The Westpac-NFFCommodity Index easedmarginally by 0.7% duringMarch, yet still remains asignificant 25% above levelsrecorded this time last year.

Grain and cotton marketscontinued their upward trend asgovernments around the worldattempt to curb food inflation byrestricting exports and channeltheir supplies back to domesticconsumers.

Australian farmers remaineager to capitalise on strongglobal prices, however, goodwinter rain is needed to make thisa reality.

Farmers also need toensure that they have sufficientresources available to maximisetheir output this year.

However, asunemployment levels remainclose to 33-year lows, labourshortages pose a serious threat toagricultural sectors, possiblylimiting farmers ability to gettheir produce to the world market.

Research by the NationalFarmers Federation indicates thatagriculture should we return tonormal seasons, will need anadditional 100,000 employees.

Should the sector fail toattract this labour, the cost to thenational economy will besubstantial, upwards of around$1.5 billion in agricultural GrossDomestic Product.

Such estimates continue to

swell, with world agriculturalcommodity prices tipped to climbfurther.

Compared with February2008 levels, global prices inMarch increased for Barley(5.1%), Wheat (4.2%), and Cotton(8.7%). Canola (-2.0%), Sugar (-3.0%), Beef (-5.1%), Wool (-3.1%), and Dairy (-3.3%) all

experienced decreases fromprevious month levels.

The overall weightedindex decreased by 0.7% duringMarch, taking it to 25.3% aboveyear-ago levels.

Barley

Despite a softening of theEuropean Union s (EU s) newcrop malt barley markets in earlyMarch, international prices rose afurther 5.1% for the month.

Demand from China forAustralian old malt barley alsoremained strong, despite

experiencing logistical difficultieswith shipping.

Export values of feedbarley increased in March as theSaudi Government liftedsubsidies.

However, old cropmarkets in Australia remainedsubdued, despite the relativelylow price.

Beef

The global beef pricedecreased by 5.1% over March.Australian stock purchasing wasunsettled pending the approval oflegislation by the JapaneseParliament to extend theapplication period for temporarytariff rates.

If implementation of thelegislation is delayed, the currentbeef tariff of 38.5% will lift to50% from 1 April 2008.

Korean beef consumptionhas been seasonally slow duringMarch and buyers of imported

“Labour shortages pose a seriousthreat to agricultural sectors.”

- Westpac Regional and Agribusiness Banking Chief Exectuive, Graham Jennings

Labour shortages may thwartbumper season

April 2008

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

Commodity IndexWestpac-NFF

Westpac-NFF Commodity Index

Australian beef remained quietahead of an anticipatedannouncement on the potentialresumption of United States (US)beef imports.

US markets for importedbeef softened in March due toincreased supplies of Australianproducts. This, combined with aweaker Australian dollar (AUD)and low grinding beef prices inthe US, dragged imported pricesdown.

The ArgentinianGovernment continues to severelyrestrict beef exports to lowerdomestic beef prices.

Canola

Volatility in Canola pricescontinued in March, easing 2.0%during the month.

The severe storms thatswept across China in Februaryhave reportedly wiped out 1.4million tonnes from their canolacrop, resulting in Chinaaggressively buying up stocks.

India also contributed topushing up oilseed prices as itsought to bolster new supplyneeds due to poor local crops.

Exports in canolaincreased as a weakening inmarket prices stimulated interest.

Cotton

Global cotton marketswere, again, volatile throughoutMarch, with New York s futuresrecording their highest level since1995.

Despite subdued millenquiries, the market wassupported by ongoing high pricesof other commodities and aweaker US dollar.

A report by the USDepartment of Agriculture statedthe current supply of US andglobal ending stocks of cotton ismore than sufficient. This helpedsubdue the market.

In India, despite a recentsurge in production, cotton pricesremained firm and were wellsupported by strong exports.

Prices in Pakistan alsoincreased, while higher volumesof unsold yarn stocks in Chinacurtailed demand.

Dairy

The global dairy price

decreased 3.3% in March, despiteglobal demand remaining strong.

Reduction of exports frommajor suppliers, coupled with aslowing of stocks from the EU,fuelled demand.

As a result of attempts bythe Chinese Government to curbinflation, two leading dairyproducers were givenauthorisation to raise milk prices.

The European milkproduction season has begun withstrong early output in France,Denmark, Germany and theNetherlands.

On 17 March, theEuropean Commission s proposalfor a planned 2% increase in milkproduction quotas was approvedto meet growing domestic andinternational demand, and willcome into effect on 1 April 2008.

Implementation of theincreased quota is voluntary foreach of the 27 EU member states.

Dry conditions in bothAustralia and New Zealandaffected end of season milkproduction. While good rainfallwas reported in both countries,farmers are shifting their focus tomaintaining good herd conditionahead of the winter season.

Sugar

Despite a decrease inofficial Indian crop estimates,international prices of raw sugarfell 3.0% during March due todelayed cane harvest and milling.

High domestic prices inIndia have also limited millers

2

Table 1. Component Indices.

Cotton on a roll... global prices soar totheir highest point in over 13 years.

April 2008

selling on international markets,resulting in buyers from Asiaexperiencing difficulty in securingraw sugar supplies.

Wheat

International wheat pricesrose a further 4.2% in March,supported by sustained globaldemand in an environment ofvery tight stocks. Despite recordhigh prices, Egypt, Japan, Turkey,Morocco and Bangladesh allbought wheat, and Iraqannounced another tender.

In a response to shortages,many governments haveattempted to ease escalating foodprices by restraining exports.China banned exports, Russiainstigated a 40% export tax forwheat and Argentina slowedexport authorisations.

The EU has moved toboost supplies by allocating more

land for production.While improved weather

conditions have been reported inthe wheat growing areas of theEU and Black Sea, Chineseofficials alluded to problems withtheir crops due to frost. Lack ofmoisture in the US also fuelledconcerns over crop health.

Wool

Global wool pricesdecreased by 3.1% in March, asthe strength of the AUD played akey part in curbing foreigndemand.

Interest in the Australianwool market from China pickedup as buyers returned from theirNew Year holiday recess andmills re-opened after being closeddue to severe weather storms.

A weakening of the AUDsaw buyers for China, India andEurope dominate the market.#

Westpac-NFF Commodity Index

3

Westpac-NFF

Commodity Index

Editor-in-ChiefBrett Heffernan

EditorEmma Keogh

EconomistsJustin Smirk

Charlie McElhone

The Westpac-NFF Commodity Index ispublished monthly (February through

December) as a joint undertaking betweenthe Westpac Banking Corporation (ABN 33007 457 141) and the National Farmers’

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:

Chris CollinsWestpac Media

Westpac Banking Corporation(02) 8253 1382

orBrett Heffernan

General Manager - Public AffairsNational 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.

April 2008