EVERY cent of depreciation in the Australian dollar could generate up to $200 million in benefits to the Australian economy.
This was one of the messages that came from the ABARES Regional Outlook held in Northam last week.
Currently the dollar is sitting at US89 cents, and has been on a steady decline all year, dropping 13.8 per cent since the start of the year.
ABARES chief commodity analyst Jamiee Penn who spoke at the conference said if the steady depreciation of the Australian dollar continued, exporters were set to benefit on a number of levels.
"Because we export 60pc of our agricultural production, and most of those contracts are in US dollars, the lower Australian dollar will increase our export values for our commodities, including our rural products," Mr Penn said.
But he admitted a lower Australian dollar also meant product imports into Australia, such as machinery and fertiliser, which could offset some of the benefits.
In recent times though there had been an anomaly in the equation Mr Penn said.
"Commodity prices have been higher in the recent season, but so was the Australian dollar," he said.
"The reason for that was the US drought."
Mr Penn said the US drought was continuing, but improving in some regions.
The areas that produced soy beans and maize were free of drought, but the regions producing wheat were still under stress.
"If the situation in the US continues to improve, then we would also imagine the increase in production would put some downward pressure on the world prices for cereal," Mr Penn said.
Mr Penn spoke on the national and international issues affecting agricultural regions in Australia.
He said aside from the volatility in the Australian dollar and production in the US affecting world prices, uncertainty in the world economic outlook could also have an effect.
Although Asia was still growing, Mr Penn said there were uncertainties with the economic growth in those regions.
The situation was similar in China.
Mr Penn said there had been some significant changes in the political situation in China with a new President and Premier recently installed.
"Word is they will be focusing on quality economic growth, rather than just pumping money into the economy like they have been doing," he said.
"What this means is we are likely to see Chinese economic growth to slow down to about 7.5pc per year, which is down from where it has been over the last few years.
"That will have a certain impact on demand for mineral resources, but we don't expect there will a significant impact on agriculture."
Looking well into the future, Mr Penn said the population was expected to reach 9.3 billion people by 2050.
He said population and income growth in the Asian regions and developing countries would mean agrifood consumption by 2050 would be 75pc higher.
He said obviously on the supply side of the things this presented enormous opportunities for Australian agriculture.
But he recognised there were a number of issues with meeting such a heightened demand.
"Land expansion is limited, not just in Australia but in many other parts of the world," Mr Penn said.
"There are also issues of land degradation, water availability and climate change so we have to ask ourselves, can the world actually produce enough food for the future populations."
He said in the past global agricultural productivity growth was sitting at 3pc per year, now it is 2pc.
"Assume this slow down would continue to get to an average of 1pc a year in terms of productivity growth in agriculture, it could be an issue," Mr Penn said.
While much of the increased food consumption demand will come from Asia, the region was also expected to see an increase in food production.
Mr Penn said if Asia could double agricultural production, they could achieve very significant production increases.
"Towards 2050 there will be significant increases in food consumption, offering advantages for Australian agrifood producers, but it must noted there will also be competition," he said.
"However Asia is unable to increase their food production enough to satisfy every single component of their increase in demand."
Mr Penn expected that food prices in real terms would be up to 11.5pc higher than recent figures.
"It may not seem that impressive, but keep in mind food prices in real terms over the past 50 years have actually been declining, so we will be seeing a change in that trend," he said.
