Weaker dollar gives grain relief
The falling Australian dollar is providing a small boost for WA grain growers who are reeling from weak commodity prices under the weight of a massive global harvest.
The $A has dropped about four cents in recent weeks to a six-month low, driven by a strengthening US dollar after strong economic data. At the same time softer iron ore prices and Chinese data have added downward pressure on the $A.
According to Profarmer Australia commodity analyst Hannah Janson, every US1c move in the Australian dollar equates to about $2.20 per tonne in wheat prices at current values. Now trading about 89c, down from highs of 94-95c earlier in the year, at current levels the weaker $AU means about $11 per tonne extra in growers' pockets.
With wheat trading at a current price of $267 a tonne from Kwinana, this represents about a 3 per cent improvement on returns for farmers at current levels.
"The weaker $A improves the competitiveness of our grain in the international market," she said. "For an export-oriented State in particular, the weaker $A is good news for growers and means more money in their pockets."
But Ms Janson said farmers should not try to second guess the direction of the Australian dollar when determining their grain marketing strategies.
"We feel that it is prudent to take grain prices on what they are and consider the current value in the context of the business and make the decision on that, rather than taking a punt on the direction of the Aussie dollar, as it could go higher or lower," she said.
She said Australian grain prices were already trading at strong premiums relative to the international market and risked losing part of the current premium should growing conditions end up better than expected.
Tractor and Machinery Association executive director Richard Lewis said the falling Australian dollar would have little immediate impact on machinery prices.
He siad the $A remained fairly stable relative to the Euro.
"If the Australian dollar stays low for a while it will lead to higher ticket prices for US machinery," he said.
"However, the farmers are unlikely to start paying more.
"You still have to meet the market and it will probably be more a case of margin erosion for the dealers and import- ers."
But amid predictions the Australian dollar would continue to fall in 2015, Mr Lewis said now was a good time to buy for those considering upgrading their machinery.
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