sheldonthinks.com

Yeh, I dont see a NZ rate rise. Why? On the negative side (ie. favours a rate rise)
1. NZ'ers dont save
2. Need to rein in credit creation in an inflationary setting (ie. real rates are lower)
3. Growing inflationary outcomes worldwide
4. Central banks are generally not inclined to make big steps unless they want their impact to resonate. A 0.5% would kill off the economy when there are strengths emerging.

On the positive side:
1. Previous rate rises are already having an impact
2. Softer global ecoonomy - softer currency
3. The outlook for NZ exports (food in particular) is very good
4. NZ is principally a food exporter

You watch food prices take off over the next few years. The good news is that this will restore earnings to farmers who have until now been struggling under low prices, high fuel/fertiliser costs and rising interest rates. I think we will increasingly see the corporatisation of farms globally in this period. The consequence of this will be:
1. Acquisition or merging of farm interests around the world by corporate players for subsequent listing on the stock exchange.
2. Amalgamation of farm holdings under a few very large companies with interests that integrate farming, processing and retailing

Hopefully farmers will see what is happening and not sell off the farm too cheaply. Fortunately they are already benefiting from an oversupply of credit. But you can expect corporates will pay even more for properties IF they can generate an income.

Why will this happen?
1. Because farm prices have lagged the increases in other commodity prices. Just look at the components of the CRB Index.
2. Because its a global trend - towards greater global integration - and it makes particular sense in agriculture because farms are under-capitalised, often lacking the benefits of skilled technical resources, climates are shifting around the world because of the 'natural' heating and redistribution of rainfall.
2. Because where there is money there are investment bankers
3. Because farming is no longer a lifestyle - its a business and deregulation has globalised the agri-market
4. Because the use of farm produce in biofuels will lift demand, along with growing demand for agri-products in emerging markets (eg. China, India) as diets change.
5. Corporate entities want to increase market share
6. Corporate entities are comfortable operating in multiple jurisdictions
7. Corporate entities want to diversify operations to preserve stable earnings as well as offering segmental market focal advantages

The leaders in this process are likely to be:
1. Investment bankers, eg. Rand Merchant Bank, Macquarie Bank, Elders Resources
2. Resource-retailers, eg. Wesfarmers, Woolworths looking for vertical integration