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TAS Country : October 14th 2010
Friday, October 15, 2010 Tasmanian Country 11 Opinion www.tfga.com.au Dollar-wise, everything's relative TFGA matters with Jan Davis SHE'LL BE APPLES: Sir Isaac Newton. WITH the Australian dollar approaching parity with the US greenback, it is timely to assess the impact of the strengthening dollar on the Tasmanian farming sector and the compounding effect of changes in the marketplace on the viability of Tasmanian farms. As we all know, a higher Australian dollar is not a simple matter of cheaper holidays overseas, cheaper imported tractors, cars and white-goods and bargain buys from amazon.com. I think it is Newton's Third Law of Motion that says, in effect, for every action there is always an opposing or opposite reaction. If you press a stone with your finger, the stone also presses your finger. So, while imports become cheaper (and that includes many agricultural inputs), we get less Australian dollars for most of our exports. For example, if you sold a commodity at $US68 per tonne when the exchange rate was US68c to the Australian dollar, you received $A100. At parity, you will receive $A68. And remember that cheaper imports cuts two ways --- we might be able to buy imported goods more cheaply, but it also means that our competitors can also undercut our prices --- and that means fewer Tasmanian products being sold and fewer dollars coming back into our economy. If the commodity is priced in Australian dollars --- and they seldom are --- the overseas buyer has to find more US dollars to pay for it and that is likely to mean that demand for that product drops. If we follow the Newton analogy, these two economic forces should have a balancing effect: there should be benefits to farmers from reduced input costs as imports become cheaper, but in practice we are not seeing this. Fuel, power and labour charges are not falling. You might get a cheaper fridge for the dairy (and even that is questionable), but it will cost more to have it delivered and to run it. The National Farmers Federation has calculated that every one-cent increase in the Australian dollar value against the US dollar slices $210 million off farmers' bottom lines. This amounts to about $9 billion since the start of 2009 when the Aussie dollar was trading at US68c. Tasmania has a disproportionate share of the nation's agricultural exports. The annual value of Tasmanian international exports is $3 billion, of which agriculture contributes $527 million and forestry (wood and paper products) $370 million. That's about 30 per cent of all exports between them, so the impact on the statewide economy of reduced returns from agricultural exports is substantial. At the level of the individual farmer, this is serious. Each faces a double whammy. As they go into more debt because of tough times --- the cost of repositioning after the drought, high water costs, significant increases in power charges, higher interest rates --- they are getting less for what they produce at both the international and domestic level. For example, over the past 12 months many growers have seen significant reductions in milk and potato prices supplied to processors. Added to that, governments continue to impose higher expectations on farming --- for example, the accelerated removal of sow stalls, reductions in availability of chemicals required for efficient production, and opening the doors to imports from cheaper. What really gets up my nose is the continued evidence of double standards that disadvantage Tasmanian farmers --- for no sensible reason. Here's just one example. If the Government believes we must lead the way in improved conditions for pig husbandry, and brings in laws to make that happen, there's not a lot we can do about it. However, if that is what happens, then it is only fair and reasonable that all pork sold in Tasmania be subject to the same standards or it not be allowed to be imported. To do otherwise smacks of hypocrisy. And that leads me to think about increasing community expectations on farmers --- and the coming realisation that these expectations will need to be paid for. The debate on the mainland around Murray Darling Basin water issues is not something we can ignore in Tasmania --- there will be spillovers that affect us as farmers and as a community. But that's a discussion for another day. This information has been prepared without taking into account your personal circumstances, objectives, financial situation or needs. All applications for loans or credit are subject to lending criteria. Terms, conditions, fees and charges may apply. Full details are available on application or by phoning our Customer Service Centre on 1300 660 115, online at www.ruralbank.com.au, or by visiting your local branch. All information is subject to change. Products are issued by Rural Bank Limited and distributed by Elders Rural Services Australia Limited. Rural Bank Limited ABN 74 083 938 416 AFSL 238042. Registered office: Level 1, 27 Currie Street , Adelaide SA 500 0. rub-3498_TC_1010 TREAT YOUR LAND TO SOME MORE LIVESTOCK BORROW AGAINST THE EQUITY IN YOUR LAND OR EXISTING LIVESTOCK WITH CUSTOMISED LENDING SOLUTIONS FROM RURAL BANK. Get a lending solution that works for you and grow your agribusiness. For more details on the seasonal and term finance options that best suit your needs, speak to the rural lending specialist at your local Bendigo Bank or Elders branch or call Rural Bank on 1300 660 115. www.ruralbank.com.au
October 7th 2010
October 21st 2010