Managing the risk factors

28 May, 2003 10:00 PM

COMMODITY analyst Dennis Wise said the global economy would remain volatile and farmers should get advice from trusted financial advisors about marketing strategies.

He said consultants must be licensed to give financial advice.

³Many people who produce goods for export do not fully understand the potential for volatility of the Australian currency,² Mr Wise said.

³It can get switched around so quickly and farmers need to estimate their exposure to risk and devise a strategy which will protect their profitability whichever way the dollar goes.

³I don¹t believe in a one size fits all strategy ‹ you have to look at each producer¹s equity, their cash flow, production mix and variability of yields.

³There are a range of options ‹ such as foreign exchange contacts, forward selling or commodity swaps.

³Some are simple, some are more complicated. I think the first port of call for growers looking for information should be their banks.²

Mr Wise said prices could also be heavily influenced by global demand.

³At this point the dollar has risen 2c, which takes $6-$7 per tonne from wheat prices. But the AWB basis has declined $16 which has far more influence.²


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