This essay about economic analysis is with respect to the Australian Crop Report which was published on February 2017. The report has been prepared by the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES). The economic analysis is to be made with respect to the production of summer crops and winter crops during the economic cycle of 2016-2017 (Agbenyegah et al., 2017). First the issues in hand have to be understood. From the data put up it can be discerned that the plantations of the summer crops are mostly ready and the area of plantation has increased as per estimations in 2017 as a result of more than average spring rainfall. The main constraint for the dryland summer crops yield is the hot and dry conditions during the summer. From the data on the winter crops in the 2016-2017 cycles suggests that the harvesting has been mostly completed (Agbenyegah et al., 2017). The production seems to have increased compared to the estimated production record presented in edition of the Australian Crop report of December 2016.
The concern with respect to the summer crops is within the cropping regions of Queensland and northern New South Wales. The hot and dry period in Australia is during December, January and February. As a result of the unfavourable seasonal condition the moisture levels of the soil have lowered. This has created negative impact on the planting of the summer crops resulting in poor prospects of yield of the dryland crops. The Bureau of Meteorology climate outlook for the period of February to April 2017 has given negative indications pertaining to rainfall (Friedrich et al., 2017). They predict that rainfall will be lower than the average and the temperatures will be more than the average. From the above conditions it is imminent that the poor yield of summer crops will impact on the supply of the crops. The report speaks about different summer crops. These are cotton, grain sorghum and rice respectively. The price of the crops will be dependent on the demand in the market. If a crop has no substitutes in the market and has a specific use the demand of the crop will be price inelastic (Seymour et al., 2012). This means that the price elasticity will be lower than 1. This can be attributed to the production of cotton. Australia is a small producer with respect to cotton. However they export around 90% of their cotton production. Currently they are the third highest exporter of cotton. Thus the cotton industry is one of the major sources of agricultural revenue in Australia. However the supply of the cotton is dependent of the availability of certain factors. Irrigation water is dependent on rainfall. If there is lack of irrigation water, the yield is bound to go down. This will have a negative impact on the supply (Nuttall et al., 2017). This will force the farmers to increase the prices of cotton. If cotton has substitutes the demand will be price elastic. From the data available in the report it can be understood that area used for planting cotton has been doubled to the tune of 557,400 hectares. Thus the production of cotton is expected to increase due to factors like good supplies of irrigation water and favourable levels of soil moisture. From the data available it can be understood that the possible increase in the supply of the cotton will bring down the price of cotton (Robertson et al., 2010). However if there is overproduction, the farmers have to set the prices below the marginal cost of production. However it has been seen that Australian cotton is in high demand internationally. Thus to increase the profits the suppliers can hoard the cotton supply to create scarcity in the market. This will result in the demand levels to increase. This will help the suppliers to increase the prices. This will help in bringing in equilibrium in the price and quantity supplied and demanded.
Since more focus has been put into the production of cotton, the area of production of grain sorghum is estimated to fall by 35% to the tune of 441,000 hectares in the years 2016-2017. Moreover the yield is expected to drop due to late season plantings and unfavourable weather situations. It has been seen that sorghum has certain climate requirements for its growth. It requires 4 to 5 months of growing period (Conyers et al., 2013). Demand of grain sorghum is always high since it is used as fodder for the dairy, pig, beef and poultry industry. Thus due to the negative factors cited, the supply of sorghum will fall. This will force the suppliers to increase the prices. This will eventually force the related industries requiring this grain to increase their prices. If the prices continue to increase, the purchasing power of the buyers will decrease. They will stop buying sorghum and look for alternatives. This will force the suppliers to reduce the prices. In this way equilibrium can be maintained.
