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Grain and beef prices strong despite higher Australian dollar

EXPORT commodity prices are bucking against a high Australian dollar.
With the currency stubbornly sitting just shy of US77c, other global factors are keeping wheat, canola and beef prices at relatively high levels.
Last August, bank analysts were predicting the Australian dollar to slip below US70c for much of the year.
When the dollar remained higher than expected late last year, National Australia Bank was predicting in November an average exchange rate of US73c for the first quarter of this year and US72c for the June quarter.
But the dollar defied pundits to rapidly jump from US72c in January to trade between 75c and 77c for much of the March quarter and rarely fell below US74c in the June quarter.
In its latest Rural Commodities Wrap, NAB has forecast the Australian dollar to average US73c for the September quarter and fall to 70c for the following nine months.
“We continue to seriously doubt that the strength in the AUD (Australian dollar) can survive any meaningful recovery in the US dollar, which remains our base case,” the bank said.
NAB agribusiness economist Phin Ziebell said Australian currency’s better-than-expected performance was largely a function of a weaker US dollar.
“Part of that was based on the US Fed (Federal Bank) cranking up interest rates, which it has been doing slowly,” Mr Ziebell said.
He said a fall in the Australian dollar from current levels to US70c was not going to be a “make or break situation for wheat growers”.
He said at a Chicago wheat price of $US200 a tonne, a fall in the Australian dollar from US75c-US70c would make a difference of about $19 a tonne.
Grain and beef prices have defied the higher-than-expected dollar. Near-contract canola futures prices have jumped $32 a tonne in the past month, while wheat futures have risen about $40 a tonne.
Physical prices for last harvest’s wheat delivered to Geelong have exceeded $50 a tonne during the past month.

Mr Ziebell said the rise in wheat prices was due to global supply issues and dry weather in the US, along with livestock producers in Australia scrambling for feed grain amid drier- than-normal conditions.
Beef prices have also held up, largely due to a shortage in the supply of cattle. But Mr Ziebell said that could quickly change if dry weather persists and producers are forced to destock.
NAB said a lower Australian dollar was expected to boost local wool prices.