Bush is booming, believe it or not

PRIME Minister John Howard is enough of a politician to believe his visit to WA broke the drought – apres moi le deluge and all that. But I am in a position to refute the claim, having attended an earlier shindig for farmers laid on by The Royal Agricultural Society in Claremont Showgrounds.

Nobody actually performed a rain dance at the drinks party, but entertainment provided by the Barber’s Shop Quartet undoubtedly did the trick. Within 48-hours it was pouring. The songsters can look forward to many a return gig.

The rain got through to much of the parched wheatbelt. It was not enough, but better late than never, and it will help the crop reach perhaps six million tonnes this year, as well as providing much needed feed for livestock.

The bush is booming nationally. Agriculture led the way in pushing Australian exports up 13 per cent last financial year. Rural overseas sales were up 22 per cent.

Farmers were buoyed by a winning trifecta of a dirt cheap Australian dollar, record prices for wool, grain and beef, and the unfortunate outbreaks of foot and mouth and mad cow disease among our competitors.

Is this as good as it gets? Cynics point to the recent rollout of rural stock market floats as signalling the top of the market. Brokers were generally cool to the $200 million spin-off of Australian Agricultural Co. from Futuris to new cattle baron Peter Holmes a Court. However, both retail and institutional investors stampeded the float, which is several times oversubscribed. More will trickle in, when Futuris figures out what to do about many of its shareholders who did not get their prospectuses in time before the premature closing of the issue.

The four times bigger Australian Wheat Board IPO coming up in a few weeks will be another test. Most Australian fund managers do not get further out in the country than the Blue Mountains, and are suspicious of cyclical agricultural investments. But they know how to spell monopoly, which is what AWB will probably continue to enjoy for at least another decade.

Woolgrowers will soon be raising their glasses to toast the last scraps being swept out of the once mountainous government stockpile, which peaked at 4.7 million bales 10 years ago.

The value of wool exports rose over $1 billion last year to $3.9 billion. Prices were pushed up by strong demand for fine wools and an overall shortage of supply. The sheep flock has dwindled to 115 million head, the lowest numbers since the Korean War. Australia is still the world’s biggest supplier of wool, accounting for one third of the total 1.3 million tonne global demand. Prospects are the best for many years, despite the slowdown in key markets, and restocking is slowly taking place.

Wheat prices are pushing a dizzy $250 a tonne in local dollars and the generally highly efficient growers have, in some cases, been locking in prices by selling on the forward markets.

Beef is the standout money spinner. Chilled beef prices have risen 28 per cent during the past 12 months and around 48 per cent over two years. Live cattle exports are recovering from the Asian crisis, and there is talk that Indonesia is looking promising again.

The big imponderable is how soon the Australian dollar will get out of the sick bay and start hobbling around. The crackerjack $537 million trade surplus in June means the current account deficit – the shortfall between what we buy and sell with the rest of the world – is on target to shrink to 2 per cent of GDP. This will be the best performance in a decade and down from more than 6 per cent a year ago. The CAD was one of the reasons often given for the selling of the dollar. The fact that the number is dwindling, together with forecasts that Australia will top the OECD league table this year with growth of 3.25 per cent to 4 per cent, is finally penetrating foreign exchange dealers’ skulls. Provided they continue to bracket the currency with Argentina, Germany and Asia, it will remain weak. Should they ever look at domestic fundamentals, it will strengthen markedly. Meanwhile rural exporters should continue to make hay.

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