Rural Commodities Wrap – August 2012

The NAB Rural Commodities Wrap focuses on some of the key economic activity that occurred in the Agribusiness sector during […]


The NAB Rural Commodities Wrap focuses on some of the key economic activity that occurred in the Agribusiness sector during the month.

  • Global growth weighed down by weakness in big developed economies, emerging markets also slowing
  • Australian farm sector mixed but likely to benefit from US drought, which could add around $6 billion in export incomes to the sector in aggregate
  • Australian beef sector remains in solid shape, on solid herd rebuilding effort and robust export and production outlook, however, outlook a little weaker than at the start of the year.

Despite the more positive sentiment that the Euro-zone hasn’t taken a turn for the worst, the global economy is currently in the grip of a broad-based slowdown. Conditions have deteriorated across the advanced economies with recessions either occurring or predicted across much of Europe and a slowdown in the pace of US growth. Similarly, conditions in Japan have softened, as industrial output and exports have slipped in recent months. In the big emerging market economies of China, India and Brazil, growth has also slipped in recent months. Brazil has been the worst affected, its growth slipping to under 1 per cent year-on-year in March, while Indian growth has slowed to its lowest since the 2009 trough. Chinese growth has been better maintained but here too the pace of expansion has fallen to its weakest since the first half of 2009.

Looking ahead, it is difficult to see rapid progress in Europe being made, so while recessions are likely to end as stock cycles turn and net exports pick-up, the outlook is for at best moderate growth in 2013. The US has better prospects, but these are conditional on it avoiding the drastic budgetary cutbacks outlined in current legislation. In the emerging economies, the situation is better as their slowdown owes more to the lagged effects of a tightening in policy than the sort of structural impediments facing the advanced economies. Policy is now being eased in China, Brazil and several Asian Tigers as price pressures fade and attention shifts to stimulating activity. As a result, we expect to see growth accelerate through 2013 across much of Asia.

As growth picks up in the emerging economies, European recessions end and confidence recovers as the worst downside risks are averted, global growth should pick up to around 3.4 per cent in 2013. This still represents a disappointing recovery from the deepest global downturn since the 1930s and jobless rates should stay high around the big advanced economies while both inflation and interest rates remain low.

For further analysis download the full report.