USDA, Nufarm: Australian Heat Wave Bad for Business

Temperature anomaly map of Australia from January 1-8, 2013. (Source: NASA)

A heat wave is ravaging Australia’s economy. Having seen its hottest day in history, (105 degrees Fahrenheit, 40.5 Celsius), the country’s agricultural commodities industry is seeing the impact on cotton crops, and the world is adjusting its expectations of the region’s output accordingly.

The period of intense heat began in late December/early January, and was described by Australian meteorologists as “very unusual,” with each of the first eight days of 2013 ranking among the 20 hottest days on record. Furthermore, eastern Australia (New South Wales and Queensland), where most of the country’s cotton is grown, is experiencing the brunt of the intense weather. Because of this, USDA has adjusted its world crop estimates, reporting an approximate 27% drop to 4.0m bales, with sowings depressed by lower prices.

Nufarm, a Melbourne, Australia-based crop protection company, has announced it expects its full-year results to be lower than anticipated due to the hot, dry weather. Shares in the pesticide maker have dropped by more than 8% due to reduced demand for the company’s product.

“[Weather] has impacted a number of market segments, including relatively high-value segments such as cotton, horticulture and other summer crops,” the company said. It cautioned that its Australia/New Zealand business is expected to be “well down” in the first half of the year and the full year compared to 2012.

The company hopes that autumn rainfall will cause an uptick in product demand in the area, but is counting more on better-than-expected growth in the company’s international operations to balance out the losses in Australia.

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