The impact of the falling Aussie dollar on food producers

The Australian dollar dipped below parity overnight, creating a hopeful Australian food industry which may now have a fighting chance with exports and production.

The high Australian dollar has been blamed for a myriad of factory closures, company takeovers and a slump in food exports, as local producers struggles to compete with other countries.

As fear of Greece exiting the eurozone continue to increase, investors are shifting money to the more secure US and Japanese markets.

One of the industries most affected by the high Australian dollar’s impact on trade is agriculture, so farmers have welcomed the fall.

National Farmers Federation's general manager of policy, Charles McElhorn, told the ABC the impact that the high Aussie dollar has on the sector is larger than most people realise.

"We export about two-thirds of what we produce, and we're also increasingly exposed on the import market, so great news," he said.

Every one per cent fall in the Australian dollar equates to about $220 million in export earnings, according to the federation.

This will mean an additional income of about $2 billion for the sector since the dollar started falling a around March.

AusVeg spokesperson  William Churchill told Food Magazine the produce industry will welcome the news, but other industries do reap greater benefits.

“Some companies have a real export focus, some sell up to 90 per cent of their products offshore, and with a high Australian dollar they were definitely finding it harder to it overseas.

“Some is going into the domestic market, and in some instances they have been able to do that, but the Australian produce market is highly saturated right now so there is no demand for any extra.

“There won’t be any increased demand until people start to eat more [vegetables], but they aren’t doing that.

“As the dollar falls, it becomes easier to send that produce overseas.”

Churchill said that while producers are being urged to export as much as possible, the highest demand is not for Australian vegetables.

“Growers who are exporting have a bit less stress in their life [with a lower Australian dollar], however, as for export, there is a lot of rhetoric we’re getting, particularly from governments, that we can be the Asian foodbowl for the booming middle class.

“That’s great if you’re a beef producer, but historically the food of those people is actually vegetables.

“Now they can afford a high protein diet like we do in Australia.

“They may have had diet consisting of rice and veg and now they might include meat, so the amount of vegetables will decrease per person, but as we now have 100 million more people who can buy vegetables, the entire volume will hopefully increase.

“I definitely echo, reiterate and support export is a way to go because in this country we have a saturated produce market and out consumption is so small compared to others in world.

“It’s frustrating when politicians get up and say “we can do such and such” when they don’t actually have all the information, and their figures are actually very distorted.

“If the government is serious about making this the Asian century and exporting, they need to actually talk to with largest market out there.”

Prime Minister Julia Gillard made the announcement that Australian farmers and food producers should focus on becoming the foodbowl for the rising Asian middle class last week, but her comments were met with criticism from the industry who say current policies are killing their businesses, not helping them.

The food manufacturing sector was also overlooked in the Federal Budget released last week.

The industry has been calling for a helping hand like the one given to the car manufacturing industry, and a Supermarket Ombudsman to help keep Australian companies in business, but these requests were ignored. 

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