Hopes high for Australia’s winter grain

Australia’s grain farmers should have a better season this year.

If that bright prospect is realised, that should help them recover from the longest drought in living memory.

The Australian Bureau of Agricultural and Resource Economics is cautiously optimistic.

But, in its latest crop report, the bureau says bigger winter grain crops are possible.

” While conditions across the Australian grains belt have been variable, there is optimism regarding winter grains production in 2008-09, ” ABARE says.

“Although substantial areas have been dry sown, the recent rainfall across eastern states has provided the moisture to assist growers to complete intended cropping programs,” said Ms Karen Schneider, acting Executive Director, ABARE said, on releasing the report.

“However, rainfall during the growing season will be critical to these production forecasts being realised,” Ms Schneider cautioned.

The total area sown to winter crops in Australia is forecast to increase by 9 per cent to 22.3 million hectares in 2008-09.

“Assuming an improvement in yields, winter crop production is forecast to be around 37 million tonnes in 2008-09, 15 million tonnes above the drought affected harvest of the previous year,” Ms Schneider added.

The bureau says the area planted to wheat is forecast to rise by 13 per cent to a record 14 million hectares.

Total wheat production is forecast to be around 23.7 million tonnes in 2008-09.

That would be well above the previous year’s harvest of around 13 million tonnes.

Ms Schneider noted that the area planted to barley and canola was also forecast to increase in 2008-09 by 2 per cent and 16 per cent respectively.

Production of barley is forecast to increase to around 8 million tonnes and canola to around 1.7 million tonnes.

Total summer crop production in 2007-08 is estimated at 3.5 million tonnes, nearly 60 per cent above the 2006-07 drought affected harvest.

“Grain sorghum yields were well above average as a result of good summer rainfall, and production is estimated at a record 2.7 million tonnes in 2007-08,” Ms Schneider said

Related stories:

1. Rudd hopes for a better week
2. A bitter harvest

Reserve Bank warns on petrol and rates

The Reserve Bank says rising petrol prices will add significantly to Australia’s inflation.

It has also warned that there might be further rate rises, if the economy does not “moderate” as expected.

The bank makes both points, in the minutes of this month’s board meeting, which it published today.

It has calculated that fuel price rises will add about 0.25 per centage points to Australia’s inflation in both the June and September quarters.

With inflation already running at 4.2 per cent, that means lower inflation, in the immediate future, is unlikely.

And the bank already regards Australia’s present inflation rate as “uncomfortably high.”

It admits that most current indicators suggest that there has, indeed, been “moderation” in domestic demand growth.

But the also bank warned that the present rise in Australia’s terms of trade could “work in the opposite direction.”

It would add to both national income and the ability of many Australians to spend more.

The bank said interest rates would have to be reviewed if demand growth did not moderate, as presently expected.

That warning was blunt.

“…should demand not slow as expected – or should expectations of high – ongoing – inflation begin to affect wage and price setting behaviour, the outlook and stance of policy would need to be reviewed,” it said.

Related stories:

1. Reserve keeps rates on hold – but adds a warning
2. Why the Reserve Bank didn’t raise rates

Angry wheat farmers plan protest

Angry wheat farmers are expected to protest in Canberra today.

They want to retain the traditional single desk system of selling wheat.

The government is planning to liberalise the industry, to provide more competition in wheat exporting.

Its plans are almost guaranteed to succeed, as the opposition is split on the issue.

The Liberals support the government’s plan to bring single desk selling to an end.

Only the Nationals oppose it.

And they don’t have the numbers, alone, to block the proposed changes.

One Liberal who supports the plan, Wilson Tuckey, says it won’t mean great changes for growers who still want to sell their wheat, through pooling arrangements.

He says they will still be able to do so.

But farmers, who oppose the changes, accuse the government of experimenting with their industry.

Other countries, including the United States, have sharply criticised Australia’s system of single desk selling, calling it a major restraint on trade.

This has been a major stumbling block, in free trade talks.

angry

Related stories:

1. Ugly scenes over an ugly monopoly
2. A bitter harvest

Wall Street rises as oil eases

Wall Street traders recovered some of Friday’s losses overnight, when share prices rose as oil eased.

The Dow Jones industrial index rose 70.51 points on the day to close at 12,280.32
This index had plunged on Friday, falling 394.64 points on the day.

The S&P 500 also rose 1.08 points  overnight to 1,361.76.
But the tech heavy NASDAQ composite index fell 15.10 points to 2,459.46.

It was weighed down by falls in Google and Apple shares.

Meanwhile, oil futures, which leapt by $US10.75 a barrel on Friday eased by $US3.89 overnight to $US134.65.

That happened after a Saudi minister Al-Naimi said Friday’s record price of $US138.54 was “not justified.”

In other finance news, overnight, Lehman raised $US6 billion, in a share sale, after reporting a $US2.8 billion loss.

The US market was also unsettled overnight by speculation that US interest rates will rise.

New data also suggested that home sales in the US are likely to rise.

New data showed pending sales of existing homes rising by 9.3 per cent.

Related stories:

1. Wall Street rises, but so does oil
2. Wall Street – finally – rises

Oil spike could have “profound” consequences:Swan warns

It’s always worth watching politician’s words closely.

Occasionally they reveal more than they intended.

And the messages they send, then, can be critically important.

Wayne Swan, almost certainly, had such a moment at the weekend when he told a television journalist that sharply rising oil prices could have “profound implications” for the global economy.

The Treasurer did not predict, as others have, that soaring oil prices could precipitate a deep recession in the United States.

