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Rabobank’s latest Agribusiness Review for Australia and New Zealand

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Agribusiness banking specialist, Rabobank presents the latest agribusiness review for Australia and New Zealand.
Prepared by the bank’s Food & Agribusiness Research and Advisory division (FAR), the report provides a monthly commentary on Australian and New Zealand agricultural conditions.

According to the latest seasonal outlook, a normal to drier-than-normal spring is expected across southern South Australia, driven by a weak positive Indian Ocean Dipole. The west coast can look forward to a break from the recent dry conditions.
The end of a mixed winter in New Zealand has brought with it below-normal soil moisture levels across the southwest South Island. In contrast, above-normal soil moisture levels are evident in south Canterbury.

Economic activity across the Eurozone and broader European Union block continues to slow, with GDP growth declining to -0.2% quarter-on-quarter and -0.1% quarter-on-quarter, respectively in Q2. GDP growth in the US also slowed to an annual rate of 1.7% in Q2 2012, primarily on the back of slower growth in business investment and household consumption spending.

The Australian and New Zealand dollars eased towards the end of August on the back of declining terms of trade; however, demand from overseas investors continues to provide support at high levels.

Global grain and oilseed prices are expected to be sustained at high levels over Q4 2012 and into Q1 2013 as markets attempt to ration demand. Rabobank expects a significantly smaller Australian winter crop production year-on-year for the 2012/13 season due to dry conditions throughout July and August, which hampered crop development.

The drought in the US continues to push cattle onto feed, but the higher grain prices have resulted in cattle being on feed for a shorter period than usual. With peaks in late July and early August, US cow slaughter numbers have started to decline. Australia is well placed to meet this supply shortage with total exports up 37% year-on-year.

Through August, global dairy commodity prices continued a subtle recovery in US dollar terms with butter up 9%, WMP up 12%, SMP up 14% and cheese at a more modest 3%. The global dairy market is likely to continue to firm over the coming months but the pace and magnitude of price movements will heavily depend on production news.

Global fertiliser markets have been relatively quiet during the period. Attention turns to buying programs in South America and India and Pakistan for the upcoming planting seasons. The future price direction is important for both Australia and New Zealand agricultural sectors as import programs for upcoming domestic seasons approach.

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