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Lower dollar means things are looking up for farmers

25 September 2008

DESPITE a recent rebound, the Aussie dollar has fallen by about 15% since July, with the Westpac-NFF Commodity Index reporting that Australian farmers are breathing easier on the back of improved international competitiveness and better prices on the global market.

“While the modern use of risk management practices ensure Australian farmers are more insulated from currency variables than ever before, the sector remains sensitive to dramatic fluctuations,” National Farmers’ Federation (NFF) Vice-President Charles Burke said.

“Farmers were certainly exposed when the dollar pushed towards parity with the United States (US). A dollar around 83 cents is still high, but the relief is palpable. Most agricultural commodities compete on international markets and will benefit from the improved competitive position that the lower dollar brings – especially by high volume commodities produced in the second half of this year.

“With the winter harvest fast approaching and the firming up of production levels, grain growers will be particularly pleased by the lower dollar as they look to the potential for ‘locking in’ prices for their grain – prices linked to the new dollar rates.”

Westpac Senior Agribusiness Economist Andrew Hanlan added: “The recent exchange rate movement is providing the cushioning role that the floating Australian dollar is designed to play.

“The fall in the dollar is offsetting the effects of easing global commodity prices – not only for agricultural commodities that have reduced by almost 10% in US dollar terms since March this year, but also base metal prices that have fallen by 30% during the same period.

“We must also keep in mind the fact that a depreciating dollar elevates the price of imported farm inputs, such as oil and fertiliser. It is fortunate that the price of crude oil has decreased from an early July peak of US$145/barrel to its current level of around US$105/barrel – making the dollar’s impact on farm inputs less pronounced.”

As for the latest on world commodity prices, the Westpac-NFF Commodity Index lifted 5.2%, assisted by the Australian dollar’s fall to be 3.1% above year-ago levels.

Commodities experiencing decreases were canola (-9.1%) and barley (-6.5%). However, these substantial falls were not enough to negate the affects of robust wheat (9.8%), dairy (5.5%), wool (1.2%), cotton (4.7%), sugar (11.7%) and beef (7.4%) gains.

[ENDS]

The Westpac-NFF Commodity Index is weighted according to the value of Australian agricultural exports and includes only rural commodities – unlike other price indices that are overshadowed by oil, mineral and energy prices. It provides daily movements based on prices of Australia’s eight key farm exports – barley, beef, canola, cotton, dairy, sugar, wheat and wool – in both $US and $A.

Media Enquiries: Brett Heffernan on (02) 6273 3855 or 0408 448 250.

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