The first real examination of the impact of the recent floods on the food and minerals sectors is surprisingly better than many of the doomsayers in investment banks, the media and other areas have suggested.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) on Friday produced a short but detailed first assessment of the damage, especially on the rural sector.
Federal Treasurer, Wayne Swan said yesterday that while it’s still too early to quantify the impact with any certainty at this stage, he will be "sketching out some preliminary estimates of the economic and fiscal impact of the floods next Friday, in a speech at the CEO Institute Annual Conference in Brisbane.
"There’s no question that the economic impact of these floods will be enormous," he said in yesterday’s statement.
"Queensland’s rapid development has meant that its economic performance has a much bigger influence over our national economy.
"The state now contributes around 19 per cent to our national output (up from 14 per cent in 1974) and although the full impact won’t be known for some time, obviously the hit to our economy will be much larger than 1974 and much larger than other natural disasters in our memory."
As Mr Swan said, while there has been an obvious impact, especially on coal and some areas of the fresh food sector and property, especially around the Brisbane River, the overwhelming impact of the floods is on people and small businesses.
That cost will only be become known through the number and totals for insurance claims over time from the impacted areas.
In fact if the estimates from ABARES of lost production of around $3 to $4 billion are correct, then there could be upwards of $16 billion of other damage to homes, roads, bridges, rail lines, buildings, schools and other bits of infrastructure and possessions.
But as always the human cost of lost lives, injuries, memories etc can’t be quantified.
And with the December quarter CPI out tomorrow, there will be a lot of focus and comment on the impact of flooding and heavy rain in November and December.
The ABARES report makes it clear there are more fruits and vegetables unaffected by the rain and floods than impacted, so the price pressure shouldn’t be as dramatic as some recent commentaries have suggested.
But we have yet to get any idea of the impact of flooding in parts of NSW, Victoria and Tasmania on the fruit and vegetable sectors.
The headline from the ABARES report was the estimate that the floods, which shut mines and damaged rail lines over the past several weeks in Central Queensland, could cut coal exports by around 15 million tonnes in the December to March period.
That in turn could reduce coal export earnings by between $2.0 billion and $2.5 billion over the period," ABARES estimated.
"Parts of the Queensland rail network linking coal mines to ports have been severely affected by the flooding," the ABARES said in a special report. (QR National confirmed that last week in an update).
But that amount could be cut as the bureau said it "is anticipated that metallurgical coal prices negotiated for the June quarter 2011 will be settled at a significantly higher price, reflecting the tight market balance created by the floods in Queensland."
And so far, the impact is concentrated on the coal industry with the bureau saying on Friday: "The wet weather in Queensland has had a limited impact on other mineral and energy commodity production.
"The one notable exception was Rio Tinto declaring force majeure at its Boyne Island aluminium smelter in mid-January. Road and rail access between Gladstone and Brisbane was cut and, combined with the closure of the port of Brisbane, prevented deliveries to some customers."
There may be some small producers of copper etc that have been impacted in northern and northwestern areas of Queensland, but there have been no reports as yet of significant losses.
The other area of impact is on fruit and vegetables and the bureau said that rain and flooding in other parts of eastern Australia had reduced agricultural production by at least $500 million to $600 million in 2010/11.
It said the winter harvest, including wheat, barley and canola, in most of the flood-affected regions was either complete or near completion before the recent flooding.
ABARES also estimated that around 7% of total Australian cotton plantings, valued at around $150 million in 2010-11 had been destroyed and a further 2% were at risk if the crops did not have the opportunity to dry out.
"The Australian sugar cane harvest (June to December) was severely hampered by excessive rainfall in the latter part of 2010. An estimated 3 to 5 million tonnes of sugar cane intended to be harvested in 2010–11 was stood over (not harvested).
"The sugar content of cane was also down sharply in 2010–11 because of the excessive rain. Australian sugar production in 2010–11 is estimated to be around 3.6 million tonnes, 0.9 million tonnes lower than in 2009–10 and the lowest output since 1991–92.
"While information is not yet available on the impact of recent flooding on sugar cane plantings, the cost of the earlier damage was estimated by ABARES in December to be around $470 million.
"The recent flooding in eastern Australia is estimated t
