Fed: Food prices to come down despite financial crisis: report
10 Feb 2009 5:16 PM
CANBERRA, Feb 10 AAP - Food prices are tipped to drop in 2009, despite the impact of the global financial crisis, a new report says.
The global credit crunch and a drop in consumption left a marked impact on the agriculture sector, according to Dutch-based Rabobank's annual Australian Agriculture in Focus report.
The report also said the crisis would continue to affect commodity prices in 2009.
As the economic crisis hit in 2008, a lack of available credit created difficulties for all borrowers, including farmers, processors, distributors and retailers, Rabobank said.
The report predicts a likely contraction in planted crops and global cuts in herd and flock numbers due to the uncertainty of agricultural commodity prices.
"The exodus from futures markets, a shortage of credit for companies trading in agricultural commodities and the damage to consumer wealth have all added to the downward pressure on commodity prices," general manager of agribusiness research at the bank, Bill Cordingly, said.
While all commodities would be affected, discretionary items like natural fibres, wine and dairy products would be hardest hit.
Food prices continued to remain high to the end of 2008 despite the costs of agricultural and oil-derived products dropping sharply.
"We expect to see reduced costs of ingredients, fuel and plastics passed on to shoppers as processors compete to sell product in a challenging retail environment and retailers strive to keep consumers moving in through their doors," he said.
But a fall in the Australian dollar has softened the impact of the financial crisis for the agricultural industries.
"The Australian dollar was driven down by 30 per cent against the US dollar in the second half of 2008 helping to offset the falling US dollar, commodity prices in export markets and the softening of prices at the farm gate," Mr Cordingly said.
A decrease in input costs including fuel, energy, fertilisers and agrichemicals, and a cut in official interest rates, had also been a benefit to Australian farmers.
