Rural Commodities Wrap – September 2013

Global financial markets rallied strongly when US Federal Open Market Committee (FOMC) defied market expectations of a modest tapering and decided to leave retain the status quo on the pace of asset purchases.

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  • Global financial markets rallied strongly when US Federal Open Market Committee (FOMC) defied market expectations of a modest tapering and decided to leave retain the status quo on the pace of asset purchases.
  • The long-awaited rotation of global growth towards a greater contribution from big advanced economies is currently underway, while some key emerging economies have shown notable signs of slowing.
  • In Australia, domestic demand continues to struggle, with retail trade remaining weak into July, although sentiment in the housing market has improved.

In focus – Dairy

  • Global dairy prices have maintained at historically high levels despite Oceania peak production period now underway, supported by a strong pent-up demand from the downturn in supplies from New Zealand, US and Europe earlier this year.
  • Globally, the high prices are beginning to entice a positive global supply response, with New Zealand and the United States likely to generate the greatest quantity of surplus milk to be processed into dairy commodities in 2013-14. In Europe many countries are showing strong growth in output but demand from their domestic market is currently soaking up the newly available milk.
  • Sentiment of Australian dairy farmers has improved on more favourable price and production prospects but they have yet to see substantial cashflow impacts. The individual farms’ ability to leverage on the improved margins and expand production is likely to vary widely, with many needing to pay down high debt levels and rebuild their stocks before they see any cashflow benefits.

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