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The "Straggle Muster" from the Farmingshow
Issue 181 - March 10th 2006

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Hello from Jamie and Nick, your Farmingshow team.

Welcome to this week’s Straggle Muster.

It is being sent to you at your request. If you no longer wish to receive it or
if it is being sent to you in error, please send us a return e-mail and we’ll
take you off our list of Musterers.

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Remember, you can your lunchtime bite of farming every weekday afternoon from 12
noon on these fantastic radio stations: Hokonui Gold in Southland on 94.8FM and
West Otago on 95.2FM Radio Clutha in South Otago on 96.9FM And nation-wide on
Newstalk ZB in: Alexandra on 95.1FM, Ashburton on 873AM, Gisborne on 945AM,
Greymouth on 99.1FM, Oamaru on 1395AM, Queenstown on 89.6FM, Taupo on 95.9FM,
Timaru on 1152AM, Wairarapa on 846AM, Wanaka on 90.6FM and Wanganui on 1197AM

And our Prime Cuts “Best Of” Show feature Saturday morning from 6am on Newstalk
ZB Hamilton on 1296AM and 97.0FM and on Sunday morning from 8am in the south on
Hokonui Gold and Radio Clutha.

Plus we’re online anytime you like at http://www.farmingshow.com

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Now on with the show...

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BRIGHTER OUTLOOK FOR AG INDUSTRY: RABOBANK INDUSTRY REPORT

A brighter outlook for the New Zealand agriculture industry beyond 2006 is
expected, despite difficult economic conditions, according to a recently-
released industry report.

In its annual Agriculture in Focus Report, one of New Zealand’s biggest rural
financiers, Rabobank says that New Zealand agriculture faces a testing year in
2006, due to the accumulated high impact of the New Zealand dollar, higher
interest rates and higher farm input costs biting farm returns, which occurred
throughout 2005.

However, the strength of the global economy remains positive and has mitigated
these negative factors in a number of sectors, most notably dairy, beef and
lamb, the report says.

“In comparison, throughout 2005, apple growers and deer farmers have been
challenged with bleak global markets, which offered no protection from other
external factors affecting their industries,” it says.

+++ GLOBAL ECONOMY +++
The global economy remains strong moving into 2006, with global economic growth
forecast by the International Monetary Fund (IMF) to remain at a steady 4.3 per
cent – well above the long-term average of 3.6 per cent.

Head of Rabobank’s Food and Agribusiness Research division, Dr Ben Russell says
the continued expansion of the Chinese economy and relatively stable conditions
in the United States and Japan, have underpinned the strength of the global
economy.

“The strength of the global economy and the strength in New Zealand’s main
trading partners are critical to maintaining good demand for food and rural
commodities,” Dr Russell says.

“Most short and medium-term price volatility in agriculture commodities is
driven by supply fluctuations, but strong economic conditions are essential to
maintaining long-term demand tension in markets.”

While the economic conditions in New Zealand’s trading partners remain strong,
the slowdown in the New Zealand economy that started in 2005 looks set to
continue into 2006.

+++ INTEREST RATES +++

Rising interest rates have been a significant headache for New Zealand
agribusiness, Dr Russell says. “Since 2004, official interest rates have
increased nine times, by a total of 2.25 per cent.”

The most recent rise occurred in December 2005, when the Official Cash Rate
(OCR) was increased to 7.25 per cent – the highest rate since the OCR was
introduced in 1999.

Slower rates of economic growth in 2006 should bring the pattern of interest
rate increases to an end.

+++ NEW ZEALAND DOLLAR +++

The high New Zealand dollar has also contributed to the difficult business
conditions for agribusiness. This persisted through most of 2005, with the New
Zealand dollar remaining around 20 per cent above its long-term average exchange
rate against major trading partners.

The strength of commodity prices and relatively high interest rates are
providing continued support for the dollar, to the consternation of almost all
agricultural sectors.

Highly export dependant, all of New Zealand’s major agricultural sectors, along
with forestry, account for over 60 per cent of the country’s total merchandise
trade.

