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Agribusiness Review August 2012

Agribusiness Review

August 2012

Please find attached 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 New Zealand and Australian agricultural conditions.

Key highlights:
• In New Zealand, an eruption of Mount Tongariro and the resulting ash cloud may impact livestock health, particularly on the East Coast. Producers are being notified to consider mitigation options. Warmer and drier-than-normal conditions look to be on the horizon for many parts of Australia during the late winter and early spring period.
• The eurozone debt crisis continues to dominate headlines with global markets still waiting for a long-term resolution. Global market sentiment was not helped by the release of weak economic data for key regions through August. The Chinese economic activity is being dragged lower by lacklustre export activity to key trading partners. On a positive note, a better-than-expected report of conditions in the US labour market was welcomed in global markets.
• Through July the New Zealand and the Australian dollar both continued to drift higher against the US dollar. Exporters in both countries remain frustrated by the stubbornly high currencies despite the weaker commodity prices.
• Global dairy commodity prices continued to show signs of stabilising through July. Mounting concerns about global supply in the coming months have captured the market’s attention. Severe drought in the US is causing heat stress for cows and driving feed costs up. Meanwhile unfavourable weather in Europe and India is fuelling the global supply concern. Unfortunately for New Zealand and Australian exports, respective currencies remain stubbornly high.
• The worst US drought for more than 50 years is driving global grains markets. The crop condition for both US corn and soybean continue to be downgraded, supporting global prices, including global wheat markets. Turning the attention to the local situation, follow up rains are still required for parts of the Australian crop, in particular Western Australia.
• Recent US cattle inventory data reinforced the point that beef supplies will remain tight in the US for some time as the herd continues to contract. This will be supportive of import demand in the US. Young cattle prices again saw improvement through July rising from AUD 375.5c/kg and finishing at AUD 389.75c/kg which is up AUD 11c/kg on the same time in 2011.
• Global urea markets were weaker through August driven by the high levels of Chinese product for global markets following the opening of the low export tax window. Global phosphate markets remain stable, supported by strong demand and tight supply pipelines.

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


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