THERE will be factors that both benefit and disadvantage the Australian grains industry out of last week’s shock Brexit vote where the British people voted to leave the European Union (EU).
At present, grains industry analyst Malcolm Bartholomaeus, Bartholomaeus Consulting, says Australian grain prices have risen slightly in real terms since Friday’s referendum in the United Kingdom.
Mr Bartholomaeus said most of the rise in values was due to the two cent fall in the value of the Australian dollar against the greenback in the wake of the Brexit vote as investors looked for safe haven options such as the US dollar and the Japanese yen, although the dollar is now recovering.
Port prices for new crop hover at around $260 a tonne in most port zones.
Mr Bartholomaeus said in Australian dollar terms, US wheat futures went from $218/t prior to the Brexit vote to $226/t on Monday.
Another negative for grain prices will be the pressure on flagship US futures, which have a key influence on Australian pricing, as the appreciating dollar will make US exports less competitive.
Peter McMeekin, originations manager with Nidera Australia, said the result would put a dampener on global demand across the commodities sector as a whole.
“There has been a flight to the security of the US dollar (and gold) which has in turn drained the purchasing power of many countries by lowering the value of their own currencies,” he said.
Nick Crundall, assistant pool manager at MarketCheck, said the Brexit vote’s main impact on the Australian grains industry at present was the volatility in the currency sector
“Currency has been a roller coaster since the vote and it is hard to gauge longer term what Brexit will mean to foreign exchange levels for the Australian dollar.”
Mr Crundall said a lower euro was having a negative impact on Australian canola values.
“Europe is a major oilseed producer and a lower euro makes Australian canola less competitive.”
NAB currency strategist Ray Attrill said the fall-out from Brexit would be felt for a long time to come, but said the impact on Australia was less pronounced than the slowdown in the Chinese economy in August-September last year.
“The political vacuum in the UK won’t be filled in the next couple of months and we are still yet to hear anything about when a British government would invoke Article 50, necessary to exit the EU.”
“In the meantime there will be a lot of uncertainty.”
Mr Attrill said there would be difficulties for sectors that traded directly with the UK, such as the wine industry, but said for most Australian businesses the impact would be in terms of market volatility.
“We don’t see there being much further downside to the Aussie dollar without further news.”
“We’re watching closely for a contagion effect, with other big countries pushing for votes on leaving the EU of their own, and if we do see that we could see the Aussie push down towards below US70 cents, but that is unlikely without further developments.”
The Australia dollar has stabilised since incurring sharp losses in the trading period immediately after Brexit, sitting at US74.5c on Tuesday evening after falling US2.5c on Friday to lows of US73.5c.
