Forum Archive Index - May 2003

["mvanv" <mvanv@xtra.co.nz>]

Farmers brace for rising kiwi

13.05.2003
By LIAM DANN

The rural sector is steeling itself for further surges in the kiwi dollar, which yesterday hit 58USc for the first time in more than five years.

"It looks like it's heading for 60c," said Affco finance manager Robert Gerrie. "We're bracing ourselves for that.

"Every cent it moves makes us more uncompetitive."

Richmond chief executive Graeme Milne said the kiwi was being influenced by a falling US dollar.

That was hurting beef sales to the US more than lamb, which was mostly destined for Europe.

Sales to Europe were holding up because their currencies were also gaining against the greenback, he said.

Federated Farmers vice-president Charlie Pedersen said currency woes, combined with drought, left some farmers facing one of their worst years for more than a decade.

"It's as tough a year as many farmers have ever had to deal with."

Only the fact that farmers were coming off two good seasons was buffering the sector from the kind of downturns suffered in the late 1980s and early 1990s, Pedersen said.

Meat exporters are being hit harder than dairy farmers.

The meat industry pays farmers for stock weekly and buys forward cover for currency as and when it is needed. Gerrie said it was a case at present of watching the market and looking for dips to buy in.

Fonterra, with its single annual payout, is protected from short-term fluctuations. It buys most of its currency a year in advance.

Next month Fonterra begins fully hedging its currency requirements 15 months ahead.

Chief financial officer Graham Stuart said the latest movement in the kiwi was bad news but would not have any impact on this year's payout.

Fonterra has forecast a payment of $3.60 per kg of milk fat, which is due at the end of the month.

BNZ chief economist Tony Alexander said currency traders were selling out of the US dollar.

"They'll buy the kiwi before something like the yen because our interest rates are higher ...

"We're going to peak at somewhere just over 60USc." Then traders who were holding the kiwi would take profits.