January 27, 2012 – Australia’s summer is taking a battering from La Niña again: Last year, heavy rainfall brought devastating floods to large swathes of the country that could knock half a percentage point off fiscal 2011’s gross domestic product. The city of Brisbane was submerged and the country’s all-important resources sector suffered project delays and costly wash-outs.
So far this year, the weather has been less severe, but the economic impact is still a concern. Western Australia and parts of Queensland have experienced rainfall as high as two to three times the norm. The risk of tropical cyclones is high and adverse conditions could last for months.
The Reserve Bank of Australia has warned that continuing rain could hamper the recovery of coal exports from last year’s floods. But the bigger impact could be on the agricultural sector.
The 2011-12 wheat harvest in Western Australia broke records, grain cooperative CBH said this month. Australia could become the world’s second-largest wheat exporter. But with producers elsewhere already seeing bumper crops, the plentiful harvest has the potential to dampen global prices, says CBA agricultural commodities analyst Luke Mathews.
Wet weather is also likely to boost the harvest of Australian cotton, commodities analysts say. That, too, could lead to lower prices in the global market. Cotton is currently trading around 95 U.S. cents per pound, well above long-term averages of about 66 cents per pound. Rabobank says cotton prices could drop to 80 cents per pound by the end of this year.
Australia’s Bureau of Meteorology says the La Niña effect is nearing its peak, though it will be months before forecasters declare it’s over. In the meantime, the best business to be in this Australian summer may well be umbrella sales.
The Master of Disaster