The strategy on this article is to take a look at the rolling 12 month correlation between Australian commodity costs and the Australian to US greenback trade charge, from 1995 onwards. This reveals how a lot of the change within the trade charge is mirrored within the change in of the commodity value for every 12 month interval.
In every graph there are two items of data for every commodity. Firstly, there’s the signal of the connection (telling us whether or not it’s constructive or unfavourable) and secondly, the magnitude of the connection (starting from a attainable plus one to a attainable minus one) which is telling how a lot of the change in a commodity value might be attributed to vary within the trade charge.
The usual assumption is the correlation is a unfavourable one (for instance the trade charge rises and the Australian greenback nominated commodity value falls). Determine 1 reveals the rolling correlation between Australian greenback cotton costs and the Australian to US greenback trade charge. Cotton usually has a unfavourable correlation to the trade charge, with the correlation charge unfavourable two thirds of the time since 1995. The correlation was constructive for one third of the time, albeit extra weakly than the unfavourable correlation.
Determine 2 compares NSW port zone costs for ASW wheat and canola to the Australian to US greenback trade charge. Correlation for these two crops is extra evenly balanced, spending round 55% of the time in unfavourable territory particularly lately. In some years the correlation swings strongly to the constructive facet, and the schematic reveals that wheat and canola can have fairly completely different correlations in some seasons.
Beef (commerce steer) and lamb correlations are proven in Determine 3. The cut up between constructive and unfavourable correlation is extra evenly cut up, roughly half and half. A larger home consumption matches with a weaker correlation to the trade charge. In recent times, since 2022, the correlation has been constructive.
Lastly, in Determine 4 the merino and crossbred (28 MPG) correlation is proven. Wool can run via intervals of the correlation being skewed to at least one facet. Crossbred wool is extra delicate to the trade charge, spending 70% of the time with a unfavourable correlation in comparison with merino which is extra half and half.
In abstract the connection between Australian in depth agricultural commodity costs and the Australian and US greenback trade charge varies throughout time and between commodities.
