Australia Floods to Cut A$2.5 Billion of Farm Output

Flooding in Queensland, Australia’s third most populous state, may cut the value of farm production by as much as A$2.5 billion ($2.49 billion) and drive food price inflation in coming quarters, National Australia Bank Ltd. said.

A jump of about 30 percent in the fruit and vegetable component of the consumer price index could be expected in the near term, the bank said today in an e-mailed report, citing the example of gains in banana prices after Cyclone Larry destroyed banana crops in Queensland in 2006. The floods may add 0.75 percentage points to consumer prices in the March quarter, to give a quarterly CPI growth rate of 1.6 percent, it said.

More than three-quarters of Queensland state, or an area the size of California and Texas combined, has been declared a disaster zone after the worst flooding in 50 years. Queensland accounts for as much as 30 percent of the nation’s horticultural output and 35 percent of its red meat production, the bank said.

“A spike in fruit and vegetables is likely to occur, while a fairly persistent price rise for meat and cereals can be expected over the coming quarters,” the bank said.

Still the bank said, the farm sector will expand in 2010-2011, although at a slower rate than it had previously expected.

Flooding may cause cotton crop losses of as much as 400,000 bales, and cut sugar production by around 700,000 tons, the bank said. Sorghum crops are likely to lose several hundred thousand tons, it said. A wheat crop of about 24 million tons is still expected, it said.

To contact the reporter on this story: Madelene Pearson in Mumbai on mpearson1@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@Bloomberg.net;

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