Rabobank's February agricultural forecast

Prepared by Rabobank's Food & Agribusiness Research and Advisory division, the report provides monthly commentary on NZ and Australian economic and agricultural conditions. Highlighted in this report: "¢ The start of 2010 has seen the south of NZ wet and cool, while the north of the country has been dry and warm.  Pacific Ocean temperatures remain warm "“ above El Niño thresholds in most areas "“ but the trend is now to cooling, with an expectation that the Southern Oscillation Index will gradually return to normal conditions over the next few months "¢ The recovery in the global economy continues, although there are signs of volatility. The economic recovery in New Zealand remains fragile, with several risks to momentum, including non-residential construction, the housing market and unemployment.  There has been an easing of both the New Zealand and Australian dollars over recent weeks, although both are expected to firm over coming months. "¢ Global dairy prices have eased over the past six weeks. Rabobank sees this as a correction to a price overshoot; the fundamentals are still positive, at a time when milk production in key export regions remains restricted. The recent weakening of local currencies has protected exporters from some of the impact of falling prices. "¢ Young cattle prices have improved during December-January in both New Zealand and Australia, although remain below five-year average levels. Exports have been hampered by the relative strength of the local currencies against the USD and subdued demand in export markets, particularly in Asia. Good rainfall, a recent weakening in currency, improved prices in the US (New Zealand producers), and potential access for additional exports to the EU (Australian producers) offer some potential for improvement.