. The Australian winter cropping season is about to start, and based on seasonal conditions and global grains prices, Rabobank’s initial view is that the wheat crop could reach over 25 million tonnes.

• Oil prices continue to respond to instability in North Africa and the Middle East, trading around USD110/barrel.

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New Zealand and Australia Agribusiness Review

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