Horticulture vulnerable to high AU$

Monday, 10 November, 2014

A study funded by the Rural Industries Research & Development Corporation (RIRDC) has found that the horticulture industry is more vulnerable to a high Australian dollar than other agrifood sectors, with issues such as ease of differentiation and perishability playing significant roles.

The study, The high Australian dollar and agrifood export, interviewed Australian exporters and overseas importers to determine the impact of a higher exchange rate (US$ to AU$) on trade. The researchers found the influence of the exchange rate on trade varied across industries and export markets.

At an exchange of $0.80 to $1.00, horticulture exporters compete on price for most fruit, although pears struggle at the high end of this range. However, at $1.00 to $1.20, costs need to be cut and products differentiated to maintain markets.

Meat exporters find it difficult to compete on price at $1.02 to $1.05 and need to focus on higher-value cuts or renegotiate prices in order to compete.

Dairy is competitive at $0.80 to $1.00, but at $1.00 to $1.20, exporters need to manage farm pricing and currency hedging carefully.

Grain is influenced less by exchange rate than by other factors such as world supply. An Australian dollar of $1.00 to $1.20 prompts better currency management and price hedging, and farmers store grain for later sale.

Branded food products compete on price at $0.80 to $1.00, but at $1.00 to $1.20, price-sensitive importers take fewer products, requiring increased promotion to maintain sales.

The report includes strategies other than price that companies can use to improve competitiveness in international markets.

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