Westpac Agribiz update for march

The bleak world economic situation and the impact on NZ remains a hot topic across the nation. Some say the domestic downturn is just begining, others say we are past the worst. Many say forecasters that predict doom and gloom are not helping. But we are in the worst global downturn since WW2 and all forecasters wish they had the power to make it go away. Westpac Agribiz forecasters report that increasing supply will become less of a weight on dairy prices in 2009 with a huge cull of dairy cows in the US and milk supply constrained by prices in Europe. However with no drought this year in NZ and even Aussie showing signs of growth Oceania's production is tipped to rise. Market intervention is on the rise again and storage of product underpins the market but delays price recovery. They forecast Fonterra's 2008/09 payout at $5.10 but put 2009/10 figure at $4.50. The short term outlook for international beef prices has weakened substantially and the US dairy cow cull is not helping. However reductions of US supply will help prices later in 2009 and beyond. The substantially weaker NZD will help insulate NZ returns to the farm gate and they are optimistic there will be some upside to NZ beef prices  in 2009 compared with 2008. Lack of supply is the major story in international lamb markets. NZ sheep numbers are at their lowest levels since  1950 as are all the major producing nations of the world. Demand is weak but with supply even weaker prices are fully firm especially with our exchange rate. Forecast figures for lamb this season are $5.25/kg but lowering to $4.80/kg next year.