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Grain farmers will not see full benefit of weaker AUD

Categories: AUD, Business FX

US wheat futures are dropping along with the Australian dollar, creating a neutral effect for the farm gate price.

As an export-focused industry, for every cent the Australian dollar falls, in theory, the underlying value of wheat jumps by around $3.40 per tonne.

But grain market analyst with Avant Agri, Malcolm Bartholomaeus, said farmers would not feel the full impact of a weaker currency because the recent changes were closely linked to the US dollar going up.

“A rally in the US dollar puts downward pressure on the underlying commodity price, so when we see our dollar go down, we often see the futures market go down as well,” he said.

“So in Australian dollar terms, the move in the futures markets is normally much less than $3 per tonne.”

The Australian dollar is trading at 73 US cents today, a four-cent drop from 77 US cents on July 1.

“The most recent moves in the currency have been simply the mirror image of what the US dollar was doing, so the impact on our farm gate prices have been diminished in recent weeks,” Mr Bartholomaeus said.

Source: abc.net.au

Please note that the opinions of our authors are their own and do not reflect the opinion of Best Exchange Rates and should not be taken as a reference to buy or sell any financial product. Full Disclaimer

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