“The relatively small domestic market provides limited protection from exchange
rate appreciation,” Dr Russell says. “And in most commodity markets, the higher
currency translates directly into lower New Zealand dollar returns for
exporters.”
“In 2006, there is a reasonable likelihood of a downward correction in the
currency, due to global commodity prices softening and the domestic economy
weakening,” Dr Russell says.

+++ FUEL +++

Despite oil and fuel prices retreating towards the latter part of 2005, further
volatility is expected in 2006.

The unwelcome sharp increase in fuel costs in 2005 was almost entirely driven by
demand, due to a buoyant world economy and with the Chinese economy having a
particular impact.

“Higher fuel prices contributed to the decline in New Zealand farmers’
confidence last year. Over 65 per cent of New Zealand farmers expect the
agricultural economy to worsen over the next year. However, in a reflection of
longer-term confidence, 80 per cent of farmers expect to maintain or increase
the level of their investment in the farm business,” Dr Russell says.

+++ RURAL PROPERTY VALUES +++

In 2005, rural property values continued to break new ground, with growth of
over 50 per cent throughout the last three years. This has been a result of
several years of good product returns, assisted by strong commodity markets and
increasing productivity.

“Rising land values are tangible evidence of a strong agricultural sector, but
they are also a double-edged sword – and can reduce capital returns further,
making expansion more difficult,” Dr Russell says.

It is expected that the rate of growth in rural land values will ease in 2006 as
rising interest rates take effect.

+++ TRADE +++

Trade liberalisation continues to loom as an ongoing challenge for the sector in
2006 and beyond, the report says.

“While the key outcome of the World Trade Organisation’s Ministerial Conference
in Hong Kong in December last year – that agricultural export subsidies must be
removed by 2013 – is a positive move, it is just a small step on the road to
free trade,” Dr Russell explains.

The 2013 date to end farm export subsidies is many years away, indeed three
years later than free- trade countries like New Zealand would have preferred.
But, more than that, agricultural export subsidies represent only a small
proportion, estimated to be only two per cent, of all subsidies.

The biggest failure of the Hong Kong meeting, the report says, was its inability
to make significant headway on improving market access for agricultural exports
into the EU, Japan and the United States, particularly in relation to tariffs.

“Agricultural trade liberalisation still has a long way to go,” the report
concludes. “For the time being, full tariff reduction and market access
opportunities for agricultural exporters such as New Zealand remain out of
reach, certainly within the current Doha Round, scheduled for completion by the
end of 2006.”
In the meantime, the report reasons, bilateral and regional trade agreements –
which have proved easier to manage and market to local populations – will
continue to be the focus.

# Rabobank New Zealand is a part of the international Rabobank Group, the
world’s leading specialist in food and agribusiness banking. Rabobank has more
than 100 years’ experience providing customised banking and finance solutions to
businesses involved in all aspects of food and agribusiness. Rabobank has a AAA
credit rating and, in recent years, has twice been awarded the title of the
world’s safest bank by Global Finance magazine. Rabobank operates in 35
countries, servicing the needs of more than nine million clients worldwide
through a network of more than 1500 offices and branches. Rabobank New Zealand
is one of the leading rural lenders and a significant provider of business and
corporate banking and financial services to the New Zealand food and
agribusiness sector. The bank has 28 branches throughout New Zealand.

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2.   FARMINGSHOW NEWSWIRE

We've again searched the depths of the World Wide farming Web to bring you rural
news from home and abroad. And you can find it all here:
http://www.farmingshow.com/stragglemuster/newswire.htm?muster1003

Here's just a few of this week's big stories:

QUAD BIKE CHARGES 'POINTLESS'
The lawyer who defended a farmer cleared over the death of his 4-year-old
daughter yesterday slammed police for laying the charges, calling the case
pointless and saying it disrupted a family's ability to grieve.

STRONG GLOBAL GROWTH TIPPED TO LIFT FARMING
Farmers facing tougher economic times this year can look forward to a more
positive future, says rural financier Rabobank.

PPCS SUFFERS TOUGH TIMES
The country's biggest meat company, Otago-based PPCS, is likely to follow rival
Affco's warning last week of lower profits.

ACCESS CRITICS APPEASED
The Government's new inclusive approach to the land access debate has pacified
its staunchest critic but the National Party is raising questions about massive
delays in the review process.

