Lack of Oz Confidence Mirrors Commodity Decline

AUSTRALIA - The slight decline in Australian farmer confidence this quarter was not surprising given difficult global markets and the fall in world prices for key commodities such as grain, oil seeds, wool, dairy and cotton.
calendar icon 3 December 2008
clock icon 2 minute read

The latest Australian Rural Confidence Survey showed farmers were remaining cautious despite an improvement in seasonal conditions across much of the country.

“Uncertainty in international markets has adversely impacted commodity prices. The weakening dollar has provided some insulation, however not enough to offset the depreciation we are seeing. Also locally, production has been encouraging so we are seeing a further dampening effect on commodity prices driven by local supply,” said Rabobank General Manager Rural Australia, Peter Knoblanche.

Australia's major agricultural commodity prices had fallen 29 per cent in October, in US dollar terms, from a record high reached in March this year. However, Australian primary producers have been somewhat protected from the downturn in world prices by a weaker domestic currency.

Lingering drought and farm input prices

Despite lingering worries about the drought, Knoblanche said Australia remains on track for a much improved agricultural season this year compared to 2007.

However, the ongoing negative impact of high farm input prices is still weighing down farmer sentiment. While spring was considered average to above-average in many areas, it failed to meet the expectation of some producers.

“In 2007 and early 2008, when global supply conditions for farm inputs were quite tight, many suppliers made forward purchases at high price levels in order to safeguard domestic supplies. They now have to run down these higher priced inventories before the major gains from falling international input prices will be felt locally,” said Knoblanche.

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