The heavy rain across much of Eastern Australia since September has played a big part in reducing forecast 2011 financial year commodity export income by $3.8 billion, according to the country’s leading commodity analyst and forecaster.
But while this is a negative, rising production and higher world prices for many commodities (wheat, sugar, cotton, copper, LNG, oil and coal and iron ore) will help offset the impact of the weather and lower production for the likes of zinc, nickel, iron ore and wheat in Western Australia and sugar in Queensland.
The dollar won’t give much help, its forecast to remain around 95 USc, slightly weaker than it is now at around 99 USc or a bit higher.
As a result, total commodity export income will still be a record at around $211 billion, up more than 20% from 2009-10, according to the December update from the Australian Bureau of Agricultural and Resource Economics and Sciences.
Despite the fall, the latest forecast is more confirmation that the resources boom lives on, with boost to national income in store for next year (though not at the same rate as in 2010).
The Bureau forecast that the Australian economy will grow by around 3.2% in 2010-11.
That’s stronger than the 2.2% expansion in 2009-10 and will be supported by a surge in private sector demand, while farm production is likely to rise 8.9%.
Mine production is forecast to rise by 10.2% in 2010-11, much stronger than the 2.7% rise in the 2010 financial year.
ABARE said in a statement that the "forecast for Australian commodity exports in 2010-11 has been lowered by $3.8 billion off the back of a poor end to the winter cropping season and lower gold, iron ore and metallurgical coal exports".
The value of wheat production and wheat exports will drop by $1 billion and more than $400 million respectively, according to the forecast.
On top of these falls, ABARES said it was now forecasting a $2.5 billion fall from the September estimate, in the value of mineral commodity exports, thanks in part to the impact of the wet on coal exports from Queensland.
ABARE said losses will be recorded in exports of coking and thermal coal.
Wheat and sugar will be hit by crop losses and reduced quality of grain and sugar produced from lower yielding crops.
According to the Bureau, the rain of the past month has lopped around $400 million off the value of wheat exports.
All up the rain will cost wheat farmers around $1 billion, thanks to the reduction in quality and a smaller harvest and lower exports from the vital Western Australian wheat sector where dry weather has seen cuts in crops and shipment forecasts.
The drop in coal exports was illustrated Monday by another reduction in production estimates by the Wesfarmers Curragh export mine in Queensland. All up its production could be down by 1 million tonnes, worth some $200 million or ore.
As well as Curragh, Macarthur Coal, Xstrata and several other producers have declared what’s known as ‘force majeure’ under their export contracts, meaning they can’t supply buyers overseas with contracted shipments. The producers have cited the wet weather, flooding and a lack of coal stocks for the shipment delays in their announcements.
But ABARE says total commodity exports in the 2011 financial year will still hit a new high.
"Despite the lower forecast, the value of commodity exports in 2010-11 is still expected to be a record $211 billion, an increase of 23 per cent from last year,” said Paul Morris, acting Executive Director of ABARE said in the statement.
The value of wheat exports is forecast to be around $4.7 billion in 2010-11.
This represents a downward revision by around $480 million from the forecast ($5.2 billion) released in September.
Similarly the gross value of wheat production at farm gate is forecast to be around $5.7 billion in 2010-11, compared with the forecast of $6.7 billion released in September.
“In addition to expected lower production and export volumes from Western Australia, these downward revisions reflect the impact on grain quality of untimely rain on the wheat crop in the eastern states,” Mr Morris said.
While the 2010-11 farm export forecast of $30.2 billion is $1.2 billion lower than the ABARE September forecast, it is still an increase of 6% compared with 2009-10.
This is due to higher crop production and prices as compared with 2009-10.
"Compared with 2009-10, total crop export earnings are forecast to increase by 8.7 per cent in 2010-11 to $16.5 billion.
"For livestock and livestock products, export earnings are forecast to rise by 2.6 per cent to $13.7 billion in 2010-11, with the effect of higher export prices more than offsetting expected lower production.
For mineral resources
, export earnings are forecast to increase by 28 per cent in 2010-11 to around $177 billion.
"Earnings from exports of metals and other minerals are forecast to increase by 29 per cent to $105 billion in 2010-11, while the value of energy exports is forecast to rise by 26 per cent to $72 billion.
The minerals resources export forecasts represent a $2.5 billion reduction compared with ABARES’ September forecasts due to a reduction in the forecast growth in iron ore, gold and me
