Prices down 2.3pc on rising dollar

15 Dec, 2004 10:00 PM
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THE Australia dollar's rise over the past two months hit farmers in the hip pocket as commodity prices were dragged down 2.3pc in November on top of the 2pc drop in commodity prices in October.

The Westpac NFF Rural Commodity Index showed prices for major commodities were down in the year to November.

The biggest fall was far cotton, down 42pc, followed by wheat 27pc, canola 20pc, barley 11pc and wool 9pc.

But beef prices were up 17pc.

National Farmers Federation farm business and economics committee chairman Charles Burke said the continued appreciation of the Australian dollar against the US dollar would hurt farm income, where prices for the major commodities had not risen as much as the mining sector.

"Over the past two months as the exchange rate has risen, we have also had price falls for almost all major rural commodities due to record global supply," Mr Burke said.

"The ABARE Australian Commodities report forecasts the net value of farm production to be around $5.5b in 2004-05, compared with $7.5b in 2003-04, or down about 26pc.

"However, the report expects the value of farm exports to increase by 2.6pc, driven by strong livestock exports and a carryover effect from record harvests last year."

NFF estimated a 1pc change in the exchange rate slashed about $115m from farm returns on rural commodities.

"Unfortunately, this is coming at the same time as Australian crop production estimates have fallen 21pc on last year due to worse than expected weather conditions over winter and early spring, resulting in a double hit of lower returns in Australian dollars and lower volumes for many farmers," Mr Burke said.

Westpac Banking Corporation senior economist Justin Smirk said the Australian dollar was going through a period of extreme volatility.

"During November the currency rose from US75.5c to US79c," Mr Smirk said.

"The first two weeks of December has seen the currency fall back to US74c.

"While this volatility may continue for some time, Westpac continues to expect the Aussie to be worth less than US70c by the end of 2005."

The Westpac NFF 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 wheat, barley, beef, wool, cotton, sugar and canola in both $US and $A.

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