Agricultural sector better placed than some

While the agricultural industry will not be immune from the impact of a global recession this year, Australian farmers may be better placed than some of their international counterparts to weather the storm.

Michael Whitehead, vice president of food and agribusiness research with Rabobank’s New York arm, said possible negative pressure on agriculture could include a drop in consumer demand, however this may be offset by ongoing global population growth.

There are also other factors that would contribute to the relative strength of the Australian agribusiness sector, Whitehead said.

For example, a reduction in the use of fertilizer by some farmers may see fertilizer yields drop. The risk of drought in China and political and climactic problems in South America may also cause a fall in the production of grain, which would see upward pressure on prices.

“The Australian agricultural sector will also benefit from the likely continuing lower currency, with the US dollar expected to stay strong,” Whitehead said.

Whitehead, who is currently visiting Australia, said while 2009 would be tough, Rabobank believes the long-term fundamentals for farmers with good operations remain sound.

Whitehead added that global demand for grain from the bio-fuels industry – particularly under the new US administration – shows few signs of abating.