With respect to winter crops the season is favourable for crop production. The main crops grown during this period are chickpea, wheat, barley and canola. Due to the favourable conditions it was estimated that during 2016-2017 the winter crop production levels would increase by 49% to the tune of 58.9 million tonnes. This indicates that there will be an oversupply of winter crops (Kleemann et al., 2016). This will lead to prices being low. If the demand is equally high the suppliers can hoard the supply of the winter crops and wait for the prices to increase. If the prices increase, they will be able to incur profits above the marginal cost of production.
The entire economic analysis is based on the data available and the ideas are hypothetical.
This particular essay about economic analysis is based on the news report ‘Apartment outlook brightens as Chinese buyers come rushing back’ written by Robert Gottliebsen on 10th March, 2017. The article was published in the Australian Business Review journal. The economic analysis is to be made with respect to demand and supply situation of the Sydney, Melbourne and Brisbane apartment industry on the influx of Chinese buyers (Gottliebsen, 2017). From the article it is discerned that Chinese buyers have suddenly entered the Sydney and Melbourne off the plan apartment industry.
Source- https://www.ampcapital.com.au
The above graph depicts the increasing housing prices in cities like Melbourne and Sydney. However after the influx of Chinese buyers in these cities, the demand and supply situation seems to look stabilised (Gottliebsen, 2017). The sudden prospect has come up as a result of Chinese government’s decision to act flexibly in terms of decisions of restricting small investors from taking money out of the country. With respect to Melbourne, the emergence of Chinese buyers for the future off the plan apartment plans is a good sign. In this case an economic analysis can be made (Bryant, 2012). Since the future plans can be negotiated as to determination of price, the demand is constant. The developers can determine the supply accordingly as well as the price. However the case in regards to the already developed and available apartments is different. The supply is already there but there is absence of demand from the Chinese buyers. They lack the purchasing power. The lack of purchasing power is owed to lack of access to funds. Statistics suggest that around 15,000 apartments in the city have to be sold between March and June, 2017. The contracts have been entered with overseas Chinese buyers. The reason for the current issue is that the investors are only able to bring out 30% of their funds out of China. This is the main reason behind the possible financial dearth. The apartment developers have estimated that the financial requirement for buying these apartments would be to the tune of 7 to 10 billion Australian dollars. The issue raised here is that most of the funds would be coming from the local Australian Chinese people who can get access to the funds (Dalton, 2011). Thus from the instant situation it is explicit that supply is more than demand. Equilibrium can only be established if the supply situation is matched with equal amounts of demand. However the limiting factor for this gap is the dearth of buyers and their lack of purchasing power.
The banks in Australia are lending out hefty development loans to the builders and developers. However in this situation the equilibrium in terms of demand and supply is still not being met. This is because the customers of these developers were not entertained for procuring home loans. Hence due to the existing dearth of funds in the hands of the customers, supply is outweighing demand (Beer, 2012). The situation has occurred as most of the contracts had been entered by the Chinese customers. This seems to be a financial decision on the part of the Reserve Bank of Australia and the APRA. It seems that the current scenario has forced the government to launch a rescue effort on a global scale wherein many million dollars are being channelized to institutions of non banking nature to ensure at least 70% of the buying rates of the apartments in Melbourne. In this way the purchasing power of the buyers would be restored. The demand for the completed apartments would be re created. This will help the developers to determine the price of the apartments (Yates and Berry, 2011). Hence in this manner the equilibrium price and demand will be achieved. The rest of the funds can be extracted by the Chinese investors from China i.e. 30%.
This stance is especially beneficial for small apartment lenders since currently there is a major influx of foreign students owing to the restrictions applied in USA and UK in terms of visa rules. With the inflow of student populations, the demand for small apartments will be high. The price of small apartments is relatively less compared to the large residential apartments (Kupke and Rossini, 2011). The interest rates charged for the loans are generally 8% considered to be high. Thus since the demand for small apartments are already high, the developers can increase the price of the flats to earn more profits. However if the purchasing power of the students are low and they try to opt for alternative options, the prices have to be slashed.
