Over November 2009, theWestpac-NFF CommodityIndex increased 2.6% and is

now 9.3% lower than a year agoInternational commodity

prices that lifted during Novemberwere dairy (13.1%), barley (10.1%),wheat (6.8%), cotton (5.1%), canola(1.5%) and wool (0.4%).

While prices to ease werebeef (-3.5%) and sugar (-3.2%).

Barley

Strong demand from Chinaand a weak US$ is currentlysupporting barley prices, which lifted10.1% during November.

Barley originating from theBlack Sea region continues to beaggressively priced below themarket, and is currently the cheapestsource of feed grain on theinternational market.

USDA reports estimate thatglobal production of barley has risenby 1 million tonnes to 148 milliontonnes. Australia is forecast toharvest 7.8 million tonnes in itscurrent season, 1.8 million tonnesmore than last year s crop.

There is still an ample globalmalt supply, and improved yieldsfrom harvests in the EU, Canada andAustralia will all contribute to thepressure on market prices in comingmonths.

The USDA estimates relatingto Australia s increased barleyproduction may be revised afterregions in Australia experienced hotdry conditions which have promptedan early harvest for some areas.

Due to the hot finishreceived by many Australian barley

crops, there has been considerabledowngrading and has resulted in areduction of malt barley and anincrease of feed barley for Australianstocks.

Oversupply of feed barley tothe local market and a reducedexport market are the key concernsfor Australian barley farmers duringNovember.

Beef

The global beef marketduring November fell 3.5% from lastmonth.

The Argentinean herdcontinues to decline as drought andgovernment policies make exportunprofitable for farmers.

US buying was slow andthere was limited inquiry formanufacturing beef as consumerdemand in the US wanes in favour ofturkey and ham over theThanksgiving and Christmas festiveperiods.

Imports for beef to the USare predicted to be at a 4 year low in2009.

Consumption of beef inKorea is also down, due to reduceddemand and fears of H1N1.

Catering companies in Koreahave been especially affected by theH1N1 flu, as 205 schools have beenclosed down due to outbreaks.

Korean buyers are weary ofbuilding stock due to Australiancurrency fluctuations, demanduncertainty and tight creditconditions.

Japanese buyers are alsomaintaining cautious inventories,despite stable consumer demand and

increased retail demand.The strong A$ continues to

be the main issue for both buyersand sellers.

Canola

Demand remains steady forCanola during November, withinternational prices lifting 1.5% fromlast month.

Sellers are avoiding Chinesesales due to black leg issues, and areinstead looking to market demandfrom Pakistan, Dubai, Europe andJapan.

Canada are seeking politicalsolutions with the Chinesegovernment on the black leg issue, asthey are set to lose upwards of 70%of their export market if China insiston black leg free status for imports.

Speculation is still that thenew regulations from China are anattempt to rebalance and/or reassessits supply/demand ratios.

Currently any imports withblack leg must go to specific portsaway from local growing regions,although these regions have no crushfacilities.

Canada is looking to enternew markets and is aggressivelypricing canola into Mexico andKorea.

ABARE reports early in themonth estimate Australia s acreageof canola has risen 31% last year to1.7 million hectares, and productionis predicted to have increased by53% to 1.9 million tonnes.

Extreme weather conditionslate in November may reviseAustralian production estimates, asquality and yields are now less

Higher prices show early signsof combating protectionism

December 2009

Barley • Beef • Canola • Cotton • Dairy • Sugar • Wheat • Wool

Commodity IndexWestpac-NFF

Westpac-NFF Commodity Index

certain.

Cotton

Reduced Chinese and Indiancrop estimates coupled withincreased inquiry and buying asspinning mill inventories run lowand confidence slowly returns hasresulted in global cotton priceslifting 5.1% during November.

Chinese mill inventoriesremain low due to lack of importquota and the slow release of statereserves.

US growers affected bytropical storm Ida have takenadvantage of recent dry conditions toresume harvest, which is estimated tobe 6 weeks behind schedule.

The A$ easing and a lift incotton futures has given some reliefto cotton farmers during the monthof November.

Dairy

Increased global demand andreduced supplies from Australia andNZ has dairy prices lifting 13.1%during November.

Price increases this month(the fifth month straight) are supplydriven.

Confidence is returning toAsian dairy markets after theMelamine scandal and is reflected bythe increases in demand from boththis region and India.

The EU has decided to scrapdairy export subsidies on butter andskim milk powder due to risingprices.

The US is looking tointroduce a bill to eliminate costsincurred by farmers associated withtransporting milk to processingplants.

The Australian dairy industryis forecasting a 4% drop inproduction for 2009.

Sugar

Improved irrigation andfertiliser use in India has contributedto improved production and yields,easing global concerns over sugarshortages, even though internationalproduction still lags behind growingdemand, particularly in Asia.

International sugar prices fell3.2% during November, despiteworld consumption of sugarexceeding production in 2009 for the2nd year in row.