Nor did he echo Kevin Rudd’s assertion that the world oil market is “distorted.”

His warning, from London, though, takes on a fuller meaning, if we look back at a statement he made late last week, after meeting his British counterpart, Alistair Darling.

Swan said then that Darling had agreed with his plan to push for more effective international strategies to deal with international “market turmoil.”

That statement, itself, proved to be prophetic.

Swan made it just one day before the US share market collapsed, last Friday, with the Dow Jones industrial index plunging almost 400 points, on fears ignited by a new spike in oil prices.

The Fed president, Ben Bernanke, has been working hard, over recent months, to restore stability to US financial markets.

His initiatives have been bold, particularly with the Fed’s unprecedented intervention to support a proposed takeover of the investment bank, Bear Stearns.

So far, though, international support for Bernanke has been well short of conspicuous.

Swan and Darling hope – audaciously – to change all that.

They will put their plan, over coming weeks,  to the International Monetary Fund, the Financial Stability Forum, the G8, G20 and the World Bank.

Swan is trying, very hard, to remain optimistic, about it all.

“Communities around the world are feeling the effects of rising food and oil prices,” he says.

“So it’s vital that we work together, particularly with close friends like the UK, to tackle these major issues.”
But his plan will face fierce opposition.

Financial authorities are always reluctant to put their State treasure at risk.

But failures of courage, at troubled times like these, can and- too often have had – serious consequences, including war.

“Profound implications” in fact.

Related stories:

1. You can’t hide:Swan warns
2. Government warns banks

Pamplona on Wall Street

Bulls dominated trade on Wall Street overnight, Australian time, sending the Dow Jones industrial index up 213.97 points on the day.

But oil prices also rose, by $US5.91 a barrel, as the $US sagged.

The Australian dollar was trading at95.89 US cents early today.

Stronger retail trade and job figures in the United States encouraged traders.

The strong rises came after three consecutive days of losses.

The big US retailer, Wal-Mart reported better than expected sales.

And US jobless numbers fell faster than had been forecast.

The Dow Jones index stood at 12,604.45 as the closing bells rang.

The S&P500 index rose 26.85 points to close at 1,404.05.

And the tech heavy NASDAQ composite index rose 46.80 points to  2,549.94.

Less welcome, though, was a strong rise in oil futures, which stood at $US128.21 a barrel, as the market closed.

One trader wondered, publicly, what the rise would mean for the Democratic candidate, Barack Obama.

“Now that the country is back on a firm footing,” he said, “will they really want change.”

Well, there’s one optimist left.

Related stories:

1. Wall Street rises, but so does oil
2. Wall Street falls, but oil rises

Trade gap falls as Australia’s exports rise

Australia’s trade deficit in April was just $957 million – the lowest since February last year.

That’s important in a country whose current account to output ratio is already well above the 6 per cent level, at which interest rate rises were once virtually automatic.

Especially as the nation chalked up monthly current account deficits above the $3 billion mark, earlier this year.

But the new, lower figure, must be kept in perspective. As the Trade MInister, Simon Crean points out, April was also the 73rd consecutive month in which Australia’s trade figures stayed in the red.
The Australian Bureau of Statistics reported that Australia’s exports rose by 6 per cent on seasonally adjusted figures in April, while imports fell by 2 per per cent.

As usual, though, it’s the detail that counts most.

At first sight, the fall of 10 per cent in imports of capital goods in April looks bad.

Australia needs much more machinery to clear the troublesome bottlenecks, in its industry, that are adding, heavily, to the serious inflationary pressures the nation now faces.

But special factors, like a fall in aircraft imports, had a big impact on Australia’s capital import figures for April.

The Prime Minister, Kevin Rudd, would have been delighted, though, to see imports of consumption goods fall 6 per cent in the month.

Big spending shippers, too, have been adding to his inflation headaches.

April’s rise, in export returns, would also have delighted the Federal government.

Exports of meat, coal and manufactured goods all rose strongly during the month.

Related stories:

1. Australia signs big trade deal with Chile
2. Will rates rise? watch the West

Further rate rises possible

The Reserve Bank’s long string of rate rises may not have ended yet.

The bank’s governor, Glenn Stevens, admitted yesterday that the economy seems to have slowed, as a result of previous rate rises.

And that – largely – is why the bank’s board has kept rates on hold, at 7.25 per cent.

But Stevens added a warning.

“The rise in Australia’s terms of trade, that is currently occurring, will work in the opposite direction,” he said.

“It will add substantially to national income and ability to spend, even with the slowing in global growth to the below trend pace that the bank is assuming.”

The latest  balance of payments figures, which the Bureau of Statistics released yesterday, showed that  Australia’s terms of trade rose by 1.1 per cent, in the March quarter.

That’s quite a big improvement.

Especially as these figures do not include any of the recently settled contract prices for iron ore and coal.

Those rises started to apply in April.

High demand from China and India, in particular, had already driven coal and iron ore prices to a level that one well-placed analyst has called “elevated.”

So the big rises, coming on top of that, might well leave Australia awash with money.

And that, in turn, could drive inflation even higher.

Mr Stevens is signalling, unmistakably, that the Reserve Bank will act, if that happens.

The Prime Minister, Kevin Rudd, welcomed the bank’s decision yesterday to keep interest rates on hold.

He has no guarantee, though, that the restraint the bank showed yesterday will continue.

Related stories:

1. $A soars on rate hints
2. Fresh rate rises unlikely as Reserve sees signs of moderation