The National Australia Bank (NAB) Agribusiness Commodities Wrap released today forecasts the Australian dollar to peak above parity with the US dollar, limiting the impact of rising soft commodity prices.

Commodity prices have begun to rise again in US dollar terms but gains for Australian farmers are being wiped out by the strength of our currency.

In commodities, NAB expects total farm production to remain unchanged in 2009-10, however wheat production has been revised down by two million tonnes (to 21 million tonnes) on last month’s outlook, with yields in many areas falling below expectations. Global wool, dairy and barley prices are up, however sugar, beef, cotton, wheat and lamb prices have fallen, resulting in a downward revision of the outlook for the net value of farm production to around $5.4 billion.

Major commodities still down on yearly basis

The index is estimated to fall by 11 per cent in 2009-10 as forecast weaker prices for grains, dairy, beef and wine offset higher prices for lamb, wool, sugar and cotton. The average 2009/10 FY prices are expected to be 38% lower for wheat, 1% lower for beef, and 19% lower for dairy but 6% higher for lamb and 30% higher for sugar compared to the 08/09 FY.

NAB’s Head of Agribusiness – Wholesale Banking, Rod Fraser, said the currency strength was a concern for producers, but believed there were strategies that could be used to effectively mitigate its impact.

“Importers and exporters can manage the changing exchange rate and we’re encouraging them to seek professional advice on which options suit their business,” he said.

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