Brazil is expected to be thetop sugar exporter in 2009/10,

followed by Thailand and Australiaaccording to USDA reports, afterpoor monsoonal conditions forcedIndia to become a net importer thisyear.

Brazil s 2009-10 sugar canecrop is estimated at 594 millionmetric tonnes.

Poor weather conditions andprice disputes have contributed todelays in crushing in parts of Indiaduring November.

China s 2009 sugarproduction is down 6.9% due tocontinuing drought conditions.

Dry weather has alsoaffected Australian growers, with theNSW crop estimated to be thesmallest in a decade, although thesugar content is reported to be thebest in 20 years.

Wheat

International wheat pricesare currently being supported byfutures markets, as assessmentbegins as to the impact on globalsupplies due to reduced acreage inboth the US and Canada, and dryconditions in the Black Sea area.

Global wheat prices rose inNovember 6.8% from last month.

Due to the current wheatglut, buyers are increasinglydiscerning, although demand is stillstrong for high quality, high proteinwheat.

Fluctuation in prices ismainly attributed to currencyfluctuations, as there has beenlimited movement in thesupply/demand ratio.

Recent USDA reports haveincreased the 2009 internationalwheat production estimate to 672million tonnes, and estimating wheatstocks will increase this year by 24

2

Table 1. Component Indices.

Dairy moves ahead... global pricessoared 13.1% over the past month.

December 2009

million tonnes due to productionincreases in Russia, the Ukraine andKazakhstan.

US wheat is being priced outof the market in November bycheaper EU and Black Sea crops.

The US is currently behindits export schedule and will havelarge carryover stocks into the NewYear.

The Australian harvest isunderway, although the strength ofthe A$ and ample global inventoriesare affecting prices.

Australian farmers are alsobeing challenged by extreme weatherconditions in parts of Australia,reducing yield and quality estimatesacross many areas.

Wool

The International wool marketremained strong during November,with prices lifting 0.4% on the backof improved demand and interestfrom overseas mills.

Buyers are cautiously

stocking up and looking forconsumer demand signals as there iscurrently limited fleece on themarket.

Retailers are reportingsluggish demand going into peakselling times and Italy remainsvirtually absent from the market.

China continues to dominatebuying with little price differencepaid between categories.

India is currently accountingfor 10% of wool sales, and isshowing greater interest in buyinglower quality broader and crossbredwools.

ABARE figures now showthat the national flock is the lowestin 104 years, falling to 71.6 millionhead.

This fall is the result ofdrought and associated costs of feedand water, a fall in wool prices fromlast year, swapping from wool tosheep meat and a switch to croppingin some areas.

The high A$ continues toaffect buying activity.#

Westpac-NFF Commodity Index

3

Westpac-NFF

Commodity Index

Economists

Andrew Hanlan (Westpac)

Charlie McElhone (NFF)

The Westpac-NFF Commodity Index ispublished monthly as a joint undertaking

between the Westpac Banking Corporation(ABN 33 007 457 141) and the NationalFarmers’ Federation (ABN 77 097 140

166).

Westpac Banking Corporation Head Office:275 Kent St, Sydney NSW 2000.

[T] 02 9293 9270, [F] 02 8253 4128,[W] www.westpac.com.au.

National Farmers’ Federation Head Office:NFF House, 14-16 Brisbane Ave, Barton ACT

2600. PO Box E10, Kingston ACT 2604.[T] 02 6273 3855, [F] 02 6273 2331,

[E] nff@nff.org.au; [W] www.nff.org.au.

Material in the Westpac-NFF CommodityIndex is protected under the

Commonwealth Copyright Act 1968. Nomaterial may be reproduced in part, or inwhole, without the written consent from

the copyright holders (NFF).

The Westpac-NFF Commodity Index isweighted according to the value of

Australian rural commodity exports only,dating back to June 1983.

Therefore, unlike other commodity indices,rural export prices are not overshawdowed

by oil, mineral and energy prices.

This index is updated on a daily basis andcalculated in both $A and $US so the

effects of exchange rate differentials canbe determined. The Westpac-NFF

Commodity Index benefits all levels ofAustralian agribusiness by providing a

relevant and timely indicator of commodityprice movements.

Westpac Banking Corporation and theNational Farmers’ Federation have taken allreasonable care to ensure the materials arecorrect and complete. However, since they

are not the primary sources of thematerials, they can give no warranty in

relation thereto and disclaim liability for allclaims against them, their employees,agents or any other person, which may

arise from anyone acting or relying on thematerials.

For more information, enquiries should bedirected to either:

Andrew HanlanWestpac

Westpac Banking Corporation(02) 8254 9337

or

Charlie McElhoneManager - Economics and Trade

National Farmers’ Federation(02) 6273 3855.

Graph 1. Index Over 1 Year: Average Of First Month = 100.

Graph 2. Historical Index: Average Of 1997/98 = 100.

December 2009