Where to With The Exchange Rate?Monday, Dec 11, 2000
Today's AgriFax Market update shows the vulnerability of our export prices to an upward movement in
the NZ dollar. Political unease and technology company doubts are causing a hesitation in the US economy.
Not a great shift in attitude, but enough for attention to turn to the opportunities presented
by a grossly undersold NZ dollar.
How many farmers took advantage of the opportunity to purchase forward cover or other financial instruments
that would fix in a future value for sales from this season? What meat firms have offered
contracts, which include forward cover for exchange variation and have they been taken up or were
they too limited?
Are these sensible options for today's farm business or are they impractical to manage and too sophisticated
in structure for the average farmer to manage. The same farmer who may in March be managing
a much lower seasonal average return per head of livestock but a much higher cost structure than
originally budgeted for three months ago.
The AgriFax update also seems to show a very good anticipation of the impending exchange lift by wool
buyers. Have the wool exporters access to financial data that is not available to other players
in the export market? Whatever, the wool buyers have certainly taken care of any exposure their buying
may have presented by lowering auction prices up to three weeks before the exchange decline showed.
With such short price cycles appearing in international trade are we as producers being forced to manage
our financial environment with much more detail?
Who is going to show us how?