Rabobank Agribusiness Review November 2011

Rabobank Agribusiness Review November 2011

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

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

Key highlights:

Wet and cloudy conditions generally covered most regions of New Zealand, due to easterly pressure events. La Niña has returned and Australia experienced a wetter-than-normal month in October, with around one-and-a-half times the normal rainfall received, averaged across the country.

Political confusion in the Euro zone continues to obscure resolution of the sovereign debt crisis, causing ongoing financial market volatility and impeding the global economic recovery. On the upside, strong third quarter GDP growth in the United States has made the prospect of a relapse into recession less likely.

Both the New Zealand and Australian dollar have regained ground from their early October lows, and are expected to trade around current levels in the near term. The Reserve Bank of Australia cut interest rates on Melbourne Cup day by 25 basis points to 4.5% in response to the weaker global economic outlook and more benign domestic inflation.

For the dairy market, modestly softer market dynamics since May 2011 have continued to result in price weakness through October. Global supply is running ahead of the previous year’s level in all key regions. Sluggish demand in Europe and the US has made more milk available for export, and reduced imports into China has also added pressure to a softening market.

Excellent seasonal conditions has supported young cattle prices at high levels, while heavy cattle have felt the pressure of a rebounding Australian dollar. In the global trade arena, the US government has finally ratified the US-Korea Free Trade Agreement, which will allow for progressive reductions of the 40% tariff on US beef imports. The Korean government is currently working towards ratifying the agreement which is intended to come into force on 1 January 2012.

Global grain prices are trading in a narrow range after a significant fall in October as the uncertainty over EU sovereign debt concerns continues to weigh on grains and oilseeds markets. In terms of fundamentals, the final US corn yields and the effect of La Niña on production Brazil and Argentina are the biggest swing factors presently.

The price of oil remains volatile, reflecting swings in global market sentiment. It is currently trading around USD110/barrel.

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