ABARE forecast that commodity export income is now expected to rise to $214 billion for the year to June, 2009, compared with the June forecast of $212 billion and the actual $149 billion in the year to June, 2008.
It's still a huge rise in income, but with the terms of trade up 13.6% in the June quarter alone and a couple of more quarters of growth, its clear there will be a slowing in the closing months of 2009.
It's no wonder the Reserve Bank is now looking for an easing in our terms of trade in 2009 of up to 5% or a bit more.
A number of metal miners, mainly in the zinc and nickel sectors, have cut production or closed mines, while wheat exports will be up on 2008, but down on the June forecast with a 5% fall in the size of the current crop.
In a statement issued with its latest sets of forecast, ABARE head, Phillip Glyde said that "Earnings from iron ore, coal, oil and liquefied natural gas are forecast to account for almost 98 % of the growth in total energy and mineral export earnings".
"The short-term prospects for energy and mineral commodities remain positive, supported by continued demand growth and supply-side constraints."
Australia's exports of minerals and metals are forecast at about $90 billion, 25% higher than last year, while earnings from energy commodities are forecast to jump 98% to $90 billion (it was $88 billion in June forecast).
"Earnings from both farm and mineral resources exports are forecast to increase in 2008-09," Mr Glyde said.
The value of Australia's minerals and energy exports is forecast to be around $180 billion in 2008-09, a rise of 53% on the previous year.
Farm export earnings are forecast to be $30 billion in 2008-09, a 9% increase from $27.5 billion in 2007-08.
Mr Glyde said "Agricultural commodities for which export earnings are forecast to rise in 2008-09 include wheat, barley, canola, pulses, sorghum, sugar and wine."
He said crop export earnings are forecast to increase by 24%, to $16 billion in 2008-09, off the back of higher volumes for wheat, barley and canola.
"In contrast, export earnings from livestock and livestock products are forecast to decline in 2008-09, by 3% to around $14 billion.
"But as the agency warned last week in its spring crop report Mr Glyde said that "further spring rainfall will be critical to secure forecast production levels."
"If seasonal conditions permit, farmers are expected to reduce slaughterings as they commence rebuilding herd and flock numbers.
"As a result, exports of livestock and livestock products are forecast to decline."
The updated forecast of total commodity earnings in 2008-09 represents an upward revision of only $1.4 billion from the June edition of Australian Commodities.
In June ABARE's forecast was for a 40% rise in commodity export earnings, so the latest estimate represents a sharp slowing in that growth. It wouldn't surprise to see a further slowing as the global economy continues to fall.
But if the US dollar falls and commodity prices rise, then this slowing trend could reverse.
ABARE said that its forecasts were based on a slowing global economy
"The slowdown in world economic growth is expected to continue through the second half of 2008, with a gradual recovery starting in late 2009. In year average terms, world economic growth is assumed to be 3.9 per cent in 2008, before declining to 3.8 per cent in 2009.
"The economic slowdown reflects continued weak economic growth in the United States and the associated slowing in other OECD economies.
"In contrast, strong growth in the emerging economies is expected to continue, although moderating from the rapid rates of recent years.
"In Australia, economic growth is assumed to average 2.75 per cent in 2008-09, compared with 3.7 per cent in 2007-08."
"In preparing this set of commodity forecasts, economic growth in the United States is assumed to average 1.2 per cent in 2008 and 0.8 per cent in 2009." (No sign of that optimism on Bloomberg here).
"Economic growth in China is assumed to average 10 per cent in 2008, before declining to 9.3 per cent in 2009."
"In preparing this set of commodity forecasts, the Australian dollar is assumed to average US85c and TWI 67 in 2008-09. This compares with an average of US90c and TWI 70 in 2007-08.
"There is considerable uncertainty surrounding the short-term outlook for the Australian dollar.
"This is because movements in the Australian exchange rate can be significantly influenced by changes in financial market sentiment, leading to strong volatility in the Australian exchange rate."
