Fed: Drought and now dollar hitting miners and farmers

AAP General News (Australia)
12-15-2003
Fed: Drought and now dollar hitting miners and farmers

By Shane Wright

CANBERRA, Dec 15 AAP - First it was the drought, now the Australian dollar is playing
havoc with the nation's rural sector.

The Australian Bureau of Agricultural and Resource Economics (ABARE) today said commodity
exports would slump 5.3 per cent to $82.2 billion in 2003-04, largely due to the strong
dollar.

Although cautioning that some parts of Australia were still struggling with the drought,
ABARE said it was the dollar that was now creating problems for farmers and miners.

But it did have some good news, with farmers set to enjoy a 45 per cent lift in income.

Farm exports are tipped to drop 5.5 per cent to $25.5 billion, with crop exports remaining
constant at $13.2 billion and livestock sales slumping 11 per cent to $12.3 billion.

Energy mineral exports are tipped to fall 13.3 per cent to $20.9 billion, while metals
and minerals exports should climb a miserly 0.4 per cent to $31.7 billion.

Across almost all sectors, the story is the same.

Good overseas demand and increased production has been met with the higher dollar,
knocking down profits.

One of the worst hit will by the nation's most important export, coal.

Coal production is tipped to climb 4.7 per cent to 287 million tonnes, but the export
value is expected to be down 9.7 per cent to $10.7 billion.

In the dairy sector, production should improve 0.7 per cent to 10.3 million litres,
but because of the strong dollar, exports will fall 17.2 per cent to $1.9 billion.

ABARE executive director Brian Fisher said the fall in commodity export earnings was
largely due to the stronger dollar.

"This forecast decline in 2003-04 partly reflects the effect of an assumed higher average
value of the Australian dollar, especially against the US dollar," he said in a statement.

The tough year endured by farmers because of the drought was improving, albeit slowly
for those in the livestock sector.

The net value of farm production would climb an impressive 74.5 per cent to $4.5 billion,
far short of the $11.2 billion recorded in 2001-02.

But like miners, farmers have been caught by the stronger dollar.

The prices received by farmers are expected to fall 5.7 per cent, while the prices
paid by farmers are expected to lift 1.3 per cent.

Sheep numbers are expected to fall to just 96 million, the smallest national flock
since World War II.

The pain endured by livestock farmers would also be felt by consumers, with beef prices
likely to climb 5.9 per cent and lamb prices up 7.3 per cent.

In the mineral and energy sector, the dollar's impact had offset what would have been
a strong year on the back of improving world growth.

"The estimated 19 per cent appreciation of the Australian dollar against the US dollar
in 2003 more than offset the US dollar price gains of most commodities," ABARE said.

Australian Democrats agriculture spokesman John Cherry said the dollar's rise was further
evidence for the government to review policies which pushed up domestic consumption that
in turn hit interest rates.

"The tax system is stacked against exporters, with massive tax breaks for investment
in property speculation creating a skewed economy where the cities prosper and the country
falls behind," he said.

AAP sw/sb/cjh/jlw

KEYWORD: ABARE NIGHTLEAD

2003 AAP Information Services Pty Limited (AAP) or its Licensors.