Farm sector exporters can expect some relatively good news on the Australian currency price front for the next six months, or more, but high shipping prices and congestion in global trade routes will continue to plague the sector.
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The coronavirus pandemic's disruption to labour and airline freight has sent international freight supply chain costs jumping at least 300 per cent in the past 18 months according to Australian farm sector analysts.
Shipping schedules have also been increasingly unreliable at a time when Australian mineral and farm commodity exports are in strong demand.
High shipping costs and lengthy delivery delays are also set to put more pressures on fertiliser and farm chemical imports, particularly from China.
Despite bullish commodity markets, which generally push the Australian dollar higher, Rabobank is tipping the exchange rate will not rise much, if at all, from its current US73 cent territory.
The dollar slipped 2pc in July and the agribusiness lender has forecast it will be down to around US72c by year's end, and then likely to stay under US75c for the first half of next year.
The Aussie dollar has been on a fairly consistent slide since May's US78c high, which had represented a brief recovery from a March low of US75c, after starting the year at almost US80c.
While market consensus among foreign exchange analysts suggested a median value for the year at US78c, Rabobank was less bullish, saying a number of factors were weighing on the Australian dollar, while its US namesake was more likely to rise in value.
Delta damage
The pandemic's expanding Delta virus impact on Sydney, regional NSW and other states had forced the Reserve Bank of Australia to revise down gross domestic product expectations, inflation and jobs growth after the country's previously positive economic recovery from COVID-19 lockdowns.
With new lockdowns taking their toll on the economy, Rabobank's latest monthly agribusiness forecast has pointed to the RBA being unlikely to risk any lift in the record low 0.25pc official interest rate.
On the other hand, however, increasing signals from overseas suggested the US Federal Reserve and central banks in Canada, Britain and even New Zealand may start lifting rates sooner, rather than waiting for 2022.
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The softer exchange rate was proving helpful to Australian farm commodity prices, but Rabobank senior analyst Wes Lefroy said import challenges ahead suggested now would be a good time for farmers to start discussions with farm chemical and fertiliser importers before prices climb further.
This winter's cropping season had been characterised by tight supplies and high prices, with global urea and diammonium phosphate (DAP) costs jumping between 55pc and 75pc, while rising shipping prices and delays added as much as another 10pc to farmgate costs.
High prices and shipping disruption add weight to a `just in case' buying strategy for next season
- Wes Lefroy, Rabobank
Although high global fertiliser prices may subdue overall demand for a while and cause the market to ease, Mr Lefroy said the respite could be short-lived, largely due to China wanting to limit its own fertiliser and glyphosate herbicide exports to keep its home market costs from blowing out.
Chinese glyphosate prices had nearly doubled in 2021 because of high demand, and to a lesser extent, rising supply chain and production costs.
China supplied almost 60pc of Australia's MAP imports during the past 12 months.
Shipping challenges
"High prices and shipping disruption add weight to a `just in case' buying strategy for next season," he said.
According the Baltic and International Maritime Council, one of the largest of the international shipping bodies representing shipowners and charterers, strong demand for Asian exports had led to serious container misallocation away from the region which subsequently disrupted export movements from China and also put pressure on dry bulk freight space on shipping routes.
At the same time new shipping fleet growth was at record lows.
Meanwhile, the National Farmers Federation has led attempts to co-ordinate industry and food sector representatives seeking a speedy federal government review of Australia's containerised freight delays, wharf disruptions and land transport concerns.
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Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
