expanding the supply of arable land. this is one of the consequences of the low level of prices in the 1980s and 1990s. the result has been that the rate of growth in yields has slowed and there has been little growth in the area devoted to agricultural production over recent decades, partly due to the urbanisation process in asia ( graph 5 ). another factor affecting global supply has been an increase in the frequency of reported extreme weather events including droughts, floods and high temperatures. 3 export bans imposed by some countries have also reduced the supply coming onto world markets. graph 5 all up, these fundamental global drivers are reasonably favourable for the australian farming sector. no doubt, global prices will continue to fluctuate in a wide range and there will be problems in individual markets. but the overall external environment is likely to be a relatively positive one over the medium term. and this external environment is being driven by some of the same underlying factors that have improved the outlook for the mining sector. i would now like to turn more specifically to recent developments in australia. developments in australia to begin with, it is worth noting that the high prices for agricultural commodities in global markets have flowed through to higher prices for many commodities in our domestic markets. however, the higher exchange rate has meant that the increase in australian dollar prices has been less than the increase in foreign currency prices. in australian dollar terms, the imf ’ s food price index that i showed earlier has increased by 40 per cent since 2004 ; this is substantially less than the increase in foreign currency terms, but significant nevertheless see, for example, g20 ( 2011 ), p 17. bis central bankers ’ speeches ( graph 6 ). the other notable feature of this graph is that the long - run swings in australian dollar prices tend to be smaller than those in foreign currency prices. this is another illustration of the stabilising effects of our floating exchange rate ; when commodity prices are high, the exchange rate tends to be high, and when commodity prices are low the exchange rate tends to be low, smoothing out the fluctuations in domestic prices. this provides an important source of stability for the economy as a whole. graph 6 at the individual commodity level, there have been substantial increases in the prices of a number of commodities over recent years ( graph 7 ). while prices are generally lower than earlier in the year, partly due to problems in the global economy, most are substantially higher than they were a decade ago. this is true for the commodities in

from the urgent need for more rigorous analysis and regulation of systemic risk should be divided between them. at this point, i also want to stress that this macroprudential task does not call into question the snb ’ s primary mandate, which is the maintenance of price stability. instead, it supports the long - term fulfilment of this mandate. the snb has also expressed its opinion – along the lines of this proposal – on the recommendations made by the business audit commissions of the national council and the council of states in their report on the financial crisis. snb balance sheet risks in my following remarks, i would like to look at the snb ’ s balance sheet risks. as the chairman of the governing board, philipp hildebrand, has already mentioned, it was primarily the large - scale purchases of foreign currency that contributed to the expansion of our balance sheet to its current level of approximately chf 280 billion. of this amount, chf 260 billion is made up of currency reserves, which comprise not only foreign exchange, but also gold and the imf ’ s special drawing rights. if we add to that the snb ’ s loan to the stabilisation fund, over 95 % of our assets are denominated in foreign currency. not only is the balance sheet longer as a result, it also carries more risk. without doubt, the exchange rate risk is now our most significant risk. while fluctuations in annual earnings running into the billions have also occurred in the past, they are likely to be even more pronounced in the future owing to the greater size of the balance sheet. in this context, i would like to point out two factors in particular. first, experience has shown that losses on foreign currency positions decline over time. on the one hand, strong currency fluctuations are often followed by corrections, since markets tend to overreact, while on the other, interest and dividend payments help to reduce losses on foreign currency investments. second, the snb has, for a long time now, placed a great deal of value on a robust balance sheet. established mechanisms for the steady build - up of provisions and smoothing of profit distribution have helped build up an equity capital buffer over the years, and this makes it possible for us to carry losses. owing largely to this foresighted approach, the level of equity capital on our balance sheet is, by international standards, still above average, in spite of its current size. a gratifying reduction in the balance sheet