However the property prices are rising in Sydney and Melbourne which is affecting the purchasing power of the buyers. They are already evidences of younger people who are opting move to Brisbane or the Gold Coast. Initially the demand for the apartment market of Gold Coast was low. However with the influx of new population, the demand for the apartments will rise (Hulse et al., 2015). This will enable the developers and builders of the area to increase the price of the apartments to ensure that profits are earned. On the other hand the numbers of buyers in the crowded cities like Sydney and Melbourne will reduce. The gap between demand and supply will again increase. In such cases the developers and builders in these cities will again have to reduce the price of the apartments to encourage new buyers. This will trigger the creation of a new equilibrium price for the apartments.
Source- https://www.iea.org/oilmarketreport/omrpublic/
References
Agbenyegah, B., Brown, A., Fell, J., Mansfield, D., Pitts, N., Price, C. and Smith, S. (2017). Australian Crop Report: February 2017 No. 181. [online] Data.daff.gov.au. Available at:
https://data.daff.gov.au/anrdl/metadata_files/pb_aucrpd9aba_20170214_Sn9Dg.xml [Accessed 27 Apr. 2017].
Beer, A. (2012). The Economic Geography of Australia and Its Analysis: From Industrial to Post?Industrial Regions. Geographical Research, 50(3), 269-281.
Bryant, L. (2012). An assessment of development funding for new housing post GFC in Queensland, Australia. International Journal of Housing Markets and Analysis, 5(2), 118-133.
Conyers, M. K., Bell, M. J., Wilhelm, N. S., Bell, R., Norton, R. M., & Walker, C. (2013). Making Better Fertiliser Decisions for Cropping Systems in Australia (BFDC): knowledge gaps and lessons learnt. Crop and Pasture Science, 64(5), 539-547.
Dalton, T. (2011). Australian suburban house building: industry organisation, practices and constraints.
Friedrich, T., Derpsch, R., & Kassam, A. (2017). Chapter 3 Overview of the Global Spread of Conservation Agriculture. In Sustainable Development of Organic Agriculture: Historical Perspectives (pp. 53-68). Apple Academic Press.
Gottliebsen, R. (2017). Apartment outlook brightens as Chinese buyers come rushing back. [online] Theaustralian.com.au. Available at: https://www.theaustralian.com.au/business/opinion/robert-gottliebsen/apartment-outlook-brightens-as-chinese-buyers-come-rushing-back/news-story/1fcea1add2024aff1ed059c45c2883af [Accessed 27 Apr. 2017].
Hulse, K., Reynolds, M., Stone, W., & Yates, J. (2015). Supply shortages and affordability outcomes in the private rental sector: short and longer term trends. Australian Housing and Urban Research Institute, Melbourne.
Kleemann, S. G., Preston, C., & Gill, G. S. (2016). Influence of management on long-term seedbank dynamics of rigid ryegrass (Lolium rigidum) in cropping systems of Southern Australia. Weed Science, 64(2), 303-311.
Kupke, V., & Rossini, P. (2011). Housing affordability in Australia for first home buyers on moderate incomes. Property management, 29(4), 357-370.
Nuttall, J. G., O’Leary, G. J., Panozzo, J. F., Walker, C. K., Barlow, K. M., & Fitzgerald, G. J. (2017). Models of grain quality in wheat—A review. Field Crops Research, 202, 136-145.
Robertson, M. J., Lawes, R. A., Bathgate, A., Byrne, F., White, P., & Sands, R. (2010). Determinants of the proportion of break crops on Western Australian broadacre farms. Crop and Pasture Science, 61(3), 203-213.
Seymour, M., Kirkegaard, J. A., Peoples, M. B., White, P. F., & French, R. J. (2012). Break-crop benefits to wheat in Western Australia–insights from over three decades of research. Crop and Pasture Science, 63(1), 1-16.
Yates, J. and Berry, M., (2011). Housing and mortgage markets in turbulent times: is Australia different?. Housing Studies, 26(7-8), pp.1133-1156.
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