Farming to regain ground, says NAB
A MARKED improvement in business conditions has seen the best result for this year in the latest Post Farm Gate Agribusiness Survey by National Australia Bank (NAB) Agribusiness.
But the business conditions index still remains in negative territory, despite a 12 point jump in the profitability component and moderate improvements in trading conditions and employment.
NAB's general manager of agribusiness Khan Horne said sales margins are being squeezed hard - not a surprise given a significant number of those surveyed are food manufacturers.
"While farmers are generally reaping the benefits of high global prices, many industries that come under the post farm gate sector are caught between having to pay high input costs for agricultural commodities and a cautious consumer," Mr Horne said.
"Weak customer demand is cited by the overwhelming majority of respondents as the key constraint to profitability and output, which has been the case for the past year. A high Aussie dollar is hurting export competitiveness and agribusinesses are facing rising labour costs."
Improvements to the trading conditions index through the September quarter were largely driven by a turnaround in seasonal conditions, particularly as late spring rains managed to boost the outlook for the east coast crop.
The quarterly Agribusiness Survey can be found on the website at www.nab.com.au/agrireports.
Dairy prices to fall
A RISE in milk production nationally, coupled with increases in New Zealand, is expected to result in a milk price fall, according to the latest data National Australia Bank Agribusiness rural commodities wrap.
According to NAB's November wrap, Australian milk production is expected to rise another 2.2% in 2011-12 and New Zealand production is set to increase 5%, which is forecast to lead to a 7% fall in prices compared with 2010-11.
Khan Horne, NAB Agribusiness General Manager, said milk production to date in 2011 was 2% higher than the same period last year, driven by strong seasonal conditions in many dairy regions, falling feed costs and favourable pricing.
"Global demand has not kept pace with supply, and the key question is who is going to absorb this surplus," Mr Horne said.
"Looking ahead, these market fundamentals point to further falls in the world dairy price during the year, but it's important to note that prices are still 48.5% above their average over the past decade."
NAB data showed that wool, wheat, cotton and sugar prices fell and beef prices were relatively flat, while rises for lamb, barley and dairy managed to offset some of the decline in the Australian dollar.
NAB has revised the forecast for the Australian winter wheat crop up to 26.6 million tonnes. The crop is likely to face strong competition for market share.