Commodity Prices May Decline `Sharply', NAB Says

By Madelene Pearson

Oct. 21 (Bloomberg) -- National Australia Bank Ltd., the nation's biggest by assets, said commodity prices may decline ``sharply'' amid expectations global economic conditions will continue to deteriorate.

``Global commodity prices are already falling and their elevated starting levels shows the potential for them to fall sharply and still be high by historical standards,'' the Melbourne-based company said today in a statement. The bank, the largest lender to Australian farmers, today reported full-year profit dropped 11 percent.

The 19 commodities in the Reuters/Jefferies CRB Index have slumped 21 percent this year as falling equities, reduced lending and slumps in manufacturing and construction trimmed demand. Global economic conditions will likely continue softening well into 2009, National Australia Bank said today.

``Few regions in the global economy can expect to emerge unscathed from such a period of economic weakness,'' it said. ``Fortunately, the relative resilience of the Chinese and India economies should help support income and output in their commodity suppliers and that should cushion the impact of the global downturn on the Australian and New Zealand economies.''

Still, the pace of growth in big emerging economies should slow considerably through the next two years, National Australia said today.

China's economy, the biggest contributor to global growth, expanded at 9 percent in the third quarter from a year earlier, the slowest pace in five years, the statistics bureau said in Beijing yesterday.

National Australia's agricultural business is ``doing great,'' Ahmed Fahour, head of Australian banking, said today on a conference all with reporters. ``Our agribusiness grew revenue by 12 percent. Commodity prices have been fantastic. There has been no aberration in the demand.''

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