By GREG ANSLEY in Canberra
New Zealand's key farm industries face a series of blows that are likely to push down prices and increase subsidised competition on world markets, says Australian forecasts.
In Australia - where the net value of farm production is expected to dive by more than 40 per cent over the next year - the nation will confront sliding commodity prices, uncertainties over the global economy, penalties from a rising dollar, the fallout from disease scares and the spectre of another El Nino drought.
American beef quotas and the US$180 billion ($369 billion) farm bill will also hit hard, as continuing large subsidies encourage dairy production and push more US exports on to already struggling global markets.
These gloomy predictions are contained in the latest quarterly forecasts of the Australian Bureau of Agricultural and Resource Economics, Canberra's key commodity adviser.
In projections warning that Australian farm income is expected to fall from A$9.7 billion this financial year to A$5.8 billion next, the bureau said commodity markets had already partially reversed earlier gains because of concerns about the continued pace of recovery in the US.
It said US growth was needed to underpin the strengthening of the global economy required to lift commodity demand and prices. If America faltered, markets could suffer.
More problems were expected from the Australian dollar, which, like the kiwi, has been strengthening against the greenback, the currency in which most international contracts are denominated.
The aussie is expected to average about US57c next financial year, compared with about US52c this year.
In the background is tension in the Middle East and its potential impact on oil prices, and the growing likelihood of another El Nino-inspired drought, now assessed as a 70 to 90 per cent probability by the Australian Bureau of Meteorology.
The bureau said the nation's farm export earnings were expected to fall from an estimated A$30.5 billion this year to A$27.7 billion, reflecting lower returns from dairy, beef, wool and most crops.
World dairy prices had been hit by weaker demand in key importing countries and by increased subsidised exports from the US and Europe. Also, although international spot prices were likely to rise, average prices for the next financial year were forecast to remain lower than in 2001-02.
Average international spot prices for cheese were expected to fall about 9 per cent to US$1830 a tonne and, with weak demand in such major importing countries as Russia, spot prices for butter were forecast to fall a further 11 per cent to average less than US$1020 a tonne next year.
The bureau said the dairy industry's problems would be compounded by the US Farm Bill as well as continued huge subsidies for American producers that had already produced domestic surpluses.
Demand for beef would also suffer from the BSE scare in Japan and tariff quotas in the US. With higher production from herd expansion and a drier season, Australian saleyard prices for cattle were expected to fall by 20 per cent in 2002-03 to an average A243c a kilogram.
Wool, already hurt by a global downturn that had closed three plants in New Zealand, Italy and South Africa in the past two weeks, could see gains from a recovering world economy eroded by competition from synthetic fibres and cotton.
Gloomy outlook for farmers
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