Chart of Note: Aussie Lower on Weak Trade Data, but Hope Lies in Agriculture

Just now, the Australian import and export prices were released: export prices fell 8.1% from a quarter ago, while import prices fell 3.8% from a quarter ago. This illustrates lower yield from trade for Australia.

A month ago, I raised great concern about Australia's trade sustainability with China. This mainly because of China's rapid expansion that is set to cool down a bit as the country tackles domestic problems such as inflation.The demand for goods abroad will remain high, but sluggish based on its known buying frenzy trend. Weak reports like this don't mean well for Australian investors; most notably the Aussie.

I also suggested that Australia make stronger ties with India. However, the Indian government expressed concern over its widening trade gap with Australia:

In 2009-10, India's exports to Australia stood at just USD 1.38 billion, while imports amounted to a whopping USD 12.4 billion, translating into a trade deficit of about USD 11 billion for New Delhi. 

Krishna "urged greater flexibility and requested for early action on issues that impacted India's exports to Australia, especially in service exports (IT) and products such as pharmaceuticals, mangoes and table grapes," it said. 

However, Australian Foreign Affairs Minister Kevin Rudd said Australia has an open market and welcomed Indian trade and investment, it said. - The Economic Times

However, there is hope - a great opportunity actually. The demand for agriculture is sure to grow as China's domestic inflation needs to be tamed - most importantly, food prices. Reuters reported yesterday that China purchased 150kt of Australian feed wheat (3 cargos of wheat shipment for March/April).

In 2010, China imported 1.23 million tonnes of wheat, 36 percent more than in 2009, which saw a big shift from net exports the previous year. China normally imports to meet demand for high quality bread and cakes at the top end of the market, but it is under no pressure to import because it holds large reserves. - Reuters

Food prices in China have shot up by about 11%. Raising the supply of agricultural products will work to decrease the price burden on Chinese consumers so that they can continue to demand other goods to keep China's economy kicking. I hope traders realize this opportunity for Australia.