Remember, for these stories and a whole lot more, click:
http://www.farmingshow.com/stragglemuster/newswire.htm?muster1003 this week's
Newswire.

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NEXT WEEK'S FARMINGSHOW ... what to listen out for

MONDAY
Augie Auer - Weather Expert
Richard Loe - Farmer & former All Black
Tony Leggett - Farmers Weekly
Mark Morrow - MWNZ Monitor farmer
John Morrison, Eric Roy & Steve Wyn-Harris - Debaters

TUESDAY
John Luxton - Open Country Cheese
Rich Vetter - American correspondent
Helen Clark - Prime Minister
Warwick Catto - Ballance Agri-Nutrients
Andy Thompson - West Coast Dairy Farmer
David Carter - National Agriculture spokesman

WEDNESDAY
Winston Peters - Foreign Affairs Minister
Duncan Smeaton - Farm consultant
Paul Brown - South Island Dairy Farmers
John Smart - Farm vet
Cameron Bagrie - ANZ Acting Chief Economist

THURSDAY
Doug Edmeades - Soil scientist
Don Brash - National Party Leader
Chris Russell - Australian correspondent
Charlie Pedersen - Federated Farmers President
Dylan Ditchfield - Dairy farmer

FRIDAY
Bob McDavitt - Metservice weather Ambassador
Don Carson - Rural commentator
Jim Patterson - Wool correspondent
Barry Soper - Political Editor
Ian Matthews - MWNZ Monitor farmer

The Farmingshow can be heard weekdays between 12 and 1pm on a station near you -
they're all listed at the top of this Straggle Muster and at
http://www.farmingshow.com/radio.htm. And remember if you miss it on-air catch
it on-line at http://www.farmingshow.com - updated each afternoon following the
Farmingshow.

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HIGHLIGHTS ... this week's Farmingshow

Another Farmingshow week down - check our picks of the action at
http://www.farmingshow.com/picks.htm?muster1003

MONDAY: TONY LEGGETT
The Managing Editor of New Zealand Farmers Weekly looks at the big stories in
this week’s issue including a mid-season update from the Meat and Wool Economic
Service suggesting sheep and beef farm incomes (before tax) will be down this
season by a whopping 33%.

TUESDAY: ROB DAVISON
The Executive Director of the Economic Service for Meat and Wool New Zealand
expands on his organization’s 2005-06 mid-season update and the gloomy picture
it paints for sheep and beef farmers.

WEDNESDAY: BRENDAN O’DONOVAN
The Chief Economist of the Westpac Bank discusses recessions and whether or not
we’re heading for one.

THURSDAY: DON FRASER
Is the principal of Kati Kati-domiciled Fraser Farm Finance where some avocado
growers are facing dramatic crop failures. We also look at some of the
challenges facing other sectors of the agricultural community in light of
Rabobank’s recently-released Agriculture in Focus Report.

FRIDAY: KEVIN WILSON
Is a rural economist with the National Bank who attempts to answer the age-old
question, is land too expensive?

Listen to what you want, when you want - thanks to the marvels of modern
technology! All available right now at
http://www.farmingshow.com/picks.htm?muster1003

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Don’t forget to shut the gate on your way out and have a great farming week

Jamie Mackay & Nick Jeffrey
The Farmingshow.

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Remember, you can your lunchtime bite of farming every weekday afternoon from 12
noon on these fantastic radio stations: Hokonui Gold in Southland on 94.8FM and
West Otago on 95.2FM Radio Clutha in South Otago on 96.9FM And nation-wide on
Newstalk ZB in: Alexandra on 95.1FM, Ashburton on 873AM, Gisborne on 945AM,
Greymouth on 99.1FM, Oamaru on 1395AM, Queenstown on 89.6FM, Taupo on 95.9FM,
Timaru on 1152AM, Wairarapa on 846AM, Wanaka on 90.6FM and Wanganui on 1197AM

And our Prime Cuts “Best Of” Show feature Saturday morning from 6am on Newstalk
ZB Hamilton on 1296AM and 97.0FM and on Sunday morning from 8am in the south on
Hokonui Gold and Radio Clutha.

Plus we’re online anytime you like at http://www.farmingshow.com

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