Reports
Trends
Volume 4, 2011
Overview
The final quarter of 2011 is well and truly progressing. The climatic conditions have turned out to be very favourable, providing an excellent growing season and delivering rain when it was needed. The Australian winter crop has developed well, despite experiencing some nervous times earlier in the season and it now appears to be on track to deliver a bumper harvest to the cropping community (fingers crossed). The harvest has already commenced in Western Australia, and after the disappointment of the previous year, 2011 looks likely to deliver significant improvements in terms of both quality and yields. The East Coast croppers are not too far behind with some headers already rolling in northern regions. As the season draws to a conclusion, eyes are turning skyward to ensure a repeat of 2010 and the damaging rain does not occur again.
In the international grains markets, the story remains mixed. For wheat, the large 2010 harvest from Australia, together with improvements in yields from other global producers has resulted in a much stronger global balance sheet for wheat supply. Strong export activity has been seen, particularly from the Russian and Black Sea regions where wheat has been offered at significantly discounted rates against other exportable wheat. The volatility in the corn market which was evident through the third quarter of the year on the back of poor production data has tended to ease. While the corn balance sheet has weakened, there are sufficient alternative sources for corn consumers and prices have meandered along within a fairly narrow range.
Outside of the agricultural environment, the global economic maelstrom remains stubbornly in place and the resulting nervousness from investors is being felt across currency, equities and of course the commodity markets. The technical elements of the market remain the dominant force over the fundamentals and as a result extreme volatility remains. While the Euro debt crisis remains unresolved, the commodity markets remain at the mercy of fickle investor activity.
All things being equal, the final quarter of 2011 should end what has been a relatively successful year for agriculture in Australia. Despite the difficulties of the beginning of the year, the industry as a whole has shown considerable resilience and has been supported by strong commodity prices against the backdrop of an Australian dollar that has been persistently above parity against the US dollar. Indeed, farm returns are expected to be significantly improved, according to the Assistant Governor of the Reserve Bank of Australia, “Farm income for 2011 will be double the average over the last 20 years”.
In this quarter’s edition, the special feature article is on the livestock industries. Over the 2011 year, prices in the livestock markets have displayed something of a renaissance. Despite the volatility in outside markets, the Australian market has maintained discipline and performed reasonably strongly. Certainly there has been volatility with prices as supply and demand have fluctuated at the sale yards, but overall, the industry is still performing well above expectation.
In the international markets, the traditional destinations for Australian beef remain subdued, however, the industry has maintained course with the further development of non-traditional export markets and these are now breathing new life into export opportunities.
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