Food firms welcome dollar’s fall, but say it is still too high

Blair Speedy
May 14, 2013
The Australian

FOOD manufacturers have welcomed a slide in the dollar against the greenback but say it will need to fall much further to turn back a tide of cheap imported groceries.

The dollar fell below parity against the US dollar for the first time in more than 10 months on Friday, raising hopes among exporters and import-competing industries.

But Coca-Cola Amatil managing director Terry Davis said the dollar was still too high for comfort. “The dollar still remains very strong at near or just below parity, and still too strong in my view to be of much benefit for any of the business sectors which have been hit by the strong dollar, like tourism, education and manufacturing,” Mr Davis said.

“However, the softening of the Australian dollar against the euro is better news as this will help inflate the prices of the very cheap imported fruit and tomatoes coming in from European markets which have been flooding our domestic markets.”

CCA has partly blamed the impact of cheap imported tomatoes and tinned fruit on its SPC Ardmona fruit-processing division for an expected fall of up to 9 per cent in first-half earnings, and called for emergency tariffs to be imposed to protect local manufacturers.

Gary Dawson, chief executive at the Australian Food and Grocery Council, said the dollar would need to fall closer to its long-term average since it was floated in December 1983 — about US76c.

“There’s no doubt the high dollar has a significantly negative effect on the competitiveness of food manufacturing in Australia, so the recent falls are welcome,” Mr Dawson said. “But it would need to move lower for longer to start having some impact.”

Michael Lea, formerly executive director of the Darrell Lea confectionery company, said he did not believe a lower dollar would have saved his business.
“It would have had to have happened a long time ago — it wouldn’t have made the difference in the company turning around or not, but it certainly would have helped,” Mr Lea said.

“Our contracts were all predicated on a dollar that wasn’t expected to skyrocket as it did.”

A spokesman for company administrators Ferrier Hodgson, which handled the collapse of Rosella this year, said the strength of the dollar had fuelled a shift by supermarkets towards imported private-label groceries.

“It had an indirect impact on Rosella, but even if the dollar moved by 10 per cent it probably wouldn’t have been enough to stop the company from going into receivership,” the spokesman said.

But Freedom Foods group managing director Rory Macleod said his company was set to clean up on the back of a lower dollar, having planned its export business on the assumption that the currency would remain at parity.

“All our plans are based on making a reasonable return at that level, so if there’s a reduction in the currency we’ll see some earnings benefits,” Mr Macleod said.