Long term projections for a weaker dollar unchanged

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A higher Australian dollar (AUD) saw the National Australia Bank (NAB) Agribusiness Rural Commodities Index increase 2.1 per cent in US dollar (USD) terms but remain flat in AUD terms in April. This result is in contrast to the trend since 2014 of the depreciating Australian currency buffering global prices movements,

General Manager of NAB Agribusiness, Khan Horne, says despite the strength of the AUD in April, NAB’s long term projections for a weaker dollar remain in place.

“On balance, we expect that the AUD will resume its downward trajectory in the second half of the year. Our AUD/USD forecast shows the AUD falling to a low of 0.74 this year and 0.73 in early 2016 before recovery commencing later in 2016 and into 2017.

“While there is still the risk of further interest rate cuts, recent improvements in the economy suggest the Reserve Bank will pause for some time, with the next move likely to be up. Given our forecasts for activity and inflation, we currently expect the first hike to be very late in 2016.”

The NAB Rural Commodities Index was effectively flat in April with a renewed rise in beef and lamb prices and stability across major grains balanced against lower dairy, fruit and vegetable prices.

“Beef and lamb prices continue to dominate the forecasts with 26.6 and seven per cent increases respectively for the 2014-15 financial year, compared with last year.

“Pulses were another highlight in April as chickpea prices continued an upward trend that started in September 2014,” Mr Horne said.

Chickpeas (Brisbane) in April gained a further 9.0 per cent to AUD723.30/tonne.

The NAB monthly weighted dairy price indicator fell 14.4 per cent in AUD terms in April, and the last five International Dairy Trade auctions have seen prices trend lower. This reflects improved supply and lacklustre international demand.

Wool gained in April, with the Eastern Market Indicator averaging AUD11.27/kg for the month, up 3.3 per cent. The recent gains break a period of relative stability in wool prices.

NAB’s Rural Commodities Index includes 28 commodities (wheat, barley, sorghum, rice, oats, canola, chick peas, field peas, lupins, wool, cotton, sugar, wine grapes, beef, lamb, pork, poultry, dairy, apples, bananas, oranges, mangoes, strawberries, broccoli, carrots, lettuce, potatoes and tomatoes). The index is weighted annually according to the gross value of production of each industry in Australia.

Agribusiness View provides the latest insights from NAB Agribusiness. Visit nab.com.au/agriview to sign up as well as to find the contact details for your nearest NAB Agribusiness Manager.

Important Note: Any advice in this editorial has been prepared without taking into account your objectives, financial situation and needs. Before acting on this advice, you should consider its appropriateness to you.

 

About NAB Agribusiness

National Australia Bank (NAB) Agribusiness is Australia’s leading Agribusiness Bank and has been supporting Australian farmers for more than 150 years. NAB employs more than 600 agribusiness banking specialists in 110 metropolitan and regional locations Australia-wide. With their local and industry knowledge, our Agribusiness team understand the unique financial and environmental needs of farmers and businesses beyond the farm gate – whether they provide inputs into agriculture or process, distribute or market primary produce. NAB also has a specialist Agribusiness Asia Desk to help Australian farmers make the most of the rapid growth in demand for high quality produce in Asia. We deliver a flexible range of agribusiness products and services by listening to and working with our customers, to tailor the best packages and advice for their businesses. For further information please visit www.nab.com.au/agribusiness.

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