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Dip in dollar benefits grain and dairy farmers

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Australian farmers have received a flow-through benefit from the global decline in commodity markets and a reduction in the value of the Aussie dollar against the greenback.

The Australian dollar slumped below parity at US98 cents earlier this week due to various reasons including a strengthen US economy and a potential end to the soft and mineral commodities boom according The Land.

The reduction in the Aussie dollar has helped to soften the blow of lower grain prices this week resulting in additional earnings of $5 per tonne to approximately $283.

Commodities giant, Cargill said that the decline in the dollar is welcome news for farmers as it is making farm exports more competitive.

“The dollar’s decline is good news for grain growers – our wheat is sold in US dollars and our prices are strengthening slightly,” said Peter McBride, corporate affairs director for Cargill.

“Global production forecasts suggest it is going to be a big production year so any exchange rate advantage for Australian exports will be helpful.”

Dairy Australia said that that drop in the dollar would also potentially see a rise in 2.2 cents per litre for dairy farmers in the export market should the dollar stabilize at the current level.

Charlie McElhone, Dairy Australia’s trade and industry strategy manager said that better returns from favourably priced dairy export values partnered with increased global demand, would flow through to lift the domestic milk market.

“But we’ve still got some pretty strong competition in the trade from places like New Zealand which has the advantage of its free trade agreement with China and will likey benefit generally from a dollar devaluation too,” McElhone said.

National Farmers Federation economics and trade manager, Tony Mahar, cautioned farmers not to get too optimistic as the dollar is still at a relatively high level for exporters, and could potentially rise again in the future.

“It’s hard to get economists to agree on what will happen, but it seems unlikely to be moving much bleow parity – certainly not back to the US70c region,” he said.  

Image credit globalfx.com.au 

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